Sydney has owned a 200-seat movie theater in her hometown for the past two years. Even though it's the only movie theater in town, the theater is rarely filled to capacity. While Sydney is not in financial trouble yet, she feels like she would make a lot more money if she could just fill more seats. With only one theater, Sydney is limited to five showtimes a day, three in the nonpeak hours between 10 AM and 6 PM and two in the peak time between 7 PM and midnight.

Sydney has been debating a number of changes to price and promotion. One tactic she is considering is a $1 ticket price reduction, but she is worried that a price reduction will simply erode her profit margin. A second tactic she is considering is a loyalty program, which rewards customers with a free movie ticket after 10 tickets are purchased. A third option under consideration is offering $5 tickets all day on Thursday. Last but not least, she is considering advertising her theater with a billboard ad.

To evaluate the different strategies, Sydney constructs a spreadsheet and populates the cells with her best estimates.

The goal of this activity is to understand how a service firm can use marketing metrics for capacity management. For the movie theater industry, key metrics include average ticket price, revenue per screen, and admissions per screen.

Average ticket price = [(Total peak tickets sold per week X Peak ticket price) + (Total nonpeak tickets sold per week X Nonpeak ticket price)]/Total tickets sold per week

Use the formulas above and the spreadsheet below to help answer the questions that follow. The spreadsheet fields highlighted in yellow can be changed in order to determine possible outcomes. You can find the initial values in the corresponding blue cells in columns G to J. Start by entering the initial values into columns B to E. Then review the questions below and adjust the values in columns B to E to determine the correct answers.

A B D E F 1 Without Promotion Price Change Promotion 1- Loyalty Program Promotion 2 Promotion 3 $5 Thursdays Advertising G H 1 ] Initial Value: Initial Value: 1- Initial Value: Initial Value: Price Change Promotion 2- Promotion 3 Loyalty $5 Thursdays Program Advertising $ 12 $ 13 $ 13 $ 13 $ 13 $ 13 $ 13 $ 13 $ 8 $ 8 $ 8 $ 8 $ 7 7 $ 8 $ 8 $ 8 $ 5 14 14 14 14 14 14 12 14 21 21 21 21 21 21 18 21 5 200 200 200 200 200 200 200 200 200 60% 66% 72% 60% 63% 40% 44% 48% 40% 50% 2 Peak time ticket price 3 Off peak time ticket price 4 Promotional ticket price 5 Peak show time times per week 6 Off peak show times per week 7 Promotional price showings 8 Number of theater seats 9 Percent of peak tickets sold per week 10 Percent of off peak tickets sold per week 11 Percent of promotional tickets sold per week 12 Revenue per screen 13 promotion 14 Ticket sales profit 15 Potential revenue lost from unsold tickets 16 Admissions per screen per week 17 Average ticket price 18 70% 35,280 $ 0 $ 0 $ 0 $ 0 $ 35,112 $ 42,336 $ 33,740 $ 39,732 Cost of $ 0 $ 0 $ 0 $ 5,000 $ 1,500 $ 2,500 $ 35,280 $ 0 $ 0 $ 0 $ 0 $ $ 35.112 $ 37.336 $ 32,240 $ 37.232 $ $ 34.720 $ 0 $ 70,000 $ 0 $ 70,000 $ 27.888 $ 27,664 $ 26,260 $ 30,268 3,360 0 0 0 0 3,696 4,032 3,580 3,864 $ 11 NaN NaN NaN NaN $ 10 $ 11 $ 9 $ 10 A B D E F 1 Without Promotion Price Change Promotion 1- Loyalty Program Promotion 2 Promotion 3 $5 Thursdays Advertising G H 1 ] Initial Value: Initial Value: 1- Initial Value: Initial Value: Price Change Promotion 2- Promotion 3 Loyalty $5 Thursdays Program Advertising $ 12 $ 13 $ 13 $ 13 $ 13 $ 13 $ 13 $ 13 $ 8 $ 8 $ 8 $ 8 $ 7 7 $ 8 $ 8 $ 8 $ 5 14 14 14 14 14 14 12 14 21 21 21 21 21 21 18 21 5 200 200 200 200 200 200 200 200 200 60% 66% 72% 60% 63% 40% 44% 48% 40% 50% 2 Peak time ticket price 3 Off peak time ticket price 4 Promotional ticket price 5 Peak show time times per week 6 Off peak show times per week 7 Promotional price showings 8 Number of theater seats 9 Percent of peak tickets sold per week 10 Percent of off peak tickets sold per week 11 Percent of promotional tickets sold per week 12 Revenue per screen 13 promotion 14 Ticket sales profit 15 Potential revenue lost from unsold tickets 16 Admissions per screen per week 17 Average ticket price 18 70% 35,280 $ 0 $ 0 $ 0 $ 0 $ 35,112 $ 42,336 $ 33,740 $ 39,732 Cost of $ 0 $ 0 $ 0 $ 5,000 $ 1,500 $ 2,500 $ 35,280 $ 0 $ 0 $ 0 $ 0 $ $ 35.112 $ 37.336 $ 32,240 $ 37.232 $ $ 34.720 $ 0 $ 70,000 $ 0 $ 70,000 $ 27.888 $ 27,664 $ 26,260 $ 30,268 3,360 0 0 0 0 3,696 4,032 3,580 3,864 $ 11 NaN NaN NaN NaN $ 10 $ 11 $ 9 $ 10