I’m a big Disney fan. I moved from the hustle and bustle of the New York City metropolitan area to live in Central Florida for both better weather and to be able to go to Walt Disney World whenever I want. My family has lived here for 4 years, and we still visit Disney World at least once a week. Until recently, I’ve had just a handful of negative things to say about the Disney theme park experience. With the recession, my perception has changed quite a bit.
Let me preface this by saying most people who visit Walt Disney World would never notice the little price increases here and there that Disney has implemented at its theme parks over the past few years, but since I’m there so often, I notice. For example, the price of drinks and snacks sold at the multitude of carts and kiosks around the parks went up first by a quarter and then by another quarter. Next, the food portions at restaurants became noticeably smaller while prices stayed the same or increased. When I moved here in 2005, the price to park each day was $3 less than it is now, and a new array of park ticket packages make the short-term visitors pay a lot more than anyone can truly afford even in the best of economic times. Luckily, I’m a Florida resident so my annual pass is a decent value given how often we visit a Disney theme park (and parking is free), but it kills me to have to pay over $300 for each of my 4-year old triplets’ annual passes.
These are just a couple of examples of the little price hikes that Disney has implemented over the course of the past year or two to make up for attendance losses. At the same time, the company has been discounting hotel rooms and packaging in their dining plan to resort bookings. For example, a current promotion allowed families to stay for 7-nights but only pay for 4. There is no doubt these discounts are working to boost attendance. I have never seen the Disney parks so crowded at all times throughout the year as I have over the past year or so. There simply isn’t a “down time” anymore. I’m constantly amazed by how busy the parks are!
So what does this have to do with corporate branding?
Simple, according to an article in the Orlando Sentinel, Disney is reporting losses despite its aggressive hotel room discounting strategy (although Disney’s losses are considerably less than its competitors such as Universal). Disney’s spokesperson stated in the article that the discounting strategy is meant to expose more people to the Disney brand in the hopes of turning them into repeat customers in the future.
Here is my argument against that strategy:
We all know the 80-20 rule (20% of your customers are responsible for 80% of your sales/profits). Disney’s discounting strategy runs counter to that rule. Rather than trying to rewards its best and most loyal customers, Disney is hurting them by boosting prices on the items those loyal customers buy. Instead, Disney is rewarding the masses who are less likely to become repeat customers. Why are these people unlikely to become repeat Disney World visitors? Simple — the prices for all of the ancillary items people have to purchase are so high that when the hotel price goes up again (and you know they will), the perception for those customers will be that a Disney vacation is simply not in their budgets. The brand loyalty isn’t there, so this audience is unlikely to forego other purchases in order to take a Disney vacation.
Disney is one of the rare yet admired brands that can truly be called a relationship brand that loyal consumers have a strong emotional attachment to. Those loyal customers are the best brand advocates. They’ll defend the brand, spread the word about the brand, and influence others about the brand. Trading a brand’s focus on loyal customers for short term profits from that 80% of customers who are responsible for 20% of sales is a long term strategic error. While most brands try desperately to get the emotional attachment that relationship brands like Disney or Apple have, Disney is forgetting their core audience and doing exactly the opposite. It seems to run counter to fundamental marketing and branding theory, and it will be interesting to see how this strategy fares in the future.
What do you think?
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