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Friday, April 25, 2008

Strollers, take 4 - DME?

One smart reader thinks the stroller price hikes are the first "squeeze" from DME, which makes WDW patrons captive. Now might as well raise prices!!

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Prices are set at WDW by price/value perception research. In a fairly homogenous closed population like WDW guests with a large population from which to sample, you can pretty accurately measure cost/sales behavior and find the revenue-maximization price point. They can even claim now to factor in goodwill--they sample guests 5, 7, 10 years out to see what they remember and how it shapes buying behavior, and you know what, people don't complain!

One of my theories is that because prices continuously rise, perception of expense in the past is overwhelmed by perception of how things have *gotten* so expensive in the present. One big driver of prices right now is DME. Because DME eliminates guest purchase choices, what a guest perceives as being willing to pay is way more now than a few years ago; in the past it was a that they didn't want to drive to Wal Mart; now they simply can't, so it doesn't enter into their thinking.

Another big driver is the US exchange rate. Perceptions have adjusted around the strong GBP/EUR. In the inverse, remember for over a decade there was essentially a different price for Canadians whose CAD was strongly devalued vs. the USD. You could buy tickets and vacation packages for WDW in Canada for 15% less than in the States.