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Luxury cinema leisureandlifestylemarketing
 

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    Luxury cinema leisureandlifestylemarketing Luxury cinema leisureandlifestylemarketing Document Transcript

    • Olga Safonova Iris Maria Steffansdottir Laufey Karítas EinarsdóttirLuxury CinemaLeisure and Lifestyle Marketing  
    • Table of Contents1. Introduction................................................................................................................1 2. Methodology ..............................................................................................................2 3. Idea specification .......................................................................................................2 4. Business model ..........................................................................................................2  4.1 Generating revenue ..............................................................................................3  4.2 Service offerings ..................................................................................................4  4.3 Movie offerings ....................................................................................................5  4.4 Target group .........................................................................................................6  4.4.1 Segmentation .................................................................................................7  4.5 Competition..........................................................................................................8  4.6 Threats and opportunities ...................................................................................11  4.7 Risk of cannibalisation .......................................................................................12 5. Feasibility.................................................................................................................13  5.1 Resource feasibility ............................................................................................13  5.2 Legal feasibility..................................................................................................13  5.3 Cultural feasibility..............................................................................................14  5.4 Timeframe ..........................................................................................................16 6. Marketing plan .........................................................................................................16  6.1 Product/concept..................................................................................................16  6.2 Process................................................................................................................17  6.3 Price....................................................................................................................19  6.4 Place ...................................................................................................................20  6.5 Physical environment .........................................................................................20  6.6 Promotion ...........................................................................................................22  6.7 People .................................................................................................................23 7. Expected returns.......................................................................................................24  7.1 Ticket revenue estimation ..................................................................................24  7.2 Cost factors estimation .......................................................................................25  7.3 Break-even estimation........................................................................................26  7.4 Brand equity .......................................................................................................27 8. Conclusion ...............................................................................................................28  8.1 Limitations .........................................................................................................29 9. Bibliography ............................................................................................................30 
    • 1. IntroductionIn October 1896 the first permanent and purpose-built movie cinema in the world wasopened in Buffolo, USA (Internet 1). Twelve years later the first cinema opened inKorsør, Denmark, which is the oldest running cinema in the world today (Internet 2).The movie going experience has therefore been a part of the Danish public’s leisureactivities for a century now and has gone through extreme changes these last 100years. The technology has advanced hundredfold, and now, multiple cinemas areavailable all over the country. Most of them have many screening rooms in differentsizes, with digital sound and picture. The competition between cinemas is big. Forinstance, in a small area like Aarhus city centre, there are two large cinemas located ashort walking distance away from each other. These cinemas often show the samemovies and, as many other types of businesses, they encounter challenges of attractingand holding on to their customers. People nowadays are becoming more consciousabout various leisure activities available and are therefore focusing more on aspectsregarding quality and value. Value as such, is an intangible concept. It is the overallbenefits that a customer gains from buying and using a product or a service, minus thecosts of obtaining that product or service. It is difficult to measure and the value of thesame good or service can be perceived differently by different people (Kotler,Armstrong, Saunders & Wong, 2001). Therefore, in order to stay on top of thecompetition in a constantly changing environment, cinemas have to advance and offersomething extra to attract the movie-goer.“Experience economy” is a buzz word nowadays. In order to differentiate a companyfrom the competitors, it is necessary to design and stage distinctive “experiences” forthe customers. Pine and Gilmore (1999) suggest a framework where they classifydifferent experiences, depending on two dimensions: the level of guest participation(passive to active) and the kind of connection or environmental relationship(absorption to immersion). The coupling of these dimensions defines four types ofmutually compatible domains of an experience: entertainment, education, escape andaestheticism. To stage a compelling, distinctive and memorable experience, it isadvised to not just choose and stay within one of these domains, but try to explore allfour of them. 1
    • 2. MethodologyThe report starts with a specification of the overall idea. Then a description of thegeneral business model is put forth. After that, a feasibility study is presented. Basedon the feasibility study, a specific marketing plan is created and the expected returnsof the project are estimated.3. Idea specificationThe present project will introduce a detailed proposal on a concept named the Luxurycinema. The Luxury cinema is designed to enhance the experience of going to thecinema. It involves taking a whole new approach to a common experience andincorporating in some way three of Pine and Gillmore’s domains mentioned earlier.The Luxury cinema will offer cinema guests a venue to escape from everydayconcerns, where guests can immerse into the environment of the cinema. The Luxurycinema can be seen as a treat for the regular movie-goer who wants to have anentertaining experience. Also, it has a certain element of surprise because the Luxurycinema is much more than a regular screening room. It is more comfortable, visuallyappealing, with thoroughly designed physical settings, which all draw on the aestheticaspects of the experience.Guests can enjoy an entertaining movie in the best physical setting with large andcosy La-Z-Boy chairs (Appendix 1), blankets, tables to keep their snacks, beverages,and/or pre-ordered food, and an exclusive lavatory. The Luxury cinema concept willbe offered in the form of one screening room in an available Aarhus cinema,preferably Cinemaxx. Even though it is just one screening room, it is still called theLuxury cinema because it is considered to be an experience that is beyond the regularmovie going experience.4. Business modelDuring the last years there has been an increase in disposable income in Denmark andDanes are therefore going out more. Danes’ expenditure on leisure and recreation isjust over 10% of their total consumer expenditure. The cinema is a popular leisureactivity in Denmark. According to a report from 2005 by Euromonitor Internationalon consumer lifestyles in Denmark, 66% of adults had been to the cinema that pastyear. There has been an increase in the number of people going to the cinema but a 2
    • decline in the numbers concerning how often they go. In 2007, there were 12,1million admissions in total and 2,3 annual cinema trips per capita (Internet 3).According to a research made in 2003 by the company Vilstrup Research for theDanish Film Institute, people from urban areas go to the cinema more often thanpeople living in rural districts (Internet 4). It is thus considered appropriate to launchthe Luxury cinema concept in a bigger city. The objective is therefore to open aLuxury cinema in Cinemaxx in Aarhus. Cinemaxx is a well established brand name inthe movie cinema market, with cinemas situated in various cities in Germany and inthree cities in Denmark: Aarhus, København and Odense. In Aarhus, Cinemaxx islocated on Bruunsgade in the city’s centre. The cinema contains screening rooms thatall have wall to wall screens with one of the best sound systems on the market. Thecinema has the six biggest white screens in Aarhus, where two of them are the biggestin Jylland. The cinema offers eight screening rooms and the biggest one has 550 seats.Cinemaxx focuses on offering the most comfort and the best experience, and istherefore considered to be the most appropriate cinema for the Luxury cinema concept(Internet 5). The Luxury cinema will expand Cinemaxx’s current offerings, attractinga wider variety of guests by offering more value. The physical settings of the cinemaare changed, but the basic business model is still the same.4.1 Generating revenueThe cinema has two business areas, the sales of tickets and sales of snacks andbeverages (Internet 6). The revenue is therefore generated from the sales of tickets,snacks and beverages, but also from sales of advertisements on the screen before amovie starts. Companies are able to buy still ads on the screen or longer filmed adsbefore a particular movie starts. Cinemas are considered to be a high-impact mediumbecause the audience is focused on watching the big screen and experiencing highquality sound. Cinemas are also considered to demonstrate lower media andenvironmental cluttering because the audience is focused on the big screen (Ewing,Plessis, & Foster, 2001). Because of the exclusivity of the Luxury cinema, there willbe fewer ads displayed before the movie, which demonstrates even less crowdingeffect. According to Ewing et.al (2001), in most countries ad space is sold withrespect to in what cinema the ad will be shown during a certain period and not inregards to what movie is being shown. This can make it difficult for media planners to 3
    • target the right audience. In regards to the Luxury cinema, advertisers will be able tochoose the movies they want to advertise before, therefore choose what movie toassociate their brand with. It is emphasised that the ads shown before the movie startsmay actually be linked to the movie, i.e. because of product placement within themovie or the overall theme of the movie. This is done so that the brand can leave aneven bigger impression on the cinema guests. Since fewer and longer ad spaces willbe offered in the Luxury cinema, along with the possibility to choose before whatmovie an ad should be shown, the price of the ad space will be a bit higher than inregular screening rooms.4.2 Service offeringsThere will be an increased focus on luxury, comfort and service. One additionalservice that will be offered in the Luxury cinema is the possibility to order food andhave it delivered to guests’ seats when they arrive at the cinema. In order to do that,guests have to order the food at the same time they order the ticket. The food andticket then need to be paid for in advance, at least an hour before the movie starts. Theobjective is to do this in cooperation with restaurants located at Bruuns Galleri. Theserestaurants are Ha Long, Kong Kaffe, Mamma Mia, What’s cooking and Café KongVenience. These restaurants are chosen because of their proximity to the cinema, theirvarious food offerings and because they belong to the Bruuns Galleri “community”.This will not bring any extra cash flow into Cinemaxx’s register but it will enhancetheir offerings and should increase customer satisfaction. This will though bring theBruuns Galleri restaurants more business which may make them more willing tocooperate in this project.GallupTNS conducted a research in 2006, about Danes’ attitude to movies and habitsin relation to the cinema. This research revealed that 4% of the population alwayscombine the cinema visit with a café or restaurant visit; 27% of the Danes oftencombine these two activities and 33% sometimes go both to the cinema and a café ora restaurant. These data show that the idea of serving food during a movie would fitinto a Danish “common practise” of going to the movies (Internet 7).Another service factor is regarding snacks and beverages offered at the cinema.Luxury guests can make an order at the concession stand for some extra beveragesand snacks while the movie is playing, which are delivered to their seats. The guests 4
    • can i.e. request for another round of the theme drink to be brought to their seats whilethe movie is playing. The guests pay for the extra beverages and snacks when placingthe order.An exclusive lavatory will also be available for luxury guests. This lavatory will becompletely soundproof so it won’t disturb other guests. In the lavatory, a small LCDscreen will display the same movie so that the guests don’t miss any part of it. Thismight encourage guests to buy more drinks, because if they need to use the lavatory itis very accessible and they are not taking a risk of missing an important part of themovie.4.3 Movie offeringsAs described in the introduction, the basic idea of the concept is changing theenvironment, or physical settings of the cinema, in order to enhance the experiencewhich nowadays is becoming more and more commoditized. The companiesoperating in the cinema business do notice this fact of commoditization, and try tocope with this challenge by differentiating themselves in several dimensions. One ofthe first dimensions to think of in this context is the content of the movie-goingexperience, i.e. what kind of movie is being shown. Some cinemas positionthemselves as being art cinemas which provide the viewers with sophisticated worksof art in the cinema genre. They consciously make efforts to dissociate themselvesfrom commercial blockbuster movies, trying to appeal to more selective viewers.However, according to the research by Anite Elberse, the popular hit titles generatesignificantly more profit and attract significantly more viewers. Hit titles remaindominant, even among viewers who "venture deep into the tail" (Elberse, 2008), i.e.consume obscure, less known titles. Hit titles are also more liked than obscure titles.Even though Elberses research was done within an online buying/rental area, it isassumed that the results can be applied in the context of the cinemas as well. There isno doubt that a special segment with sophisticated movie tastes and preferences mightexist, but its size and potential spending on the art-type of movies is quite small.Holbrook and Addis (2007) suggest that a two-path model of motion-picture successexists: one path is related to the artistic excellence aspect, while another to thecommercial appeal of the movie. The two phenomena are essentially separable asindependent paths to conceptually distinct and empirically uncorrelated aspects of 5
    • motion-picture success. In other words, Holbrook and Addis argue that they foundsupport for a general principle of contrast between art and commerce. While audiencemight appreciate the aesthetic value of small-budget, low profile, art-house type films,they also enjoy the blockbuster aspects of big-budget, high-profile, mass-market filmsthat feature famous stars in action or adventure scenarios with spectacular specialeffects. Moreover, marketing efforts of such blockbuster movies add significantly tothe buzz surrounding the movie. This buzz in turn contributes positively to marketperformance.It is therefore proposed that the Luxury cinema will focus on showing popularblockbuster movies. The movies chosen for the cinema are not paid for in advance butinstead the movie producers get a certain percentage of the sales, usually ranging from50%-70%. If the movie is a big blockbuster then the percentage will be closer to 70%because the bigger the movie, the higher the percentage (Jóhannsson, 2008). It isanticipated that the Luxury cinema will also show other types of movies, i.e. Danishmovies and award winning movies, which may not have been categorized as thetypical blockbusters to begin with. But the main focus in the Luxury cinema will beon blockbuster movies.4.4 Target groupCinema guests in Denmark are of all ages but people 16-39 years old are the mostfrequent guests. These are people that choose the cinema over other cultural activities.Of people aged 16-29 years old, 89% go at least once a year to the cinema, 79% ofpeople aged 30-39, 75% of people aged 40-49, 59% of people aged 50-59, 42% ofpeople aged 60-69%, and only 28% of people over 70 years of age go at least once ayear to the cinema (Haagen, Arffmann, Buchter, Flyvholm, & Brøgger, 2008).According to the research, done by Alsted Research for the Danish Film Institute andFAFID (Foreningen af filmudlejere i Danmark), the motives which drive most Danishvisitors to go to the cinema are: “quality time being together with friends, family orboyfriend/girlfriend” (54%), “the movie experience itself” (24%) and “entertainment”(12%) (Internet 8).For the majority of the public (46%), it is generally of great significance whichcinema is chosen for the movie experience. The technical quality of the cinema, suchas sound, light and the size of chairs, plays an important role for 40% of the guests. 6
    • Both the atmosphere in the cinema and other guests has an impact on how the overallmovie experience is evaluated by the movie goers. These factors are of greatimportance to 24% and of some importance to 28% of the guests. The physicalcomfort provided in the cinema (such as comfortable chairs with enough leg space,the temperature in the premises, and the view) is important for 42% of the moviegoers and very important for 29% (Internet 8).4.4.1 SegmentationAccording to research by Alsted Research Company, three overall culturalorientations were identified, which are decisive for individuals’ attitude towards theusage of the movie cinemas: Upmarket, Mainstream and Downmarket (Internet 8).Upmarket and mainstream segments have generally very positive attitude toward themovie cinemas. This attitude is based on a higher perceived experience value of themovie cinema as compared to TV or Video. Even those, who go to the cinema lessfrequently in these segments, justify opting out of the cinema visits by differentbarriers, such as convenience, but still express a desire to go to the cinema more often(Internet 8).Figure 1. Upmarket and mainstream market.On the other hand, the downmarket segment perceives the experience value of thevisit to the cinema as being lower than the experience value for TV and video (figure2). The reason which people in the downmarket segment express for not going to thecinema is the limited “freedom of behaviour” of the individual in the cinema, as wellas lack of comfort (Internet 8). 7
    • Figure 2. DownmarketSo, an affordable Luxury cinema is able to address both upmarket/mainstreamsegments, by enriching the experience of going to the cinema, and the downmarketsegment, by providing more comfortable physical settings.The Luxury cinema concept proposed in this report would therefore appeal to thecinema goers in general. The target group can be defined as people, who arehedonically oriented, enjoy entertainment, like comfort and being treated, but alsowho like spending time in the company of friends, family or a partner. The Luxurycinema is targeted at the upmarket/mainstream market and the downmarket with somerestrictions. After 18:00 more emphasis is put on attracting more mature movie guestsand therefore, children are not allowed after 18:00. This is also done in order to attractpeople who have reduced their visits to the cinema for different reasons, likedisturbance from younger kids, commoditised experience, price, etc. As the Luxurycinema ticket will be priced higher than a normal ticket, the target group has to affordit and be willing to spend on this luxury experience. Therefore, it is very important tocommunicate well the value of the experience to this group, so they know what theyare paying a higher price for.4.5 CompetitionThere are several cinemas in Aarhus where international films are shown in theiroriginal language with Danish subtitles. The largest cinemas show 30-40 Danish andinternational films per day, and are equipped with state-of-the-art audio and imagetechnology. There are four major cinemas in Aarhus that are well known and seem to 8
    • be the most popular ones (Internet 9, Internet 10). These cinemas are Cinemaxx (thepreferred location for the Luxury cinema), BioCity, Metropol, and Øst for Paradis.BioCity Aarhus is located in the city centre and it was the first THX-approved cinemain Denmark. BioCity positions itself as having the newest and the best technologyalong with warm and personal atmosphere. The cinema has nine rooms of differentsizes with 96 to 340 seats per room. All the screening rooms are named after moviesthat belong to Aarhus’ history. Screening room 1 is the only cinema room in wholeJylland that has a digital projector (Internet 11).Metropol is located a little outside the centre. When the cinema opened in 1950 it wascalled Palads and it had only one screening room with 800 seats. In 2004 the entirefacade was rebuilt and modernized, and in 2005 the cinema’s name changed intoMetropol. Today, the cinema offers five newly renovated screening rooms (Internet12)Øst for Paradis (East of Paradise) is located in the centre of Aarhus and is categorizedas an art cinema. This cinema is quite well known in Aarhus, even if it is smaller insize than the other large cinemas on the market. Øst for Paradis has created great filmexperiences for the viewers in Aarhus for almost 30 years. These are specialexperiences as this cinema shows films of high artistic quality that are not necessarilycommercial blockbusters. In 2006, the cinema had a financial crisis and the interiorwas torn down. With financial support from the city council and the community, it hasnow been rebuilt with new physical surroundings. Øst for Paradis is well on its way inbecoming a modern art cinema with its own unique soul and atmosphere (Internet 13).Aarhus’ city council is trying to position Aarhus as a centre of art and culture, andtherefore different art cinemas and various other cultural activities are available inAarhus. Art cinemas are small film theatres, screening new films but having arepertory function as well. Most of these cinemas try to be aligned with the latesttrends in literature and fine arts. The target audience is often outside the typical youngadult demographic, and belongs to smaller niche market groups (Internet 14, Internet15, Internet 16).Art cinemas can be considered as a competition to the Luxury cinema, as anotherleisure activity where guests share the experience of watching a movie. Although, itcan be argued that art cinemas are not a direct competition to the Luxury cinema 9
    • because the movie watching experience in these two kinds of cinemas can bedifferentiated in few ways. The films shown in the art cinemas are different. The artcinemas offer films that are somewhat traditional, but associated with the world of art.These films are more cultural, circulating internationally and are often premiered atthe world’s leading film festivals. Therefore, the target audience can be very differentfor those two kinds of cinemas, but the most obvious difference is that the targetaudience for the Luxury cinema is bigger and can cover the art cinema audiences aswell. The art cinemas both appeal to and serve a niche market, while the Luxurycinema can reach the whole market of cinema goers (Internet 16).The competition that the Luxury cinema faces is not only the other existing cinemasin Aarhus. Television, video rental stores and individual downloading can also beconsidered as direct competition to the Luxury cinema. The improved technology inTV-home equipment available now in stores, like surround systems (home-theatre),has enhanced the movie watching experience at home. People who are more antisocialmay choose to stay at home rather than go to the cinema. These people often preferhaving the best technology at home, and are willing to invest in expensive homeequipment (Internet 17).Video rental stores can be considered as competition because some people choose towait for a movie, rent it and enjoy it in the comfort of their own home. These aremovie viewers that would rather save some money and see a particular movie after ithas been on the market for some time, than going to the cinema.A large proportion of consumers find it easier, cheaper and more comfortable todownload movies, and watch them at their own home without any disturbance. Bythis, consumers can also choose the exact time they want to watch a movie and pauseit whenever they like, so it creates more “freedom” for the viewers experience.However, there are certain aspects viewers do not experience at home. For instance,the experience of going to the cinema has a certain charisma and it is an opportunityto go out among others. Most people are social and they like to be accompanied byfriends and family while spending their leisure activities (Baumeister & Bushman,2008). Thus, the experience of dressing up and meeting with friends to see a moviethat just came out, whilst enjoying the best technical surroundings, could beconsidered as a more attractive alternative. Individual downloading might therefore bea bigger threat to video rental stores than to the Luxury cinema. 10
    • Other leisure activities, like sports, hobbies, theatres, concerts, cafés, or simplyhanging out with friends at home instead of going out, can be considered as anindirect competition.4.6 Threats and opportunitiesOne of the biggest current threats on the cinema market is the economic decline that isaffecting many other industries as well. As the economy is experiencing stagnationand consumers are more focused on saving their money, the expenditures on luxuryand leisure activities are less. People may find the need to hold on to their money andprefer to spend their leisure time with friends and family in the comfort of their ownhome. Companies offering products and services in the leisure field may therefore bemore concerned with keeping their businesses running, and have to focus more onfinance and better resource efficiency. This could make it more difficult forcompanies like Cinemaxx to finance new projects like the Luxury cinema.The economic decline can also be considered as an opportunity. Because consumershave less money to spend, they might be more willing to spend their money on a morespecial experience. According to Johannsson (2008), the manager of an Icelandiccinema offering a luxury room, cinema attendance usually increases when a countryexperiences an economic decline. People don’t have as much money to spend andrealize that going to the cinema is a leisure activity that they can actually afford. TheLuxury cinema experience is a luxury experience which does not cost as much asseeing a play or going to a concert.Several other factors can also be considered as threats to the cinema environment.Smaller factors interrupting the movie watching experience, like people talking duringthe movie, cell phones ringing, and little babies crying, are becoming more disturbinginfluence factors. This has become one of the reasons people do not enjoy going to thecinema as much. Too many advertisements in the cinemas have also been mentionedas a disturbance to the experience (Internet 17). This can push movie-goers further tothe illegal downloading, where all the ads and disturbance factors can be avoided,which can then lead to cinemas loosing long term relationships with their guests.The price of the whole experience is considered by many to be too high, as ticketprices have been increasing and usually guests buy some sort of beverages andsnacks. The trip to the cinema has therefore become an expensive leisure activity in 11
    • many consumers’ eyes. The cinema guests‘ perception of the movie-going experiencemight though have an even more influence than the price. Some simply find thisexperience not as enjoyable or as worthwhile as before because the experience isbecoming stagnant (Internet 17). Therefore there could be an opportunity for theLuxury cinema to add more to the experience and justify the higher price with highervalue creation for the guests.4.7 Risk of cannibalisationAs the Luxury cinema is a new concept introduced by an existing brand name,preferably Cinemaxx, there might be a risk of cannibalisation. The offerings of theLuxury cinema might cannibalise what Cinemaxx is already offering on the market,instead of taking away market share from the competition (Pelsmacker, Geuens &Van den Bergh, 2007). If such cannibalisation occurs, then in the worst case scenariothe Luxury cinema will not be profitable for Cinemaxx, which might result in costlyinvestments suddenly being useless and Cinemaxx becoming uncompetitive (Chandy& Tellis, 1998).Although, in this particular project, few strategies will be used that could help preventcannibalisation. First of all, the aim of the Luxury cinema is to try to reach a differenttarget audience than targeted by the normal screening rooms. Even though the Luxurycinema can be considered as a line extension to Cinemaxx’s current offerings, it isstill a new and very different concept. Secondly, the price will be higher as the servicewill be considered as a luxury service and therefore, the guests might attend it fordifferent occasions than when going to the normal cinema. The luxury experience isfor guests that can afford it and guests that want to spend money on something extraspecial. Thirdly, there is a risk of cannibalising the offerings of the concession standby offering guests to pre-order food elsewhere to be delivered to their seats. Becauseincluded in the price of the movie ticket is 73 DKK for snacks and beverages, it isguaranteed that each guest “spends” at least 73 DKK at the concession stand. Finally,as will be argued later on, the luxury cinema project is very feasible. It is workingvery well in other countries and Cinemaxx would thus not be engaging in any highrisk activities. Additionally, because the Luxury cinema is replacing an existing room,Cinemaxx is not adding a screening room. The Luxury cinema is replacing one of thetwo smallest rooms in Cinemaxx, which only has 84 regular seats. These smaller 12
    • screening rooms usually offer movies that have been showing for some time and aredwindling in attendance. Rather than having a screening room that is seldom full, thesame space would be used for 48 more expensive seats that are more likely to be fullbecause of their exclusivity. This can therefore be seen as a way to create moreefficiency in the long run than having a cannibalising effect. The risk ofcannibalisation is therefore not considered as an issue to worry about.5. Feasibility5.1 Resource feasibilityThe objective is to build a Luxury cinema in cooperation with the local cinema,Cinemaxx. In order to transform one of Cinemaxx’s current screening rooms into aLuxury cinema, a loan will need to be acquired in order to do the appropriaterenovations. Because Cinemaxx is a well established cinema in the central of Aarhus,it is assumed that they have an agreement with a local bank institution in regards tofinancing the renovations.The renovations that will have to be done are among others; changing the seats fromthe regular ones to La-Z-Boy’s, altering the slope of the room in order to create roomfor the larger seats, and building a soundproof lavatory which is available for luxuryguests exclusively. Most technical aspects regarding the big screen, projector, soundand lighting are assumed to be already available in the room. Extra technical cost willbe regarding the small LCD screen in the lavatory, along with the integration of theLuxury cinema into the current website and booking system. Additionally, minorcosts are expected regarding communicating the new concept.Because the Luxury cinema is replacing an existing room, the current personnel willsuffice. It is though necessary to hire a service “coach” to introduce the current staffto the added service value and teach them the right work method. It is thereforeassumed that in the long run it will cost the same for Cinemaxx to show a movie inthe Luxury cinema as in a regular room. The main cost will be regarding the start-up.5.2 Legal feasibilityImplementation of a new Luxury cinema project has to be evaluated with regards tothe current legislation. Since renovations of existing premises in the cinema will take 13
    • place, rather than the establishment of a completely new cinema, there is no need toregister a new business. However, the cinema will need to make sure that specialpermissions to serve food ("næringsbrev") and a licence to sell alcoholic drinks("alkoholbevilling") are in place. If food is supposed to be delivered to the cinemaguests’ seats then the facilities should meet the hygienic requirements set by Danishauthorities. It is assumed that Cinemaxx has already obtained these documentsbecause they already offer alcoholic beverages and snacks.5.3 Cultural feasibilityOne of the main characteristics of Denmark is its welfare system, where each memberof the society has equal rights and access to social support and social benefits(Internet 18). The welfare state, the sense of security and comfort, the solidarity andsense of community support are all part of the Danish way of life (Internet 19).Hofstede’s cultural typology can give some insight into how the Danish culture can beinterpreted compared to other cultures. Hofstede’s cultural typology is one of the mostinfluential national cultural frameworks. It represents four cultural dimensions;individualism/collectivism, power distance, masculinity/femininity, and uncertaintyavoidance. These dimensions are based on four fundamental problems which societiesface regarding the relationship between the individual and the group, social inequality,social implications of gender, and handling of uncertainty ingrained in economic andsocial processes (Steenkamp, 2001).When Denmark is compared to 68 other countries in accordance to Hofstede’scultural dimensions, it is ranked as the 10th most individualistic country (Internet 20).Individualism asserts individuality and independence (Usunier, 1996). Additionally,individualistic cultures like Denmark are associated with achievement, freedom, highlevels of competition and pleasure (Han & Shavitt, 1994). Denmark has very lowscores in the other three dimensions of Hofstede’s cultural typology. It ranks as the 4thmost feminine culture and the 4th lowest in power distance. This emphasizes theimportance of equality, nurturing, modesty, patience, helpfulness, and closerelationships between people in the Danish culture. Denmark is also the second lowestscoring country regarding uncertainty avoidance, which reflects how willing Danesare to try new ways and approaches (Internet 21, Internet 22). 14
    • According to Denmark’s ranking on Hofstede’s cultural dimensions, Danes should beopen to the idea of affordable luxury in the form of a Luxury cinema. It is a luxurythat is available for nearly everyone, appealing to Danes’ need for equality. It isunique and different, appealing to Danes’ need for individuality. It is a new andmodern way of enjoying a movie in a cinema, which appeals to Danes’ openness toinnovation and experiencing new things. It represents a comfortable way to enjoy amovie, appealing to Danes’ need to “hygge sig”, which is considered a fundamentalnotion of Danish lifestyle (Internet 21). Since "hygge" is a key cultural concept, itinvolves many of the basic attitudes and values in Danish culture. J.F.HansenFOOTNOTE-1 (1980) mentions several meanings and associations which thisword embraces. First of all, "hygge" is closely connected to physical comfort,cosiness, sense of well-being and a relaxed frame of mind. Elements of comfortdepend on the context, but generally speaking these are warmth, the presence ofdelicious food and settled physical position. The concept of the Luxury cinema withfood served, blankets and comfortable La-Z-Boy chairs would comply with theseelements. Also, the leisure nature of this experience implies that a relaxed frame ofmind is present."Hygge" is also commonly associated with family and friends, i.e. members of onesprimary social network. The movie-going pass-time activity is usually performed inthe company of friends, family or a partner. Hansen (1980) also discussesattainableness and familiarity as associations with "hygge". The Luxury cinema,despite its name, is an affordable activity and the experience as such is a newapproach to an old concept, it therefore has the element of familiarity. It is thus notconsidered feasible to implement too extravagant changes to start with. Instead, itcould be a possibility to add more elements to the concept later on.Furthermore, Hansen (1980) defines closure to be an important element of "hygge".Only spaces, both inside or outside, which are in reasonable proportions to anindividuals own dimensions, can affect the emergence of "hygge". Closure, as anaspect of "hygge", involves size and boundaries. The room, which is framed by thewalls, is considered to be "hyggeligt". It provides a sense of security and protection,while a more open space can diminish this feeling. The Luxury cinema will be largeenough to accommodate enough guests, but not too large. The notion of protectiveboundaries expresses the possibility of undisturbed involvement in the present 15
    • moment of "hygge". Blankets, which are planned to be offered in the Luxury cinema,can facilitate the creation of these protective boundaries as well.5.4 TimeframeIt is estimated that the implementation of the project will take approximately up tothree months. The task will take place during the summer season, which is a down-season in the cinemas. By choosing a down-season, it is possible to make sure that thepotential revenue from the room will not be lost. The tasks to be completed within thistimeframe include room renovation, new furniture acquisition and installation,lavatory redesign, signing up the agreements with the cafes and restaurants,integration with the existing system for ticket bookings, communication campaigndevelopment and launch, staff education and other tasks.6. Marketing plan6.1 Product/conceptThe Luxury cinema is a new approach to an old and common leisure concept. Likewith most leisure activities, cinemas have to advance in order to attract a wider andmore diverse audience.The Luxury cinema involves enhancing the value creation, making it more intimateand exclusive. Guests can go to the cinema and experience watching a movie on a bigscreen, with the best sound quality, in an even more comfortable and luxurious settingthan before. The seats will be larger and more comfortable, with adjustable back andfoot rest, and a warm and cosy blanket available for all guests.The Luxury cinema recognises the need for extra beverages while the movie isshowing. Guests can place an order at the concession stand before the movie starts forextra drinks or snacks to be delivered to their seats in a discrete manner while themovie is playing. Guests can also order food before they come to the cinema fromrestaurants at Bruuns Galleri, which is then waiting for them at their seats when theyarrive.During the movie, the cinema guest might want to go to the lavatory. The Luxurycinema foresees such a need and provides an exclusive lavatory for guests of the 16
    • Luxury cinema. There, a smaller LCD screen is installed, so if guests need to leavethe room they can still follow the movie on that screen.The movies offered at the cinema will rotate weekly so that the same movie won’t beshown in the Luxury cinema many weeks at a time. Every movie will have its owntheme beverage which is included in the price. The theme beverage will differbetween movie genres, i.e. the theme beverage for a hard core action movie could be alarge beer and peanuts, for a „chick-flick“ it could be a cosmopolitan, for a JamesBond movie it could be a vodka martini – shaken not stirred, for a comedy it could bea fun and fruity flavoured cocktail, and for a horror movie it could be a Bloody Mary.The possibilities are endless and of course, the same beverage can suit several movies.If guests choose not to have an alcoholic beverage, they can have a medium sizedpopcorn and soda instead.During special occasions, i.e. on premiers or Valentine’s Day, the Luxury cinema willtry to add some extra elements of surprise to their offerings. This can be in the form ofa waiter in a tuxedo waiting for the guests when they arrive and offering them a glassof champagne, or a piece of heart shaped chocolate at each guest’s table when theyarrive, or even a free shoulder massage for guests that show up early for the movie. Itcan also be in the form of changing the physical settings in accordance to a certainmovie’s theme. For instance, some sort of theme related decorations in the room, likecandles lit on the table when showing a romantic movie on Valentine’s day or tastefulChristmas decorations when premiering a Christmas movie. These are just few ideasof how to add to the surprise factor of the Luxury cinema. Of course, each movie willhave its own theme and therefore have different surprise elements that fit best to eachparticular theme. All these elements of surprise can enhance the luxury experienceeven more.6.2 ProcessThe movie-going experience starts long before the lights go off and the movie titleappears on the screen, and ends after the movie credits are displayed and the lights goon again. When the decision is made on how to spend the free time available, the pre-research on what movies are being shown is completed and it is agreed upon whatmovie to watch, tickets have to be obtained. Nowadays the majority of movie ticketsis ordered on-line, since this method assumingly saves time and is very convenient for 17
    • the users. The on-line ticket booking system is a first “touch point” between the guestsand the cinema. When a Luxury cinema ticket is chosen, the guests can choose toorder a meal on-line which will be waiting for them when they enter the Luxurycinema. Interaction with the system should therefore be smooth, “transparent” andcomprehensible. It should be useful and usable in order to provide an optimalexperience for the cinema guests.The next stage in the movie-going experience is collecting and paying for the ticketsat the cinema cash desk, which is yet another touch point between the company andthe cinema guests. Long lines, though generally acceptable, do not contributepositively to the guests’ perception of the experience. When guests have obtainedtheir tickets they enter the cinema. Included in the price of the Luxury cinema ticket iseither medium popcorn and soda, or the movie’s theme drink. The guests then need todecide whether they want popcorn and soda or the theme drink, which is served in thecinema’s concession stand. The cinema guests can then buy some other snacks ordrinks if desired. The personnel at the cash desk and at the concession stand are animportant factor affecting the guests.The next part of the process is locating the Luxury cinema within Cinemaxx andfinding the right seat. It is important that “navigation” within the cinema is easy andfree of distractions.Before the movie starts, advertisements are usually shown to the audience. Whilesome people despise those ads and try to avoid being exposed, most consider them tobe entertaining and do not mind watching (Internet 23). Cinema administration faces adilemma in this case. On the one hand, ads are profitable for the cinema and the moreads displayed, the more money the cinema gets paid. On the other hand, too many adscan be considered as a disturbance to the guests. The cinema thus needs to beselective regarding ads and display only the ones which are relevant to the guests.The next stage in the process is watching the movie itself, and even though experienceat this stage is determined a lot by individual preferences and attitudes towards theparticular movie, the cinema can enhance the experience by providing comfortablephysical settings (see details in chapter 6.1). While watching the movie, guests canenjoy meals and drinks under a cosy blanket, and thus the experience is enrichedthrough different senses. 18
    • The process of the luxury service can be described as an elaborate interpersonalservice where both guests and employees are involved (Bitner, 1992). The physicalenvironment (tangible servicescapes) in the Luxury cinema is what is probably mosteffective concerning influencing the guests when enjoying the experience. Although,the personal contact (intangible servicescapes) from employees while servicing theguests in the physical setting is also a very important factor of the process. Theemployees can influence the experience with their service attitude, knowledge andwelcoming (Aubert-Gamet & Cova, 1999).An important aspect of the service process is to train the employees well so they caninform the guests about the function of the service experience in order to maximizeguests‘ satisfaction. If there is insufficient interaction level between the employeesand the guests, the system will not work efficiently. One of the goals of creating this"linking" value between employees and guests, during the process, is to help keep theguests‘ satisfaction level high (Internet 24).6.3 PriceBecause the Luxury cinema concept is not available in the Danish market, the pricehas to be set by taking into account the price of regular movie tickets. The price ofmovie tickets is the same in the three main cinemas in Aarhus, 65 DKK before 18:00and 75 DKK after 18:00 (Internet 11, Internet 12, Internet 25). According toJohannsson (2008), movie producers take 50-70% of the ticket price. It is assumedthat the same goes for cinemas in Denmark. In the Icelandic cinema, the ticket pricefor the luxury room is 16% higher than the ticket price for the regular screening room.A regular price for a movie ticket in Cinemaxx is 75 DKK and with the same pricelevel as in Iceland the Luxury cinema ticket will be 87 DKK. After sales tax of 25%and the movie producers cut of 50-70% of the ticket price, Cinemaxx will get 19,575to 32,625 DKK for each ticket. The price of the Luxury cinema ticket will though be160 DKK in whole. The price 160 is chosen rather than 159 because the digit 0 hasbeen found to indicate higher quality, while the number 9 can signal lower quality anddiscount pricing (Stiving & Winer, 1997). Included in the price will be the themedrink for that particular movie or medium popcorn and medium soda drink (priced 55DKK regularly). By having some part of the beverages included in the price, thecinema is guaranteed the income from a medium popcorn and soda sold. If not 19
    • included, the movie-goers might not choose to buy beverages and snacks equal to theprice of a medium popcorn and soda.Cinemaxx, BioCity and Metropol all use the same price fencing strategy. The Luxurycinema will offer the same price fences as the other cinemas (table 1).Table 1. Pricing list Before 18:00 After 18:00 Luxury Luxury Regular room* cinema Regular room* cinema Children under 12 55 140 55 - *** Normal ticket 65 150 75 160 Seniors +65 55 140 55 140 Students mon-thu** 55 140 65 150*The ticket price in Cinemaxx, BioCity, and Metropol.**Students get a 10 DDK discount four days a week.***The Luxury cinema will be closed for children after 18:006.4 PlaceThe objective is to have the Luxury cinema located in Cinemaxx. Cinemaxx is a wellknown brand name, not only by residents in Aarhus, but also by people from ruralareas and tourists visiting the city. Cinemaxx is situated in Bruuns Gallery, which is inthe centre of Aarhus. It is located next to the train station, making the Luxury cinemamore accessible to people arriving from rural areas and tourists. Cinemaxx is thelargest cinema in Aarhus and offers the most suitable facilities. Screening room 5 issuggested for renovations because it is one of the smallest rooms in Cinemaxx,seating only 83 regular seats. The room will therefore seat 48 La-Z-Boy chairs. Room5 is located in the far end of the cinema so it is relatively private from the otherscreening rooms. It is also next to a lavatory which means that the necessary plumingis available, making it easier to create an exclusive soundproof lavatory for theLuxury cinema.6.5 Physical environmentThe effect of the physical settings, atmospherics, design and layout of the premises onconsumers has been recognized by both researchers and managers for a long time.Based on the physical settings, consumers can form their perception of, and to someextent, the attitude towards a certain facility. For example, Bitner (1992) suggest thatphysical settings may influence the customer ultimate satisfaction with the service. 20
    • Physical settings are also said to effect behaviour of the customers. A frameworksuggested by Bitner implies that consumers respond cognitively, emotionally andphysiologically to the physical environment. These internal responses, in turn,influence the customers’ behaviour.According to environmental psychologists, such behavioural reactions to the placeswhere individuals find themselves can be classified into two general and oppositeforms: approach and avoidance. Approach behaviour can manifest itself in attractionto the place, desire to stay longer in the environment, spending more money, loyaltytowards the organization (return) and carrying out a certain plan or purpose withinthose settings. Avoidance behaviour is the opposite behaviour, i.e. consumers feelingthe desire to leave the place and not to come back there anymore (Bitner, 1992).Thus, special emphasis will be placed on creating the most appropriate physicalsetting. Careful planning out and designing of the physical settings of the Luxurycinema in Cinemaxx can facilitate the desired behaviour among guests. The Luxurycinema concept, if implemented thoughtfully, could contribute to attracting guests andgetting them to come back to enjoy the experience of movie watching withincomfortable settings.It is worth noting though, that physical settings do not affect behaviour directly, butelicit internal responses among the individuals. As mentioned before, such responsesmay be classified as cognitive, emotional and physiological. Cognitive responsesinfluence people beliefs about the place. So by experiencing physical settings whichare different from (and by default more pleasurable than) usual cinema settings, theguests might form the belief that the Luxury cinema is something special that providesa richer experience than a regular screening room. Emotional responses can becaptured by two dimensions: pleasure and arousal. Approach behaviour increases inthe more pleasurable environments. Emotional arousal is also associated with increasein approach behaviour, unless combined with unpleasant settings (Bitner, 1992). TheLuxury cinema aims to create a pleasant atmosphere and an elevated arousal amongthe guests. The movie-going as such is always associated with emotional arousal, andby providing comfortable seats and cosy interior designs, the Luxury cinemafacilitates pleasantness of the environment. Physiological responses also contribute tothe behaviour of the guests. Therefore factors such as the level of noise, temperature, 21
    • seats comfort, lighting and the “freshness” of the air, should all be considered whendesigning physical settings.A careful design of the physical settings in the Luxury cinema will contribute to theapproach behaviour of the visitors, and further help Cinemaxx to achieve itsmarketing and economic goals. When the concept is a success, when it is liked andappreciated by those for whom it was created, people tend to engage in word of mouthactivities, telling their friends and relatives stories about their positive experiences.People who enjoy a pleasant and comfortable time spent in the cinema, will comeback to relive the experience.6.6 PromotionTo promote the Luxury cinema, several communication methods will be used. In thebeginning, to introduce the concept, a social gathering will be held where employees,management and other stakeholders, will be invited along with their families andfriends. This will work as both a sales promotion with a free movie, food andbeverages, and as a public relation event, where hopefully the public media (press andTV) will find this new concept interesting. This will be done to create awareness andpositive Word Of Mouth among guests. Mass media advertising in the form of ads innewspapers, magazines and on WebPages, along with some point of purchasematerial, will then support the initial promotion of the Luxury cinema.Integrated marketing communication will be used as a tool to help inform guests in aconsistent way, where the goal is to provide clarity of the message and maximumcommunication impact (Pelsmacker et al, 2007). All the messages, no matter in whatform, will have the same goal to communicate the added customer value offered bythe Luxury cinema experience compared to other competitive experiences. Toimprove relations with target groups, increase customer satisfaction, and reinforcebrand awareness and brand preference, image or theme communications will be used(Pelsmacker et al, 2007). This will be the goal of the ”theme strategy” in the Luxurycinema. To follow this strategy, the luxury cinema will always have a special themewith every movie, which involves specific drinks or cocktails offered that fit with themovie theme. During premieres, this theme strategy will be taken a bit further withextra service factors to enhance the luxury experience. Other special events,supposedly more private ones, will be held which should also help communicate the 22
    • value and attributes to other internal stakeholders. This will enable an effectivecommunication with all the employees so they can be knowledgeable and share theexperience with guests (Internet 24).All printed mass media advertising will mostly be in the form of putting the Luxurycinema logo on existing movie advertisements, pointing out that the movie is shownin the Luxury cinema.E-communication, e.g. e-commerce and mobile marketing, will be used as a reminderof the Luxury cinema and to inform about certain movie premieres in the Luxurycinema or other theme events. Firstly, this will be done in the form of a Luxury Clubwhere members receive emails or text messages regarding the Luxury cinema.Everybody who is interested in attending the Luxury cinema can join the Luxury clubby registering on Cinemaxx’s webpage. The people who receive these emails or textmessages will then have the chance to be first in line to buy a ticket for that particularpremiere. Tickets to pre-premiers will also be offered to members through e-communication, signalling the exclusivity the luxury cinema guests attain. Secondly,through Facebook and other social web-networks, the Luxury cinema aims to create astrong social network, where it is possible to send out group messages to all connectedprofile friends. Finally, on the current Cinemaxx webpage a new link will be added tothe front webpage where all information about the Luxury cinema can be found andguests can sign up for free membership to the Luxury Club. The ordering of ticketswill go through the same booking system as Cinemaxx is already using.6.7 PeopleAll the people involved in the Luxury cinema service, directly and indirectly, areimportant for the brand building of the Luxury cinema. These are cinema guests,employees, management and other stakeholders who all add value to the serviceofferings. These people are also responsible for the reputation of the brand. Therefore,the whole workforce that comes in direct contact with the guests has to be welltrained, motivated and has to have the right attitude (Internet 24).For the Luxury cinema, a new service ”coach” will be hired for short time period totrain the current employees in how to provide the extra luxury service that the guestsare paying for, both technically and personally/behaviourally. This coach is aspecialist in service marketing and will give a one-day seminar to the employees, 23
    • where he will go over the important aspects to consider when providing such a luxuryexperience. After the day of the seminar, the coach will stay for the first weeks tosupervise and give instructions to any adjustments that have to be done regarding theservice. All the people who are in direct contact with guests will have the same goal increating a ”linking value” between and within the employees and guests. This is donein order to maximize the service value offered by the Luxury cinema. This will beaccomplished through the use of the cinema’s servicescapes. To achieve this ”linkingvalue” experience, the guests will play an important role as they are the onesexperiencing the service and will give it this meaning (Aubert-Gamet & Cova, 1999).7. Expected returns7.1 Ticket revenue estimationThe ticket revenue from the Luxury cinema could be over 3 times more than therevenue from a regular room (table 2). This implies that this concept is financiallyfeasible and could be of economic interest to possible stakeholders, in this caseCinemaxx. The base of this estimation is data provided by an Icelandic cinema whichoffers a luxury room (Johannsson, 2008). It is therefore emphasized that these are notnumbers from the Danish market but it is assumed that they might be similar. It wasnot possible to get data of this kind concerning the Danish market because the conceptis not available in Denmark at the time being.As mentioned before, the Luxury cinema will focus on showing the latest blockbustermovies. Therefore, the calculations in table 2 are made with 70% cut to the movieproducers. 24
    • Table 2. Estimated revenues from the Luxury cinema compared to a regular room Regular room Luxury cinema Number of seats 83 48 Average attendance 14% = 13 30% = 15 Movie ticket price 75 87 Beverages and snacks 0 73 Total ticket price 75 160 Movie ticket price 75 87 - 25% sales tax 56,25 65,25 - movie producers cut (70%) 16,875 19,575 Movie ticket sales on average per show 219,375 293,625 Beverages and snacks 0 73 Beverages and snacks included in price after sales tax 0 54,75 Beverages and snacks included in price before mark-up (100%) 0 27,375Beverages and snacks included in price on average per show 0 410,625 Total revenue on average per show 219,375 704,25 Total revenue on average per day 1.316,25 4.225,5 Total revenue on average per week 9.213,75 29.578,57.2 Cost factors estimationBecause the Luxury cinema would be located within Cinemaxx, the main cost factorswill be in regards to changing screening room 5 into the Luxury cinema. It isestimated that when renovating the room, the following cost factors will be relevant(table 3). The cost estimations of the contractor factors were made in cooperation withan employee of a local building/floor work company (Markusson, 2008).The Luxury cinema will use all the existing advertising agreements and mediachannels that Cinemaxx is already using, which keeps the communication cost for theLuxury cinema lower. The communication tactics used to promote the Luxury cinemaare not considered costly, where it will mostly use public relations, e- 25
    • communications, and the Luxury cinema logo added to existing printedadvertisements. In most cases, printed materials and various other promotionalmaterials are supplied by the movie producers (Kolbeinsson, 2008). Therefore, it isassumed that the income from the advertisement sales will be enough to cover anyadditional communication costs.Table 3. Estimated cost factors for the renovations. Price Sales without sales Supplier Product Price tax tax Quantity Cost Bauhaus Toilet 998 199,6 798,4 1 798,4 Ikea lights 39 7,8 31,2 2 62,4 Ikea Small tables 149 29,8 119,2 24 2.860,8 Ikea Blanket 79 15,8 63,2 48 3.033,6 Silvan Sink 249,95 49,99 199,96 1 199,96 Silvan Faucet 149,94 29,99 119,95 1 119,95Pixmania.com TV 1.468 293,6 1.174,4 1 1.174,4 Recliner.dk La-Z-Boy 4.495 899 3.596 48 172.608 Floor work with Contractor material 375 75 300 200 60.000 Painting with Contractor material 15.000 3.000 12.000 1 12.000 Setting up the Contractor chairs 10.000 2.000 8.000 1 8.000 Contractor Service seminar 12.000 2.400 9.600 1 9.600 Total cost: 270.457,517.3 Break-even estimationAccording to Johannsson (2008) a movie with 10% and lower attendance isconsidered to be flopping. A movie with 85% and higher attendance is on the otherhand considered as a huge success for the cinema. With these figures in mind, a worstcase and best case scenario analysis is conducted in order to estimate the break-evenpoint (table 4). As mentioned in chapter 4.3, blockbuster movies are considered to bethe most appropriate for the Luxury cinema. Therefore, a 70% cut to the movieproducers is used in the calculations. 26
    • Table 4. Worst case and best case scenario analysis Scenarios Worst case Best case No of seats 48 48 Attendance 10% 85% Sold seats 5 41Total revenue from the sales of the tickets 93,96 798,66 Total revenue from the beverages and snacks included in the overall price 131,4 1116,9 Total revenue from all sold seats 225,36 1915,56 How many shows does it take to pay off the renovations 1200 141 With 6 shows every day* 200 24*There are on average 46 showings in all the rooms daily, which makes approximately 6shows in each room (Internet 26)As table 4 shows, it would take just under a month to pay for the renovations if theLuxury cinema would have at least 85% attendance. It would take nearly 7 months ifthe Luxury cinema had only 10% attendance, which is not expected. If Cinemaxxwould decide to launch this concept in their Aarhus cinema, then it is expected thatthe biggest blockbusters would be shown in the Luxury cinema. Also, because it is anew addition to Cinemaxx offerings, it is believed that guests will want to try theLuxury cinema. As stated before, Danes are open to new experiences.7.4 Brand equityIntroduction of a new Luxury cinema concept will increase Cinemaxx’s brand equity.Brand equity is an intangible asset indicating the value of the brand and it depends onthe associations formed by customers towards the company’s service or product.When the brand is well recognized and has positive associations in the mind of theconsumers, it can add a significant value to the company (Pelsmacker, et.al, 2007).Strong brand equity might provide benefits, such as increased cash flow due toincreased market share, reduced promotional costs and premium pricing. 27
    • Since there is no luxury cinema concept available in Denmark at the moment, it willhelp Cinemaxx to differentiate itself from all other cinemas. It also creates a first-mover advantage for Cinemaxx. That kind of advantage can only be maintained ifCinemaxx keeps on innovating in the service field and designing a richer experiencefor the cinema guests to make movie-going more desirable. Improved service will alsoinfluence the organizational efficiency and effectiveness. It is clear-cut, that standingout from the competition and offering greater value is much better than just sellingand pushing advertising and pricing.8. ConclusionBased on the feasibility analysis conducted, it can be concluded that the launch of theLuxury cinema concept is feasible and fits well with the current situation. The launchis proposed to Cinemaxx, which has the necessary competences and suitableconditions. The concept is compatible with the cultural settings in Denmark and canbe implemented in a relatively short time.It is expected that the Luxury cinema will have a positive effect on Cinemaxx’sbottom line. Firstly, the expected returns analysis demonstrates that the launch of theconcept will positively affect Cinemaxx’s revenue and brand equity. Secondly,enhancing Cinemaxx’s service offerings is expected to influence customer satisfactionpositively. Finally, the launch of the Luxury cinema, which is not available on theDanish market at the moment, will give Cinemaxx a first-mover advantage.In order to hold on to their first mover advantage, Cinemaxx could add several serviceaspects to increase the value offerings even more. To further enhance the guests’experience, the concept has to be constantly developed and innovations have to bebrought about. For example, in the future, the Luxury cinema could be equipped withtouch screens, which guests can use to place the orders for meals and beverages whilewatching a movie. This would “sensualise” the experience. Additionally, a Luxurylounge could be built where only luxury guests are allowed to enter. A conciergecould greet the guests when they arrive and be available to take any orders guestsmight want to make. This concierge could be considered as a part of the Luxurycinema experience, available to make the movie-going experience even moreenjoyable. 28
    • Another potential perspective is to add to the Luxury cinema offerings a concept thatis similar to the existing “baby-bio”, i.e. showing the movies during the lowattendance morning hours exclusively for mothers and families, who can then taketheir babies with them to the movie (Internet 27). In this case, the Luxury cinemacould serve healthy meals and beverages.It is though proposed that, if Cinemaxx decides to incorporate the Luxury cinemaconcept into their offerings, they should start slowly. As mentioned earlier regardingcultural feasibility, Danes like changes but not too many changes at a time. It istherefore advisable to start by offering the Luxury cinema as proposed in this report,and then later on when it is a success, add more service attributes to hold on to thenewly acquired competitive advantage.8.1 LimitationsIt is worth mentioning that there are certain limitations to the analysis made in thisreport. It was not possible to get any information from Cinemaxx concerning cinemaattendance or any aspects regarding how the cinema operates. The expected returnswere based on numbers from the Icelandic cinema market and it was assumedthroughout the report that Cinemaxx’s operations are similar to the Icelandic cinema.Even though Iceland and Denmark are similar in many ways, there may be somedifferences regarding the cinema market which the authors of this report were not ableto pinpoint.Also, regarding expected returns, only one price is used in the calculations, the after18:00 price. Because there were no available data on how the attendance before 18:00varies from the attendance after 18:00, the average attendance in Iceland was used asa reference. In Icelandic movie cinemas, there is only one fixed price for regularscreening rooms and one fixed price for the luxury room. It is therefore possible thatbecause Danish cinemas offer some degree of price fencing, their average attendanceis higher than in Iceland. 29
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