Direct Debit Can Help Manage Peaks and Troughs

Direct Debits are ubiquitous as a form of payment nowadays with around 75% of the UK adult population having at least one of these payments set up against their bank account. Generally they are used for regular payments, such as loans, satellite TV or for household bills such as the Gas and Electricity.

But Direct Debit can be used to help many different business models – for example, a cinema chain.

One of the largest cinema chains in the UK, who held 24.6% of the 2011 box office share, provide a membership card where for a monthly subscription, members can see as many 2 D films as they can watch. The majority of cards are paid for monthly via Direct Debit.

So what are the reasons that a cinema would effectively open their doors for a single monthly payment? The reasons are manifold:

  1. Usage Spread – There will be subscribers that frequently use their membership cards and those that ‘underuse’ them. The under-users will subsidise the more frequent cinema-goers so that an average income per use can be established.
  2. Smoothing Peaks and Troughs – When there is a lull in Hollywood output, subscription income continues to be collected. Similarly, the subscription income helps fund non-mainstream films such as Bollywood and other foreign offerings.
  3. Encouraging Repeat Visits – Customers will want to get value from their cards so they will be inclined to visit the cinema more, often at off-peak times where business is slower. This helps smooth capacity utilisation throughout the week.
  4. Increasing Other Revenue Streams – A trip to the cinema wouldn’t be complete without popcorn and a soft drink; repeat visits mean repeat custom at the concession stands.
  5. Reinforcing Customer Loyalty – The fact that a movie-goer has a membership card means that they are less likely to frequent competitor cinema chains.

Monthly subscription cards for services are clearly popular and evidence of this is clear from the membership numbers given in the company’s annual reports: ( 2008 – 223,000; 2009 – 240,000; 2010 – 250,000; 2011 – 280,000 ).

The membership scheme brings many benefits to the company allowing it to try different things such as ‘alternative’ programming and now accounts for around 16% of total box office revenue. Of course, as long as the scheme continues to appear to provide good value to its members, the revenue remains constant or increases throughout the year. Encouragement to spend more at the concession stands is also given in the form of a 10% discount on food and drink when the card is presented at the point of sale.

One other potential benefit of running such a scheme is that it opens up the opportunity to collate individual usage data on a per-customer basis. From a marketing point of view, this information is absolutely invaluable as it would allow the cinema to target direct marketing or offers by e-mail, direct mail or on till receipts to individual customers or groups of customers based on profiles built up from past viewing and spending history. This means that the cinema can utilise its marketing resources more efficiently by focussing its time and energy on targeted campaigns that produce a greater response rate.

As you can see, while the benefits of using Direct Debit for your business may not be immediately obvious, employing it in different ways can produce many benefits, not only by smoothing peaks and troughs in revenue, but by encouraging repeat custom, loyalty and marketing opportunities.

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