Harvard Case - Tokyo Disneyland (3): New Pricing Policy Needed For Sluggish Demand
"Tokyo Disneyland (3): New Pricing Policy Needed For Sluggish Demand" Harvard business case study is written by Mitsuru Misawa. It deals with the challenges in the field of General Management. The case study is 17 page(s) long and it was first published on : Nov 1, 2012
At Fern Fort University, we recommend a multi-pronged approach to revitalize Tokyo Disneyland's demand, focusing on a strategic shift towards value-based pricing, coupled with targeted marketing campaigns and enhanced guest experiences. This strategy aims to capture a wider market segment while maintaining profitability and fostering long-term growth.
2. Background
Tokyo Disneyland, a flagship attraction of the Oriental Land Company, has experienced a decline in visitor numbers, primarily due to increased competition from other theme parks and a perception of high ticket prices. The case study highlights the company's struggle to maintain its competitive edge and attract new visitors while catering to existing loyal customers.
The main protagonists are the executives at Oriental Land Company, who are tasked with developing a new pricing policy to address the sluggish demand and ensure the park's future success.
3. Analysis of the Case Study
Strategic Analysis:
SWOT Analysis:
- Strengths: Strong brand recognition, iconic attractions, high quality of service, dedicated fanbase.
- Weaknesses: High ticket prices, limited capacity, potential for overcrowding, reliance on a single park model.
- Opportunities: Expanding into new markets, diversifying offerings, leveraging technology for enhanced guest experiences, incorporating sustainability practices.
- Threats: Increasing competition from other theme parks, economic downturns, changing consumer preferences, environmental concerns.
Porter's Five Forces:
- Threat of New Entrants: High due to the availability of land and potential for new theme park developments.
- Bargaining Power of Buyers: Moderate, as consumers have a range of entertainment options, but Tokyo Disneyland holds a strong brand appeal.
- Threat of Substitutes: High, with other theme parks, entertainment venues, and online entertainment options competing for consumer attention.
- Bargaining Power of Suppliers: Low, as the company has established relationships with suppliers and can negotiate favorable terms.
- Rivalry Among Existing Competitors: High, with increasing competition from both domestic and international theme parks.
Financial Analysis:
- The case study highlights the need for a pricing strategy that balances profitability with attracting new customers.
- A regression analysis could be conducted to assess the relationship between ticket prices and visitor numbers, identifying the price elasticity of demand.
- This analysis would help determine the optimal price point that maximizes revenue and minimizes the risk of further decline in attendance.
Marketing Analysis:
- Target Audience: The park should identify and segment its target audience, catering to both families and adults seeking a unique experience.
- Value Proposition: Emphasize the unique aspects of Tokyo Disneyland, such as its immersive storytelling, meticulous attention to detail, and cultural experiences.
- Marketing Channels: Utilize a mix of traditional and digital marketing channels, including social media campaigns, online advertising, partnerships with travel agencies, and influencer collaborations.
Operational Analysis:
- Capacity Management: Analyze current capacity and explore options for expanding the park's facilities to accommodate more visitors.
- Queue Management: Implement efficient queue management systems, such as virtual queueing and fast passes, to enhance the guest experience.
- Staff Training: Train staff on customer service excellence, cultural sensitivity, and the ability to handle diverse guest needs.
4. Recommendations
1. Implement Value-Based Pricing:
- Tiered Pricing: Introduce different ticket prices based on the day of the week, season, and time of visit. This allows for flexibility and attracts price-sensitive customers during off-peak periods.
- Multi-Day Pass Discounts: Offer discounted multi-day passes to encourage longer stays and increase revenue per visitor.
- Dynamic Pricing: Utilize real-time data and predictive analytics to adjust ticket prices based on demand, similar to airlines and hotels. This optimizes pricing for maximum revenue generation.
2. Enhance Guest Experiences:
- Technology Integration: Leverage technology to create immersive experiences, such as augmented reality attractions, interactive games, and personalized mobile apps.
- Character Interactions: Increase the frequency and variety of character interactions to create memorable moments for guests.
- Food and Beverage Offerings: Expand the range of food and beverage options, including themed dining experiences and cultural cuisine.
- Sustainability Initiatives: Implement eco-friendly practices, such as reducing waste, conserving water, and promoting sustainable tourism.
3. Targeted Marketing Campaigns:
- Segmentation: Develop targeted marketing campaigns based on different audience segments, such as families, young adults, and international tourists.
- Digital Marketing: Utilize social media platforms, online advertising, and influencer marketing to reach a wider audience and promote special events.
- Partnerships: Collaborate with travel agencies, airlines, and other businesses to create package deals and attract new customers.
- Content Marketing: Create engaging content, such as videos, blog posts, and social media updates, to showcase the park's unique offerings and experiences.
5. Basis of Recommendations
These recommendations are based on a comprehensive understanding of the park's strengths, weaknesses, opportunities, and threats. They align with the company's mission to provide exceptional guest experiences while maintaining profitability.
- Core Competencies: The recommendations leverage the park's existing strengths, such as its brand recognition, iconic attractions, and high quality of service, while addressing its weaknesses through innovative strategies.
- External Customers: The recommendations cater to the diverse needs of the park's target audience, offering a range of pricing options and experiences to attract a wider customer base.
- Competitors: The recommendations aim to differentiate Tokyo Disneyland from its competitors by emphasizing its unique offerings, enhancing guest experiences, and leveraging technology for innovation.
- Attractiveness: The recommendations are expected to increase revenue and profitability through a combination of value-based pricing, enhanced guest experiences, and targeted marketing campaigns.
6. Conclusion
By implementing these recommendations, Oriental Land Company can revitalize demand for Tokyo Disneyland, attract new customers, and ensure the park's long-term success. The combination of value-based pricing, enhanced guest experiences, and targeted marketing campaigns will create a more compelling value proposition for visitors, leading to increased attendance and revenue.
7. Discussion
Alternatives:
- Lowering Prices: While lowering prices might attract new customers, it could also negatively impact profitability and potentially devalue the brand.
- Expanding the Park: This option requires significant investment and may not be feasible in the short term due to land constraints.
Risks:
- Price Sensitivity: The new pricing strategy may not be successful if customers are highly price-sensitive.
- Competition: Competitors may implement similar strategies, leading to a price war.
- Technology Adoption: The successful implementation of technology-driven experiences requires significant investment and expertise.
Key Assumptions:
- The new pricing strategy will be effectively communicated to customers.
- The park will be able to manage capacity effectively to avoid overcrowding.
- The marketing campaigns will be successful in reaching the target audience.
8. Next Steps
- Conduct a comprehensive market research study to assess customer preferences and price sensitivity.
- Develop a detailed implementation plan for the new pricing strategy, including timelines and resource allocation.
- Pilot test the new pricing strategy in select periods before implementing it across the park.
- Invest in technology and staff training to support the implementation of enhanced guest experiences.
- Monitor the performance of the new pricing strategy and make adjustments as needed.
By taking these steps, Oriental Land Company can successfully navigate the challenges of a competitive market and ensure the continued success of Tokyo Disneyland.
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Case Description
On 9 May 2005, Oriental Land Co, Ltd ("OL") announced changes in the company's top management. They were feeling the heat not only from the humid weather in Tokyo in the rainy season but also as a result of the visitors' numbers that had just come in. The total combined attendance at Tokyo Disneyland Park and Tokyo DisneySea Park for the fiscal year (1 April 2004 to 31 March 2005) amounted to 25.021 million guests, 98.2% of the previous year's attendance. The top management was concerned that this decrease in attendance might be a bad sign of tough times ahead and it was a prime example of a successful foreign investment in Japan now caught in a completely new structural change. The factors that had been critical to its past success were now diminishing. The top management thought that the amusement park and leisure land industry provided little cause for optimism, due to factors such as slackening consumer spending and demographic changes. Under these conditions, the top management felt that a study was needed to determine whether OL could diversify the operating base. They specifically wanted to know whether the current pricing policy was effective under deflation, which the Japanese economy had been suffering for a long time, and how changes in pricing to visitors, if necessary, would affect the company's cash flow in the future. The new pricing strategy would be based on the price elasticity of demand by the visitors to the company's services.The top management asked the planning department to study the possible price changes and use net present value ("NPV") methods to evaluate these alternatives on the effect of the future cash flow. The strategy would also need to incorporate the company's long-term strategies.
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