Making Magic the Multiplex Way

CASE STUDY ON “MAKING MAGIC THE MULTIPLEX WAY” ASSIGNMENT Economics & Management Decisions

SUMMARY: The case study on “MAKING MAGIC THE MULTIPLEX WAY” reveals the shift in consumers’ preferences with respect to watching films. Nowadays, people are expecting more than an experience from entertainment industry. Cinema goers are ready to pay reasonably well for getting that kind of more than an experience. This shift in consumers’ preference is due to the change in their economic status and change in attitude towards viewing experience. People have started to prefer multiplexes over single screen cinemas since they find more variety under reasonable prices. Multiplex culture has started to spread out to many other small towns and cities which have led to drastic shift among film goers. The contribution of multiplexes to film industry accounts to 35% which is a very encouraging economic factor. Thus the middle class people are also able to get more than a cinema viewing experience by the revolution caused by the emergence of multiplexes. Questions: 1) What lessons can you draw from the case regarding consumer behaviour? Due to the increase in employment opportunities, there has been a significant growth in population in urban areas like metro cities. Since the earning capacity of individuals has increased gradually, people are ready to spend more for entertainment segment. But there has also been a significant shift in the preference of spenders when it is concerned with entertainment. Various new financing options from banks like credit purchases has also made middle class urban India to start enjoying things which upper classes had been enjoying for the past couple of years. People like to either “have more entertainment for less money” or “more entertainment under a single roof”. Multiplex industry has timely capitalised of this need of consumers and has started to improvise more on these needs. These factors can be drawn regarding the change in the consumer behaviour. 2) Do you think change in consumer perception in middle class has been instrumental in emergence of multiplexes? What can be the other reasons? Definitely the change in consumer perception of the middle class has been instrumental and influential to a large extent for the emergence of multiplexes. And also the need for more entertainment under a single roof and at a reasonable price has been rightly understood which has led to the proper positioning of multiplex business. The population of middle class India is more which the target market for the multiplex industry is. The earning capacity of middle class has also considerably improved to a great extent and continues to improve still further too. The other reasons for the emergence of multiplexes are a) Emergence of fashion outlets of various brands in multiplex malls since from a marketing point of view there is an immense potential in positioning and selling of products. b) Global brands find it as the right place for positioning their brand and products among the maximum spending community.

c) Food chains have found an excellent place to sell out their products in a mass scale since people who come to multiplex have an idea of experimenting out with new things under a single roof. d) Window shopping is more prominent in these multiplex malls which help for advertising and marketing in a much easier way. e) Due to the presence of many shops / brands under a single roof, the maintenance cost is shared in smaller unit which consumes less from the profit a shop earns. 3) Which of the groups, according to you, would have demand for multiplexes? No of Household in Millions

CATEGORY OF PEOPLE

1994-1995

1999-2000

2006-07

Very Rich

1

3

6

Consuming

29

55

91

Climbers

48

66

74

Aspirants

48

32

15

Destitutes

35

24

13

From the above table, the data can be used for interpreting which segment of population has been influential for the emergence of multiplexes. 100

NUMBER OF HOUSEHOLDS (in millions)

91 90 80

74 66

70 60

55 48

50

48

40 30 20 10 1 0

3

35

32

29

15

15 13

6

VERY RICH

CONSUMING

CLIMBERS

ASPIRANTS

DESTITUTE

1994-95

1

29

48

48

35

1999-2000

3

55

66

32

15

2006-07

6

91

74

15

13

CATEGORY OF HOUSEHOLDS 1994-95

1999-2000

2006-07

From the graphical representation of the data, it can be analysed and interpreted that the potential market for the multiplex industry has been and will be among the Very Rich, Consuming and Climbers segment of the entire population. There will be a continued increase in trend as long as the earning capacity of the people, belonging to the above mentioned groups, improves. India is the future global market and its symptoms have already started to make its presence which in turn will improve the economic status of various groups of Indian population. 4) Would law of diminishing marginal utility apply to movie watching? Will this affect the growth rate of multiplexes? Or can it be seen as a cause for establishment of multiplexes? Give arguments in support of your contention. The law of Diminishing Marginal utility would take a back step when it comes to entertainment industry as long as there is innovation in it. The income level of the very rich, consuming and climbers group will continue to increase as long there is increase in growth opportunities of India since these three groups are linked to each other. Growth of the multiplexes will not be affected in a negative sense but every new multiplex must come out with a novel idea in targeting these target potential markets innovatively with new and attractive features which will be valuable for the consumers. This means that knowing that there will be change in consumer preferences periodically; it should be the responsibility of the multiplexes to revive itself with innovative ideas for its existence. The consumers would not compromise on getting the full cinema viewing experience which is got at perfect quality in multiplexes. 5) Can multiplexes use the concept of consumer surplus for attracting more consumers? How? Consumer Surplus is the difference between the prices which the consumers are willing to pay and the amount which they actually pay. As the earning and buying capacity of the consumers’ increases, the concept of consumer surplus can be used to attract more customers. The multiplex developers can take this opportunity to make good business by providing good quality entertainment to the customers. As the spending capacity of the consumers is good, the consumers won’t mind to spend more to get satisfaction in the service they get from what they pay. So only the multiplex business offers tickets at higher rates than the single screen cinema halls thereby able to invest more on technologies which can attract more and more customers by giving them an incredible experience.

From the entire case study, it is clearly evident how multiplex business emerged to its peak by utilising the increased potential among the middle class people. They were quick to sense the opportunity that has come into existence among a particular group of people. Thus it can be said that multiplex business will tend to be more profitable as they improvise their technology to provide an excellent viewing experience to the customers.