What comes to mind when you hear the name “Disney”? Mickey Mouse? The movies? The TV Channel? The theme parks? If you are a business person, the first thing that comes to mind might be Disney’s incredible brand power that they built on their consistent track record of surprising and delighting customers. Whatever comes to mind, I am willing to guess that it is not “business analytics”. Yet one of the little-known secrets of Disney’s success is their commitment to business analytics and their successful use of analytics across their many lines of business.
Last week, Mark Shafer -- Senior Vice President, Revenue and Profit Management at Disney Parks and Resorts -- spoke about the use of Customer Analytics throughout the Disney organization. Mark supervises a team of 120 plus analysts who work on business analytics, largely on pricing, sales, marketing and revenue management topics. The group is based within the parks and resorts groups but supports projects across their business lines including their television networks (ABC, Disney Network, ESP), the cruise line, and the theatrical groups as well as the theme parks and hotels. A short film clip showing Mark speaking on the use of Business Analytics can be found here.
Mark mentioned two areas in which customer analytics has had a major impact at Disney. The first was revenue management for “The Lion King”. The “Lion King” has now generated more revenue than any other Broadway show ever. This despite being in a smaller theater and having a shorter run to date. How does “The Lion King” do so well? Of course it is a great show with widespread name recognition that appeals to audiences of all ages. But – as pointed out in an article in the trade weekly Variety, another reason is “dynamic pricing” a.k.a “revenue management”.
According to Variety, the pricing system that Mark’s team designed and built for “The Lion King” has two layers. “First, the range of prices across the theater is set according to an estimate of the demand for a particular performance, based on the 15 years of past (box office) from which to extrapolate annual trends. Second, after tickets go on sale, Disney re-examines each (performance) to see how demand is shaping up in reality, and then tweaks pricing accordingly.”
This is a great implementation of classical revenue management – long practiced by the airlines and hotels, but a relative newcomer to Broadway. Like the airlines and the hotels, revenue management has enabled Disney to increase revenue while keeping prices under control. “The Lion King” has been able to generate record revenues even though it has never had the highest average ticket price among Broadway shows.
I worked for a number of years with airlines, hotels, rental cars and cruise lines to build some of the first revenue management systems and I know from firsthand experience how effective these approaches can be. I find it very gratifying to see similar approaches being applied effectively in new industries such as Broadway theater and sporting events. As Mark put it, “Whenever you hear Variety magazine talking about analytics, you’ve hit the big time.”