What Theme Parks Teach Us About Market Segmentation
The Wizarding World of Harry Potter and Universal Island of Adventures have mastered the art of extracting value from customers
Editor’s Note: No Mercy/No Malice is a column from Professor Scott Galloway, where he shares various reflections on business, tech, and life on his mind each week.
Market segmentation is the process of dividing a large homogenous market into cohorts with similar needs or wants. You then design product/pricing/perception that match the preferences of that segment.
As marketing has evolved, managers had to figure out how to carve up the pig and sell different parts to different people, for various reasons and at varying prices, to capture surplus value. Differentiation of a product or service, real or perceived, is a form of price discrimination that helps maximize revenue while offering some consumers (21-day advance purchase and no cancellation) the chance to buy things for below cost.
Segmentation has become increasingly deft/daft. That’s not an exit row seat, but “Economy Plus,” worth an incremental $29. A coach seat closer to the front will set you back $40, and includes “up to” 4 inches of additional pitch. You can splurge and upgrade your hotel room from a “King” to a “Superior King,” which for another $79 includes a loveseat and table.
We segment our kids into favorites. I know how awful that sounds. We naturally begin to sort, as it helps any sentient entity, or manager, achieve success — allocate resources or capital to achieve greater return than their competitors. Note: The previous sentence was a bullshit/pedantic way of saying “prioritize.” I have a favorite son, always have. I think most parents do. That’s the bad news. The good news is it changes back and forth — we have two. We protect this secret (who is our favorite at any given moment) as if it was a nuclear launch code. Recognition you have a favorite outs you as a terrible parent, like Steve Jobs.
I took my oldest to the World Cup, so the youngest knew he was owed, big time. It’s impressive that kids who can’t put on their own pajamas understand the currency of intangibles and can communicate, super clearly, that you owe them something special. So my response to the trial attorney with his pajama top on backwards: “We can do anything you want.”
And then, he calls my bluff: “I want to go to Universal Orlando Islands of Adventure and Volcano Bay.” No. Please no. It’s as if we’d hired a consultant to coach him on how to extract something his dad would never consider ever, for anybody.
Orlando or Bust
We stop to get gas, and it’s clear big oil has figured out segmentation. Shell gas stations segment the fuel — regular, unleaded, and supreme. I go for the supreme, as they’ve figured out guys like me will pay another 27 cents/gallon as it might, who knows, be better. The two-day two-park tix have been purchased. However, the strategy group at Comcast has found a way to extract additional, 100% gross margin, revenue by offering me an “express” pass — cut the line for an additional $85/ticket. Yes, I should do this. Then for another $10 ($95 total), I can purchase the “unlimited” express pass, meaning I can cut the line on the same ride numerous times, vs. just once.
Who. Even. Thought. Of. That?
They’ve done the testing, and anybody willing to pay $85 to cut the line is also willing to pay $95 for the same thing, but maybe a little better. In recognition of the 1% who have just killed it, there are now VIP private tours of theme parks with a guide who merchandises your day and escorts you through employee-only trap doors to look behind the scenes (“This is where we find phones that fall out from people on the ride above”). The cost is around $3,000 for a party of 1–5 people, but doesn’t include admission to the park.
If this feels like a nationwide strategy to serve the cohort that has captured 85% of post-recession income growth (the top 1%), trust your instincts. Our economy, and its pricing, is barreling toward a society of 350 million serfs serving 3 million lords.
The Wizarding World of Harry Potter is the best product in the market, full stop. Creative attractions, great personnel, visually stunning, inspiring. The crush of humanity waiting to ride on a bookcase through Hogwarts is easy to be cynical about, when you’re a glass-half-empty type of guy like I am. The first day was fine. The Wizarding World was wonderful: butterbeer and rides that are both well done and like a blast of chemo — sure to make you nauseous.
The Wizarding World has also mastered segmentation and offers Harry Potter’s wand: 11 inches long, made of holly with a phoenix feather core for $49. But wait, there’s more. The wand can make crazy-cool shit happen, as wands are supposed to do, when you wave one at a window on Diagon Alley. A book page turns on its own (I know, amazing, a page that turns on its own). However, if you want the page-turning wand, you need to purchase the stick with “interactive powers” for $59. We capped the day at the Toothsome Chocolate Emporium & Savory Feast Kitchen, which is a parent’s way of saying, “I love you so much I’ll let you eat chocolate and marshmallows for dinner.”
The second day was a real test, Volcano Bay. A water park designed by Neil Armstrong and Jason from Friday the 13th. Your TapuTapu wearable can be preloaded with your caste status. Or maybe not, we have to go to the park concierge to get another wearable in case we want to cut the line. My son and his best friend, Charlie, a wonderful boy who is happy, polite, and fearless, are leading the pack, demanding we go on everything. Charlie gives my son the confidence to go on rides he wouldn’t normally, as my son would register the look of dread/terror on his dad’s face and pass. But not Charlie — he’s 8 years old, 4’2″, 45 lbs, and not afraid of anything.
It’s the end of a long day, and Dad is struggling with his inner-ear functions after the Honu ika Moana ride. It’s 95 degrees of humid heat. I’m sunburned, full of butterbeer, nauseous, and there’s a decent chance I could have a stroke or start crying. It’s time to go, thank Jesus. My youngest, who, again, can’t put on his own pajamas, sees his opening to negotiate. “Can we go on just one more ride?”
“Sure,” says Dad.
My youngest pulls out the big gun: “I want to go on the Ko’okiri Body Plunge.” The plunge is a straw running down the center of an eight-story Polynesian volcano built by Polish work crews. Entrance into the straw involves climbing into a pneumatic transport tube designed for humans who decided they needed to travel down a volcano at 85mph in a dark hermetically sealed tube. This was a bridge too far for me. So, after validating they were tall enough, Dad sent them up the 476 steps and agreed to meet them at the pool that Ko’okiri expectorates them into. In general, I leave all parenting decisions to a painted sign that, because my son is tall enough, assures me I no longer need to be his guardian. Good stuff.
I walk to the volcano’s urinal, the exit pool, but too much time goes by. Where is my boy? Is he in the capsule, stuck and screaming? Would he not get in the capsule, and is hovering around the top of the straw wondering where his dad is? Finally, his friend explodes into the pool and seems only mildly scarred by the experience. So, my boy must be plunging through the volcano, at 1/10th the speed of sound, as his Steve Jobs–like dad waits by the pool worried sick. I mean, sick. And then my eight-year-old, who has survived the plunge and is my favorite again, comes barreling into the water. His dad, in a bathing suit, Havaianas flip-flops, and dress socks (forgot athletic socks and was worried my feet were getting sunburned) is there armed with reassurance — “That was amazing, so proud of you!” — and a protein bar: “Are you hungry?”
Advice to My Younger Self
Love and relationships are the ends, everything else is just the means. We, as a species, segment love. When we are young, we take love, our parents’, teachers’, caregivers’. When we enter adulthood, we find transactional love; we love others in exchange for something in return — their love, security, intimacy, etc. Then there’s complete love, surrendering to loving someone regardless of whether they love you back, or get anything in return for that matter. No conditions, no exchange, just a decision to love this person and focus solely on their well-being.
Love received is comforting, love reciprocated is rewarding, and love given completely is eternal. You are immortal. Our role, our job as agents of the species, is to love someone unconditionally. It’s the secret sauce cementing the survival of homo sapiens. And to ensure we continue to enlist in this act, it’s also the most rewarding. To love someone completely is the ultimate accomplishment. It says to the universe you matter, you are an agent of survival, evolution, and life. You are still just a blink of an eye, but the blink matters.
Standing at the edge of a pool, I wait for my son. He is rattled by the violent drop of the Ko’okiri, but his gaze immediately purchases his dad, and he looks relieved, even gratified. He dropped eight stories, feels a sense of accomplishment, and asks to go again. He knows he can do it, and that a man in shorts and dress socks will be at the bottom waiting for him. Someone who loves him, completely.
Life is so rich,
Originally published at www.l2inc.com.