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Strollers & Spreadsheets (continued)
I have to wonder about something else economists talk about; namely, the
opportunity cost. Simply put, the opportunity cost refers to what you lose by
NOT taking an action. If you decide not to produce the GI Joe action doll
because the mock-up doesn't please you, and then a competitor does it and makes
a fortune, your opportunity cost is high.
In the case of Disney's strollers, the opportunity costs are the lost rental
fees. But I would like to postulate a second opportunity cost: customer
goodwill. You can't measure this, and you won't find any results no matter how
many Guest Satisfaction Surveys you conduct, but it pisses off tourists to
travel thousands of miles to visit your resort, and then feel the cold paws of
the Mouse reaching into their wallets. If a product is perceived as so expensive
they gravitate to the alternative – buying the offered stroller instead of
renting one – well, guess what: you've just alienated your customer.
Sure, the alienation is slight. You can't measure it. But by golly, it's
there. I challenge any Disney World executive (or Burbank super-executive) to go
listen for a half hour at the stroller rental counter. Don't wear a suit. Dress
like a tourist, and act lost, and just eavesdrop.
I could veer into a side argument at this point, pointing out the
environmental cost of the new pricing scheme. It's obvious to just about
everyone that the new pricing will mean a ton of abandoned strollers when the
vacation is over, and people don't want to take the unwanted "rental" home.
Where will those strollers go? Well, Disney can't sell them again, so they go
into the trash. Is this in keeping with Disney's philosophies? A quick look at
the corporate website reveals this gem:
Ever since Walt Disney expressed his commitment to the
environment more than 60 years ago, the Walt Disney Company (TWDC) has
upheld a strong commitment and responsibility to conserve natural resources.
In 1990, TWDC formed the Environmental Policy Division, which focuses on the
education and maintenance of six key priorities: climate protection, energy
conservation, green purchasing, waste minimization, water conservation and
wildlife conservation. In addition, Disney introduced their environmental
brand: Disney's Environmentality™. The brand represents Disney's fundamental
ethic that blends business growth with the preservation of nature. Today,
environmental departments Companywide have made progress toward an even
stronger environmental commitment by introducing new programs, increasing
employee and Guest involvement, and positively impacting our communities.
I don't see much "waste minimization" in the new stroller pricing scheme.
Methinks the one hand of the Walt Disney Company is not talking to the other
hand!
But mostly, the problem is one of worshipping at the altar of quantitative
analysis. In a way, I'm making an argument for considering the qualitative side
of things, not just the quantitative. Even if the numbers *do* add up, it's not
always a good thing to do. My hyperbolic example is to consider the issue of
blackjack gambling on the Mark Twain steamboat. It would make a boatload of
money! Doesn't mean it's the right thing to do for Disneyland.
Well, guess what? Most of the decisions made at Disneyland and Walt Disney
World these days are driven ONLY by the numbers. Pick an innovation at the
parks, and there's a numbers-driven reason why it's there. FastPass, for
instance, only continues to exist because Guest surveys indicate such a high
regard for this line-skipping system (that the Guests are being bamboozled into
thinking the system is good for the parks is never taken into account).
Consider Outdoor Vending (called OutDoor Foods here in Orlando). Those carts
are everywhere! Meanwhile, there are closed restaurants at every turn. Yes, I'm
looking at the Magic Kingdom (El Pirata and Noodle Station in particular). Why
in the world would you close restaurants but add extra food carts in the park?
Because on paper, it makes sense. A cart can generate $100 per hour with one
labor hour. A restaurant may require 17 labor hours in a sixty-minute period,
and generate less than $1700. A simple ratio comparison will tell you that the
cart, minute by minute, is generating more money per person.
Some joke that at California Adventure the
carts may very well outnumber the visitors.
The Disney park experience is more than the sum of spreadsheets. Patrons
paid good money to go there, and those shuttered restaurants right next to those
open food carts just plain look cheap. Don't take my word for it. Dress like a
tourist, and act lost, and just eavesdrop. You'll hear plenty complain. That's
what Walt understood. He wanted his managers inside Disneyland, not in some
office far from the visitors.
It's not just the restaurants, either. Have you ever been at a park on a day
when the crowds are thin, but the lines move slowly at the big rides anyway?
You're a victim of the spreadsheets. They are running only three of the trains
on that roller-coaster that day, as a way to save labor costs. They could run
five trains, but that costs more money in labor. So to save a piddling $24 or
$50, the company has decided your wait time has to increase from 12 minutes to
30 minutes.
This is risky territory, but the same argument could be applied to the Annual
Passport program at both Disneyland and Walt Disney World. How so? It's a
question of spreadsheets. In the days before one-day passports, you had A
through E tickets. It would make no sense to offer annual passes in those days,
but once the ticket system was abandoned, the annual pass made sense.
On paper, this looks like a win-win. But a side effect crept into the scene.
Recently, a reader lamented to me in an email that Disney no longer offers
"tiered experiences." In other words, they tend to build the big rides now, but
no longer build the small rides. In fact, they are closing small rides to save
money (see the Labor Costs argument above!)
And once you think about it, it makes sense. If you're Disney and you want to
drive new traffic to your parks, you only build things that will encourage
people to come. Thus, you build E-Ticket, D-Ticket, and maybe C-Ticket rides.
But no A-Ticket and B-Ticket rides. You can't market those in your national ad
campaign, so it would be money down the drain.
In a world with ticket books, it's not money down the drain to build A-Ticket
and B-Ticket rides. You would still get riders for them, because they purchased
ticket books. As radical as this sounds, I really think the one-day passport
(and the Annual Passes which were spawned by them) did some harm to the parks.
The Disney company loves to trot out quotes from Walt Disney when convenient,
such as the recent attempts to justify the changes to 'it's a small world'. But
this same tool can be turned against them. Can you possibly imagine Walt Disney
trying to sell those New York bankers on the idea of Disneyland using
quantitative analysis? Walt needed seed money, so did he turn to charts and
graphs and marginal returns? Heck no. Walt brought them an aerial view, an
artist's rendering of the eventual Disneyland. He brought them an argument done
in qualitative terms, not quantitative.
A sea of unrented strollers
sits just inside the turnstiles. I guess the prices were too high!
Managers at Disney parks and bigwigs at Burbank: I have a challenge for you.
Don't listen to your Accountanteers. I know, you have a fiduciary
responsibility, and you want the financials to improve every quarter. But you
should resist that call. Make an argument for Disney as a solid, core,
dependable earner of cash year after year. Disney is not a growth stock. Your
job is to ensure shareholder value, that much is true. But you should ensure
value responsibly. Don't do it by eviscerating the core model so completely that
customers leave, and long-term you end up with LESS shareholder value. I'm not
suggesting you abandon quantitative analysis, but for goodness' sake please
temper it. Think of the qualitative side, too!
In the grand scheme of things, the strollers at WDW are pretty trivial.
Insignificant, even. Especially when there are giant glaring issues that impact
the customer experience much more directly, such as that dead real estate in the
parks. But the stroller pricing phenomenon is symptomatic of everything else
that's keeping Disney from its full potential. Disney may be "declining by
degrees" lately, but it doesn't have to. A simple balance with the qualitative
side may be all that's needed. Yes, profit is important. But doesn't it make
sense to let the customer leave with a few dollars still in his wallet, so he'll
have both desire and means to return again soon, and be a customer again?
Keep flirting with the opposite extreme, Disney, and you'll soon be facing
that worst of all possible scenarios: the burned customers. Ask any industry
expert, and they'll tell you it's much harder to woo back a burned customer than
to keep him in the first place. Less expensive, too.
The strollers are only a small part of that. But customers used to want those
rental strollers, and at these new prices, they don't want them anymore. You
aren't giving the customers what they want anymore. Now you've giving them what
the spreadsheet dictates, and that's a crucial and critical difference. I hope
the lesson is learned before it's too late. |
