Analysis from TRG Arts

This blog has moved.

2013-05-01T20:19:00.000-06:00

Hi there reader,

Analysis from TRG Arts is now located on the new TRG Arts website, so come on over and join us there.

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Sincerely,
The TRG Arts blog team

We're moving! New TRG Arts website coming soon

2013-04-24T06:00:00.000-06:00

At the beginning of May, TRG's website and blog will unite on the same site, with a new look and feel.

This means that the Analysis from TRG Arts blog will no longer be on blogspot and this URL will re-direct you to the new blog. If you access this blog through RSS, you will need to subscribe to the new blog—and we hope you will!

We've made this move simply to house all of our content under one roof, so you can access blog posts alongside case studies, webinar recordings, and more. You'll be able to browse by artistic genre and topics such as "dynamic pricing". You'll still have access every blog post all the way back to the beginning on the new site. And, of course, we'll continue to bring you new insights on cultural consumer behavior from all your favorite contributors.

The new website is located at the same URL as the current one (www.trgarts.com). It will feature:

New and updated information on who we are and what we do
Staff profiles, so you can get to know our expert team better
Better player for recorded webinars
Ways to browse blog posts alongside case studies, webinar recordings, and more by topic and artistic genre.
And more!

We can't wait for you to visit us at www.trgarts.com and check out our new look. See you soon!

The Risk of Free

2013-04-18T07:07:00.000-06:00

Photo via flickr

Some time ago I had a conversation with a theatre manager who had expressed an interest in TRG’s ticket pricing counsel. The more we talked, the more agitated she became. She nervously offered that her artistic director would NEVER allow pricing strategies like this happen at her theater. I, laughing, joked, “Oh my. Your artistic director is a socialist?” With great seriousness, she replied, “Absolutely not! He is a communist! He believes that every ticket should be FREE!”

The argument surrounding free and deeply discounted tickets has been around forever. The Dallas Museum of Art kicked off another round of conversation when they recently announced their decision to provide everyday free admission to everyone. Museum memberships will also become free, with visitors actively encouraged to join using a very slick electronic system located at entry points to the museum.

Will history repeat itself?
Colleagues in the performing arts world have gone down the path DMA is undertaking. The unrequited hopes that free tickets would generate larger, more invested audiences are a cautionary tale. The expected audience growth and contributed revenue did not materialize. Our firm’s study may offer some insight.

Over the past two decades, whenever TRG has been asked to measure the impact of complimentary ticket programs, our results have been consistent. The lifetime value of a comp ticket patron is virtually zero. Here’s why.

Transactional patron behavior data shows that a comp ticket holder seldom buys another ticket to that organization. Recipients of a comp ticket generally wait until offered the chance to return—you guessed it—using another comp. Two transactions later, they are more likely to ask you for another comp than buy a ticket.

Our analysis methodology confirms free ticket recipient behavior in two ways. Looking at individual patron households, we can examine longitudinal patron transaction behavior over time. First, the patron did this and they then did that. Looking more broadly, we can also apply an RFM model to score activities based on Recency and Frequency of experience and the Monetary value of each transaction. Here, the monetary score of a comp ticket is zero dollars.

Either method produces the same result. Comp tickets do not build audiences, encourage donations or foster deeper levels of patron engagement.

Papering is not a business strategy.
We’ve also encountered organizations that have made the strategic decision, usually driven by well-meaning board members, to use comp tickets as an audience development tool. It’s based on the notion, “if we can’t sell them, let’s at least make sure that the seats don’t go empty.” The staff then regularly faces the unenviable task of “papering the house” in the hope that a comp patron will ‘move’ up later. We have never seen this strategy work.

As any manager who has had to paper a house knows well, comp tickets are never easy to give away to people who will actually use them. Comp tickets have no value. The associated performances or events are, by association, worthless. It is tough to find people who will use tickets to a performance that has no value.

Different model, different results?
At the Dallas Museum of Art, two exceptions to the performing arts case history appear relevant.

First, there may be a big difference between a comp ticket to a “priced, seated” event and an admission that has been priced at zero. The DMA is not charging some people $15, while a few others receive a comp ticket. Every DMA visitor gains free entry to the same exhibits at no cost. Everyone is getting the same deal.

The second exception goes to business model and mission. TRG’s research on using free tickets to build audiences has focused on organizations whose financial model depends upon generating a significant portion—ranging from a third to three-quarters—of their earned revenues from ticket sales. In this seated event model, the patron “rents” a chair for a specific period of time for a concert, show or performance that has a set starting and ending time.

At a museum, patrons can arrive when they wish, enjoy the art at their own pace and then decide when their experience is complete.

Because the museum model is different, the risks associated with free admission also are different.

Dallas Museum of Art
The Dallas Museum of Art is a big organization with an annual operating budget of about $21 million. Admission revenues (excluding special exhibitions) have averaged about a half million dollars annually. Moving to a free admission model puts 2.3% of their total revenues at risk.

The museum can recover these revenues through a number of non-admission visitor revenues sources like parking, merchandise sales, tuition for classes, and food and beverage purchases—and future special exhibits, which will not be included in the free admission policy. The DMA wisely plans to price each event separately.

In addition, DMA’s free admission strategy may offer tantalizing opportunities for individual and institutional funders to play a bigger role in providing open access to a cultural treasure in their community.

Free admission does appear to be relatively low risk strategy with upside opportunity in DMA’s case. Still, my unsolicited advice to the museum is that free admission – powerful though it may be – is unlikely on its own to ensure ongoing visitation that the museum is dependent upon for other income.

To use our patron behavior terms, free admission won’t improve Recency and Frequency patron behaviors. The longer-term measure of success will depend on DMA’s ability to improve both frequency of visitation from existing supporters and recency of lapsed visitors. That will take continually reinventing a great artistic product and great visitor cultivation and marketing.

Neither will be easy to accomplish, but in DMA’s case, our industry may be observing a gamble worth taking. Like many arts managers, I am eager to see how this experiment works for the DMA. I wish them only the best.

NOTE: Many thanks to DMA staffers Jill Bernstein, Director of Communications and Jeffrey R Guy, Chief Financial & Administrative Officer for their kind assistance in the preparation of this blog. Any errors are mine.

How does your organization assess risk associated with free or deeply-discounted ticket programs? Comments welcome.

Profile in Bravery

2013-04-03T05:01:00.000-06:00

Sharon Gersten Luckman.
Photo by Paul Kolnik.

TRG President Jill Robinson and I recently hosted an online webinar entitled “Make Time to Make Money.” Our central thesis was the need for arts managers to stop trying to do everything and focus on those strategies that can truly move the institutional needle of success.

Based on considerable feedback, one of my closing remarks apparently hit a nerve for many participants when I admonished the group to “Be Brave.” Because organizational and industry needs are so great (and feel more dire with each passing week), insignificant or incremental change simply will not get the job done.

It was in that context that I received an invitation to attend a celebration honoring Sharon Gersten Luckman who is retiring as Executive Director of Alvin Ailey American Dance Theater. When reading the invitation, it hit me. Sharon is the perfect example of what I had in mind when describing bravery on the front lines of arts management.

First, a bit of background. The Ailey company is a genuine national treasure. They are big, influential and driven by a powerful brand based on artistic genius, a storied tradition of excellence and the deep passion required to create a uniquely great American institution.

Truly great companies uphold their tradition of greatness without becoming bound to it above all else. In the wrong hands a heritage of success can become a strategic straight jacket that warps institutional values and vision. Change becomes a dirty word and perpetuating the status quo becomes the real organizational mission.

Sharon never allowed this to happen on her watch at Ailey. Simply put, she questioned everything. She regularly dared to challenge the conventional ways of managing an arts organization while running one of the most fiscally-disciplined operations our firm has ever seen.

When TRG was asked to work with Alvin Ailey, we made a number of recommendations that significantly challenged aspects of the Ailey business model. In the months that followed, Sharon was a demanding client. She insisted that we examine every issue, every recommendation from every possible angle. We covered and reexamined contingencies and consequences – both intended and unintended. And once she agreed to move forward, she was “all in” on the strategies. She expected and got the best that TRG and her staff had to offer – the same level of performance excellence in the front office that audiences have come to expect from the stage.

The results were spectacular by any measure.

So, what made Sharon such a model of management bravery?

1.    She was never content with business as usual answers or solutions. She knew that to be great, one must always seek to be better. Constant improvement is the only path to sustainable greatness.

2.    She was unafraid to ask the hard questions – many times, if necessary – to get quantifiable answers required for making smart decisions.

3.    She had the guts to take calculated risks. She also clearly understood the differences between taking a calculated risk and risky behavior. Risk for the sake of risk is guaranteed to fail on many levels.

4.    Finally, once Sharon made a decision, all energies were mobilized on implementing the new strategy or business direction. Bravery means nothing without action. As I consider the thousands of arts management professionals I’ve been privileged to know, the most successful have always been those who possessed an ability to make things happen. Sharon consistently and persistently insured that the entire staff team and their partners were aggressively pulling in the same direction.

Alvin Ailey American Dance Theater was a great company before Sharon Luckman joined the team. The company that will carry forward her management legacy is stronger because of her leadership, passion and bravery of both thought and action.

My colleagues at TRG and I feel fortunate to have had an opportunity to play a small part in her and Alvin Ailey’s success story.

If you missed Rick and Jill's webinar "Make Time to Make Money", you can access the recording here.

Stressed out? You're not alone.

2013-02-26T11:08:00.000-07:00

Photo by Eamon Curry via flickr

Lack of time, money and proper staff get in the way of arts and cultural organizations achieving their top priority goals, TRG Arts found in its recent survey of the consulting firm’s eNews recipients, Twitter followers, and blog readers. By the numbers:

•    Too many activities, too little time (53%) – Priorities conflict and as one respondent aptly put it, “I can’t do anything right when I’m doing everything at the same time.”
•    Financial constraints (44%) of insufficient funding and not enough revenue are age-old issues that recent economic factors appear to have exacerbated. Organizations of all sizes and genres say they cannot afford what they need.
•    People problems (45%) – Not enough or not the right staff, causing these three institutional shortcomings:
     o    Poor collaboration between staff peers and partners
     o    Ineffective leadership that imposes top-down pressures, provides too little or unclear direction and sets unrealistic expectations.
     o    Lack of skills/training staff need to be successful, especially in technology, campaigns, and database activities.

This won’t come as a surprise to anyone who’s worked in the arts industry for any amount of time—indeed, it confirms what our consulting team sees regularly.

This may surprise you though: survey responses revealed a disconnect between the importance of patrons as a revenue stream and what arts practitioners do every day on the job.

Virtually every responder working in a broad range of large and small arts organizations said that patrons – what they do and how they invest – are a critical revenue source. Yet in their workday priorities it is the short-term needs of the organization, not the lifetime needs of the patron, that take precedence. Survey respondents indicated following as top priorities:
•    Making budget (68%)
•    Deploying immediate campaigns (42%)
•    Managing expenses, working on new initiatives, or planning for the future (33%)

Of course, we could defend as patron-centric the top priorities related to budget and campaign priorities. Campaigns do support patron revenue and making budget is critical to maintaining patron programs. However, both are immediate “this season” issues. The bigger finding is that only 18% of respondents mentioned understanding or knowing patrons better among top priorities. In the context of multiple, competing priorities, the goal of knowing patrons better inevitably gets set aside awaiting more time, money or staff that may or may not ever materialize.

The survey corroborated TRG’s recent field observation that too often every priority is important and every initiative has short-term goals. There is no clear focus on the patron as a sustaining asset. Serving audiences and increasing their loyalty is not only a mission-critical goal for most organizations; it’s also the surest way to measurably increase sustaining revenue.

Fact-informed, well-implemented patron initiatives build an organization's capacity to overcome obstacles and maintain financial health long-term.

To be sure, none of the priorities respondents cited are bad ones. However, when leaders pursue these goals in a way that pull time, money, and staff away from patron-centered activities, the results are toxic. Conversely, providing resources to activities that build capacity alleviates those “stretched-too-thin” problems like the ones cited in the survey—essentially multiplying outcomes from staff efforts.

So where to start? What should and should not be on your to-do list? TRG CEO Rick Lester and President Jill Robinson will discussed how the survey points to prescriptive actions every organization should take in our webinar, Make Time to Make Money, on Wednesday, February 27. If you missed it, you can watch it here.

Upcoming Webinar: Make Time to Make Money

2013-02-13T05:41:00.000-07:00

Word cloud created from an open-ended TRG survey question on
the greatest challenge practitioners face. Created via tagxedo.

Title: Make Time to Make Money
Date: Wednesday, February 27
Time: 2-3 p.m. EST/11 a.m.-noon PST
Cost: Free--register here.

A recent TRG survey suggests that if you’re stressed out by competing critical priorities and dealing with too many challenges to achieve them, you are not alone. The survey shows a snapshot of arts practitioners pulled in many directions – too many to focus on and still meet big objectives around patronage and revenue.

In this one-hour TRG.Rx webinar, TRG’s CEO Rick Lester and President Jill Robinson prescribe must-do actions to get your organization on track to succeed in 2013.

You’ll learn:
• What kinds of activities you can stop doing
• How you can start making patron-based decisions that generate greater and longer lasting revenue
• Why patron data can help you clear your schedule for activities that matter most

Assemble your colleagues and plan to attend together because we’ll be answering the kinds of questions that your whole team wants hear. Plus, learn about free post-webinar one-to-one consultations that TRG is offering for a limited time to organizations that participate in this webinar.

TRG CEO Rick Lester and President Jill
Robinson team up to lead this new webinar.

To Register:
1. Click here to register at GoToWebinar.
2. Fill in the short form and SUBMIT.
3. You will receive log-in information for the webinar in the confirmation email.

Mark your calendar; mind your time zone:
Wednesday, February 27
11 a.m. Pacific
Noon Mountain
1 p.m. Central
2 p.m. Eastern

TRG Arts Partners with new National Center for Arts Research

2013-02-12T17:09:00.000-07:00

TRG Arts is pleased to announce its consulting partnership with
the National Center for Arts Research at Southern Methodist University in Dallas.

Southern Methodist University announced yesterday that its Meadows School of the Arts and Cox School of Business are leading a collaboration with the Cultural Data Project (CDP) and numerous other partners to create a National Center for Arts Research (NCAR) at SMU. The center, the first of its kind in the nation, will analyze the largest database of arts research ever assembled, investigate important issues in arts management and patronage, and make its findings available to arts leaders, funders, policymakers, researchers and the general public.

The vision of NCAR is to act as a catalyst for the transformation and sustainability of the national arts and cultural community.

TRG will consult with NCAR to offer insights into how consumers invest their time and money in the arts. From its ongoing study of arts consumer behavior, client work, and management of 19 data network programs across the U.S., TRG regularly publishes its analyses online and at industry conferences.

“NCAR will be a powerful resource for the arts in America,” said Rick Lester, founder and CEO of TRG Arts and a distinguished visiting professor of arts management at SMU’s Meadows School of the Arts. “With the fact-based decision-making capabilities that NCAR makes possible, organizations will be better equipped to develop good fiscal and operational health.”

Read the full story here>>

2013: The Year of the Patron

2013-01-22T11:23:00.000-07:00

Photo via flickr

Follow the conversation in the blogosphere, on social media or the year-end collection of intellectual thought on the arts, and you’ll find variations on several themes: Values – economic, artistic, experiential. The relative merit of technique and technology. Disappearing public and corporate support. Can innovation remodel the industry model?

In today’s important dialog, the patron is missing in action.

One troubling indication is the frequency with which our firm observes strategic planning initiatives being built around facilities, programs, operations, technology, and campaigns. Everything BUT the patron is being examined in those visions for institutions’ futures.

As we begin a new year, we are putting the patron front and center in our consumer analysis and thought. TRG’s CEO Rick Lester sounded the first notes late last year in his posts about the lessons that arts managers could learn from the Obama team’s winning data strategy. Knowing the voter by using data won the day. Rick’s point applied to the arts industry prompts our assertion:

Knowing the patron by using data is a core competency that
every arts organization should master in 2013.

This is an aspirational assertion. Our industry is far from even recognizing “patron knowledge” as a necessary competency.

That’s a finding, not a criticism. It’s clear to this consulting firm that arts practitioners today must be able to do more and know more about a wider range of activities, media, techniques, programs, and technology than ever before. Industry colleagues are doing all of this with less predictably available resources than ever before. Staying focused in the face of so much to learn, know and do is a formidable challenge.

But, focus, we must.

Why?

“Follow the money…”
This advice Deep Throat famously gave The Washington Post during the Watergate investigation resonates in today’s arts funding reality. Patrons are the source of paid attendance and visitation. They invest in memberships, subscriptions, and annual fund programs. They buy education programs, gala events, and items in your gift shop. They influence corporate support, foundation giving, and public funding.

Patrons are, for U.S. arts organizations, the main (sometimes only) source of income – both earned and contributed income. In all transactions, the common denominator is not the campaign or program that delivers revenue.

The source to be followed in our industry is the patron.

How?

Follow data to follow the patron.
It is possible in any data system to look at whatever patron history is available and gain knowledge about patrons – what they have bought, when, how much they spend, and where they live. Even this very basic data can lead to more patrons and more investment by the patrons any organization already has.

But organizations get tripped up over data. It’s a pain point that too many organizations relieve by avoidance. Little wonder they do; ours is a data-oriented industry with no data management standards. (And that’s another story for another time.) Organizations that get past the challenges find that smart data use can help arts practitioners know the patron better, engage them more, and make them lifelong loyalists.

When? Now.

Master the art of patron knowledge.
At TRG, we can think of no better investment for 2013, because we see these benefits:

Talk to patrons like you know them... Familiarity fosters relationship. Relationships lead to loyalty. Loyalty generates sustaining support. There are cool things that can be done with data that make it possible to have direct, courteous, meaningful interaction with patrons – the kind that keep patrons engaged and coming back.

…in every communication by any member of staff. The patron sees your organization in every encounter with every individual. Knowing the patron not only better informs campaigns. It helps everyone interact with patrons in the way that a valued supporter will appreciate being treated.

Find the right channel for communication. The options for communicating today are dizzying. Knowing the patron helps inform the choice of channel as well as the right mix of new media and classic technique.

Stop doing things that don’t matter. No organization can adopt every new technology, act on every board member’s great idea, fix everything with one approach. Knowing the patron helps make priorities clear and makes saying no a positive strategic outcome.

Stay tuned. How to develop patron focus and direct it strategically will be part of TRG’s ongoing contribution to industry knowledge this year.

We want to hear from you about your own focus right now. Take this quick survey and let us know what’s impacting your work.

4 New Year’s Resolutions for Your Database

2013-01-17T17:56:00.000-07:00

Photo via flickr

This article is cross-posted on artsmarketing.org.

Declarations of 2012 as the year of Big Data bring to 2013 a renewed—and well-deserved--focus on analytics and making data-driven decisions. Your organization’s database is the key to the hearts, minds, and wallets of your most fervent supporters—your patrons. Patrons, in other words, are your biggest asset.

Of all the numbers you can pull from your database, which matter most? Two decades of arts consumer study is clear. The metrics surrounding loyalty—keeping patrons coming back and increasing their investment—are the ones that really count when it comes to building a sustainable audience (and revenue) base.

Whether your organization is large or small, performing or visual, subscription or member-oriented, here’s four resolutions to make regarding your data in the year ahead:

Get Active
The first metric TRG looks at with new clients is the total number of active patron households in the database—audience members who have done something with you in the past year. When the total number of all kinds of patrons (ticket buyers, subscribers, members, donors, program attendees, whatever you have) increases every year, the organization’s health improves. If active patron numbers are falling, so are the prospects for growth.

2013 Resolution: Count your patron households, new and returning, for this season to-date and each of the past three to five seasons. Flat or down-trending counts are symptoms of decline. Even if your counts are up, find ways to keep them growing.

Improve your Capture Rate
How can you invite back those coveted new audience members if you’re not getting their name, email address, phone or street address? (Or in a perfect world, all four?)

Getting contact data can be relatively easy when the majority of your sales are done online or over the phone with a well-staffed box office and a good database system. Not everyone has state-of-the art systems and trained sales staff, but there are work-arounds that any organization can use. For example, we’ve seen organizations encourage online ordering with a small price break as incentive and requiring the patron to provide contact information, just as most online retail orders do. Some organizations even have in-person ticket buyers fill out cards with contact information while they’re in line to expedite the process.

2013 resolution: Always ask for this information. The best of the best collect contact data from 90% of new audience members.

Down with Attrition
If your organization is typical, lack of new audiences is not your problem. The real culprit? Holding on to those first-timers after they’ve attended. Improving your capture rate will help, but using that contact information is the must-do. You may lament those patrons that come to a hit show and never return, but are you asking them to come back?

Make it a priority to invite newcomers to another event within a few weeks of their visit. Involve your ticket office in this initiative. They can tell when someone is coming for the first time because in most systems, a “new file” has to be created for that newbie. So, keep the box office informed and encourage them to suggest what else a new patron might enjoy – a similar program, the season’s not-to-be-missed event. Here’s where sharing information and teamwork really pays off!

2013 resolution: Have a plan to invite every new ticket buyer to come back soon. Make the invitation through every channel available to you: mail, email, on the phone, at the box office, and online. In organizations TRG tracks, about one-third of new-to-file patrons return by the next year. That leaves a lot of room for improvement. Any increase in your own repeat-buyer metrics has a positive impact this season and in seasons to come.

Up with First Time Renewals
Another big attrition challenge is with first-time subscribers and members. Research shows that unless new subscribers and members are treated with special care that first year, they don’t renew. For instance, our studies consistently show turnover rates of up to 60% among new subscribers – patrons that organizations spent huge resources on finding and selling in the first place.

That’s why it’s critically important to track new subscribers and members separately from those who have been with you for two or more years. Newbies need different information to become acquainted with you and more specific instruction on how to do everything from finding event locations to parking to filling out a renewal form. Here’s another initiative colleague departments can work on together. Most systems make the new-to-file date apparent. Once new loyalists are marked in your system, the entire patron-facing team can collaborate on making their experience a great one.

2013 Resolution: Team up to identify new subscribers and members. Collaborate on ways to make it hard for them to turn down another year of great art, whether it’s a killer suite of subscriber benefits, an irresistible upgrade, or an opportunity to see something they really want—but only if they renew. America’s best arts practitioners are renewing 50-60% of new loyalists. Every increase in retention has an escalating effect because subscribers and members are more likely to give and most likely to stick with you.

Like that resolution to fit into your college jeans, minding data metrics is no easy task. But the payoff is equally great. You’ll have helped hit revenue goals with more—and more loyal—patrons. And, that’s a great way to start any New Year.

Prediction for 2013: Big Data means Big Changes

2012-12-19T09:49:00.001-07:00

Yesterday You’ve Cott Mail asked readers for predictions about the arts in 2013. Rick's prediction was published in today's edition.

Photo via flickr

In 2013, Big Data will radically change the shape of arts management. The reelection of Barack Obama in November marked a tipping point for the arts, but not because of a change of public policy or a shift of power in Washington.

We reached a milestone because of HOW the President won. He won because of the power of big data to identify individual voters, understand their attitudes and then encourage their behaviors. Big Data tools got the President's supporters to the polls and assured the needed votes on a neighborhood basis in all-important swing states.

Big Data is radically changing the shape of business. The arts will be no different. After decades of a guildhall mentality, new managers' training will forego traditional wisdom. Data and facts will find their place at the conference room table. Management decisions that now rely upon the HIPPO theory (Highest Paid Person's Opinion) will begin to fade in 2013. Instead, smart (and probably younger, not-yet top earning) managers will arrive at meetings armed with facts. Who is our audience? Who is not our audience? How do we put the needs and expectations of our patrons at the center of our organizational planning?

In 2013, data will win - just like Obama did.

Thinking Long Term About Your Next Right Offer

2012-12-12T11:08:00.000-07:00

Photo by Vards Uzvards via flickr

At TRG we frequently talk about how an arts organization should create the Next Right Offer – that is, a promotional outreach that statistically possesses a high probability of acceptance or response by the prospective buyer.

What determines your Next Right Offer? TRG orthodoxy holds that data analysis is the only path to get it right and to evaluate the offer’s success. Specifically:

• Response rates can be predictive for any offer. History is a perfectly valid guide. For example, if a specific data segment typically produces a 2.5% response for a new subscription offer, the odds are high that the same offer made next year to the same data segment will produce about a 2.5% response.

• Purchase patterns of an organization’s most active, highest-spending patrons also can shape the best offer. Every organization offers a variety of ways to experience and support its artistic product. Oftentimes the bigger the organization is, the greater the number of ways offered. Some ways tend to produce patrons that stick around. Others could be more accurately labeled “Exit”. Understanding the transactional footprints of your most loyal patrons – their comings, goings, and repeated activities provides tangible clues about the ideal sequence of offers over time.

To be sure, offering the right product to the right group of patrons reduces risk, improves return-on-investment ratios and reduces patron churn. The outcome is “stickier” patrons.

Stickier is good. Is it enough?
In TRG’s October 31st webinar, Dynamic Pricing or Patron Loyalty, I was reminded again that arts managers need – and we want to give – clear-cut tactical solutions. That’s why developing the Next Right Offer makes good sense, especially when marketing and development campaigns reinforce each other. An annual fund gift, for instance, might be be the next right investment for a frequent single ticket buyer.

Yet, focusing only on the Next Right Offer can risk unintended consequences. The linear transactional nature of Next Right Offer can too easily overlook the most important overarching goal of any patron development program: Lifetime Patron Value.

When scoring a patron’s loyalty level, TRG consistently finds that the key drivers are frequency and recency of patron activity. Frequent and more recent patron activities always lead to improved loyalty.

This finding provides context for understanding why unrestricted annual fund campaigns are critically important, even when many efforts spend as much as they raise. I’ve seen this strategy at work in my volunteer role of chair of a university Alumni and Development Committee. There, the short-term returns on investment of our annual fund campaign are hard to justify. The payback occurs year after year when we raise significant revenues for various bricks and mortar projects, the endowment or planned gifts and other special projects. Annual giving programs are the basic building blocks of long-term loyalty that sustain these larger, more episodic projects.

Activities boost loyalty.
For newer donors, adding an annual fund gift is a method for building both recency and frequency. It is, therefore, an indispensable tool for creating loyalty.

Subscriptions work the same way. By definition, subscriptions drive frequency of attendance – and greater frequency drives retention rates upward.

Artistic choices also have an impact. Let’s consider a ballet company’s mixed rep program. While an admittedly smaller group compared to attendees of a Swan Lake or Sleeping Beauty, the mixed rep patrons tend to possess unusually high lifetime values. Discerning artistic programs attract patrons who are statistically more likely to make a repeat visit. And multi-buyers are database gold.

It’s frequently a sound decision to mount challenging artistic programs designed to attract high value patrons and then exploit the opportunity with narrowly targeted sales or development campaigns designed to generate appropriate Next Right Offer behaviors.

Going long with the NRO.
So what’s a company to do? Because improved lifetime value is the real goal, the Next Right Offer must be driven by a broader set of metrics than immediate responsiveness.

A different yardstick is required to insure that “Gateway” offers drive lifetime value farther and perhaps faster. I’d start with three interrelated strategies:

1. Use the latest generation of predictive models to create a very tightly defined target market – a behaviorally defined attribute-based model that insures much higher a response rates. This micro targeting strategy allows for enhanced patron segmentation, differentiated offers and improved frequency of offer for less money.
2. Adopt more liberal cost-of-sale ratios when developing Gateway offers. Instead of evaluating return-on-investment ratios for the performances this weekend, base your investment decisions using patron lifetime value scoring models. Remember, the goal is sustainable long-term patron value and growth.
3. Always include a bounce-back offer targeting multi-buyers to keep their activity frequent and recent. You’ll always earn back their re-engagement costs.

Ultimately, the Next Right Offer needs to “go long” and reach for lifetime value rather than just the immediate response within its grasp. As an industry, we need a simple metric for measuring the overall impact of Next Right Offer efforts. I’ll bet that metric can be found by monitoring patron activity (databases) for improved recency and frequency scores.

What is your data telling you about your recent, frequent patrons?

Data vs. Message: Which wins arts patrons?

2012-11-29T07:31:00.000-07:00

This article was originally posted on the Technology in the Arts blog, in conjunction with Rick's guest lecture for Carnegie Mellon University's Master of Arts Management program.

What’s more important, what you say or who you say it to?

Some might argue that a precisely defined target market can trump the creative message or offer. Proponents of the “killer offer” believe the right compelling message will overcome an imperfect effort to define the “who” in the equation.

I’m convinced that data, not guesswork or intuition, must drive sales and contributed revenues. A perfectly crafted message sent to the wrong prospect or patron is not only a waste of money, but damaging to the relationship we are trying to foster with our patrons.

So, message doesn’t matter? Wrong.

Data is incredibly important–and has arrived as the Secret Sauce of winning supporters. But data alone cannot drive success.

In his brilliant book, The Power of Habit, New York Times staff reporter Charles Duhigg explores how habits guide our lives as citizens and consumers – especially consumers of brand name products. Brands become habits that are very hard to break. If you live in a Tide or Crest toothpaste household, it is almost impossible to change the habit of buying those specific products.

Photo by Mahalie Stackpole via Flickr

Enter retailing giant, Target.

Like major retailers everywhere, Target collects terabytes of information about consumers and their purchases. Their desire to exploit moments of potential brand fickleness prompted Target management to look at changing purchase patterns as a predictor of specific significant consumer readiness to buy.

“Pregnant women and new parents are the holy grail of retailing,” a Target analyst told Mr. Duhigg in an interview for his book, which was excerpted in New York Times Magazine. They have much to buy and are relatively price insensitive. And, new brand habits can last for decades. Predicting pregnancy could be worth millions from a small group of customers.

From data, Target learned that pregnant women buy more vitamins and specific minerals, unscented lotions and soaps, hand sanitizers and a few dozen other products. Their data analysts actually built a model to predict a due date for the baby.

Data wins, right? No. As Mr. Duhigg reports, it turns out that “hiding what you know is sometimes as important as knowing it.” Sending a likely pregnant mother coupon offers for diapers or discounts on maternity clothing may be good direct marketing but likely will be seen as a creepy intrusion into a customer’s private life.

For Target, the solution became one of messaging – meaning that they could successfully make expectant baby offers so long as the offer appeared to be random or non-specific to the pregnant woman. Diapers and lawn mowers. Vitamins and DVD players. If the offer appeared to be directed to everyone on the street, she would respond. Target sales to likely pregnant moms soared.

During the recent presidential campaign, Obama volunteers made millions of outbound telephone calls with scripts that included questions asking voters to visualize their behavior on Election Day. “What time of day will you vote?” “Will you drive or walk to your polling place?” “Which route will you take?” Such visualization techniques markedly improved the probability of the voter’s carrying through with the desired action – in this case, casting their ballot on Election Day.

Considerable research is emerging around the use of offers that rely on social or peer recommendation to encourage a positive action. The rise of Facebook, Twitter and other social media channels offers limitless opportunities to build virtual communities around any idea. When coupled with expansive data resources, the effectiveness of social media and other tools for creating new patrons and deepening existing relationship grows exponentially.

But data does not create relationships. Data is just an inert tool that allows conversation, cultivation and the building of relationship to occur in a much more efficient way. And ultimately, patron values only rise when a sense of relationship exists between people: patrons, artists and the art that is being created. Passion is an indispensable part of the equation. Obama campaign architect David Plouffe offers,

If you want to "…build a grassroots campaign, ... it's not going to happen because there's a list or because you have the best technology. That's not how this works. They have to build up that kind of emotional appeal so that people are willing to go out there ... and spend the time and their resources and provide their talents ... But the reason those people got involved was because they believed in Barack Obama. It was a relationship between them and our candidate."

This concept has deep roots. Four decades ago, Danny Newman counseled arts organizations to host house parties that brought together friends from the country club, bridge club and PTA. His goal was to use peer community networks to get neighbors to encourage neighbors to “Subscribe Now”
– to support the local ballet or symphony orchestra. And it worked.

As humans, we crave community and relationship. Tools like Facebook and predictive modeling allow arts organizations to tap into the DNA of our patrons and their communities – and do so in a very efficient way. Ultimately message trumps everything.

What have you learned from using data to craft your message?

Post-Election Lessons for the Arts

2012-11-14T08:46:00.000-07:00

Photo via flickr

The billion dollar campaign that won the presidency on Election Day was the ultimate direct marketing strategy. The outcome provides part lesson, part forecast about our future in marketing and raising money for the arts.

Big Data is not the future – it is now.
In 2004, political consultant Joe Trippi reinvented politics by applying a few crazy ideas learned from a consulting gig in Silicon Valley. Governor Howard Dean used websites and elementary data tools to collect contact information about voters, volunteers and solicited donations on-line. These guys started a revolution.

In 2008, the Obama campaign built a massive database of some 13 million supporters and their email addresses. When connected with new social media tools and a barrage of emails, then-Senator Obama raised a half a billion dollars from small donations and went on to win his first term in office.

For 2012, the Obama reelection campaign squeezed victory from a race that appeared to be very tight. The strategy was built on growing their sizable 2008 database into a 21st century set of database tools.

They hired a data scientist to lead a talented team of 150 data geeks. This, the campaign’s single largest department, began by collecting traditional facts on individual identity.

They acquired public record voter history files, appended consumer data with purchase histories, demographic and psychographic attributes. They collected information from personal interviews conducted by telephone and on front porches across America. They asked visitors to the campaign website to log-in using their Facebook account so that data miners could gain access to the public information stored in each account. They matched all of this information with issues of interest gleaned from visitors’ web page analysis. Finally, they tracked supporters’ computers to other sites they visited.

This vast Obama data set allowed campaign volunteers to begin every conversation with considerable knowledge about how the targeted person was living their life and what issues were important to them.

Big data drives micro-targeting.
Size matters in the world of big data. The bigger and more robust the data set, the better the predictive tools become. That’s why direct marketers can now pinpoint targets while simultaneously understanding who is not the target.

For the Obama team, this meant a series of concentric targets. They were able to precisely segment loyalists from those least likely to vote. Highly motivated Obama supporters were asked to give more and do more in carrying the Obama message across their circles of friends. Less likely voters were cultivated as friends and successfully lead along the path toward casting a ballot.

Micro-targeting works wonders…
Obama’s database-driven ground game focused less on winning “swing states” in favor of winning “swing counties.” Obama reportedly won every targeted swing county and in doing so, won most of the swing states.

Identifying potential new Obama voters using predictive models was the key. Data- directed programs got them registered and then matched them with issues that resonated with each voter. Finally, data-driven social pressure and social media insured they were “fired-up” and “ready to go” vote.

…and reveals the changing face of America.

Photo by Todd Hryckowian via flickr

Team Romney believed that conventional wisdom was fact. In this case, no president in a century has won re-election with a share of the vote larger than his first time around.

In 2012, the Obama campaign’s generated an African-American turnout that increased from 11 to 15 percent, a Latino share that increased by an all-time high of 10 percent. President Obama won both segments by larger margins.

As NBC News analyst, Chuck Todd opined the morning after Election Day, “Make no mistake: What happened last night was a demographic time bomb … that blew up in GOP faces.”

The president’s team correctly understood that a plan based solely on attracting white voters, to the exclusion of people of color, was a losing strategy.

Lessons for arts managers:
Of course, the Obama data-driven campaign machine is not scalable or affordable for the arts …yet. But here’s what we can take away:

Big arts data that’s already available is transformative. It’s redefining the selection of target markets and offers. It’s able to impact a wide range of business and artistic decisions that extend far beyond the traditional realm of marketing and development. Knowing your patron’s transactional history is no longer enough. You need to know everything possible about their activities with you and when they are not in your venue.
Ignoring the shift in American demographics is a recipe for failure. The “browning” of America will be challenging, especially for traditional Anglo institutions whose costs, artistic mission and business models are locked in place. And, as Boomers fade from the scene to be replaced by Generations X and Y, finding and retaining audiences and donors becomes another critical consideration. Success comes from knowing who your audience will be, not just who they are now.
New predictive models and improved methodologies will drive how we engage with patrons and prospects – to create relationships with them. These tools will reduce business risk and improved efficiency as we seek to build patron lifetime value and loyalty. The good news? Technological advancements make micro-targeting more affordable and accessible to all of us. With that, direct contact – in all print and digital channels – becomes a means every organization can use for building loyalty.

What did you learn from the last campaign?

Dynamic Pricing Blind Spots

2012-11-08T06:00:00.000-07:00

Photo via flickr

Unsupported Dynamic Pricing -- a condition that exists when the results of dynamic pricing mask the broader weaknesses of an organization’s prevailing and inadequate pricing strategy.

Dynamic pricing is so simple anyone can do it, right? When sales hit a pre-determined target point, prices for the remaining ticket inventory move up by five or ten bucks.

Best of all, its success can be proven. From sales reports, it’s easy to calculate a “price variance” that represents the extra money dynamic pricing generated. And typically, there are no complaints from the ticket buying public to diminish the upside of incremental revenue.

This set of operating assumptions finds its way into the executive office and the boardroom. Touting dynamic pricing results becomes a badge of honor demonstrating that one’s organization is truly maximizing revenues for each performance on the schedule.

Deeper probing, however, shows otherwise.

In TRG’s analysis of sales outcomes, we find that dynamic pricing practiced in isolation allows arts leaders to be convinced that their pricing strategies are working well while huge revenue and loyalty opportunities go unrealized with most every performance. We call this condition “Unsupported Dynamic Pricing.”

Allow me to illustrate.

One of the first things TRG examines in sales history data is the relationship between the sales volume for each performance and the corresponding per capita revenues – or the average revenue yield per ticket sold. Poorly scaled and priced houses produce very specific markers that demonstrate lost opportunity for revenue and loyal patron behavior.

Our recent work for a theatre company provides a good example. TRG analysis divided the company’s performances into quartiles based on unit sales results, from the Lowest Sold to the Highest Sold performances.

As you can see from the accompanying table, per capita revenues do not consistently rise as they should with unit volume sales success. The poorest selling performances produced $44.51 per ticket. The next best selling group of performances (Low-Mid) produced some upward improvement to $45.53. However, better-selling performances (the High-Mid Sold group) saw per capita revenues fall by 8%, from $45.53 down to $41.96. Then, like magic, per caps rebounded to $44.93 for the best selling performances. All that said:

This company’s top-selling performances produced only forty cents – 1% – per ticket more than the worst-selling shows.
When we examined sales for each ticket type, we found that subscription sales, group sales and discounted single tickets all had declining per capita revenue as sales volume grew. The current scale-of-house was working against the interests of this theater.

Full-priced ticket sales told the most compelling part of the story. Here, we found a clear and steady decline of sales across the bottom three-quarters of all performances. And then, per caps took off, growing at an erratic pace upward for the best quartile of performances.

All of this was happening while this company’s management believed that they were successfully implementing a state-of-the-art dynamic pricing program. And their dynamic pricing success validated their belief that their entire set of pricing strategies was working quite well.

On one count, they were right. They got the mechanics of dynamic pricing right. When demand exceeded expectation, they raised the price. They could prove that the tactic was making incremental money.

What they failed to notice was the immutable fact that almost everything else related to their pricing strategy was wrong. The easy money generated by dynamic pricing created a blind spot. They were unaware of the much larger sums of money that could have been made from the majority of performances that did not sell out. Additionally, they did not even begin to contemplate how scale-of-hall decisions can and should create incentives for loyalty.

TRG experience on this point is consistent. Money left in the market for the larger number of mid-selling performances is always significantly more than the potential of dynamic pricing alone.

Failure to get prices right diminishes the potential upside from dynamic pricing tactics.

Are you a victim of Unsupported Dynamic Pricing?

Hear more about dynamic pricing done right—and how pricing impacts loyalty in TRG’s webinar, “Dynamic Pricing or Patron Loyalty? Do Both in 2013-14.” Watch the recording here.

Upcoming Webinar: Dynamic Pricing or Patron Loyalty?

2012-10-15T06:00:00.000-06:00

Dynamic Pricing or Patron Loyalty? (Do Both in 2013-14.)
Date: Wednesday, October 31
Time: 2-3 p.m. EDT/11 a.m.-noon PDT
Cost: Free--register here.

TRG CEO Rick Lester and President
Jill Robinson lead this new webinar.

TRG’s latest work has focused on how ticket pricing and inventory management practices impact patron loyalty. The conclusion? Pricing – especially top-end tactics like dynamic pricing – must recognize and reflect the impact of these strategies on the loyalty of subscribers, donors, group and single seat buyers alike. Why? The risk of reduced contributed revenues is too great to ignore.

In this webinar, CEO Rick Lester and President Jill Robinson will offer must-know insights about the new tools, processes, and revenue results that come from placing the most loyal patrons in the best seats at the best price.

You’ll learn about:
•    Making strategy decisions now that can payoff in more revenue and more loyal patrons next season.
•    Measuring and observing best pricing practices for subscription packages, seat assignments, scaling the house, and discounting policies.
•    How to tell your price story in ways that secure loyalists (like subscribers) and drive newcomers to return back often.

Savvy managers will apply these techniques to grow sales revenues while improving both the demand for tickets and measurable growth in patron loyalty scores.

To Register:
1. Go to Webex: http://bit.ly/H95IXO
2. Click on "register" (free).
3. Fill in the short form and SUBMIT.
You will receive log-in information for the webinar in the confirmation email.
Note: To participate fully, you will call in for sound and log on to the online presentation and virtual dialog.

Mark your calendar; mind your time zone:
Wednesday, October 31
11 a.m. Pacific
Noon Mountain
1 p.m. Central
2 p.m. Eastern

Direct mail still works (better than you think)

2012-10-05T08:46:00.001-06:00

This week, the TRG team is contributing to the Arts Marketing Blog Salon on Americans for the Arts' ARTSblog. This article by Will was originally posted as part of the salon, which previews the National Arts Marketing Project (NAMP) Conference in November.

Photo by Brian Mitchell via flickr

In the digital age, many marketers are fond of pronouncing the death of direct mail. Yet the data is clear--the environment has changed, new techniques have emerged and smarter approaches to direct mail are getting superior results than in days gone by.

Why? It comes down to increased trust, better targeting, and integration with online channels.

Trust
The contents of the typical American mailbox have changed dramatically in the last few years. Online bill pay options, increased digital and social marketing and the spiraling costs of postage (6 price hikes in 6 years, but who’s counting?) are some of the reasons why overall mail volume has dropped by almost 20% since 2006. These changes correspond to exponential increase in the daily volume of our email inboxes.

Recent research shows that many consumers prefer and trust mail more. Epsilon’s 2011 Channel Preference Study showed:

•    75% of consumers say they get more email than they can read
•    50% of consumers prefer direct mail to email
•    26% of all U.S. consumers said they found direct mail to be the most “trustworthy” medium, an increase from prior studies, which even includes the 18-34 year old demographic.

This makes sense, particularly when we stack these findings next to the consistently positive results TRG sees in direct mail response analysis. Mail is getting opened and getting results.

Our take? Digital communication is free or very cheap. It’s easy for anyone to send email. While many legitimate companies use it liberally, scammers are even more prevalent. Just this month I received a seemingly legitimate email from my bank requesting that I follow an embedded link. It seemed a little fishy and in fact turned out to be fraudulent. (Fear not, I didn’t click through.)

Mail, on the other hand, has become more personal. Wedding invitations come in the mail. So do birth announcements, birthday cards, holiday greetings and notices from organizations I care about, just to name a few. If medium is the message, direct mail says trustworthy, legitimate, and attention-worthy.

Add to that the fact that it’s incredibly easy to dispose of digital communications. If it’s on social media, ignore it and it goes away. If it’s an email, delete it. A mail piece – at the very least – requires you to walk over to the recycling bin. And you’ll more likely look at it – if not open it – before you throw it away.

Targeting
Thanks to advances in database science and information systems, marketers have precision tools to put the right message in front of the right consumer at the right time.

Precision modeling used to be a technique that only the Fortune 500 could afford. Now, even the most budget-strapped non-profit organizations can do modeling that finds the right prospects in a house database or in the market.   Precision modeling also narrows the prospect pool to the most productive numbers, eliminating waste and expense for printing, production, and posting – and boosting response at healthy ROIs.

Follow a precisely targeted piece of mail into a prospect’s home and what happens next is a Digital Age response that works in the mailer’s favor.

Mail goes viral.
Our recent direct response studies show, technology expands the reach of mail to households beyond the mail list in numbers we never would have guessed would respond.

A recent client launched a postcard campaign with a discount code for 30% off tickets for all weekday performances. The offer was made available only on the postcard and not in ads, the company’s website or anywhere else.

The client's own internal discount code tracking measured responses that represented a 10-1 return on the piece. The organization was thrilled with the results, but a more comprehensive “Response Analysis” revealed many more sales attributable to the direct mail piece that discount code tracking overlooked. Other sales included:

•    “No thanks, I’ll pay full price.” The postcard was a prompt for consumers to seek exactly what they wanted.   This group of mailed responders shopped for dates and seats they wanted and chose full price tickets, accounting for 32% of the total revenue.
•    “Thanks, but I like this better.”   Mailed responders shopped the company’s web site and found other deals they preferred to the 30% savings offer (most with less attractive discounts and alternative benefits). These consumers were 17% of the total revenue from this campaign.
•    “You didn’t ask and I’ll buy anyway.” The discount code was shared online and went viral. Consumers who did not get the mail piece used to code and bought even more tickets at 30% off than did responders from the mail list. Viral responders – households the postcard didn’t reach directly -- provided nearly one-third of the six-figure revenue this campaign generated overall.

The actual complete campaign result was a 17:1 return on investment. This particular direct mail campaign reinforced the organization’s brand and supported the other promotional initiatives.

The numbers don’t lie. Direct mail has an important place in the digital world and a multi-channel mix. Arts marketers eager to dump direct mail in the face of digital assumptions and budget limitations should take another look—or risk losing sales.

An Appreciation: Carlos Moseley

2012-10-03T05:30:00.000-06:00

Yesterday’s news reported the passing of Carlos Moseley at age 98. His obituary can be found in The New York Times by clicking here.

I first heard the name Carlos Moseley back in 1982. At that time, Mr. Moseley was already a living legend, having managed the New York Philharmonic for nearly thirty years. I was the young marketing director for The Cleveland Orchestra

I owed my new position to Cleveland’s long serving Managing Director, Kenneth Haas. Like many orchestra managers of that era, Ken owed his career to Mr. Moseley, who hired Ken as an operations manager for the Philharmonic 1967. Ken worked backstage at the new Avery Fisher Hall and the free summer concerts Moseley created in Central Park.

Ken was a passionate man who cared about The Cleveland Orchestra, impossibly high standards (on and off stage) and Carlos Moseley. For Ken, the standard of the modern orchestra manager was Carlos Moseley.

Years later, after I had moved on to manage my own orchestras, I saw Ken at an industry meeting. After catching up on family gossip, Ken reminded me that Mr. Moseley had retired to Spartanburg, SC, not far from my post managing the Charlotte Symphony. Ken suggested that I reach out to Mr. Moseley and go for a visit.

Armed with a telephone number and Ken’s name, I placed the call. Cynthia, Mr. Moseley’s sister answered. After a few protective questions she quickly put Mr. Moseley on the line. Once he discovered my connection to Ken and my career path, he insisted that I come for lunch at my earliest convenience.

A week or two later on a hot summer day, I appeared on the deeply shaded front porch of his home. Warmly furnished and smelling of the tasty lunch prepared by Cynthia, I was welcomed as a member of their family. For the rerst of that afternoon, we sat around the dining room table sharing stories of our careers. He was a kind gentlemanly soul from another era. Despite his long career in New York, his soft voice was rich with the accent of western South Carolina. And, his stories were considerably more interesting than mine.

He was, after all, the piano soloist when Leonard Bernstein made his second conducting appearance at Tanglewood (Brahms Second Piano Concerto). He was present at the creation of a new home for the Philharmonic at Lincoln Center. He was the manager who navigated the waters that saw the creation of the modern fulltime orchestra. He also worked with (and had hilarious stories about) virtually every classical music luminary on the planet. Finally, he helped launch the careers of countless orchestra managers.

What made this visit memorable was his interest in me. Of course, he wanted to know the friends we shared. But, he also wanted to know what I knew and what I thought. He wanted to know where I saw the industry going. His Philharmonic career began as a press agent – the precursor role for the current marketing position. We were connected. Most importantly, he genuinely cared.

He made me feel as though I was a full member of a very exclusive club of people who did honorable and meaningful work that benefited communities across America. He didn’t have to, but he gave me great confidence to pursue my career.

My relationship with Mr. Moseley was not as deep as many who worked with him on a daily basis. But his passing at age 98 reminds me that all of us are inextricably connected to those who gave us an opportunity long before we deserved the chance. All of us stand here because of a spark that someone once saw in us.

I am grateful to Steve Monder, who gave me my first orchestra job in Cincinnati. I’m grateful to Ken, who gave me a shot in Cleveland and was kind enough to demand the best I had to offer. I know that I was a frustrating employee for such a perfectionist to manage. I am grateful to Henry Fogel whose counsel helped me manage my way around my incredible errors of inexperience when I moved from marketing to senior management.

I am also grateful to all those who gave Ken and Steve and Henry their first opportunities. And yes, I am grateful to Carlos Moseley. Without Mr. Moseley, I would not be doing what I love to do today.

Bravo, Carlos Moseley, for a life well lived. And thank you.

What Marketing-Development Collaboration Really Needs

2012-10-02T12:07:00.000-06:00

This week, the TRG team is contributing to the Arts Marketing Blog Salon on Americans for the Arts' ARTSblog. This article by Jill was originally posted as part of the salon, which previews the National Arts Marketing Project (NAMP) Conference in November.

If so many arts leaders believe that marketing and development departments working together will generate better patronage results, why are so few organizations actually doing it?

To be sure, there are ample tactical examples of successful cross-departmental collaboration on campaigns. And, a few industry leaders are engaging in organization-wide patron development – Arts Club Theatre Company and 5th Avenue Theatre are two we admire.

But integrated patron management is far from being a mainstream practice. Perhaps it’s because true marketing-development collaboration requires change and new ways of doing things that most organizations find impossibly difficult – especially on top of everything else that’s necessary to keep the art on our stages and in our exhibit halls.

Look beyond the challenges toward a starting point.

Marketing and development need a bridge linking their often silo-ed departments. A couple of management initiatives and tools can build that bridge.

1. Integrated patron reporting. Most arts managers see their season as a string of single ticket revenue targets, an exhibition with a visitor goal to hit, or an annual fund effort to bring in donations. It’s easy to miss individual patrons’ passion for your art when you are looking at them through the singular lens of individual campaigns.

Take this sample patron history. At first, you’ll mostly likely see it as it’s usually reported, along departmental campaign lines:

To marketing, this patron is a big-time subscriber:

But does marketing know, as the box office likely sees on their screen, that this patron has also been buying extra tickets?

And when development views this campaign history, is this same active subscriber considered only a lapsed donor?

Individual department reports fog the lens. That’s why the best first step toward productive development-marketing collaboration is good information. The aggregated view of our sample patron shows a very engaged loyalist whose investments overall have been growing and consistent for three straight years.

Integrated patron histories like this example add up to form behavior patterns that groups of patrons have in common. Those shared patterns are a source of information that can empower integrated campaigns, especially among patrons whose loyalty is on the rise and with whom an organization’s greatest opportunity exists.

2. Collaborative budgeting. When push comes to shove at budget time, executives tend to abandon big picture goals and send marketing and development officers back to their respective desks to chase individual revenue objectives. That sets up internal conflict between departments for the investments of the organizations’ patrons. When marketing and development compete for patronage, nobody wins. It’s an operational bias and approach that is limiting retention and growth of a loyal patron base.

Instead, contemplate how your organization could start budgeting for patrons like the one described above. Instead of budgeting separately for single ticket, subscription and annual fund revenues, consider creating a small number of integrated goals. For example, create a budget line for Subscriber-Donors. To start, track the current percentage of subscribers who are also donors, and budget to increase the proportion of them and their integrated revenue. As you work together to discover the possibilities within your own organization, you’ll create a path to achieve and track greater results.

Understanding and analyzing patron loyalty fuels results.

When you get down to the individual patron level—what they buy, how they give, and how much they spend —it is easier to see individual patrons’ love of the art form and how it translates into value for your organization. Having information on all patrons at the individual household level can illuminate steps you might take to deepen loyalty for both individuals and groups of patrons.

Put loyalty analysis tools like integrated patron analysis in front of marketing and development collaborators and watch how quickly and effectively working together can be. The payoff is longer, stronger patron relationships and sustaining investments.

Join Jill, along with arts marketers from MOMA and National Museum of Women in the Arts, for a session at the NAMP Conference on how to focus in on loyalty for improved revenue. “Stop Marketing to the Masses & Start Cultivating the Loyalists” is Sunday, November 11 at 10:30 a.m.

Getting the Most Out of Gen Y

2012-10-01T10:13:00.001-06:00

This week, the TRG team is contributing to the Arts Marketing Blog Salon on Americans for the Arts' ARTSblog. This article by Amelia was originally posted as part of the salon, which previews the National Arts Marketing Project (NAMP) Conference in November.

Photo by David Wellbeloved

For decades, the arts industry has chased new audiences, especially younger audiences. Today, that chase is directed at the largest population under 30 years old in human history. It’s little wonder that Gen Y (born 1981 – 2001) is a hot topic for arts marketers.

As a data-informed member of Gen Y, here’s a take on my generation of arts consumers.

We curate our lives. For as long as we’ve been consumers, we have always had access to Google and Amazon. Search is our way of finding out anything and everything we want to know. We are the generation of the long-tail. This means we have had access to more variety of art, music, performances, and consumer products than any other generation in history.

Because we have access to virtually everything, we take pleasure in exploring the original and local and not just mass-market products and experiences. The data backs this up; an Edelman Digital study found that 40% of Gen Y participants preferred buying local, even if it meant paying more than a mass-market product.

Beyond buying local, the exploration of everything available in the marketplace has led to a culture where we curate our lives. The rise of personal curation – selection of exactly what we want from all that’s available – is evident in the recent popularity of Pinterest.

We spend on what we value. Gen Y is often characterized as cheap. There’s good reason for our cost-consciousness. Gen Y paid much more for college than previous generations and now has record levels of student debt. We face an unprecedented labor market that has offered us more unemployment and underemployment than under-30s of nearly any previous generation.

In light of our generation’s thriftiness, the Edelman study’s spending metric suggest that a cheap price is not our only motivation to buy. Warren Buffet once said, “Price is what you pay, value is what you get.” Price and value are connected for Gen Y.

The research suggests that ticket price, while important to Gen Y, won’t always make or break their decision to attend. Reliance on tactics like using Groupon or deep discounting can get Gen Ys in the door. But offering cheap tickets is no silver bullet for audience building at good ROI, especially for a group of consumers who could be your patrons for a very long time. In fact, building value perception and loyalty among this generation will be key to getting them to come back.

We give. Gen Y not only spends on what we value, we also value giving back. Most Millennials (57%) say that they had volunteered in the past 12 months, according to the Pew Research Center’s Millennials: A Portrait of Generation Next. That’s the highest percentage of volunteerism of any generational group alive today.

And, surprise! We are already donating, a characteristic TRG’s ongoing study of consumer behavior generally finds among the most loyal patrons. The Millennial Impact Report, released earlier this year, reported that 93% of surveyed Millennials gave to nonprofit organizations in 2010.

In TRG’s initial study of generational giving to arts organizations, we found that among the small numbers of Gen Y patrons, there were donors. Their median gift was 20% more than that of Gen X patrons in their early 30s and 40s.

Finders, Keepers
TRG loyalty study finds most Gen Y patrons among first-time or lapsed ticket buyers in a behavior category we call “Tryers.” As audience members, Tryers are the least loyal patron group and most vulnerable to churn. Most organizations lose between two-thirds and 80% of their first time buyers after that first attendance.

It all comes back to developing loyalty. Gen Y might require different messages and media, but the objective is the same: once you’ve attracted them, hang on to them. You can only turn a Gen Y-er into a life-long attendee and donor if you get them to come back.

Is the Time Right to Go Mobile?

2012-09-13T08:13:00.000-06:00

Photo by Stanković Vlada

JiWire’s latest quarterly trend report shows mobile devices (tablets and smartphones) outrank laptops in wi-fi use. Around TRG, we’ve been talking about that report as well as circulating a Target Marketing article that predicts mobile search will surpass desktop search by the end of 2013.

Reports like these tend to ramp up the technology angst among time- and budget-stressed arts practitioners. It’s no wonder that we’ve been getting a lot of questions lately about mobile apps and websites and their ugly stepchild, the QR code.

While many organizations have already embraced mobile sites, apps and QR codes in campaigns, others are dead-set against pursuing this or any other technology “fad.” Then there are those who just want to know: How and where do I fit this type of technology into everything else I have to fund and do?

At TRG, we measure the usefulness of mobile technology as we do any strategic tactic -- on its ability to deliver results. That provides a very specific perspective on when and how best to go mobile.

Start with the end in mind.

What’s your end goal? For most, it’s selling tickets. As mobile usage continues to grow by leaps and bounds, it will become critical to give patrons a way to buy through mobile. In fact, trends indicate that consumers will soon expect to make any online purchases with their mobile devices.

Major ticketing systems are beginning to go there, but most do not have ready-to-go mobile accessibility. There are basically three ways to implement mobile ticketing:

apps run by the ticketing system where ticket buyers search for the organization’s events.
organization-specific webpages created by the ticketing system that the organization can link to.
organization-specific apps that hook up to an organization’s ticket system. (These are created by third-party companies like InstantEncore and Cloudtix.)

Ask your ticketing system provider about which of these options is available to you. Mobile ticketing is a bandwagon worth getting on. Making it easy for people to buy tickets on their mobile devices is not only savvy marketing, it’s good customer service. As an industry, that’s where we need to go.

Getting there from where you are.

Once you know where you are going, consider where any mobile endeavor (app, website, QR code usage, ticketing, etc.) fits into your overall resource and operational realities. Keep these things in mind:

“Mobile” by itself is not a strategy. This is not Batman swooping in to save the day. Mobile is a tool and YOU make the strategy around it. A tool may help you make contact but by itself won’t carry a campaign or deliver organizational objectives.
Wake-up call: Mobile cannot be ignored. Mobile is everywhere already and arts practitioners need to stay up-to-date and informed enough to consider whether and how to use mobile tactics.
Caution: Mobile must not become a distraction. Mobile is fun to talk about, full of creative possibility. But diving into this or any new technology can be like painting the trim when your basement’s flooded. It’s not worth investing inordinate time or money if it can’t contribute to revenue goals.
Remember: Mobile may be ubiquitous but still is not universally understood. Many consumers still don’t know what a QR code is or the difference between apps and websites. Bad implementation doesn’t help.

Cracking the QR Code

At last year’s NAMP conference keynote, Scott Stratten echoed what we've been counseling clients counsel with an excellent set of common sense considerations for QR codes. He summed it up rather colorfully: “Every time you use a QR code for something and don’t think it through, a kitten dies.”

Metaphors aside, TRG agrees. QR codes, strategically planned and deployed, can be an effective addition to your campaign toolbox, keeping in mind these basics:


Scanning a QR Code. Photo by Mathieu Plourde

1. Determine what you want patrons to do. There should be an action associated with each QR code. Watch a video, buy tickets, share with a friend, or get exclusive information. And, that action should relate to a message you want to convey or an outcome you want to motivate.

2. Ensure the action you request can be taken from the user’s phone. The whole point of a QR code is instant connection to specific content from the phone your patrons hold in their hands. What if the code is placed where a user can’t scan it? No instant connection? No result, just wasted effort.

3. Linking the QR code to a mobile-friendly site is a must. If the user can navigate the site easily from a mobile screen, you’ve got a winner. If the user has to “pinch and pull”, it’s not mobile friendly, and you’re as likely to lose their interest as get them to connect.

If your org’s website is not mobile-friendly: Link users to a site that is known for accessibility --YouTube, Google Places, Twitter, or Facebook (especially if you have a Facebook event you are trying to promote).

What about apps?

Using QR codes without killing kittens relates back to strategic use of mobile apps and websites, the relative merits of which are the subject of debate. Arts management and tech guru Marc Van Bree recently argued that mobile apps aren’t a good investment for arts organizations. He lays down some good points in this article, especially in his comparison of mobile websites vs. responsive design, where the website adapts to the device on which it’s being viewed. Overall,we s ee strategic value in apps. Here’s our take:

1. Adopt apps that return your investment. Van Bree points out, “Only a handful of large performing arts organizations will have a large enough following to keep a sustained audience for their app.” You may be able to count on your most loyal patrons to add your app to their mobiles and use it regularly. But the general public? It’s not likely. Is using mobile to develop your narrow but very important loyalists worth your time and money? Will it take time away from other cultivation activities? Those are questions every organization must address for itself.

2. Use apps to make mobile a direct marketing channel. Apps can give you the ability to communicate one-to-one with patrons via push notifications that alert users to new content. When done right and well, this can become a powerful tool to contact those most-engaged patrons. A mobile website is a passive presence, while an app is a communication channel.

3. Sell tickets. Lastly, as mentioned above, apps may be the only way you can sell tickets on a mobile device with your ticketing system. That in and of itself may make an app worth the investment.

How is your organization adapting to mobile technology? Share your story below.

Marketing Insanity

2012-08-16T05:00:00.000-06:00

“Insanity: doing the same thing over and over again and expecting different results.” --Albert Einstein

Data from a registration survey for our Christmas in July webinar recently reminded me how valid and valuable Mr. Einstein’s definition is.

We had asked everyone to compare their marketing budget for last season’s holiday events with the year before. Most (76%) said they had about same amount or less to spend on holiday events – generally a sure revenue producer for arts and entertainment organizations.

We also asked them to compare their revenue expectations for holiday’s breadwinning events. And that’s where it got interesting. The majority (52%) said that they were expected to bring in more revenue.

Expecting more from less.
Probing deeper, this survey showed that a lucky 37% had a higher budget to meet their increased revenue goal. That means 63% had to make a higher revenue goal with the same budget, or less!

This expectation is both incongruous and commonly seen in our experience —and not just with marketing holiday events. Subscription acquisition efforts, annual fund campaigns, and membership drives fall into to this special category of insanity as staff teams are expected to “work smarter”, “make do”, and “be creative” – all code for “do more with less money”.

You can work smarter—to a point. You can target your marketing better. You can use direct channels more. You can trim print quantities and spot frequencies to save expenses without sacrificing effective contact. But there is a point where you can also mismatch investments with expected results, especially when you are counting on an event or campaign to be a big financial success. Perhaps some of that 63% have reached that point.

Mindfulness guides.
It does arts managers no good to base revenue budgets on what they want to sell instead of what has been historically possible with set resources. Every manager wants every event to sell-out and make plan. Wishing does not make it so and yet every organization has its own version of marketing insanity: expecting extraordinary results from investing the same amount and doing the same things.

The solution? Being mindful of budget contradictions like this and correcting them by investing in your guaranteed successes. I’ve written before on this blog about under-investing in blockbusters.

Investing in shows likely to succeed doesn’t mean you completely neglect your other events. This is the arts, not Sophie’s Choice, but our study is clear on this point: Money is only going to get you so far with some events. Every season, there are a few events that are just not going to attract a large audience or even as large an audience as you wish it would. As Rick Lester has said before on this blog “A performance of Beethoven's Symphony No. 9 will always outsell an All-Scriabin Festival.”

And that’s ok. It’s important to do the All-Scriabin Festival, or new works and programs inspired by your mission and artistic vision. For some of us, the All-Scriabin Festival or similarly obscure pieces/artists are why we got into the arts in the first place. An all-blockbuster season will not serve your organization, any more than throwing a disproportionate amount of money at mission-based programming will, as good as it might feel.

ROI Rules.
Here’s the reality, though: Arts managers often fall into the trap of regarding blockbuster productions or exhibits as easy money, thinking that they’ll sell no matter what kind of time and money is invested. They set up unrealistic (or dare I say, insane?) revenue expectations. And they leave on the table the sustaining revenue that allows the All-Scriabin Festival to happen.

It’s common sense: If you expect bigger earnings, give those events a bigger budget. Especially if it’s a perennial audience favorite like The Nutcracker or A Christmas Carol.

So, make the decision now to invest in productions in direct proportion to anticipated sales and stick with it. Adjust your budget now so that you won’t end up short of cash to market holiday shows or other blockbusters. And resist the temptation to use budget for blockbusters on productions that won’t significantly return your investments.

Stop Enabling Scalpers and Discounters

2012-07-24T12:59:00.000-06:00

Photo via Flickr

There’s only one way to end the current practice of resellers getting obscene prices or discounters taking all but a fraction of the income for your tickets. Stop making it so easy for them. Broadway offers a good example of what not to do.

Do only tourists and suckers pay full price?
Every Monday afternoon, The Broadway League releases the weekly sales data for every show performing on the Great White Way. Currently, about 60% of all Broadway tickets are sold below the face value of the ticket.

When the results of “never-discounted” shows (The Book of Mormon, The Lion King and Wicked) are deducted, the proportion of discounted ticket sales jumps to nearly 70%. Last week, for instance, total Broadway sales revenues (about $33 million) were about two-thirds of their aggregate gross potential. In non-peak weeks, this ratio floats closer to 50%.

To the resellers go the best seats.
While the market is flooded with overpriced inventory that can only be sold at deep discounts, the best seats in the house are offered at premium prices in the primary market, at theatre’s own sales outlets and prices of $200-$300.

For the most popular shows, the secondary market pushes the prices for these prime seat locations into the stratosphere. And, the revenue? It’s out of producer’s hands at that point. Resellers are filling the consumer demand void and taking the profits.

The devil’s in the mid-range detail.
Broadway isn’t alone. In TRG’s observation of the nonprofit world, we see a similar breach in pricing strategies. The best seats are almost always undervalued while everything else in the house is overpriced.

Most governing boards, managers and the media focus on a few top-priced tickets. But, success is defined by what happens with those seats in the middle of the price table.

What drives pricing at the top?
Hope. Ego. Ambition and envy. Whatever the driving emotion, there’s a self-defeating notion at work that says: the higher the top price, the greater actual income will be when the ticket is sold at 50% off!

Prevailing wisdom also says that if a performance sells out, the price was probably right – regardless the original price point. But, if the price was truly right, why are so many being sold at a discount? Why are so many tickets being sold at huge and silly prices?

My previous post makes the case that traditional supply and demand theories generally don’t apply to tickets. Buyer Preference, an economic term that translates in our world to “programming,” plays a central role. When Buyer Preference is high, demand for tickets will drive up the acceptable price for any ticket.

The seat’s gotta be good enough.
Buyer Preference also shows up in the emotion that surrounds seat location. Make no mistake. The more loyal and knowledgeable patrons are, the greater the likelihood that emotion will drive their seat preference.

Who buys most of the tickets we sell? While politically incorrect, the answer is: Highly Educated Wealthy Older White People (HEWOWP). HEWOWPs care about seat location. They care about it a lot. They care so much that unless they can secure a “good enough” seat location, they may just pass on the performance altogether.

On Broadway, Premium Seats are the answer to “good enough”. Mel Brooks is generally credited with originating the concept when he opened the smash hit, The Producers. His brilliantly simple idea was to price best seats at about $150 (in today’s dollars). The best of the best seats, however, were priced even higher – $250 or $300. It worked great when premium seats at premium price found an audience. If not, they were sold at the regular top price.

The problem is that this A-B choice of prices at the top leaves a huge gap in the middle of the price table. Many HEWOWP’s will happily pay more than $150 for a great seat. Many will not pay $300.

And the price, right.
Enter the unemotional broker. Because resellers have no emotional attachment to the product or artistic merit, the retention of patronage, the risk of production – or anything, except the deal itself – they have an easier time of finding the buyer’s sweet spot. Does Mr. or Ms. HEWOWP want to pay $180? How about $225? For resellers, it’s only about the deal. Period.

Big gaps in the price table create openings for third parties to operate safely and profitably, exploiting the demand created by others.

For arts managers and producers, understanding the math and data behind the emotional attachment to seats is a huge advantage. It’s the fuel that drives profitable, sustaining pricing and inventory management plans.

The solution?
Control your own inventory. Close up the gaps of your price table. We are talking about micro-segments of the audience that can deliver macro-results. It’s doable with a bit of creativity and sound transactional data available in any competent ticketing system.

Yeah, it requires a bit of extra work on the front end to really understand the numbers that drive the emotion of a ticket purchase. But why make it so easy for third parties to take what you should be earning?

Seat-o-nomics

2012-07-19T09:40:00.000-06:00

Photo: Marja van Bochove
This article is cross-posted on Ticket News and Americans for the Arts' ARTSblog.

Harry Truman famously expressed a desire to consult only with “one-armed economists”. Our 33rd President wasn’t fond of counsel that began "On the one hand, this..." and was followed by "On the other hand, that..." Truman wanted straight talk without equivocation.

So, here is a bit of economic straight talk from the data vaults of TRG Arts. Forget everything you learned in that Econ 101 class you took in undergraduate school. You can also forget what you learned at Business School. It doesn’t apply to tickets.

Competitive Freedom

Conventional wisdom: A higher price (P1) results
in a lower quantity sold (Q1), whereas a lower
price(P2) results in a more sales (Q2).

Conventional wisdom holds that higher prices reduce demand. For instance, in the consumer universe of unlimited hamburger availability, McDonald's will sell many at $1.00 and many fewer at $10.00. And, at $100, demand goes to zero.

But, supply and demand curves do not apply to the world of selling tickets. Those curves depend upon an “open market” of goods and prices. Corn, wheat and hamburgers are sold in huge open markets. There are vast numbers of buyers and sellers who are free to compete for the exchange of goods and services.

Price subject to desire.
This condition of competitive freedom does not exist when selling tickets.

For example, nonprofit organizations are run by volunteer boards who set, approve or use their clout to influence prices – prices that these same board members pay when they attend the performances presented by their organization. That’s just one reason why the best seats are frequently undervalued.
Another is arts managers’ false sense of what the market will bear. Their gut tells them to keep prices down even when their own sales histories demonstrate that prices could go higher.

Then there’s commercial ticket pricing. Invariably, price is based on the top price a producer or presenter wants to get regardless of who or what is onstage or when and where the performance takes place.

The box office monopoly is dead. Until recently, tickets were exclusively sold through a primary ticket office controlled by the venue or the producer/presenter. This single portal created a near monopoly.

Today, too many arts organizations, especially in the commercial world, have ceded management of their seat inventory to outsiders. That’s why it’s so easy to get a cheap ticket from discounters online or a hot ticket online from resellers. Organizations that rely on ticket brokers may be “moving seats” but without regard to the loss of value – both in revenue and patron relationships.

Where can I get another Madama Butterfly tonight?
In conventional economics, the issue of “substitute products” impacts price and demand. You can bet that when McDonald’s runs a $1 burger promotion, every other fast food chain down the road is going to scramble to match or respond to the price change. That’s what competitive freedom promotes: the ability to gain a share of the increased demand.

In our industry, if you want to see Madama Butterfly this weekend, the only substitute in town is likely to be a baseball game or DVD from Redbox. It is the rare community that offers dueling operas every night of the week.

Most arts organizations exist in a world of few if any product “substitutes”. Choices simply aren’t readily available and therefore have no impact on price.

Arts consumers don’t buy a price.
Simply put, price seldom impacts demand in the arts.

If price were a significant deterrent to attendance, this fact would come screaming out of the data. In fact, decades of study have shown that price may affect choice of seat, not whether or not a patron will buy a ticket.

Most organizations perform in scaled houses. There are a wide range of price points offered for every performance, typically ranging from very expensive to downright cheap. Without exception, the most popular seat locations are the most expensive. There are, of course, arts consumers who gravitate to less expensive seats, but demand always is hotter at the top. Waiting lists for the best seats grow proportionally with price increases.

The hardest seats to sell? Those priced at a moderate price point. It’s not about price – it’s about the emotion that surrounds the perceived quality of the seat location.

Programming always matters.
It’s programming, not price, that most impacts arts consumer demand. A performance of Beethoven's Symphony No. 9 will always outsell an All-Scriabin Festival. That’s not to say an all-warhorse season is the answer. Every program finds an audience. Large or small, that audience will pay the asking price to occupy seats for the programs they want.

The art of pricing right is correctly anticipating (and exploiting) when customers perceive a scarcity of seat supply or anticipated increase in ticket price. Then, the demand curve moves in presenters’ favor. The belief that a ticket is hard to get or unavailable will always drive up both demand – and prices.

If you want to test the theory, try to buy a ticket for tonight’s performance of The Book of Mormon on Broadway.

Patron Loyalty 101

2012-07-12T14:46:00.003-06:00

Photo: Mario via Flickr

This article is cross-posted on the #artsmgtchat blog. Strategic Communications Specialist Amelia Northrup will guest-host #artsmgtchat on Twitter on July 20 at 2-3 p.m. EDT.

Audience development. Usually when you hear this arts industry buzzword, it’s all about finding new audiences—everyone wants to develop a larger audience, right? However, audience development is not only about finding new audiences, but also retaining and deepening the commitment of the patrons you already have. Out of the two, the second will nearly always give you a larger return on your investment.

That’s the goal of patron loyalty programs—retaining and deepening the commitment of existing audience members.

Don’t get me wrong; new audiences are crucial to sustaining the arts. But when ongoing TRG research shows that anywhere from two-thirds to 80% of new audience members don’t come back, the real problem becomes clear. It’s retention. That’s what will get those larger audiences in the end. As the Girl Scout saying goes: Make new friends, but keep the old.

What exactly is Patron Loyalty?
What specifically are we talking about when we say “patron loyalty”? Let’s break it down:

Patron: anyone who has a transaction with an arts organization
Loyalty: developing a longer, stronger commitment to your organization

Patron loyalty is the discipline of customer loyalty specific to arts organizations. The for-profit sector spends millions of dollars determining ways to make customers more loyal—and they’re not alone. Smart arts industry practitioners have also turned their focus to loyalty and retention. They measure the lifetime value of their customers. They plot out which offer to make to which customer. Why all the effort? They know how valuable loyalty can be.

Why is Loyalty so important?
When you look at the numbers, it’s easy to see how valuable loyal patrons are to an arts organization. TRG does just that when we analyze loyalty for an organization. Patrons naturally fall into three different categories:

Patrons begin as a “Tryers” when they have their first interaction or transaction with the organization. About 90% of the typical arts organization’s database is made up of Tryers.
Patrons who come back again as a repeat buyer, multi-buyer, subscriber or member-based frequent attendee are what we call “Buyers”.
When an organization retains Buyers and cultivates them, they can become an ongoing, engaged investor—an “Advocate.”

You can then determine, on average, how much a patron in each category is worth over a set period of time. Below is an analysis that TRG spotlighted during a webinar with 5th Avenue Theatre.

The numbers in the pyramid are the numbers of patrons in each category. The dollar amount next to the category name is the average amount that a patron in that category was worth to the organization over 2 years. The percent is the total proportion of revenue each category represents. What you see in the pyramid is typical—the value of a patron increases 10-fold at each level.

What does this mean to you?
How can arts managers orient their work to promote loyalty? When you examine all the tools in your arts marketing toolbox, some are better than others at promoting loyalty—and some can be tailored to do so.

Data should be your #1 priority. Clean, accurate data can tell you who your most valuable patrons are and illuminate how to deepen their loyalty. Systems that capture every interaction—ticketing, donations, educational programs, etc.—are best. Patrons can interact with an organization in many different ways and you want to know their total investment across all categories. Their total value can add up in ways that may surprise you—outside of the traditional single ticket buyer, subscriber/member, or donor categories.

More communication, more directly. In your budget and timetables prioritize targeted, direct communications to your existing patrons over mass media advertising campaigns. That means postal mail, e-mail, telemarketing, and targeted online ads. If your data is clean, you’ll be able to target those most likely to respond. Dumping some of the mass media and reallocating the money to communications with existing patrons will result in stronger relationships with your most value patrons and in turn, more revenue.

What about social media? By all means, use social media. People now expect your organization to be there. But see it as a medium for customer service and patron interaction. Post messages that people will respond to, share, or click through, more than simply broadcasting ads. Strive to make it personal. And, if possible, try to log important interactions in your database.

Box office=big opportunity. Every time someone calls the box office, there’s opportunity to deepen loyalty. The database can be a big part of this. Knowing all of a patron’s interactions can point box office staff to the right next step for the patron—whether it’s buying more single tickets, upgrading their subscription or membership, or making a donation.

#artsmgtchat on July 20

Chat about loyalty with arts managers from around the country during the July 20 Arts Management Chat (#artsmgtchat) on Twitter. If you’ve never participated in a Twitter chat before, it’s simple. Under the hashtag #artsmgtchat, I will ask a series of discussion questions during the hour. (The chat begins at 2 p.m. EDT/11a.m. PDT.) People who are following the hashtag respond and chat with one another, putting “#artsmgtchat” in their response. More on using Twitter hashtags.

The goal of this discussion is to have an open dialogue about how practitioners are approaching loyalty. I've structured the questions (below) to facilitate the sharing of your ideas—what’s working (and what’s not), how your organization strategizes around loyalty, and the trends you’re seeing in the field.

1.    Does your organization focus more on new patrons or patrons you already have and why?
2.    What outcomes do you look at for measuring loyalty? (renewal rate, new donors, number of upgrades, etc)
3.    How do you motivate first-timers to come to your organization again?
4.    What loyalty programs have you developed to retain or upgrade subscribers, members and/or donors?
5.    How do you feel about loyalty programs like the subscription and membership model?
6.    How do you motivate subscribers/members to become donors?
7.    Which arts organization has a loyalty program you admire and why?
8.    What’s the best idea for promoting loyalty that you’ve used or heard about recently?

Are Scalpers Winning the Gold at the London Olympics?

2012-07-09T10:32:00.000-06:00

London 2012 Tickets. Photo: Paul Hudson.

The eyes of the world turn to London July 27th when 10,500 athletes in 26 sports begin to compete in the Summer Games of the XXX Olympiad.

The logistics surrounding the buying and selling of tickets for live Olympic events are daunting. We are talking about eight million tickets for a full range of activities from preliminary rounds to final “medal” events to opening and closing ceremonies – all crammed into a two-week window of time.

To be sure, it’s a huge challenge to gauge demand and then arrive at a price model that makes sense for an event of this magnitude.

What is this seat worth?
When speaking about pricing at industry conferences, I commonly begin by rhetorically asking, “What is this chair worth?” As old ticket marketer, my answer is simple. It’s only worth what I can get for it – and my job is get as much as I can!

This answer makes some folks uncomfortable. It’s not uncommon for someone in the audience to ask me about the role of “fairness” in pricing. Don’t we, as nonprofit publically-supported entities, have an obligation to be fair to our patrons?

Being fair with prices in not a particularly new concept. The economic term for the issue is “Just Pricing”, meaning that the seller has a moral obligation do what is right and fair.

Fairness as basis for pricing strategy…
Many societies enforce or regulate Just Pricing strategies. For example, usury laws are common in most U.S. states. Their purpose is to set maximum amounts of interest that can be charged to borrow money or establish price limits for water, ice and gasoline following a natural disaster.

All of us whose lives were disrupted this summer can appreciate the need for Just Pricing. The devastating wild fires out West and ferocious storms and heat that punched out power grids from the Midwest through the East Coast limited supplies and increased demand for necessities. The injustice of price gouging under those circumstances is obvious.

How does Just Pricing apply to tickets? The London organizers of the 2012 Olympic Games believed the answer was an unambiguous “yes” and built their pricing strategies around a concept described in an interesting blog posted on the HBR Blog Network written by Marco Bertini of the London Business School and John T. Gourville from the Harvard Business School.

For the London organizers, the goal was to make the Olympiad “Everybody’s Games”. They wanted ticket buyers to become “partners”, participating in ticket allocation lotteries and with venues that were scaled only after the orders” were received.

The London model is built on what professors Bertini and Gourville call “Shared-value pricing”, a “nascent and evolving strategy” based on the belief that with “fundamental shifts consumers’ power and expectation, customers will have dwindling patience for antagonistic pricing.” The goal is to view “customers as partners in value creation”.

It didn’t work in London.
I must confess that I have a tough time following the goal logic of fairness and openness that is executed by lotteries and the cynicism of sales and inventory plans that are put in place after the fact. So how has it worked? Based on a recent report from Bloomberg News, not so well.

According to Bloomberg, “Ticket prices to sold out events at the London Olympics have climbed as high as 20 times face value on the secondary market. The Men’s basketball, track and field and the Opening-Ceremony are commanding top dollar” (er, pounds sterling).

Predictably, re-sellers did what all scalpers, aka, the secondary ticket market, do best. They step in to fill the gap when values don’t match price.

The Value Gap
A couple of years ago, Warren Buffet opined, “Price is what you pay. Value is what you get.”

My observation is that Mr. Buffet has better application to the job of pricing tickets than the “Shared Value” approach. The value proposition of most patrons is to get the best seat at the best price. And if the venue “gets it wrong,” customers do one of two things. If the asking price is low, consumers will exploit the “deal.” If the price is too high, consumers invariably pass on the event.

When price and value are balanced, everybody wins. The patron gets a great seat at a price that they believe is fair. And, in TRG’s experience, the happiest patrons are most frequently those who pay the highest price for seats they really wanted, not those who got the cheapest ticket price.

Are re-sellers filling the value gap in your pricing strategy? Comment, question here.