The Risk of Free

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.

Stressed out? You're not alone.

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.

2013: The Year of the Patron

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Thinking Long Term About Your Next Right Offer

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.

Dynamic Pricing Blind Spots

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.”

Upcoming Webinar: Dynamic Pricing or Patron Loyalty?

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

What Marketing-Development Collaboration Really Needs

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.

Patron Loyalty 101

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. 

The Bias That’s Bruising Patron Loyalty

Photo by Howard Lake

Update: If you missed Jill Robinson's session at TCG about the Bias, we are reprising it as a free webinar at the end of July. If you're interested, please e-mail info@trgarts.com to be invited.

Findings coming out of loyalty analyses are beginning to expose a bias in the arts industry. Many arts managers are convinced that patrons are either:
•    philanthropists seeking to sustain the arts
•    or consumers seeking to experience the art form. 

This “either-or” mindset is dead wrong, according to TRG Arts study. 

Yet, industry leaders continually provide incentives to keep the bias alive in the structure of their organizations’ budgets—divvying up revenue expectations between major gifts, membership/individual giving, marketing/ticket sales. In the end, patrons are not appropriately valued for their support in total.  And, as we’ve recently noted, devalued patrons don’t stick around.

It doesn’t have to be this way. At recent industry conferences, we’ve seen a small corps of patron loyalty action leaders begin to model a new way for arts organizations to treat patrons like people, instead of departmental property—and on the way, build sustaining patronage.

Loyalty is “Both-And”

Over the past decade, our firm has examined hundreds of thousands of patron behavior records looking for loyalty patterns within organizations.  Study reveals distinct hierarchal groupings of patrons that we call Advocates, Buyers, and Tryers^TM. 

It’s true: Some patrons only donate and other patrons only buy tickets.  This is hardly surprising given the way we cultivate support and promote ticket sales on separate—sometimes competing— operational tracks.  However, our research also shows huge transactional diversity among individual patrons.

I am Patron. Hear Me Roar. (Or Watch Me Leave.)

A great dialogue on patron loyalty took place at the League of American Orchestras conference in Dallas last week. TRG’s Jill Robinson and Keri Mesropov were part of it and reported sensing a slow but encouraging shift from talking about loyalty to doing something about it

Any steps that move our industry from thought to loyalty action leadership are most welcome.  And, come not a moment too soon. The era of nurturing individual patrons is long overdue. 

For more than a decade, our firm’s study and that of other arts researchers has shown the need for integrated patron management. We know that individual patrons follow their passion for an art form to the organizations that produce the art they love. Data shows that patrons invest time and money where it matters to them – in performances and events they want to enjoy, in campaigns they want to support, and at times when they are moved (or encouraged) to act. 

When we map loyalty in TRG analyses, two findings are clear.  The first is that there are distinct behavioral patterns that groups of patrons share. These patterns describe depth of loyalty. TRG calls this Advocate, Buyer and Tryer behavior, as we’ve discussed in this space. The second finding is: no two patrons behave exactly alike, even within loyalty groupings. Our study concludes that in loyalty-building, individual patron household behavior matters most.

A “major donor” has many faces

Photo: Wooden tops, Tate Modern by Howard Lake

What are you passionate about? How could we tell?

Those questions kicked off a TRG webinar April 18th that addressed the issue of patron loyalty -- how we as arts managers can drive revenue from audiences’ love of the arts. Sean Kelly, VP of Marketing and Communications at Seattle’s 5th Avenue Theatre led the webinar with Laura Willumsen, TRG’s Senior Consultant and told the story of how patron passion for The 5th is driving the company’s loyalty program.

Clearly, it’s difficult to see an individual’s passion for the arts when you are looking at patrons only through the lens of individual campaigns. Most arts managers see their season as a string of performances with seats to fill, or days of an exhibition with a visitor goal to hit, or an annual fund effort to bring in donations. “Audience engagement” and “donor cultivation”, when viewed as campaigns, are just a large number of indeterminable and unending tasks.

Life imitates art: Subscription models still going strong

This post was originally published this week on artsmarketing.org and in the National Arts Marketing Project newsletter.

How many times have you heard that the arts need a new business model, or that subscriptions are dead? There’s not a lot of people out there advocating for subscriptions. In fact most speak of abandoning it, or make conclusions or assumptions based on reports that the number of arts subscribers in America is down.

But, is the subscription model really dead? Really? The fact is, subscriptions are thriving in industries outside of the arts. In the past few months, there have been a slew of articles about entrepreneurs latching on to this model. These businesses, each of which offer a product along a specific vertical or family of products (from artisan coffee to cosmetics to books) each month for a set fee, see the subscription model as the ticket to sustaining revenue. And it’s making them successful. Entrepreneur declared subscription service startups “the hot new thing”. Now it seems more businesses than ever are imitating what has made arts organizations successful for decades—and what some in our field are preparing to throw away.

Upcoming Webinar: The Loyalty Business Model

Update: Thanks to everyone who signed up for the webinar. If you missed it, you can still view the recording here.

Announcing TRG's latest webinar...

The Loyalty Business Model:
How to use passion for the arts to drive revenue           

Date: Wednesday, April 18
Time: 2-3:15 p.m. EDT/11-12:15 PDT
Cost: Free--register here.

While some debate the feasibility of the current arts business model and look to new audiences to fill the gap, the fact remains: only 1 out of 5 new patrons come back a second time. Our problem is not new audiences; it’s keeping the patrons we have--and increasing their loyalty to our organizations.

Loyalty can be achieved when a patrons’ passion for the arts is activated. Strategies that promote loyalty involve common-sense measures to draw in "newbies" and deepen relationships among first- and long-time patrons.  Best practices focus on increasing patron satisfaction and, in turn, ongoing revenue. The 5th Avenue Theatre, in collaboration with TRG Arts, is building a wholly new model of audience engagement, centered on this view of patron loyalty. 

5^th Avenue Theatre’s Vice President of Marketing and Communications Sean Kelly and TRG’s Senior Consultant Laura Willumsen lead this webinar, which focuses on the benefits of viewing patron interactions through the lens of their lifetime loyalty to your organizations. You’ll learn:

●     why loyalty is the only sustainable model for revenue growth
●     what makes a targeted, purposeful loyalty strategy different from more general audience engagement programs
●     about the specific techniques Kelly and Willumsen used to drive retention, as well as increase engagement and revenue at 5th Avenue Theatre

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, April 18
11 a.m. Pacific
Noon Mountain
1 p.m. Central
2 p.m. Eastern

Questions? Comments? Contact us, or comment below.

How blockbusters can increase loyalty

Line to get in to Hirshhorn After Hours.
Photo by Joe Loong via Flickr.

Recently I came across an excellent article entitled “Death by Curation” on how museums have developed an over-reliance on programming special exhibits, as opposed to trusting their permanent collections to make revenue goals. Author Colleen Dilenschneider makes the point that blockbusters can increase annual revenue expectations to often unreasonable levels. The blockbuster-addicted museum then sinks more money into further special exhibits that may not be as successful as the first blockbuster, or even break even.

Over two decades, we’ve seen this pattern play out in performing arts organizations, as well as museums and other membership-based attractions. Of course, the blockbusters themselves are usually not the problem. The way that an arts organization handles a blockbuster can be. As the curation article corroborates, blockbusters have the potential to leave the organization in the lurch afterwards when 1) the previous spike in revenue leaves staff hungry for more and 2) patrons acquired from a blockbuster don’t come back. TRG and other research bears this out; just one in five patrons returns to an arts organization after their first visit.

3 Principles for Increasing Patron Loyalty

Patron Loyalty Week continues through March 24th. We’re engaging in dialogue about developing longer, stronger patron relationships on the blog, at industry conferences, and on Twitter at #LoyaltyWeek

We love loyal patrons. Why? Simply put, they make money for arts organizations, and they make arts managers’ jobs easier. Patron loyalty means developing stronger, longer relationships with your audience. It's all about finding new buyers, converting them into frequent buyers, subscriber/members, donors and, ultimately, lifelong patrons.

Making those conversions has far-reaching implications for arts organizations. TRG research shows that the more loyal a patron is, the greater their lifetime value will be to an arts organization. 

But how does that translate into your day-to-day tasks? We all know that marketing and fundraising are about patron relationships, but that reality gets lost when managers are trying make revenue goals week after week. We forget that a loyalty strategy works like a booster shot for marketing and development efforts. It means less work to promote a production or exhibit, or garner donors for development campaigns.

Here are 3 simple principles to help arts managers integrate loyalty into everyday tasks:

1. Loyalty is everyone’s job.  Leadership must be engaged and lead the kind of transformational change required to really orient around the patron.  Marketing and development departments each have major responsibility for loyalty. And so does everyone else in the organization – from the folks who plan the campaigns to the person who sells the ticket.  

Too Many Tryers to Sustain the Arts

Today marks the beginning of Patron Loyalty Week at TRG Arts. We’re engaging in dialogue about developing longer, stronger patron relationships on the blog, at industry conferences, and on Twitter at #LoyaltyWeek

What, you may ask, is a Tryer?   In our firm’s decade of arts consumer research, Tryers are the most prevalent type of patron behavior.  They are households that have infrequent, one-time, or long-ago transactions with your organization. Right now your database–like those of most arts and entertainment organizations–is likely comprised of 90% Tryers.  And most of them are patrons you’ve allowed to lapse.  

Tryers, TRG research has found, are the least loyal, most expensive to acquire, and most difficult to retain patrons. That most audience or visitor bases are built on Tryers is a real threat to the sustainable future of arts and entertainment organizations.

We’re sounding an alarm, and purposefully so. Too many Tryers place the arts on a crumbling foundation. It doesn’t have to be that way.

Ten years ago we began using Patron Migration Analysis to track and quantify how patrons begin, end, and continue their patronage. We call the pathways to patron loyalty, Entrances, Exits and Escalators^TM. Two seminal findings that are now generally accepted emerged: 

• New single ticket buyers churn out at an alarmingly high rate after their first attendance. Since most patron entrances happen as an admission purchase, it became clear that single ticket buyer attrition was creating a proverbial hole in the patronage bucket. Often, organizations lose more patrons than they bring in annually, and that trend triggers institutional decline.
• Specific patronage programs – subscription, annual fund giving, membership – are escalators toward lifetime loyalty. Patrons who stick with a company over time and through continuing investment—loyalists-do so through these programs.

So, You Think You Know Your Audience…

In 2012, TRG bloggers are taking a fresh look at data and trends that inform risks worth taking, best practices worth hanging onto, and assumptions worth challenging – each in time for action to be taken.

The operative word in the title question is: think, as in assume.  The more TRG studies patron behavior, the more we realize how often and how much even the smartest managers make wrong assumptions about the patrons who are visiting their exhibits or sitting in the seats of their theatres, concert halls and arenas.

Take the question: Who in attendance at an arts event has been here before?  A 2011 TRG patron origination study told us: only about half. We say “only” because the prevailing conventional wisdom was that most patrons—75% or more—are repeat ticket buyers, subscribers, or members.   In fact there are so many new patrons in America’s audiences that the study’s author, TRG Vice President Will Lester dubbed it, Every Night is Opening Night.  See Will’s 6-minute video presentation on the study here:

View the slides on SlideShare here.

Knowing that a large population of new-to-you or new-to-the arts patrons make up your audience should challenge some other assumptions like:

No, really, my audience is old and has been coming for decades.  The only way to be sure is to look for new-to-file patrons and track them.  Once you do that, deeper analysis can tell you when new audiences tend to show up and for what, and what they are willing to pay. 

The Patron Experience and the New Customer Service

By virtue of the way technology has changed our world, people have come to expect an ever more personalized customer experience. Retailers like Amazon and Netflix use sophisticated technology to recommend more products, remembering buying history and order information, and tailoring the experience to each customer’s preferences. Customers now expect products and the customer service surrounding those products to fulfill their specific needs.

What about the arts? In the arts, the experience is the product. The words we use to describe our product, our art, and the action of coming to the theatre or exhibit hall often include “experience”. It’s a critical part of our vernacular. Smart arts managers know that the arts experience starts from the time a patron picks up the phone or goes online to order a ticket and ends when he/she arrives home after the event. TRG’s decades of client experience and patron behavior research shows that patron loyalty is a process that grows with accumulated experiences with the organization.

Customer service supports loyalty development at every step of the way. TRG’s counsel on patron-centric management and customer service is built around the concept of patron loyalty. Think of patron loyalty as a ladder. Patrons start at the bottom rung as a “tryer” when they have their first interaction or transaction with the organization. Patrons who come back again as a repeat buyer, multi-buyer, subscriber or member-based frequent attendee are what we call “buyers”. With good customer care, an organization can retain buyers and cultivate them into an ongoing, engaged investor—an “advocate.”

A patron’s experience, then, is a set of related interactions that, together, determine future buying and donating behavior. Viewing customer service the way a patron sees the experience is the very definition of patron-centric customer service. The experience arts patrons have unfolds in a variety of ways--the marketing materials they see advertising an event, the interactions they have with box office staff or online ticketing, the ease or difficulty of parking, the way they pick up tickets at the venue, the manner in which they are seated by the ushers, and, of course, the artistic experience.

Guess who’s coming to your arts events?

Photo: Fernando de Sousa via Flickr

This week, TRG's own Will Lester and Amelia Northrup are 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.

How well do you know your audiences…really? Before the curtain goes up you can undoubtedly pick out that valued donor or long-time subscriber in your audience. Or, at every exhibition opening, you probably know the faces and names of the most important and dedicated members attending. But who are all the rest of the people coming through your doors? Are the majority of people who have been to your organization before, or are they new? And are they new to the arts or just new to you?

The team at TRG Arts was curious about this too. What we found is that, in a given season, about 50% of the people coming to your arts events are people you have seen before. The other 50% are new to the organization, although maybe not to the arts. Subscribers, members and other regular attendees actually only comprise about 37% of the typical database. Another 14% are “reactivated” patrons—patrons who have some sort of buying history, but haven’t bought in the last two years.

Teaching Patrons to Buy Late

Ken Davenport’s insightful August 30th post spotlights the reason why advance ticket buying seems like a thing of the past.  Too many presenters, producers and arts organizations are providing incentives to buy late in the sales cycle.

As readers of this blog know, our patron behavior studies challenge the accepted conventional wisdom in the field that patrons are buying later and later.  Conventional wisdom is no substitute for fact. In a study of late-buying trends of 1.5 million arts patrons in Los Angeles, we found that buying later it is not an inevitable fact of consumer behavior. We summarized these findings earlier in the year on this blog.

In our consulting practice we do see late-buying trends, but more often than not, we’ve found that late-buying is a direct result of late-selling—not making the offer to the market early enough.  This is typically a strategy based on the assumption that all patrons want to buy late. An empty house a week out then spurs a slew of panicked late-minute discounting, or worse yet: comping. When this happens often enough, as Ken Davenport also pointed out, patrons are trained to wait for this “management panic” fire sale. The bottom line is that giving up on advance ticketing only perpetuates the cycle of late buying—and leads to less per-ticket revenue (as well as total revenue!) on an ongoing basis.   

TRG client Arts Club Theatre Company (ACTC), like many, operated under the assumption that buyers were shifting later in the sales cycle.  The staff began to feel like they were dependent on good reviews or even good weather for improved sales results. Once they began accelerating their marketing and sales activities earlier, they became less dependent upon last-minute discounting or circumstances beyond their control. Selling early worked especially well for blockbusters. 

As seen in the above sales tracker chart from ACTC’s production of White Christmas, advance ticket sales and selling earlier resulted in a sell out by the first performance. The red line represents the previous pattern of selling late, where 25-40% of revenue was generated during the run. The blue line shows the pattern once ACTC started marketing early. This tactic, combined with other solutions like pricing changes, reducing comp tickets, and restructuring subscription options, led to ACTC increasing overall revenue by $3 million over two years. You can read more about their success story here or hear about it on our latest webinar here.

The data is unambiguous.  If the patron wants “it” badly enough, they will always buy well in advance of the performance date.  Just check out the available inventory of tickets for Wicked, The Lion King or The Book of Mormon. You’ll also find advance sales when the box office opens early for blockbuster programs staged by orchestras, opera and dance companies, and non-profit theatres, like ACTC.  Given a compelling reason to buy early, patrons will respond.

Which factors do you think affect patrons buying earlier or later? Leave a comment and let us know.