Wednesday, December 29, 2010

Customer Service from a Marketer's Point of View

I have been a lifelong customer of American Airlines. A frequent flyer, credit card holder, miles gifter--you name it. I started flying AA because they had direct flights into St. Louis, where most of my family lives. From there, I started to accrue miles, and soon enough, I booked all of my travel on AA. It became a habit. I knew their routes, the layout of their planes, and how to navigate Dallas Forth Worth airport like a local. In performing arts terms, I was a long time subscriber. That is until now.

My flight from St. Louis to Washington, DC was canceled the day after Christmas due to weather (even though DC didn't receive any snow, and my plane was at the airport ready to take off). I was informed by a robo call, which also told me that I was rebooked for a flight 26 hours later. The message ended by instructing me to call AA reservations if I had any questions or concerns. Knowing that I had to be at work the next day for two interviews with major media outlets, I tried calling the number given. After being hung up on four times, the automated telephone system said "we are experiencing high call volume. If you would like to speak with an agent, please call back later." Knowing that I wouldn't be able to speak with a human, I tried working out my problem on the AA iPhone App and on their website, neither of which were designed to handle cancellations. My last option was driving an hour and a half to the airport, which I did only to be met with an apologetic but complete ineffective gate agent. So with no other option, I boarded a flight 26 hours later, however I decided I would no longer be an AA subscriber.

As marketers, we know that it costs significantly more to attract new customers than it does to retain them. Customer service is one of the easiest ways to create brand champions or to drive loyal customers away. As the economic crisis continues, we are all being forced to examine our expenses and improve ROI. So here are some thoughts on customer service as a marketing tactic to reduce churn:

1. When dealing with a customer service complaint, take a holistic view of the customer. At Arena Stage, we are fortunate enough to have a robust database that allows us to see a holistic view of our patrons. Each time a patron comes into contact with our company, it is recorded. Any employee can log into the database, and see a lifetime's worth of interactions. Like most companies, Arena Stage has policies and procedures, however our greatest asset is the excellent judgment of our front line staff. They are instructed and empowered to thoroughly review a patron's file, and to depart from most policies and procedures if necessary to retain loyal customers. I would rather waive a $10 exchange fee for a longtime subscriber every once in awhile than spend ten times that finding a new subscriber. Senior managers must allow front line employees the flexibility to take care of highly valued customers.

2. Track all customer service issues, and start to look for a pattern. Each time a customer complains, be it to front of house, box office or anyone else, the complaint should be logged into your database and tracked. Every Monday morning, senior members of the Arena Stage staff are sent a CSI (customer service issue) report listing all the complaints that came in the previous week. These complaints are then put into a spreadsheet, sorted into categories and analyzed for any visible patterns. If the same issue continues to come up, you can bet that there are ten times the number of frustrated patrons with the same issue who haven't complained. It is then your responsibility to proactively address the issue swiftly to prevent future patrons from having a similar disappointing experience with your company.

3. Be proactive, rather than reactive. The best service comes from proactive management of customer service issues. Instead of relying exclusively on complaint tracking and analysis, be proactive and solicit opinions. Send customer satisfaction surveys. Benchmark numerical responses from year to year, and ask open ended questions. Aggressively solicit customer service issues and correct them before others have to experience them. In addition, if you notice a customer has experienced a problem, try to contact them before they contact you. We ask our house managers to get the names of all patrons who share complaints and/or concerns. This allows us to follow up with the patron and suggest a solution, apologize or offer some form of compensation before they contact our box office. Imagine receiving an apology and a compensatory offer from a box office before you even contact them to report an issue.

4. Even small gestures go a long way. After doing a little research on airline customer service, I was reminded by Time Magazine's Richard Zoglin in his article "The Airlines' Customer Complaint Lines: No Answer" that even small gestures go a long way. You might not be able to meet all the demands of an angry customer, but you should be able to offer a little something to most of them. A comp ticket to an under-performing show, a free drink at the bar, complimentary parking, an autographed poster or perhaps a handwritten response from your Artistic Director. In today's world of fast-paced, unfriendly, automated response systems to customer complaints, it shouldn't take much to stand out from the crowd. Differentiate yourself from your competition by making a small gesture to each upset patron.

By offering better customer service, you can reduce your marketing expenses by slowing down churn. Make it a priority to retain the customers you spent valuable time and resources attracting in the first place.

Sunday, December 05, 2010

Why I Hate Comp Tickets

If there is one thing that can kill your earned revenue quicker than anything else, it is a misguided complimentary ticket policy. Someone asked me the other day why I hate comp tickets so much, so I decided to list my top reasons:

1. Comp tickets devalue what it is we do. For my entire career, I have watched artists struggle to make the argument that the arts mean business, and that an artistic career is just as viable an option as any other. However, these same artists then give away the fruits of their labor to anyone with the most feeble of reasons. In the past few days, a viral video entitled "Explaining the Arts Non-Profit," has been passed among my colleagues illustrating this point. It starts out with one bear saying how much he enjoys a choral group, and then asking for a comp ticket. The other bear responds by saying that putting on a concert is expensive, and would prefer it if the first bear would purchase a ticket. The first bear is befuddled by the response because he thinks the choral group is made up of volunteers who perform as a hobby. For many of us, the arts aren't a hobby--they are our livelihood, and we deserve to be compensated for work that enriches the lives of so many people.

2. People don't show because they aren't invested. Many organizations believe that they must give away comp tickets to "paper the house" in order to fill as many seats with butts when important people such as reviewers are in the audience. However, in many cases, it backfires on them. Those who receive comp tickets haven't paid anything for them, therefore they aren't invested and many don't bother to show up. An average no show rate for comp tickets is in the 30% range. Next time you are at an opening night performance, take a look at how many empty seats there are. I would bet dollars to donuts that those empty seats are a result of a faulty comp ticketing policy. Not only are organizations giving away free tickets, but they aren't even getting the results they want out of them.

3. Blood in the water. Nothing smells of desperation worse than massive public discounting and uncontrolled comp ticketing programs. You might as well put a sign on your theater that says "no need to buy because we can't give tickets away." Marketers are in the business of managing perception more than reality. Even with shows that are under performing, smart marketers have tools in their toolbox to create the perception of demand.

4. Comp tickets create box office nightmares. The old saying that "those who pay the least complain the most" definitely applies to recipients of comp tickets. Recipients of comp tickets, in my mind, are the most entitled and demanding group of patrons to serve. They demand the attention of box office and front of house staff, which in turn takes a significant portion of your limited resources away from your full paying audience.

That all being said, there are a few good reasons to use comp tickets in a controlled and well thought out strategy:

1. As benefits for full time employees and actors. In many organizations, comp tickets are an important part of the benefits offered to employees. Organizations want their employees to be proud of their work, and knowledgeable about what is on stage, so offering them complimentary tickets is well worth the loss in revenue.

2. For members of the press. Press members who have agreed to cover a particular performance should be offered a comp ticket. However, do not give out comp tickets to press who haven't agreed to coverage. If a press member wants to see a performance but isn't going to cover it or your organization, it is more than acceptable to ask them to purchase a ticket. Just because they are a member of your credential press corps doesn't automatically entitle them to a free ticket.

3. To cultivate potential investors and/or donors. Comp tickets can and should be used to host potential investors and/or donors as a means of cultivation. However, these tickets should be monitored and tracked. I have seen companies give away thousands of dollars worth of comp tickets to potential donors who were in the "cultivation" process for years without a single donation.

4. As a professional courtesy. Most organizations have a vested interest in other artists seeing their work. Agents, casting directors, affiliated artists, artistic directors, and producers comprise most of this group. In some cases, if a relationship is exceptionally important, offering comp tickets would be appropriate. In many cases however, a discount for industry professionals will work just fine.

In closing, here are a few quick thoughts on developing a comprehensive comp ticketing policy for your organization:

1. Create a budget for comp tickets. Used in much the same manner as an expense budget, this allows an organization to plan for a given number of comp tickets each year for various purposes. Make sure to get buy-in from all members of senior management as they will be responsible for managing the comp tickets for their departments.

2. Develop very clear instructions on how comp tickets are to be distributed. The key to a good comp ticket policy is clarity. Make sure your policies are easy to understand and simple to follow. For fairness, it is important that the same policy be in effect for your entire organization. Once a clear and concise policy is created, stick to it.

3. It's like a crack addiction--it will be tough to wean people off of them. If your organization has a serious comp ticket problem, you might need a couple of years to turn it around. Be will piss people off. But we are talking about the livelihood of the organization and its artists. Why would anyone want to buy a ticket if they know that your organization gives them away at the drop of a hat? It will be tough, but worth it. I promise.

Friday, November 12, 2010

Managing Success

I was joking with my Managing Director a couple of days ago that managing success is just as time consuming as managing a flop. On the other end of a conference call, Adrian Bryan-Brown, whose press firm Boneau/Bryan-Brown represents Arena Stage, replied “yeah, but it’s a lot more fun.” Truer words have never been spoken.

At Arena Stage, we are fortunate enough to be in a situation where we have two record-breaking productions playing concurrently: Molly Smith’s production of Oklahoma! and Marcus Gardley’s world premiere of every tongue confess directed by Kenny Leon starring Phylicia Rashad. In the past two months, I have learned a lot about what it means to manage success. Below are a couple of things to keep in mind when a mega hit hits:

1. To ensure success in the future, you need to think about retention today. Having a smash hit is exciting—orders are flooding your box office, reviews are kind and generous, and you don’t have to stress about making your sales goals. But there will be a tomorrow, and inevitably you will hit a patch that isn’t as pleasant. So take the time today to maximize your chances of retaining all the new patrons that are coming through your doors. Help prepare them for the experience by sending them a pre-attendance e-mail that discusses the show, provides dramaturgical insight, offers tips on parking and transportation, and suggests possible dinner options. Think about greeting them with a welcome kit, or maybe a complimentary drink at concessions. Go the extra distance to ensure their first experience with you is memorable for all the right reasons, and then follow it up within 48 hours with an irresistible offer to come back for another production. Studies show that if you can get new patrons to come back to just one additional production during your season, you will significantly decrease churn.

2. Have a plan for what do if inventory suddenly becomes available. Even during high demand situations, inventory becomes available as you get closer to a performance date. Sometimes group leaders can’t fill their quotas, or maybe you get lucky and you have found a way to add a few more seats. In most cases, companies just blindly throw that inventory on the market and are satisfied when it sells. These tickets have a value beyond their price as in most cases there is significantly more demand than there is inventory. Perhaps you can maximize the value of these tickets by offering them to your highest donors first as a benefit of donating. Or you could choose to sell the tickets at a significant discount to the winner of an online raffle, thereby collecting hundreds of contacts that you can use to promote to in the future. Or a little more controversial, some companies, particularly TicketMaster clients, are setting up their own e-bay style auctions to maximize revenue.

3. Monitor discounts and comp tickets aggressively. I recommend incentivizing early purchasing behaviors by providing patrons the best possible discount when you put tickets on sale. Even in high demand situations, I would encourage people to protect a significant allotment of tickets to be sold at a substantial discount weeks in advance of performances. Once you are into performances, and demand is at its highest point, discounts need to be managed aggressively. I believe that most arts organizations have an obligation to make sure that all productions are accessible to audiences that might not be able to pay full price, but that doesn’t mean you have to offer discounts on demand. If patrons want to wait for a rave review before purchasing tickets, then they can purchase them at full price. The other option is to purchase well in advance. I would also recommend budgeting your comp tickets. If each department has a maximum amount of comp tickets they can use, then you won’t have to serve as the arbitrator when people request comp tickets. It will also help you project future sales as you can factor those seats out of your projections. Keep in mind though that just like full price tickets, demands for comp tickets increase when you have a hit on your hands. However, you need to ask yourself with each comp ticket request if honoring the request is worth the full price of the ticket, because I assure you, you will be able to sell that seat.

4. Save money on advertising, and build a reserve. Normally I would suggest spending more money on advertising a hit show as you are more likely to see a higher return on investment, however if you are in a situation where you feel relatively sure that great press coverage and word of mouth is enough to drive the needed sales to move all your inventory, then pull back on advertising expenses. Many companies enter into yearlong advertising contracts with vendors, so cutting advertising completely might not be an option. But you can build a reserve of the advertising expenses you saved on your hit production to help you later in the year when you have a production that isn’t selling as well.

5. As a follow up to bullet #4, encourage word of mouth. There is nothing more powerful than word of mouth. I know I have a hit on my hands when daily sales double the second week of performances, because I know that patrons who saw a show in the first week are talking. Think about all the ways in which you can help them spread the word. Maybe a post-attendance e-mail from the star asking them to tell all of their friends. Perhaps you should give patrons a complimentary souvenir to walk away with so they can show their friends. At Arena Stage, we are giving out complimentary hand fans to Oklahoma! attendees that have a replica of the 1907 Washington Post article announcing Oklahoma’s statehood on one side, and the lyrics to a song on the other (not to mention, The Washington Post is sponsoring them so there is no cost to us for 40,000 fans). Create a viral video featuring behind-the-scenes work, record a podcast with a leading star or even do a robocall message from a celebrity. The goal—getting them talking!

If you find yourself in the fortunate position of having a record-breaking hit on your hands, make sure you do everything in your power to have that show pay dividends well into the future. I liken it to winning the lottery—you can spend all the money today, or you can put it into a savings account and have it work for you in the future.

Sunday, October 17, 2010

The Problems of Traditional Pricing and How Dynamic Pricing Can Increase Accessibility

Over the span of the last several months, there have been numerous emotional debates over pricing in the blogosphere, particularly among a small handful of very respected colleagues in the theater industry. I have remained, for the most part, on the sidelines as much as possible, because parts of the debate centered around practices that I have publicly endorsed at major conferences. As such, I didn't want to interfere in what was an open and honest dialog. However at this point, I feel the need to address some of the misinformation that has been posted on a few reputable blogs, and shed some light on what to me seems to be a misunderstanding of dynamic pricing by Isaac Butler (founder of Parabasis) and Adam Thurman (author of Mission Paradox).

Some things to think about:

1. Dynamic pricing in itself doesn't determine accessibility.

Dynamic pricing is simply a tool, or maybe it is better described as a philosophy. Like most things in life, the devil is in the details. How it is applied is much more important than the concept itself. Basic traditional pricing establishes a maximum price point usually determined by seating section and date of performance. Once tickets are placed on sale, they are usually released at the maximum price point. In contrast, with most applications of dynamic pricing, tickets are initially released at the minimum price point, and only increase to the maximum price point if demand warrants. This ensures that a certain amount of tickets are guaranteed to be sold at the minimum price point, whereas traditional pricing can allow an entire house to be sold at the maximum price point from the initial release date.

In addition, dynamic pricing doesn't dictate how an institution deals with allotments set aside for specific audience demographics. In the case of Arena Stage, we have six distinct savings programs that target specific audiences that are extremely important to us as an organization. Aside from the pricing of the general ticket allotment, most organizations that practice dynamic pricing protect ticket allotments for their savings programs, even for productions that are in very high demand.

From my vantage point, dynamic pricing is the Robin Hood approach to yield management. The very few people who wait until the last minute are charged the maximum price point to provide for those who are charged a much more accessible price by purchasing well in advance.

2. When debating pricing, the maximum price point is much less important than the average ticket price.

When determining how accessible major institutions are to the general public, it is much more important to examine an institution's average ticket price than to critique its maximum price point. To reach the maximum price point, at most institutions practicing dynamic pricing, demand has to be so high that 90% or more of available inventory is sold, meaning that only 10% of inventory is ever sold at the highest price. In looking at it from another perspective, 90% of all inventory is sold at some sort of discount. The only litmus test an institution has to determine how accessible they are to the general public is their average ticket price. To determine average ticket price, one needs to divide total ticket revenue (subscriptions + single tickets) by the total number of tickets sold. By looking at an average ticket price, one gets a complete analysis of all sales across the entire spectrum of their ticket allotments, including those sold through savings programs. The argument shouldn't be that non-profits shouldn't sell beyond a certain maximum ticket price. Instead, it should be that non-profits should maintain an accessible average ticket price. If you are focused on the maximum price point, you can't see the forest for the trees.

3. Dynamic pricing rewards behavior that is much more in line which subscription purchasing.

I have heard my colleagues bemoan the death of subscriptions for the past decade. I too am inclined to believe that generational differences in purchasing behavior will lead to the eventual demise of the subscription. However, traditional pricing practices have escalated the downturn of subscriptions.

In most institutions, subscribers are a group of patrons who purchase multiple productions and do so early in a show's purchasing cycle. For this, they are rewarded with a slight discount. The trouble with traditional pricing occurs when single tickets are placed on sale at the maximum price point directly out of the gate, only to be drastically discounted usually a week or two before the performance when management realizes there isn't the demand to warrant the initial price point. Subscribers then realize that in a significant percentage of cases, they can wait until the last minute to purchase, and will be rewarded with the same, if not better, discount than they would have received if they purchased months in advance. Pavlov proved that if you reward a certain behavior, it will increase. If you want to kill subscriptions, then continue with a pricing model that provides the best discount at the last possible minute.

Until someone much smarter than I figures out the solution to the subscription dilemma, I will always support a single ticket pricing model that encourages behavior more associated with subscription purchasing patterns. If an organization wants to increase its subscriber base, reward early purchasing decisions with the best possible prices, and make sure that those who purchase late, do so at the highest possible prices. I am convinced that this approach to pricing is why Arena Stage has significantly increased its subscriber base over the last three fiscal years in the midst of the global economic crisis.

Final Thought
When debating and analyzing pricing strategies for an organization, remember that "a little knowledge is a dangerous thing." Get all the facts. Study sales patterns. Talk to stakeholders. Hold focus groups. Look at peer organizations. Do your due diligence, and be prudent. Before moving forward, make sure you have a complete understanding of the various options and how your decision will impact organizational values. Prior to implementing a dynamic pricing strategy at Arena Stage, we thoroughly studied the model for more than a year, and had very thoughtful discourse among staff, leadership and the board.

Sunday, September 26, 2010

Groupon and Mass Discounting Strategies

Spurred in part by an excellent article written by Chris Jones of the Chicago Tribune, in the past month, there has been a lot of talk about cultural organizations using Groupon (an online, mass discount website). Just like any mass discounting method, using Groupon should be a well thought out strategy. Used correctly, and it can work very well. Used incorrectly, and it can be very costly.

Things to remember about Groupon:
  • It is out there for the world to see and it was designed to be used by social media, so that it is picked up and passed along at a very rapid pace. From some of my previous posts on this blog, you probably know that I am a fan of what I call "ninja discounting." Very rarely do I use mass communication to advertise and promote discounts, preferring instead to use one-to-one direct marketing techniques aimed at very strategic recipients. If I need to discount, then I want to make sure that I can control who gets the discount so that it flies under the radar of full price buyers.

  • Groupon generally rewards a pattern of behavior that isn't desired--namely, last minute ticket purchasing. Before turning to a mass discounting strategy like Groupon, performing arts organizations will wait to see how their standard campaign is doing. If they are on goal, most won't discount. If they are off, time to throw out the offers. But this usually happens pretty late into a campaign. Let's use the Joffrey Ballet that Chris cites as an example. Their programming begins in October, as does Arena Stage's, so I would guess they launched their subscription campaign last spring. How do you think a subscriber who purchased early and at full price will feel when he sees that if he waited several months he could get a subscription at 50% off? and what do you think his purchasing behavior will look like next year? and trust me, he will get the offer because as my first point illustrates, it goes to everyone.

  • Groupon is a for-profit company, and operates like one. They take a significant cut of each sale made. Using the example from the Joffrey Ballet, subscriptions were offered at 61% off regular prices. However, the cut that the Joffrey gets is significantly less than that, so they most likely sold those subscriptions at 75-80% off. Larger organizations can negotiate better splits with Groupon than their smaller counterparts, but I haven't heard of anyone keeping more than 60% of the full sales price.

  • We must always remember that discount buyers behave differently and you must budget for that. Full season subscribers at most organizations renew at a rate between 85% to 90%. However, I have found that full season subscribers that purchase their subscriptions at a drastic discount renew at a much lower rate (around 60%). Additionally, because they spent significantly less amount of money per ticket, the no show rates are also substantially higher, sometimes leaving large empty holes in your house.

Instead of putting subscriptions on Groupon in order to attract thousands of new subscribers, I would do the following:

  1. Using your database, compile a list of the tough holdouts that you have hit up seven to eight times already during your subscription campaign (usually includes single ticket buyers and non-renewed subscribers from the past 3-4 years).

  2. Next, trade lists will all the other arts organizations in town.

  3. Then possibly consider purchasing lists from a list broker.

  4. Combine all the names into one master document, and suppress your current subscribers, donors and full price ticket buyers.

  5. Using the exact same deep discount offer you were going to give to Groupon, develop a cheap, but effective mailer and send to your list. Make sure it is an offer that is impossible to pass up, and that the offer leads in design and has a deadline. (note: if you don't have a large box office staff, then make sure the offer is online only, or you will be swamped). The key is to keep production and mailing costs low--send using non-profit postage and use a discount printer/mail house.

By doing this, you get to keep the entire purchase price of the discounted subscription, and you minimize the possibility that your dedicated and loyal patrons will see that you are heavily discounting late into your campaign after thousands have already purchased.

I find that Groupon is most useful when trying to fill large sections of an empty house on dates that are less desirable. Full price ticket buyers don't seem to mind because they didn't want those dates anyway, and most companies budget low percent paid capacities on those dates so it is additional revenue that wasn't anticipated.

Monday, September 06, 2010

Remember to Test even the "Sacred Cows"

I think I have always been attracted to arts marketing because it allows me to use both creative as well as scientific talents. To this day, I might be the only person to graduate from Missouri State University with a major in speech and theatre education and a minor in mathematics. So it should come as no surprise that I take a very scientific approach to marketing.

In every campaign I lead, I constantly manipulate variables and note outcomes in an attempt to continually improve upon previous results. The easiest variables that marketers turn to are design and pricing. How many times have you tested a carrier package? an offer? pricing strategy? Probably quite a few times. Now think about how many times you have tested different timing schemes for putting products on sale.

This was the first year in my tenure at Arena Stage where we experimented with using timing as a variable. For almost as long as we have had mini-subscriptions, we have put them on sale at the exact same time as our full season subscriptions, fearing that instead of waiting or upgrading, our potential mini-subscribers would opt to go elsewhere for their entertainment. The fear of losing potential mini-subscribers was so strong that for many years timing wasn't even considered a possible variable to test.

As a leader, you have to always remember that the fear of a potential loss will always be significantly more powerful than the possibility of a probable gain. By nature, we are risk averse, and if given a choice to pursue status quo or trail blaze, we will choose status quo each and every time unless there are overwhelming odds. But you have to be mindful of "sacred cows," and be willing to test even the most concrete of assumptions. In my career, the testing of "proven strategies" has led to some pretty remarkable results.
For our inaugural season in the new Mead Center for American Theater, we experimented with exclusively putting full season subscriptions on sale for the first four months of our subscription campaign. In addition, we developed a pricing strategy that encouraged full package purchases, and new exclusive benefits for full season subscribers, such as the ability to purchase parking in our onsite, underground parking lot. It was a test of timing as a variable--would potential mini-subscribers upgrade to the full season, wait until mini-subscriptions were available or leave Arena Stage entirely.

As we are eight months into our subscription campaign, we have some pretty interesting results:
  • we exceeded our projections for full season subscribers both in number of subscribers as well as revenue by almost 60%
  • we had three times as many subscribers upgrade their packages when compared to those that downgraded
  • full season subscriptions weren't just for renewals and upgrades--we more than tripled our projections for brand new subscribers to Arena Stage at the full season level. At this moment, 11% of our entire subscription base are patrons who have never subscribed to Arena Stage and did so in their first year at the full season level.

As our full season subscribers renew at a much higher rate than our mini-subscribers do, I anticipate that the growth that we have seen in our number of full season subscribers will benefit us for many years to come.

Wednesday, August 18, 2010

Some thoughts on Dynamic Pricing

A couple of months ago, a good dialogue about dynamic pricing began when Trisha Mead (PR and Publications Manager, Portland Center Stage) wrote a blog post on the benefits of dynamic pricing on the 2am theatre blog, and then Adam Thurman (Director of Marketing, Court Theatre) wrote a response entitled "the perils of dynamic pricing." It reminded me how often marketers disagree with each other when it comes to so called best practices.

If your organization is considering dynamic pricing, a couple of things to think about from someone who has some experience with it:

1. Tailor all marketing strategies to your organization. How can one pricing strategy be perfect for one organization, and completely wrong for another? The simple answer is every organization is unique, with a unique set of circumstances to consider. For example, if an organization's funding mix is 70% earned and 30% contributed, chances are, they might be much more likely to consider a dynamic pricing model, as ticket sales play a more prominent role in the organization's fiscal health. On the flip side, if your organization is known for more riskier programming, and relies upon contributed revenue more to subsidize less popular work, then dynamic pricing might seem like an alien concept.

2. Be mindful of your organizational culture and brand. Some companies are pioneering and entrepreneurial in nature, always looking for new opportunities to increase revenue streams. Other organizations have a more egalitarian approach to arts consumption. If your organization is known for having low prices available to everyone, then a dynamic pricing model might cause quite a disruption. However, those that argue that non-profits have nothing to learn from for-profit models are naive. There is now a long history of non-profits and for-profits working together. Even the most egalitarian of organizations, a "people's theater" like the Public Theater, routinely relies upon revenue from the for-profit theater world to fund its non-profit mission. Where would the Public Theater be today without A Chorus Line or New York Theatre Workshop without Rent? Sometimes for-profit strategies and approaches can be very beneficial to non-profit missions.

3. The funding conundrum. In his post, Adam asks a question which is meant to imply that the implementation of dynamic pricing could jeopardize an organization's "case for support." I have heard this argument before, and found it intriguing. Over the span of the past few months, I have sat on a couple of major funding panels with representatives from the top national arts foundations. I took the opportunity to ask them about the impact dynamic pricing might have in their opinion on an organization's "case for support." Without exception, each funder recognized that contributed support, especially from foundations and corporations, has taken a significant hit as a result of the global economic crisis, forcing non-profits to devise methods to increase other revenue streams. They understand these strategies in some cases are necessary for survival, and consequently said that they would not have any impact on a funding decision.

4. Dynamic pricing doesn't necessarily mean eliminating accessibility. Most non-profit art organizations would agree that accessibility to art is important. Dynamic pricing in itself doesn't preclude patrons from experiencing a performance if they can't pay top dollar. What it does do is force price sensitive consumers into an early buying pattern. Remember that in most cases, dynamic pricing doesn't affect ticket prices until a venue is at 60-70% paid capacity. If you purchase early, dynamic pricing shouldn't come into play. One of the reasons that I like dynamic pricing is that it rewards a buying behavior that is essential to converting a single ticket patron to a subscriber. Subscribers buy early and in bulk partially to get the best pricing available. If you can train more single ticket buyers that the later they purchase, the higher the price, it teaches the price sensitive single ticket patrons purchasing behaviors more aligned with the purchasing behaviors of subscribers.

Adam and Trisha are both right--dynamic pricing is both beneficial and perilous. Depending upon the needs of your organization, what's good for one, might not be good for all. Makes me start to wonder if there are any such things as general best practices.

Sunday, August 01, 2010

Marketing to our Emotions

Long ago, I read Dale Carnegie's How to Win Friends & Influence People, a book that I think should be required reading for all managers and marketers. The one lesson from the book that remained with me for all of these years, was a reminder that although we like to think of ourselves as rational decision-makers, we are first and foremost emotional beings.

In finishing my reading of Jonah Lehrer's How We Decide, which will be a new required book for my graduate students, I was reminded of a couple of important ways in which emotions override logic in decision-making:

Loss Aversion. The fear of loss is more powerful than the appeal of a gain, so powerful that often times it makes us make irrational decisions. To prove this principle, Lehrer discusses several studies and experiments involving investments. It has been proven over the past seven decades that stocks outperform bonds almost 12 to 1, leading one to question why bonds are so popular. In the early 1950s, an economist named Harry Markowitz won the Nobel Prize for developing an equation for the best investment ratio to ensure optimum performance. However, when it came time to implement his own theory, which supported heavier investments in stocks, he decided it was too risky and invested in stocks and bonds equally. In applying this principle to the performing arts, one could infer that the most powerful marketing message would be a message that demonstrated how one could avoid a loss (instead of acquiring a gain). For example: "Tickets selling out fast! Select dates still available. Don't be left out in the cold--call today!"

Expectation of Price. Arts marketing lore has it that price can affect one's perceived value of a brand. The thought is that selling tickets at a lower price will devalue the experience. According to Lehrer, there is some wisdom to this theory. In his book, he discusses a wine tasting experiment at Stanford. In front of a panel, scientists placed five bottles of wine ranging from $5 to $90, and the panelists were told that each bottle contained a different wine. However, there were only three types of wine, so two types were repeated (actually the $5 wine was placed in the $5 bottle and the $45 bottle). Even though the $5 and $45 bottle contained the exact same wine, the $45 bottle was considered far superior. The scientists followed up with another experiment, this time not listing any of the prices. When the taste test was executed completely blind, the cheapest wine got the highest rating of the group. Using the expectation of price to our advantage, wouldn't it be more beneficial to set the prices of our products a little higher (thereby establishing a higher perceived worth), and then discount if need be, allowing the customer to think that they are getting a bargain? Which is a great segue to...

The Anchoring Effect. Lehrer contends that a meaningless anchor--in many cases a contrived number--can have a strong impact on one's decision-making habits. To bolster his case, he describes a process that most of us are all too familiar with. When purchasing a car, we might first be drawn to the sticker price, even though most of us know that almost no one pays the actual price listed. That's because the sticker price is an anchor which allows the car dealership to sell a car at the actual price and make it look like a deal to the consumer. We leave the dealer thinking we just got a $20,000 car for a few thousand dollars less, when in actuality, we paid what the dealer was hoping for or else we would have never driven the car off the lot. So in our lives, if we need the average ticket price to be $50.00, why not set the price a little higher and discount so that our product's perceived quality is higher and the consumer walks away thinking they got a deal?

The Power of the Personalized One. Good fundraisers use this emotional quirk of our brains all the time. Lehrer examines a couple of experiments by Paul Slovic, a psychologist at the University of Oregon. In his experiment, Slovic shows a group of people a photo of a specific starving child while telling that child's story. Afterward, he asks for a donation to a charity designed to address starvation. For a different group, he provides statistics about starvation throughout Africa--numbers that illustrate the staggering size of the problem, and then he asks for a donation. The funds raised by the second group were 50% less than the first. The lesson -- causes need to be personified and at a scale where a person believes he or she can have an impact. In our daily lives, having a specific child tell how your organization's programming affected them could be more impactful than even the most compelling statistics.

Although not written for marketers or the arts, I would encourage everyone to read Jonah Lehrer's How We Decide. On average I tend to read a book about once a week, and I have found How We Decide to be one of the most challenging and intriguing reads I have had in a very long time.

Tuesday, July 13, 2010

Are you an expert? You must be a failure

Recently I was introduced to Jonah Lehrer at the Theatre Communications Group annual conference in Chicago where Mr. Lehrer was a keynote speaker. His speech inspired an earlier blog post, and convinced me that I should probably read his book How We Decide. I am just about a quarter of the way through it, and I must admit that I am finding it a bit dense, although completely fascinating. Instead of reading right before going to sleep, I am waking up a little early to read because my brain needs to be fresh to process some of his ideas.

In the second chapter of the book, entitled "Predictions of Dopamine," Lehrer examines two subjects--TD Gammon (a computer specifically designed to play backgammon competitively) and Bill Robertie (a man who is a world-class expert in chess, poker and backgammon). In his examination of these two subjects, I learned two amazing lessons:

1. If you want to be an expert, you need to fail a lot! Lehrer quotes physicist Niels Bohr who defined an expert as "a person who has made all the mistakes that can be made in a very narrow field." Demonstrating this principle was TD Gammon. TD Gammon was leaps and bounds better than earlier computers at playing backgammon primarily because it was programmed to learn from its mistakes. When TD Gammon was ready to compete, its inventors wanted it to go up against a world class champion so that it could learn, so they recruited Bill Robertie. In describing his first matches with TD Gammon, Bill said "The first time I competed against TD Gammon, I was incredibly impressed. It represented a big improvement over any other computer program I'd ever encountered. But I knew I was still a better player." The next year, when Bill returned to play TD Gammon after a year's worth of almost a million errors in played matches, it was a different story. TD Gammon had become an expert by studying its own mistakes.

2. It isn't good enough to make errors, you must systematically study them. In determining how Bill Robertie could become a world-class expert in three games, it became clear that his success was linked to his systematic study of his failures. Lehrer quotes Robertie who states "It's not the quantity of practice, it's the quality. The most effective way to get better is to focus on your mistakes." In Lehrer's study of Robertie, he noticed that after Robertie plays a game, he painstakingly reviews what happened, and every decision is critiqued and analyzed. Even when he wins, he insists on searching for errors. In my professional life, I have been accused of being a perfectionist more than once, and direct reports have questioned whether I am ever happy with a result as I constantly analyze decisions, even on the cusp of a great victory. From a management perspective, I can see how that could be construed as having an insatiable appetite for perfection, but I guess I view learning in much the same way as Robertie does. Celebrating success is important, but in situations where you need to learn, and learn quickly, you need to focus on the mistakes even in victories.

Lehrer concludes that "mistakes aren't things to be discouraged. On the contrary, they should be cultivated and carefully investigated." I believe as managers we are responsible for creating environments where admitting mistakes is encouraged, so that as a team, we can all learn from them. In an age where people only want to talk about "best practices," we should also be discussing "worst practices." As it seems to me that you can only get to the "best" by surviving and learning from the "worst."

Recently I was sitting on a funding panel with a representative from a large influential funder, whose organization was supporting projects that could either be great successes or massive failures. It was considered by the funder a "success" to have either outcome, as long as a detailed analysis of each project was made available to the public to learn from. I thought this demonstrated very forward thinking on the funder's behalf, but the funder admitted to me that the public analysis requirement was a significant deterrent to applicants, as they were afraid that public failure would make them less desirable for funding from other sources.

As a field, failure should be celebrated, as long as we are relentless in our analysis of each failure and learn from each incident. Shame should be reserved for those organizations who are complacent in situations that demand change.

Sunday, June 20, 2010

Perpetuating the Myth

I've just returned from the Theatre Communications Group Annual Conference. The theme for the conference was "Ideas into Action," and it built upon the previous year's conference where the field took a look at some of the major issues facing all of us. The idea was to take what we discussed last year and to explore "bold new solutions."

The first session I attended was entitled "Theatres Becoming Centers in the 21st Century." I attended partially because my Artistic Director, Molly Smith, was speaking, but also because I wanted to hear some ideas from other centers from around the nation as we move toward the opening of the Mead Center for American Theater. The one thing that stayed with me through the entire conference from that session was the quote Molly used to open her remarks--she referenced a quote by R. Buckminster Fuller in which he said: "You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete." It made me think that as a field, if we generally agree that our business models have significant issues, then why do we spend so much energy devising band-aids for them instead of building new models that make the existing ones obsolete?

Later that evening, I had the pleasure of listening to a wonderful speech given by Jonah Lehrer, the author of the book "How We Decide: the New Science of Decision Making." He kept me captivated throughout his entire manifesto, but a single story stood out among the rest (well, at least to me). The story goes that Procter & Gamble decided they wanted to invent a new soap to make mopping more efficient. After several months of failed attempts to create this novel soap in house, they hired a creativity firm to work with them. The firm spent nine months studying homemakers as they mopped their floors, and in the end, they concluded that a new soap wouldn't revolutionize mopping because mopping as a means of cleaning was essentially flawed in itself. After observing one woman cleaning up coffee grounds on the floor with a damp paper towel, an idea emerged--what about getting rid of the mop entirely, and fastening a damp paper towel to the end of a stick? And the Swiffer was born.

After more than 50 years of success, where should the resident theater movement look to throw away a mop, and replace it with a Swiffer? In looking back on my scribbled notes, it looks like I came up with four different ideas:

1. Arts Education/Community Engagement. The idea of having an education department at a resident theater is relatively new. Maybe 15 years or so ago, funders started to route resources to student and community programs. Theater companies took note, and started developing more education programming, however the programming was almost always intended to compliment the more "formal" arts education that students were getting in the schools. Fast forward to present day where the focus of our schools have become glued to developing the highest standardized test scores. In this environment, arts education has been highly marginalized, if not all together eliminated. Who is teaching creativity, at a time where we frequently hear from top corporations that creativity is a key component to success in today's ever changing world? Do we need to look at our education departments to figure out how to serve this essential need by ourselves instead of being a complimentary service to our school systems.

2. Subscriptions. Where is our generation's Danny Newman? When he invented the subscription, it revolutionized how performing arts organizations did business, and it mirrored how a certain generation wanted to "consume" artistic product. Baby Boomers joined Kiwanis clubs, went to church, participated in bowling leagues, and purchased tickets to a large number of shows well in advance at discounted prices. But times have changed--Generation X doesn't act like its predecessor, but we are still using the same sales techniques on them that have worked for decades with Mom and Dad. How do we continue to serve Baby Boomers as they still have the largest disposable income, and work to meet the needs and buying habits of Generation X and the Millenials? We can keep slapping band-aids on the subscription model, by doing things like introducing smaller and smaller "pick your own" packages, or acknowledge that we may need a new mop to clean up this particular problem.

3. Development vs. Marketing. If you read my previous post entitled "The Problem of Silos," you know this is an issue that I have been stuck on for awhile. In my career, I have worked at some amazing organizations both incredibly large and very small, and I can honestly say I have never seen an operation that integrates the needs and priorities of marketing and development well. Almost always, one wins out over the other, the cause of which usually can be tracked back to funding and/or leadership. To solve this, a few organizations have developed external affairs divisions that house both marketing and development activities, however those departments are just as segregated under a Director of External Affairs as they would be under an Executive Director. I proposed a new system in my prior post, but this type of change is daunting considering it would mean dismantling and rebuilding the entire revenue generating departments of an organization.

4. Funding vs. Accessibility. There are a multitude of reports out that show that funding has dropped during the global economic crisis, which has put more and more pressure on earned revenue sources to make up the difference. On the 2amt blog, there has been a heated debate on dynamic pricing, particularly as it is used by non-profit theaters. For those unaware of dynamic pricing, the basic premise is that ticket prices for popular productions are increased as demand increases. Is it a coincidence that dynamic pricing has really gained ground and become almost standard practice during the two years following the start of the global economic crisis? If there is less funding, then we need to make more money in ticket sales. Seems logical to me. The problem is that many times, we are doing excellent work in education and outreach programs that reach populations that will never be able to afford a ticket at our institutions. This used to be addressed by funders who supported lower priced tickets, but as that money has dried up, to keep afloat, institutions have cut discounting programs. So where does that leave us? For me, I have become more and more interested in finding new revenue streams--and hopefully new streams that aren't dependant upon the fickleness of reviews either.

As I wrap up this post, I am more cognizant than ever that as a professor of arts management, the techniques that I am teaching my graduate students are antiquated. I call them "best practices" when a more appropriate title might be "yesterday's best practices." If I continue to teach how I was taught, aren't I just perpetuating the myth that our arts organizations are healthy and ready to take on the challenges of the 21st century? Maybe I should begin my classes by challenging them to throw out the mop.

Sunday, June 06, 2010

Outsourcing: Make sure to consider the CONs as well as the PROs

A couple of weeks ago, NPR ran a story entitled "Everyone Else Outsources, So Why Can't the Arts?" Since that time, the story has stuck with me. One positive result of the global economic crisis is that it has forced mature organizations to rigorously examine business practices, many of which haven't changed since the publication of Danny Newman's Subscribe Now! I am consistently amazed at the number of organizations that choose to remain stagnant because change is scarier than doing nothing and watching failure creep up to the doorstep. I applaud organizations that are taking steps to inform the field, as successes and failures will provide beneficial data we can use to plan our next steps. And while I have been accused on many occasions of being too aggressive with implementing change, in this case, I am reminded of a saying that a wise professor in graduate school would always say to me--"just because it is new, doesn't mean it is better."

Let me begin by saying that I support the outsourcing of activities that involve highly specialized tasks. Even in large organizations, most of us are generalists with maybe an area or two of specialized training. In unusual circumstances, many times we need to draw upon an expert with a lot of experience in a certain area. As we approach the opening of the Mead Center for American Theater, I am working with several outside companies that we are outsourcing very specific tasks to including Boneau/Bryan-Brown, SpotCo, Target Resource Group, SD&A, Mires+Ball, Shugoll Research and Allied Live.

Although we outsource work to some of the best companies in the business, we wouldn't be successful unless we supervised their work closely. The best outcomes are usually a result of forming very tight partnerships between on site institutional managers and specialists at the outsourcing firms. One without the other usually ends with mediocre work. In fact, I can't remember a single instance in my career where I hired an outside firm and it removed as much work from my desk as I had hoped for.

In addition, as Russell Willis Taylor asks in the article, one must consider the opportunity cost of outsourcing, particularly in areas of customer service and development. For those of us lucky enough to have been TicketMaster clients in our careers, we know how hard it is to get outsourced sales agents on message and equipped to provide excellent service to our customers (I even tried delivering baked goods weekly to call centers). How can an outsourced entity be as passionate as you are about your institution, and isn't that passion crucial in developing fundraising activities? And we don't like to admit it, but in some cases, we are in competition with one another. In purchasing ads, setting up promotions, pitching stories to the press, calling in favors, taking advantage of remnant space--when you are working with 10-20 arts organizations in the same town, who gets priority when undoubtedly there will be times when the interests of these organizations conflict with each other?

I am eager to see how this experiment in Columbus pans out. To me, this model creates many more questions than it provides solutions, however I think they should be commended for taking an innovative step that I am sure will inform the field in the future.

Just a sidenote--I wonder what BP thinks of outsourcing its drilling rigs at the moment?

Sunday, May 02, 2010

The Blurring of the Line between Marketing and Publicity

The global economic crisis has made almost every industry reexamine its business practices in an effort to reduce costs, find efficiencies and tap new sources of revenue. A sector with perhaps some of the most significant changes has been media outlets. Television stations are now requiring reporters to also function as their own cameramen and video editors. Some stations are heavily investing in online media as their revenues from broadcast commercial sales shrink (Pepsi decided not to advertise during the Super Bowl for the first time in 23 years). Print media outlets are rapidly shifting content and focus to online domains, and if they already had robust online presences, some like the Washington Post are looking into other sources of advertising revenue, such as developing iPhone applications. Reviewers and culture writers are seemingly a dying breed as news outlets consolidate resources and rerun content from other providers (the Los Angeles Times regularly runs articles from its Tribune sister in Chicago), including more and more from user generated sites.

The new trend seems to be a blurring of the line between publicity and marketing. The longstanding tradition of having an impenetrable fortress between advertising and editorial at major news outlets seems to be waning. It used to be that the most an advertiser could do to help push a story was to ask their ad rep to get a press release on the right desk, however I am starting to see more and more advertising proposals that include guaranteed opportunities for press coverage and interviews. Media outlets are starting to regard press coverage as added value to advertising contracts designed to encourage a higher advertising spend. In the most extreme circumstances, there are now significant media sources that have become exclusively pay to play—meaning that the only way to secure editorial coverage is by signing an advertising contract. A recent article highlighted this trend in Seattle where arts organizations have banded together to purchase editorial time on a television station, however this isn’t an infomercial or advertorial, it simply is editorial coverage that is bought and paid for.

My concerns about this new model:

  • Is there a role for an impartial voice? One of the reasons that news outlets are trusted is that they are (mostly) viewed as being impartial. Will editorial features ever have the same power that had in the past if the readership realizes that the coverage has been purchased? How can you have an impartial review if the reviewer works for a publication that is selling editorial opportunities?

  • Is there a role for small organizations? Many small organizations live on earned editorial coverage as they do not have an advertising budget. As news outlets start to allow their editorial coverage to be influenced by advertising spends, what happens to the small organizations that have no money to spend?

  • Is there a role for a publicist? Many publicists I talk to are enraged about this new trend. Imagine that you are a publicist, and have been pitching an outlet for months and months with no success only to find out that the publication is pay to play. In a manner of minutes, the marketing director places an advertisement and all of a sudden editorial opportunities are available. What then becomes the role of a publicist?

Sunday, April 25, 2010

The Biggest Marketing Challenge of the Next 10 Years (Part 4)

The final response in this series of posts belongs to Julie Peeler, a close friend and expert arts marketer. Prior to her current position at Americans for the Arts, Julie headed the National Arts Marketing Project, which was where I met her in 2004. She is a wealth of knowledge, and someone that I look to for advice when I am navigating particularly difficult marketing decisions. I hope you enjoy her insight below.

Julie Peeler
Vice President, Private Sector Initiatives
Americans for the Arts

I would be happy if I could figure out what’s going to happen in the next 6 months. After all, very few people could have predicted in 2008 that we would be in the shape we’re in right now, facing the issues we are facing. But if we’re to learn anything from the current conditions, we know that we cannot be as insular as we have been as an industry and a profession. The arts are as bruised by this recession as any other business, and we are positively and negatively affected by the same social, economic and demographic factors as any other business. The recently published National Arts Index by Americans for the Arts points to just that thing.

And we need to become more nimble as organizations and managers than ever before. Shrinking funding and a fracturing of the American demographic mean less behemoth organizations and smaller, service oriented groups. No one department holds the crown for Nimbleness. I have worked with as many arts groups where the executive director was nimble but the staff was rooted in “this is how we always do it” as is the opposite case. There is no room for tradition any more. Not in the art on the stage or the wall or in the classroom, not in the management of our organizations and especially not in the way we reach new audiences.

And speaking of audiences, they are more and more becoming customers, and co-creators, rather than a passive body of viewers. They don’t need us to curate and direct but to facilitate their own personal arts experiences. Organizations must continually look for new ways to connect people to the arts: virtually, by being embedded in the community, by working though community issues, etc. We will be seeing more virtual organizations in nontraditional spaces, a greater blurring lines between professional and avocational, and less of a quest for a building where the building manages us rather than us managing the building.

The big challenge for marketers will be to think outside of marketing and consider how shifts affecting the world at large will translate into how their organization is run, how it connects to audiences and how they in turn, market.

Sunday, April 11, 2010

The Biggest Marketing Challenge of the Next 10 Years (Part 3)

Part three of the series features responses from two experienced theatrical marketers--one that works at one of the finest training institutions in the nation, and the other works at a top Broadway marketing and advertising firm.

Anne Trites
Director of Marketing & Communications,
Yale Repertory Theatre
Assistant Professor of Theater Management,
Yale School of Drama

Technology! I think the biggest marketing challenge facing arts organizations is related to the impact of technology on communication with audiences – current and prospective. We used to rely on print and radio advertising, snail mail, email and the telephone to communicate. A great deal of time was spent developing just the right message to be delivered at just the right time to each segment. We would develop tactics to stimulate positive word of mouth to encourage sales. Marketers were largely in control of the message. Technology has already tipped the balance and audiences are quickly gaining that control. Individual audience members offer their opinions frequently and with immediacy on a growing number of platforms. Some have online followings that rival those of professionals. And, the voice of the audience has more authenticity and therefore more clout with their networks than any marketing message.

It’s hard to think about ten years from now only because of the speed at which technology is stimulating change to marketing tools and consumer behavior. Whether it is two or ten years from today, I believe we will become `somewhat’ more transparent marketers working in partnership with loyal fans in our audience. I say `somewhat ‘because I also believe we will use the information we glean about audiences through their online activities. We will still be segmenting audiences and crafting targeted messages which we hope will become viral. In other words, it will be the same but different!

I think the biggest challenge is not about what it will be like in ten years, but how we will get there. Can we be nimble organizations? Can we keep up with the fast pace of change? Can we be proactive and get in front of change? Can we measure our efforts and make wise choices during this period of change?

One more thought … I wonder if our art form will become increasingly unique because it is live. We’re already using the slogan “there is no app for this” at Yale Rep for next season.

Ilene Rosen
Director of Business Development,

I wanted to respond to the question Chad posed with a challenge I think we can tackle. The issue is this. Today’s marketing and advertising environment has not only changed drastically in the last five years, but it is continuing to change, and it is more cluttered than ever.

So, how do we stay focused on SELLING TICKETS?

With the economic downturn and the explosion of new media, we face some tough questions:
What are the most effective forms of advertising now?
How best to use new and social media?
Does print advertising still provide value?

As new media continues to grow as an industry, this list of questions will only expand, and these questions leave me with some concerns:

• I worry that as marketers, we will get so overwhelmed with ‘the clutter’ that it will become more difficult to make good marketing decisions.

• I worry that as more forms of social media become available, we will spend more and more of our marketing energies trolling the Internet aimlessly trying to find/engage audiences.

• I worry that with all of the new and traditional media options to choose from, our attentions will get diverted away from making strategic marketing decisions. As a result, we will make less effective choices about where to focus our dollars and resources.

As we move into the next decade, I hope that we can stay macro: focus on selling tickets. If we make choices based on STRATEGY, I think it will help us be more effective in this elusive marketing environment.

As marketers, we do need to try new things, but we should be strategic about what we are doing or the efforts are wasted. We should repeatedly ask ourselves – could this yield a ticket sale, either directly or indirectly?

We will want to stay on the frontlines of new media, but when we post things on Facebook, YouTube, Twitter, etc., we have to be thoughtful about it and ask ourselves what the strategy is behind every post. We should be able to answer that question.

Over the next decade, we will need to explore, experiment, and take risks, but I believe we can be successful only if we make decisions based on strategy. If we can use macro strategies as guides, it will help navigate us through all of the questions we face moving forward.

Thursday, April 08, 2010

The Biggest Marketing Challenge of the Next 10 Years (Part Two)

The series continues as more experts weigh in on what they believe will be the biggest marketing challenge arts organizations will face in the next 10 years.

Jim Royce
Director of Marketing and Communications
Center Theatre Group

"Word of Mouth is Just Too Important to Ignore"

This is an economic time when every business and arts organization needs to look intently at its core audiences, ask yourself: what can I do to bring customers closer or more frequently to our product? How can I leverage their experience to generate more word of mouth or get it going faster and wider?

Oscar Wilde’s famous remark, “The only thing worse than being talked about is not being talked about,” is even more relevant in the age of social networking and ten-second sound bites. And the rules of spreading chatter have not changed: ya gotta have something interesting to spread around, it must be easily talked about, credible, respectful and satisfying.

People love to talk and when they have information or an opinion they think is worth sharing; they won’t stop talking. Your mavens are key talkers, because mavens thrive as influencers and need constant content. Often friends see them as informed and therefore they earn respect and attention. What do your best friends do to inform you of the cool things they’ve experienced or get you to experience?

There is plenty of evidence that shows if you can influence 150 people to spread enthusiastic chatter online, it will move faster than a newspaper circulation with a million readers.

It’s our job to educate, inform, and build interesting chat. Make no mistake: you can’t decide what’s remarkable to someone else. You can only hope your stuff is what other people think is remarkable and want to talk about.

Accommodate your core loyalists and mavens with new perks and incentives to keep their attention. Offer payment plans, free parking, extra tickets, cookies, anything customers may not expect that send signals we are in this tough time together and we want to reward “your” loyalty, especially now.

Spend more time on relationships with people who are infrequent attendees. They can be influenced by your evangelism in these tough times. Evangelism brings out the passion in your work.

Revisit or revitalize the attributes that make your brand stand out. Now is not the time to make big changes unless you see major advantages at the end of the recession. Consumers want stability and trust that says we are capable of delivering high quality and engaging productions.

Remember Malcolm Gladwell’s The Tipping Point? He spoke about ideas working like social or viral epidemics. They start small and grow because a few connectors or see something unique, but other people, tastemakers, spread them to gain wider attention and “remark-ability.”

It is the power of a lively context in which most people accept interesting products, events or ideas. Make them gain stickiness and their attraction grows exponentially.

I love Andy Sernovitz and Seth Godin. Both practice what they preach about word-of-mouth marketing and good strategic values. Andy’s classic remark haunts me every day: “People love to talk. They are talking about you and your stuff right now.” Yes they are. And Seth Godin’s famous book Purple Cow, made me a fan of him for life. (If you are driving down a long country road past herds of common ordinary cows, and all of a sudden one is purple, what would you do, think or feel? Do you have a purple cow?)

People talk to each other for advice, confirmation, and validation before committing to a significant decision or purchase. Value is a centerpiece in the customer’s mind and confirming value is critical to the sale process, particularly for high-cost experiences, like ours.

If you get excited about an arts event and you want to go, the next action is to talk about it with someone who will go with you. And you have to come up with a good reason to start the conversation. It’s up to us to help supply you with those opening lines.

WOM is more than just word of mouth. We have word-of-e-mail, word-by-blog, by Facebook, text messaging, YouTube, online search, and reader reviews in newspapers and Web sites. And this is all happening with a landscape of social networking options that have dramatically changed the way people chatter and inform themselves.

Sernovits says, “You’re getting talked about whether you like it or not. The conversation has started, so you might as well get involved. Word-of-mouth marketing only works if you have good products and services. It works if people like you and trust you. The best part, I’m convinced, is the more we participate, the more the conversation grows, and the more it becomes about us.”

It is our responsibility to provoke the chatter. Make sure tastemakers are an integral part of your audience makeup from the very beginning.

Make the chatter interesting and remarkable enough to spread. Participate through advertising, blogs, social networking, and the creation of online content to help fuel the word-of-mouth. We’re in the business of providing experiences people want to be engaged in and talk about.

Remember one of the key values of Google founders Sergey Brin and Larry Page: “Do no evil. Deliver more than expected.”

Finally, make your Web site rich with content – especially video – about your events and company brand. Spark meaningful word-of-mouth and participate honestly in the dialogue, even if it is controversial. For the consumer, make your e-mail a trusted and useful source of information, service, and most of all, full of sticky news people will want to pass along to their – not just promotion. Build stronger social networks and deeper connections in your community.

Eugene Carr
Patron Technology

The biggest marketing challenge arts marketers will face in the next decade is not technology, budgets, or audiences – it’s THEMSELVES. As the Web continues to evolve, arts patrons and consumers will have more choices and options literally at their fingertips. Will arts marketers step up and innovate, or be left behind?

A decade ago, in the middle of the dot-com crash, few would have predicted the rapidity with which the Internet would not only rebound, but forge unexpected and profound changes in how we now communicate with each other. In a short decade the very fundamentals of marketing have been challenged and reshaped.

During these past 10 years, the corporate world embraced this transformation much more quickly than did the arts. It wasn’t simply because they had more money, because the truth is smart Web-based marketing doesn’t need to be expensive. Those entities that the arts compete with for consumers’ time quickly recognized the potential that new technology could afford them, and made huge strides in improving their Web sites, generating paid Web traffic, selecting easier to use e-commerce technology, and investing time and effort in leveraging social media.

In fact, the commercial entertainment industry was one of the first to embrace social media. Even Broadway producers (not often known for innovation) are catching on. Though a few forward-thinking arts organizations have made strides in improving their online presence, not enough have.

According to our 2010 Patron Technology National Arts Patron Survey (March 2010), in which 10,000 arts patrons responded, only 20% indicated that they “always, or almost always” rely on arts organizations’ Web sites for their arts-going planning. And just 39% indicated that arts Web sites had improved in the last year. There’s a lot of ground to be made up here.

Looking ahead towards the next decade, I think it seems obvious that the rate of change wrought by the Web will continue to accelerate. In the next few years, the computer monitor will morph into your home television screen. Watching a live theatre performance or concert produced by a cultural organization streamed over the Internet will become commonplace. The Met Opera has already proven what that kind of thing does to generate demand for the live event itself.

Geo-location technology will also be a game-changer. Your mobile device will be able to tell you (while you sit at a restaurant checking your e-mail) what movies are starting within a mile of your location, in the next hour. Will arts events be listed as well?

Will arts leaders embrace changes like these and be like the creative entrepreneurial people they clearly are when they focus on producing for the stage? Or will they lag behind on the technology front and watch other forms of entertainment race ahead, as has happened during the last decade?

If arts marketers decide collectively to convince their boards and funding community that it is imperative that they get ahead of the technology curve, then there's a chance that the arts industry can blaze a trail that other entertainment art forms will envy.

The biggest challenge is not the change itself, but whether we've got the guts as an industry to embrace the change and go after it.

Wednesday, March 31, 2010

The Biggest Marketing Challenge of the Next 10 Years (Part One)

These past two years have been incredibly challenging. As the global economic crisis settled in, we all tried to figure out what that would mean for our organizations. Some organizations failed. Many launched emergency fundraising appeals. And recently, we are beginning to see the questioning of major business practices, from preview performances to selling subscriptions. New technologies are changing the way audiences interact with "art," some major metropolitan areas are showing significant declines in arts participation, and many states are slashing their arts funding.

Even with the recent craziness, it looks as if there might be a light at the end of the crisis tunnel. Many of us have been in the trenches for awhile, making strategic planning difficult as we tend to the fire of the moment. However, as we emerge from the financial crisis, we should start thinking about what lies ahead. As we enter a new decade, I began to wonder what the biggest marketing challenge of the next ten years would be, and it occurred to me that I would love to hear what some of my colleagues thought. So I asked them.

This will be part one in a series of posts where I bring you the thoughts of several leaders in the field as they respond to the question: "What is the biggest marketing challenge the arts will face in the next 10 years?"

Thomas Cott
Director of Marketing, Alvin Ailey American Dance Theater

I think some of the biggest marketing challenges of the next ten years will be linked inevitably to changes in artistic programming that have already begun. We can expect a disconnect between the more traditional art forms and things like amateur art, participatory art, mixed-media art and site-specific works. Also, the demographic shifts in the U.S – the rise of the so-called ‘minority majority’ -- should have a big impact on programming, and thus arts marketing.

Another challenge is how we deal with younger generations of Americans who did not grow up attending theater, dance or classical music and who didn’t have much (if any) arts education in school. Arts marketers will need to provide ad hoc arts education for these adults.

In addition, as fundraising goals are harder to achieve, there will be more pressure on marketers to make up the difference. But there is a limit to how much we can charge for tickets. And more to the point, while there will probably always be people who will gladly pay for 'premium seats' and plenty of others with an appetite for bargain prices... how do you convince audience members who used to buy in the middle price range to do so when they are worried about affording their basic costs of living? Even if the economy improves significantly in the next 1-2 years, there is a strong indication that some Americans’ buying habits have been irrevocably altered. The widening income gap in this country is deeply worrisome.

Last but not least, a myriad of technological advances – although they can provide wonderful marketing tools – offer big challenges to arts groups, especially those with limited budgets, staff and understanding of technology. Web 3.0 is upon us, but most arts organizations are still grappling with Web 2.0 ideas.

But. Take a big breath, everyone. All of the above challenges notwithstanding, I can’t imagine a better time to be involved in the arts. Look at the incredible opportunity we have. Over the next decade, we as marketers (along with the rest of our colleagues) get to be involved in this seismic realignment of our country. We are the ones who will determine the future of the arts in the country. Who can resist that challenge?

Rick Lester
Target Resource Group

Today may be the good old days for arts marketing. Very good organizations are running against a tide of numbers that could ultimately prove overwhelming. Three decades of selling tickets, raising money and balancing unbalance-able budgets frame this view, but it’s what we see in TRG’s cumulative data on arts and culture buyers that is alarming.

Thirty years ago, a high proportion of subscribers were seriously engaged. In the orchestra world, the audience included avocational musicians. They studied seriously. They performed chamber music in their homes. This generation departed from the scene and marketers successfully made a clever transition of message. To “Subscribe Today,” one could find happiness as a spectator. Participation was no longer required.

This strategy worked. Across the country we added thousands of new subscribers and single ticket buyers. Admittedly, these new folks no longer wanted to attend 24 Saturday night performances. Simple, we said. We’ll sell you twelve performances – or nine. Or six. And it worked. Unfortunately, another force was in play. Demographics.

As theatre, opera, orchestra and ballet companies replaced one generation with another, the new target market came of age -- Baby Boomers. Today marks the best of times for serving Boomers. Right now the target pool is 60 million of us who were born between 1946 and 1964. Any current marketing or fundraising effort need not be as efficient as those programs implemented twenty years ago. There are so many people who fit the current target, one can miss the bulls eye and still be okay.

What happens in 2020? The members of Gen X finally begin reaching the target life stage. Even if we forget the cultural divide that resulted from the demise of public arts education when this group passed through our schools, the arithmetic boils down to one number: 20 Million. That’s how many Americans were born between 1964 and 1981 -- 60 million Boomers will be replaced by 20 million Gen X’ers.

The math is simple - and it doesn’t work. Everything an arts organization does well today must be three times more efficient in 2020 if they are to maintain today’s level of success. We could, of course, wait and see what happens when Gen Y (born between 1982 and 1995) replaces Gen X. These so-called Echo Boomers are almost as big a group as its parent generation. But our data suggests waiting is a high-risk option.

Is there a solution? Yes, but it won’t be easy. The rate of audience attrition today is unacceptably high. Nationally, TRG analysis shows that 80% of all new single ticket buyers never return for a second visit. Unchecked, attrition will continue depressing audience growth and feeding decline. Smart organizations, however, won’t ignore the danger signs or wait for the generational echo. By 2020, the best among us will have long since stopped over-prospecting for new stealth patrons and will retain almost everyone they touch.

Future posts will feature responses by:
Anne Trites, Director of Marketing and Communications, Yale Repertory Theater
Ken Davenport, Producer, Davenport Theatricals Enterprises
Eugene Carr
, President of Patron Technology
Ilene Rosen, Director of Business Development, SpotCo
Jim Royce, Director of Marketing, Communications and Sales, Center Theatre Group
Julie Peeler, Vice President of Private Sector Initiatives, Americans for the Arts

Saturday, March 20, 2010

A Collection of Worst Practices

A couple of weeks ago while sitting on a funding panel, I said to a representative of a very large funder that I didn't understand why people were so afraid to fail, and then discuss their failures openly so that everyone could learn from them. Especially in the fields of technology and audience development, more advances come out of failure than anything else. The funding representative said that she felt the same way, but heard from companies that they were afraid to admit their failures because they feared it would affect future funding opportunities.

Well, I thought I might get the ball rolling by discussing some of my biggest failures and what they taught me:

Always give the exclusive to your best customers. I have made this mistake a couple of times, but trust me, I have learned the lesson. Every now and again, you might have a big news story that a major news outlet will want an exclusive on. They might even promise you front page or prime time coverage, in exchange for the opportunity to be the exclusive outlet to break the story. In the past to protect an exclusive, I have made the decision not to release any information until after the story broke. However, imagine how your subscribers might feel if they first learn of this news by reading the front page of the newspaper? Do you think they would feel like part of the family? or a VIP? NO! I still work with our media relations staff regularly to negotiate exclusives with major news outlets, but we always inform our subscribers first. It might only be an hour or two before the mainstream news breaks it, but they are first to know.

When hiring, a fire in the belly trumps experience. The old saying that "90% of directing is casting" is applicable to all walks of life. By far the most important responsibility I have is hiring. In the last several years, I have been faced with a similar dilemma--a choice between someone with a ton of drive and less experience vs. someone with a ton of experience and less drive. The first time I made this decision, I went with more experience and less drive. Big mistake. You can teach skills, but you cannot teach strong work ethic.

If you don't have the support of artistic staff, don't consider launching a blog. I have launched blogs at Virginia Stage Company (VSC) and Americans for the Arts, and relaunched a blog at Arena Stage. My first attempt at VSC failed miserably. As a communications outlet, I made the decision that I would serve as the principal writer, mostly because it was my job and secondarily because I couldn't get artistic staff to buy into the idea. So I started writing, and I couldn't get a single reader. Why? People don't care what a marketing director thinks. They want to hear from the cool people --artists, designers, actors, etc.

All that glitters isn't gold -- especially with technology. I have always been an early adopter of technology to help market cultural experiences. I used to jump on every new idea that came out spending hours and hours developing ways to use new technological advances to communicate with stakeholders. After building podcasts, Second Life sites, NING communities and discussion boards that have all failed, I take more time now to think about the overall strategy before jumping in. A year and a half ago, Next to Normal was coming to Arena Stage, and we knew there was a good chance it would be going directly to Broadway. The show already had a large number of dedicated fans, so I wanted to build a community where they could all interact with each other in anticipation of a commercial run. We set up a NING site ( and started to promote it like crazy. After two months of promotion, we had 45 fans. The show had a huge following, but the idea failed. Why? When I asked fans later why they didn't join, they said they didn't want to create yet another log-in and profile. To participate, NING makes you do both, and people were tired of having multiple log-ins and profiles (Facebook, MySpace, YouTube, Yahoo! Groups, etc). The idea was good, but the technology was flawed.

Small cuts can negate million dollar advertising plans. Early in my career, when I had to look at budget cuts, I made a decision to protect advertising expenses at all costs, opting instead to try to find operational expenses to cut. Together with my team, we looked at every little expense we thought we could shave. Despite not cutting any advertising expenses, I noticed a drop in ticket sales the following year. This concerned me, so we sent out an email survey to lapsed subscribers to figure out what happened. Two stories came back that will always stick with me: 1) a subscriber said that she stopped coming because she couldn't get a house manager to help her get a taxi home (we had released a part-time house manager to save money), and 2) one woman stopped subscribing because she had a hard time walking to the theater because of ice on the sidewalk (the city was notoriously bad about clearing sidewalks, so we used to set aside money to salt the major sidewalks that led to the theater, but we cut that). I did what I set out to accomplish which was to protect our advertising expenditures, but in doing so I compromised the experience. Word of mouth is the most powerful form of advertising, so the experience has to come first.