Blogging from NAMP...

Once again I find myself at the National Arts Marketing Project Conference, which is being held this year in Providence, RI. This is my fifth conference, and instead of presenting like I have done in the past, I really wanted to listen in on other sessions to hear what is being discussed. I have been asked to blog about my experiences for Americans for the Arts so these posts can also be seen on their blog.

This morning I was lucky enough to sit in on the Every Dollar Counts: Using ROI to Prove Marketing Effectiveness session. I decided to go to the session because one of my favorite arts marketing experts was presenting--Philippe Ravanas, marketing professor at Columbia College and former VP of Corporate Communications for EuroDisney. I have seen him speak at several conferences and he is always extraordinary.

This morning he discussed a situation he found himself in when he was the Manager of Client Development at Christie's in London. Each year, they would produce a beautiful catalog of auction items that they would send to most of their database. These catalogs were highly coveted, and cost the organization $20 a piece to produce, however Philippe noticed that his ROI (return on investment) for these catalogs was poor. It was costing him too much to produce and mail these catalogs in terms of how much revenue they were bringing in. After researching the problem, he found that they were mailing these catalogs to almost every purchaser, including those people who purchased once twenty years ago and people who only purchased a minor item just to get on the distribution list, as the Christie's catalog seemed to be a popular coffee table item. He soon cut back the distribution, and only sent the catalog to his higher end purchasers. This action greatly improved his ROI on the catalog.

It brought me back to a previous blog post I wrote about the future of the subscription brochure. If you read the post, you can see that I have some serious doubts as to whether or not a subscription brochure works as a sales piece. That being said, our subscribers at Arena Stage love our season brochure because it invites them into the process. There are articles by our featured artists, a letter from our artistic director, beautiful artwork, etc. We have heard from our subscribers that they anxiously await our brochure each year, and that these brochures have become collector's items. So they perform a very valuable function in maintaining relationships with our higher end purchasers, but they aren't necessarily needed to push acquisitions. In fact, we have found that other smaller pieces with a clear central message that cost significantly less to produce and mail actually perform better for acquisition campaigns.

As Diane Ragsdale says in her article Recreating Fine Arts Institutions : "Arts leaders may be tempted to think that the solution to dwindling audiences lies in better marketing, but if arts organizations are going to survive, they have to put more than the season brochure on the autopsy table." I completely agree with Diane...but what happens if an organization isn't even willing to put their season brochure on the autopsy table?

Thoughts on the Voodoo Art that is Branding

Many established arts organizations are finding themselves in the position of having to reinvent tried and true business models to adapt to the ever changing economic landscape. Diane Ragsdale, Associate Program Officer for the Mellon Foundation, offers a well thought out paper on this subject entitled Recreating Fine Arts Institutions. Although I don't agree with all of her arguments, I believe she outlines the overall dilemma very well.

So, what do most organizations do in this situation? They bring in a branding firm to slap a new coat of paint on the organization by creating revamped messaging rules, visual systems and logos. In guiding a couple of these rebranding projects myself, I have learned the following:

1. You can slap a little lipstick on a pig, but it is still a pig. Rebranding begins with artistic strategy. If an organization truly wants to address significant business or perceptual issues, it must do so with the product first. It doesn't matter how savy a branding firm is, if you don't reposition your artistic strategy, there is no reason to rebrand. In working on the rebranding campaign for Arena Stage at The Mead Center for American Theater, I believe this was handled in an excellent fashion by our artistic staff. The senior artistic staff members drafted an artistic plan that clearly outlined where we were, and where we wanted to go. It was a shift from a traditional regional theater model toward becoming a national center for the production, presentation, study and development of American Theater. Once given this clearly defined goal and the artistic strategies to achieve it, the rest of the rebranding process could officially kick off.

2. Say what you want, but your customers will tell you your brand. Have you ever noticed a clear disconnect between the official corporate messaging from a company and your perception of the same company? An example of this can be found in a blog post that I wrote about Hyatt Regency in 2007. Hyatt Regency corporate communications boast that they go above and beyond in customer service, but as you can see, that wasn't my experience. No matter what you say, your brand lives in the minds of your customers. We can craft the best messaging campaigns in the world, but it will not matter if we don't deliver. What we deliver on will become our brand.

3. Brand strategy can be crafted by marketing, but its success is determined by everyone. Think of the people who actually execute your brand -- front line sales associates who process orders; artists who develop the product your customers will experience; the parking attendant who most likely will be the first person to greet your patrons on the evening of their performance; the concessions staff who has to process a vast amount of orders in a very limited amount of time. And then think of the amount of time that a Marketing Director generally interacts directly with patrons. It's time to get over ourselves...brand strategy will live or die by the people who represent you on the front lines, not the pretty new colors you have selected for the organization.

All of this is to say that I do believe that messaging and visual systems are critical in conveying a brand, however they are not the most important factors in developing a brand identity. Artistic strategy and the day to day execution of your brand promises will always outrank the look and feel of any brand.

The Problem of Silos

I have just returned from a National Arts Strategies seminar entitled Managing People. One of the many things I love about their seminars is that they force you to take a hard look at strategic planning, and how strategic planning influences everything from marketing strategies to, in this case, human resources.

Upon my return from the seminar, I started to think about a common structural problem that many organizations encounter -- the problem of silos, particularly silos between the marketing and development departments. As non-profit arts organizations became more and more sophisticated, there began to emerge two distinct entities: a marketing department tasked with maximizing earned revenue streams and a development department responsible for overseeing all contributed revenue streams. It can be said that "marketing" departments have existed for much longer, and that even for major arts organizations, development departments are somewhat of a recent development (Arena Stage hired its first development director in the late 1980s). With two distinct departments tasked with being responsible for all revenue coming into an organization, all too often, the strategies devised by each department are done so with minimal thought to how they will affect or interact with the strategies of the other, causing the silo effect. As a consultant, I see this with many of the clients I work with, and it makes it difficult for an organization to make the best overall decision on how to move forward strategically.

In the last decade, many organizations have experimented with the "external affairs" model where one large department, housing both development and marketing, is tasked with revenue management. The problem with this model is that in most cases, although the department is united under one leader, there still exists marketing and development silos under the external affairs banner. Again this creates a problem because it doesn't allow an organization to view a complete picture of the customer as one side will look at a customer from a ticket sales perspective while the other will see his potential as a donor. Given the experience of the external affairs director, many times one division is stronger than the other depending upon the director's history.

So remembering a session from this summer's TCG conference, I thought what would I do if I had no rules to abide by and I were running the zoo? I believe I might blur the lines between development and marketing much more than they have been in the past in an effort to view the customer holistically and therefore provide better service. The heart of most of the roles in each department rely upon the same set of skills -- messaging, selling and promoting. Below would be a possible org chart for an external affairs department:

Director of Business Development (not so hot about the title, so it might change): This person would be responsible for all new business development. Chiefly responsible for getting new audiences into an organization, growing the reputation of the organization in targeted segments and organizing audience development events.

Direct Reports:

- Group Sales

- Inbound Sales

- Telesales

- Audience Development

Director of Loyalty and Retention: This person would be responsible for taking the current customer base, and moving them up the loyalty ladder from single ticket buyers to multi-buyers to donors. Also responsible for audience retention programs.

Direct Reports:

- Customer Account Managers: These individuals would oversee a given number of customers and would be responsible for their customers complete care with the goal of moving the customer from a multi-buyer to a subscriber to a donor, and then renewing them the following year. They would track the participation of each of their accounts, and provide customized personal strategies designed to enhance the relationship between the organization and the customer.

- Planned Giving

- Capital Campaign

Director of Brand Management: This person would be responsible for the overall brand of the organization from institutional messaging and design to public affairs and media relations.

Direct Reports:

-Media Relations

-Publications/Art Department

-Marketing/Communications

-Sponsorships

-Special Events

Director of Government & Institutional Affairs: This person would be responsible for being the liaison to all government offices (local, state and national) as well as foundations.

Direct Reports:

-Grant Writers

-Lobbyists

-Foundation Officers

Want to get into trouble? Concentrate on new audiences

If I had a quarter for every time I have been asked in my career how I planned on attracting new audiences to an organization, I would be a rich man. On the flip side, I am almost never asked about customer loyalty or retention. The quickest way for an organization to get in trouble from a marketing perspective is to ignore audience retention problems in favor of attracting new audiences.

Some common misconceptions:

1. In order to grow, you must attract new audiences. This statement is only true if you are attracting more new audiences than you are losing the audience members you currently have (and even if this is the case, it can be much more expensive...more to come on that point). Many of us are so captivated by the allure of attracting new audiences that we concentrate much of our attention on getting the new ones in the front door while the old ones are running out the back door. A recent study of nine of the most prominent U.S. orchestras conducted by Oliver Wyman showed that these orchestras were great at getting new audiences, attracting on average 57% additional new households in 2007, but had significant issues in retaining current audiences with 55% of unique households not returning in the same year.

2. New audiences are great for the fiscal bottom line. This simply isn't true. The only thing that new audiences are on their first visit is a losing proposition. New audiences only become financially beneficial to an organization over a significant period of time. The money invested in bringing in new audiences only pays off when looking at lifetime value. And to determine lifetime value, one must ensure the new audience member sticks around for more than one visit. A study conducted by Katy Raines in the United Kingdom showed that first time attendees spent on average half as much as their returning buyer counterparts. When looking at the Oliver Wyman and Katy Raines studies, one truth comes to light: first time attendees will spend half as much as regular attendees and on average 83% of them will never come back.

3. Spending money on programs specifically designed to bring in new target audiences is a good investment. The holy grail of new target audiences is the revered "young" audience. So, to get them in the door, organizations spend a lot of time and resources on developing young professional societies, throwing parties, putting together after hours events, and other similar tactics. But if your programming isn't of interest to the target demographic you are focusing your efforts on, you might as well just throw money right out the window. Having a late night club scene in your building might attract young people, but it won't convert them into experiencing your organization's central product. If you are truly invested in cultivating any specific target audience, you must find ways of making your core product attractive to them.

By nature, humans are attracted to what is new and hip. The grass is always greener on the other side, that is, until one reaches the other side. Don't be sucked into a strategy because it is shiny and new. Before digging new wells, make sure that your existing ones don't have any leaks.

So the next time someone asks how you plan on getting new audiences into your organization, you might want to begin the conversation with the status on your current audience. Are they loyal to you, or do they run for the hills after their first visit?

So you are a first time marketing director, huh?

Just recently, I have had several students and former employees who have been offered their first marketing director gigs who have reached out to me for words of wisdom. Below are the fifteen points that I like to share with any first time marketing director.

1. When results at the box office are disappointing, one of two things are usually the culprit: the artistic product didn't live up to expectations or the marketing plan wasn't successful. When enquiring minds want to know what happened, don't point fingers unless you want fingers pointed back at you. Artistic Directors will fail, and so will Marketing Directors. The arts are inherently risky, and if you are taking risks, at some point you will fail. Get up, dust yourself off, and work to make up the loss on future productions.

2. I have worked for very large and extremely small organizations. I used to think that large organizations had the resources to do everything right. I have found that organizations are sometimes like dogs, the bigger the dog, the larger the pile of shit you have to deal with. So instead of judging the organization on size, judge it on how well you fit within it -- we all have to deal with shit, so you better love the dog.

3. If you want to be successful as a marketing director, you either have to love the product or be a masochist. You are in the arts, which means you are over worked and under paid, so make sure your commitment is worth it.

4. On hiring:

• There is nothing more important than hiring.
• Always be scouting for talent. You might not have a position to fill, but you will some day.
• If I have to choose, I will always pick hunger over experience. You have to be hungry in today's market to be successful. The real key is not to have to choose between hunger and experience.
• Know yourself before you look for others. Look for people who have strengths where you have weaknesses.

5. I don't know is an acceptable answer for questions that you don't know the answer to. Whenever you have that as a response, it is your responsibility to seek out the answer in a timely fashion.

6. When you start working for a company that didn't have a successful marketing campaign prior to your arrival, fight the urge to change everything immediately. For two reasons: 1) Most times, there are good reasons (even if outdated) for the decisions that were made, and 2) you will need some time to prioritize which things need to be addressed first.

7. If you plan on being the marketing director for more than a month, make decisions that make sense for the long term, even if they might not make sense for the immediate future.

8. As soon as you start seeing the signs that one well is starting to dry up, you better do two things: 1. address the cause for the well drying up if possible, and 2. start digging a new well. Too many marketing directors aren't on the look out for new revenue streams when we should be.

9. Offer help to your colleagues. Most likely you can help someone in a situation you have dealt with, and in turn, your colleagues can probably assist you.

10. Never forget about a patron's entire experience. You can have the greatest play on the most beautiful stage in the best section of town, and it won't matter a bit if you run out of toilet paper in the women's bathroom.

11. Be a discount ninja -- move quickly and silently if needed, but don't disturb the general public.

12. On negotiating:

• Rule 1: When leaving the negotiation table, always make your opponent feel like he won.
• Rule 2: Never let your opponent win. Only sign agreements that are beneficial to you.
• Rule 3: Don't be greedy with Rule 2. You want to win, but if you win too big, you will violate Rule 1, and it will be the end of your relationship.

13. Before accepting a position, make sure you have a candid conversation about your general beliefs on marketing strategy. If the organization is looking for a technology wizard, and you just figured out "the internets" recently, probably not a good fit. Always better to have the lengthy conversations before you start than the awkward conversations after.

14. In times of trouble, often inaction can be more costly than reaction.

15. Be aware of your ego. Many times the best marketing ideas won't come from your department. When good ideas cross your desk, be humble enough to act on them and thank the source.

Pricing as a Strategy to Encourage Early Purchasing Behavior

In my earlier post, I wrote how I have observed that consumers have become ultra late purchasers this past year, while hypothesizing that with the state of the economy, most light to moderate users were waiting on a review to make a purchasing decision. Following that post, I received a lot of comments and e-mails asking how one could counteract this trend. I noted to the concern of some that we were shortening our advertising campaigns because we were finding no correlation between the amount of advanced advertising spends and the amount of advanced sales. This is not to suggest this course of action is for everyone, but I do believe it is wise for us.

I further believe that we should start looking more at pricing as a strategy to encourage early purchasing behavior. The traditional approach of discounting performances early in a run is one method of attack, but I would suggest looking at what happens after a show takes off. If consumers are waiting for a great review before purchasing, then we should capitalize on that as much as possible. Several arts organizations have experimented with demand based pricing. This isn’t a new idea, but I believe that we are just now starting to perfect it.

Demand based pricing provides an incentive for early purchasers--they will be “insured” against a spike in ticket prices if a show receives a fantastic review and takes off. Late purchasers who wait until a review hits, will have to pony up significantly more than those who leap before the review. Just as patrons learn that some companies do fire sales on shows that aren’t selling well, they will soon learn that they either purchase early or pay a premium for waiting for the review. There simply is no incentive for late purchasers to buy early if they can get a relatively good seat at the same or similar price point as an early purchaser.

This will require some educating on our behalf. Sales offices (noticed that I didn’t say box offices) in responding to complaints from customers should take the opportunity to cross and up sell – “Our prices increase with demand. With a favorable review, the demand for a production increases significantly causing prices to go up. I am sorry that has resulted in a higher ticket price for PRODUCTION A, but I know you will also be interested in PRODUCTION B because it is very similar and has an amazing cast. While purchasing today for PRODUCTION A, we can lock in the lowest available price for PRODUCTION B with the best available seats if you would like, guaranteeing that you will be protected from any increases in the future. And remember, subscribers are always protected against any fluctuation in price due to increased demand. I wouldn’t be doing my job if I let you paid any more than you absolutely had to. I know that you will enjoy both PRODUCTION A and PRODUCTION B so let’s take care of both today.”

Pricing should be a fluid variable. If we cannot encourage early purchasing behavior by running advanced advertising, maybe we can do it by capitalizing on those who insist upon purchasing late.

Buying Trends and the Impact of Reviews

To say that this has been an odd year would be a drastic understatement. A little less than a year ago towards the end of September, I remember working with the leadership and board of Arena Stage on an action plan to address the stock market crash and the, at that time, anticipated economic crisis. It seemed we had an incredibly daunting task ahead of us -- exactly how does one forecast and prepare for an economic crisis on the scale that none of us have ever experienced before? At the conclusion of our fiscal year, I am happy to report that Arena Stage had an exceptionally strong year, both artistically and financially. Our success has afforded me the time and opportunity to look back over the course of the year and analyze some of the patterns we saw to learn from them as we embark upon the next fiscal year.

From an overall observation, I started to notice two things that struck me almost immediately after the market crash in September: late purchasing behaviors became common place, and many of our would be patrons put a much higher importance on reviews in making a purchasing decision. To confirm what I thought were changes in patterns, I input sales data into an excel spreadsheet which produced the graph above. Starting from six weeks out and then going through the week that most reviews hit, I tracked our weekly sales for all eight of our mainstage productions. A dominant pattern appeared--sales remained constant for almost every show until the opening week, and then several took off almost exponentially after reviews hit.

Because we had several very short runs for a couple of our productions (2.5 weeks and 3.5 weeks), I created marketing plans that started advertising campaigns much earlier than normal, in an attempt to secure significant advanced sales. But even with robust advertising expenditures, audiences weren't willing in most cases to plop down their money until the show opened or they read a great review.

Takeaways:

1. As I don't see an end to the economic crisis anytime soon, I expect this pattern to continue next year, so I am not going to waste valuable advertising dollars on advanced campaigns as this graph shows that despite those expenditures, patrons still waited. Instead, I am going to shorten the campaigns, and spend significantly more over shorter time periods and concentrate on pushing reviews. This most likely will mean where before we had about a 50/50 split (50% of advertising dollars spent before opening and 50% after), next year we will look at a 30/70 split (30% spent before opening and 70% after).

2. In this blog just a little more than a year ago, I was arguing that traditional reviewers were becoming less influential with the addition of citizen based reviews and user generated content. However, when the crisis hit, many patrons began looking for a "sure bet" when spending their very limited expendable income. So reviews became even more important than they previously were, and certain reviewers became more influential as several media companies cut their reviewers, leaving only maybe two or three major critics in a large metropolitan area. From the graph above, you can see at least four examples of shows that took off after the reviews hit. Also by concentrating more advertising dollars for after a show opens, you can put more money behind pushing exceptional reviews.

Overall:

I thought I was going to have several heart attacks this year as sales patterns for individual shows were completely different from previous years. So much so that there were a couple of times that I was forecasting that a show would miss its goal by a significant margin only to go over goal by the time the show closed. I am sure that I must have seemed a little schizophrenic to certain board members, but forecasting during this climate was exceptionally difficult. I will say however that I was very proud that our reforecasted income model that was developed in October was almost spot on. We ended the year with a 1% variance off where we forecasted we would in the box office. Next year, I will probably continue to have the minor heart attacks, but I now know what I am up against--extremely late buyers who are very sensitive to reviews. They say that knowing is half the battle, so now we have to shift our tactics to address our new reality.