Customer Service as a Competitive Advantage

I’ve just returned from the National Arts Marketing Project Conference, the annual gathering of arts marketers convened by Americans for the Arts. I’ve gone to the conference for the past seven years to reconnect with colleagues, learn from case studies and catch up on new trends. As I return home this year, I am mindful that some arts marketers have limited control or influence over mission critical decisions, many of which affect audiences, revenue streams and branding. As marketers position themselves as growing agents of influence in their various organizations, I can’t help but think that perhaps our energies should be spent concentrating on the underperforming areas in which we can be the most impactful.

In this new environment of reduced resources, the ability for an organization to identify its competitive advantages is vital. Some of which, marketers have no responsibilities for. Others, we lead. In listening to Scott Stratten's opening keynote address at the conference, I was reminded that the general woeful state of customer service provides a prime opportunity for arts organizations to distinguish themselves. In short, Scott reminded us that we should always look for "opportunities to be awesome."

Some thoughts on how we can achieve awesomeness…

Awesomeness comes from humanness. We have our rules. Our policies and procedures. It is easy and efficient to train automatons. But the greatest value of human interaction from a transactional perspective is our unique ability to empathize, reason and trouble shoot. We have to encourage front line brand ambassadors to use their judgment. Empower them to solve problems. Reward them for breaking the rules when required because by design, rules are created for routine situations, not exceptional ones. Why hire smart and caring people if those attributes don’t influence operations? I left the conference thinking that if we all treated our customers like we would our mothers, our spouses, our best friends, that we might have lifelong relationships with them as well.

Awesomeness is unexpected. In the spirit of a random act of kindness, what if we asked our brand ambassadors to perform one act of unexpected awesomeness each day? It doesn't have to be a splashy show, as even an understated, thoughtful gesture can make someone's day. Imagine a scenario where a man calls the box office to get tickets to a performance for his wife to celebrate their anniversary, and the box office associate makes a note and leaves a few chocolates and an anniversary card waiting in their seats when they arrive. Wouldn't that be awesome? and don't you think they would remember that gesture for years to come?

Awesomeness doesn't wait for approval. Many times awesomeness is a derivative of authenticity. If corporate policy dictates that brand ambassadors need to get approval to provide extraordinary customer service, then the window of opportunity to be awesome disappears. Great customer service comes from authentic responses. If we hire caring and helpful brand ambassadors, managers need to step out of the way and let them do what they do best. Don't lose an opportunity to be awesome because you have to send it up the ladder for approval.

Awesomeness often results from a mistake. We all make mistakes, even the best of us. Even when we have the best intentions. What really matters is how we respond to our mistakes. Mistakes must be viewed as opportunities to provide great customer service. An extraordinary response to a mistake can provide for a lifelong memorable experience for a customer. In 2008, Arena Stage had to cancel a performance due to a substantial snowstorm, and although we contacted all the patrons we had contact information for, we didn’t get through to everyone. Prior to leaving their house in Philadelphia, one particularly adventurous couple called the sales office, and were informed the performance in question was still scheduled to perform. When they arrived, and discovered the show was canceled and the weather had deteriorated, not only were they disappointed, but they were stranded as well. We should have canceled earlier to give our patrons more notice. But before us was an opportunity to be awesome. Without being asked, our sales office worked with a partner hotel to arrange a room for them free of charge that evening using some trade rooms available to us from a previous cross-promotion. We reseated them into the following day’s performance, and the couple headed back to Philadelphia with a fond memory of their visit to Arena Stage. The moment immediately following a significant mistake is crucial. Don't hesitate. Own the mistake, and resolve it above and beyond a customer's expectations.

Arts organizations are charged with building communities. Communities are centered around relationships. We are in the relationship-building business. As such, we should approach each patron interaction from a position of "yes" rather than "no." Policies and procedures should be built with a focus on deepening our relationships within our communities. And each day as we go into work, we should look for opportunities to be awesome.

Rebranding the Traditional Box Office

In a previous post entitled Subscriptions Dead? Maybe Not, I discussed various strategies Arena Stage employed in order to significantly increase its subscriber base. One of the most important was systematically identifying the best subscriber leads in our database, and then developing and implementing strategies to increase the number of similar leads.

Like many others, we traded lists with other performing arts organizations during the acquisition portion of our subscription campaign. However, in doing so, we experienced an incredibly high cost-of-sale for each new subscriber. Even when factoring in the value of each new subscriber over multiple years, returns from mailings to traded lists didn't justify the cost. Our strategy was flawed, and it was time for a change.

Data showed that our best leads were in our own database, with the best of the best being single ticket buyers who purchased tickets to multiple productions during the previous fiscal year. Instead of trying to attract new subscribers with no prior transactional history with us by sending direct mail campaigns to traded lists, we shifted strategy by focusing on building multi-buyers during the 2008-09 season. The new strategy was simple--if multi-buyers were the best prospects for subscriber acquisition campaigns, then the more multi-buyers we had, the better off we were for the following year's subscription campaign.

Instead of trading lists for subscription mailings, we traded lists for our most popular productions. Transactional data showed that by luring in new patrons via our most popular programming, we had a much better shot of cross-selling them into other productions soon after they had their first great experience at our theater. If new patrons purchased tickets to just one additional production during the season, they were exponentially more likely to subscribe than a lead with no prior transactional history with us.

Our focus was now clear--in order to grow our subscriber base, we must first focus on building the number of multi-buyers throughout the year. And the most critical component of that strategy was refocusing our ticket sales operations by shifting our box office to a sales office.

The prevailing feeling at the time was that our box office associates were "order takers." They were expected to pick up the phone and process each order in a courteous and timely fashion. They were evaluated on efficiency instead of effectiveness. With the beginning of the 2008-09 season, we rebranded our box office (now referred to as a sales office), and made it clear that associates were expected to function as sales consultants. They were now responsible for up-selling, cross-selling and proactively soliciting annual fund donations. To prepare the office, I promoted an exceptionally entrepreneurial minded manager to lead the division, and she in turn, brought in several experts to train our staff. We adopted a mantra of sales through service, and in doing so, viewed each opportunity to cross-sell as a moment to provide excellent customer service.

Three years later, I am very pleased with our results:

From FY08 to FY11, new-to-file households (those that had no previous transactional history with Arena Stage) increased by 90%, but even more importantly, multi-buyer households increased by 44%, giving us a much larger "best prospects" pool for new subscribers. In this fiscal year alone, that pool was converted into more than 5,100 new subscribers. Despite what some viewed as aggressive sales techniques, our 2011 customer satisfaction survey revealed that satisfaction levels were at an all-time high, and our attrition rate decreased 6% over the last two years.

Today, our sales associates up-sell seat locations, cross-sell buyers into similar programming, solicit various levels of annual fund donations, offer to make reservations at our cafe, suggest pre-paid parking, and will even arrange for a car service with a preferred provider. In addition, during slower sales cycles, our associates also provide support to our group sales office, and participate in outbound calling. By doing so, we maximize revenue, while growing the number of multi-buyer households and providing premium concierge service to all patrons.

Subscriptions Dead? Maybe Not.

When I joined Arena Stage in 2007, I came to my new job with a couple of preconceived notions about subscriptions. Perhaps it was in part a reflection that I am on the Generation X/Millennial cusp, but I was certain that the subscription model was outdated and ineffective. Many mature organizations that had developed their business models on subscriptions were seeing significant declines in subscriber numbers, and were literally caught between a rock and a hard place -- should they dump their subscription model and leap into the unknown, or keep putting band aids on a failing and timeworn strategy? Reports from major performing arts organizations at the time seemed to indicate a trend of declining returns, forcing a feeling that immediate change to a staple in our business model could be warranted.

In early 2008, Arena Stage along with a few other LORT theaters, began to test subscription alternatives in focus groups. In doing so, I was absolutely certain that the results would show at least one, if not several, attractive alternatives to subscriptions. I was wrong. Our work indicated that each option we put forth was less attractive to target single ticket buyers, multi-buyers and current subscribers than what we currently had. I was so surprised that we conducted a second series of focus groups with similar results. Amazed and confused, after a few months, I concluded our market research indicated that the subscription model wasn't outdated, but that our execution was flawed.

With the help of Target Resource Group, we conducted a thorough audit of all subscription related practices, and started making significant changes in mid-2008. Since our 2008-09 season, Arena Stage has experienced substantial growth in subscriptions, increasing our subscriber base by 57% and revenue by 73% in three fiscal years, beginning 1.5 years before the opening of the Mead Center for American Theater at the height of the global economic crisis and during a time when we were performing in transitional spaces throughout the metropolitan area. Even more surprising, during the same time period, our subscription related marketing expenses decreased, which along with increased revenue, effectively doubled our return on investment (ROI).

Below is a brief summary of major tactical changes:

Simplified Pricing. Our previous subscription pricing strategies were incredibly complicated. I remember spending hours poring over pricing strategy, and at the end thinking that one would have to be a CPA to understand how our pricing model worked. We decided that in order to create an effective value proposition, subscription pricing would have to be clear and easy to understand. We worked for weeks to develop a simple pricing structure that could be messaged easily, such as "buy 6 plays, get 2 plays free." The new pricing structure allowed us to easily communicate a value proposition and to eliminate complicated order sheets, replacing them with order forms that could be filled out easily. Clear, concise and transparent pricing was pivotal to effectively communicating the value of a subscription.

Introduction of Dynamic Pricing for Single Tickets. In 2009, Arena Stage introduced dynamic pricing for single tickets, and we immediately started to see an unanticipated outcome. Due to our new subscription pricing structure and the introduction of dynamic pricing for single tickets, we were able to guarantee subscribers "the best seats in the house at the best prices." Dynamic pricing eliminated last minute discounting on premium tickets, and rewarded single ticket buyers with a lower price for better seats if they were willing to purchase earlier. In turn, our patrons soon started to understand that the earlier they purchased, the better "the deal" they received, with the ultimate deal being given to subscribers. As we religiously track all customer service issues, we can say with full confidence two years later that dynamic pricing has not caused distress with our ticket buyers or donors, and in fact, from the moment we introduced dynamic pricing to current day, we have increased the number of single ticket buyer households by 84%.

Focus on Retention and Customer Service. We were allocating too much resource on subscription acquisition, and not enough on subscription retention. We developed a "say yes to the customer" approach with our subscribers, thereby earning us "industry leader" marks on our most recent customer satisfaction survey conducted by Shugoll Research. Year to year benchmarks for customer service have increased steadily as we focused on providing our subscribers the best experience possible. Given today's sad state of customer service at most establishments, we were determined that our customer service would be a competitive advantage. In addition, we allotted resources for special subscriber recognition efforts throughout the year, including a sneak preview of the upcoming season, complimentary artisan chocolates at specific performances and subscriber-only events. During the 2010-11 season, we introduced a concierge program for all new subscribers. Each new subscriber was assigned a personal concierge on staff, who was expected to make themselves available to answer questions, field requests or be helpful in any way. Concierges were reactive to inbound inquiries, but were also expected to be proactive throughout the year, offering new subscribers recommendations on local restaurants, parking, interesting tidbits about upcoming productions, and the like. By concentrating on customer service and retention, we were able to increase our overall subscription renewal rate by 13% over three fiscal years.

Eliminated Advertising, but Increased Direct Mail and Telemarketing. Prior to 2008, 25% of our subscription budget was allocated to advertising. After exhaustive efforts, we could not trace a single subscription purchase back to our advertising campaigns. Therefore, we cut all subscription advertising, and refocused those resources on direct mail and telemarketing. In doing so, we completely revamped our direct mail and telemarketing campaigns. In terms of direct mail, we would previously print hundreds of thousands of season brochures, and then mail them out in a few rounds of massive mailings. Our brochures were 28 to 32 pages in length, and functioned more as a branding tool than a sales piece. Today, we send out 30+ direct mail pieces during each subscription campaign that specifically tailor the offer to the target. We have eliminated our subscription brochure, cut our design costs by 60%, and have directed all of our resources to testing message and offer. For more information on our new approach to direct mail, please read "The Future of the Season Brochure." While retooling direct mail, we also invested heavily in telemarketing. If executed properly, many patrons actually view telemarketing as a service, as it allows them the opportunity to discuss the plays with a seasoned caller and to ask any questions they may have. As the economy worsened, we found that many potential subscribers needed personal interaction with a friendly and knowledgeable sales agent in order to make a commitment.

Delayed the Introduction of Smaller Packages and Concentrated on Upgrade Strategies. In 2009, we started to experiment with delaying the on-sale date of partial season packages in order to focus our efforts on upgrading subscribers to the full season. There was a fear at the time that our partial subscribers would become frustrated, and leave the company all together, but I was confident that our programming was strong enough that a delay would encourage subscribers to upgrade. The value proposition was clear -- the only way to guarantee the absolute best seats in the house for our most popular productions was to purchase a full season subscription. By focusing on full season subscriptions and postponing the introduction of partial subscriptions, we were able to increase the percentage of full season subscribers by 14% from FY09 to FY12. Expanding upon previous successes, in 2011 we launched a completely separate upgrade campaign alongside our renewal and acquisition campaigns. In addition to crafting and executing strategies that focus on renewals and acquisitions, we now also focus on upgrading subscribers throughout the year. These strategies have proven to be quite effective, and as of publication, we have upgraded more than 1,800 subscribers from smaller packages to larger packages in the current fiscal year.

Relentless Dedication to Monitoring ROI. In FY12, we will spend almost 20% less on subscription expenses than we did in FY08 despite the fact that the number of new subscribers has increased by 166% during the same time. I've always been taught that acquisition campaigns are expensive; that you have to "spend money to make money." In most cases, I agree, however if you aggressively monitor ROI on each campaign, in many cases, you will find efficiencies that will allow you to actually decrease your expenses in the middle of an aggressive acquisition cycle. Many marketers think that given limited staff resources, tracking ROI is too time consuming, however a relentless dedication to monitoring ROI will reveal where you should invest in the future, and more importantly, where you should cut.

In addition to the above, it should also be said that the most important ingredient to any subscription campaign is programming. A subscription campaign is both a referendum on the previous season and an indicator on the amount of excitement in the marketplace for the upcoming season. In my time at Arena Stage, I have been extraordinarily lucky that our artistic team has consistently produced and presented exceptionally high quality work, without which, the aforementioned tactics would have only resulted in minor successes at best.

Building a Budget that Empowers via Flexibility

Each September, a great deal of my focus migrates to budgeting for the next fiscal year. Even while the current fiscal year is just getting its start, many senior managers at Arena Stage are focused on the following year, knowing that in just under four months, a new subscription campaign is set to launch. As summer comes to an end, and the new theater season begins, I find myself already thinking about how in many cases, budgets are created to restrict, rather than to provide, flexibility.

If there is one thing I have learned since 2008, it's that success is greatly dependent upon one's ability to adapt quickly to changing circumstances. I've always been fascinated by people who consistently make the choice to stick with a strategy that isn't working instead of leaping into the unknown. In doing so, many believe they are mitigating risk, however refusing to adapt when a strategy is clearing collapsing only ensures failure, and what could be riskier than that? Those that are change adverse often times use a rigid budget to fortify their position, but a good budget lives and breathes with an organization, thereby providing plenty of flexibility when needed.

When budgeting, common practice at many non-profit performing arts organizations allocates revenue and expense into two categories: contributed (development) and earned (marketing). In doing so, each department is assigned resources and given revenue goals with a simple charge--use the resources provided to generate the targeted revenues. In my career, I have observed that this system of allocating resources and establishing revenue goals for separate and distinct departments can lead to inefficiencies that reduce, rather than maximize, return on investment.

Let me give an example:
Organization X anticipates that a certain production will achieve a significant single ticket revenue target, and as such, budgets higher than average expenses for advertising. The production opens to less than stellar notices, and word of mouth isn't helping either. After several weeks of slow sales despite the considerable investment in advertising, management concludes that the additional expenses set aside for marketing aren't providing the necessary return on investment, and asks that you reconsider your strategy. Meanwhile, you've begun to hear from the development department that the first annual fund campaign of the season is substantially over-performing, although they don't have the additional funds needed to grow the campaign beyond what was initially budgeted for.

In these types of situations, many marketing directors would reallocate funds from the under-performing production to productions later in the season, even though those productions, if budgeted properly, should already have plenty of resources allocated to support them. Fearing that they won't receive adequate resources in future budgets if they "give back" money in their expense budget, marketing directors can feel like they are incentivized to ineffectively spend resources on a struggling production or to reallocate them to productions that are already resourced appropriately. Meanwhile, the development department has struck gold, and could desperately use an infusion of additional resources, but none will come.

To avoid situations like the above, I believe budgets should be created with minimal essential resources allocated to each revenue stream, ensuring that each is supported adequately. Resources traditionally budgeted above the minimal level for campaigns that are anticipated to do well, should instead be used to fund a reserve that is used to allocate additional resources to over-performing revenue streams based upon actual highest achieved return on investment. Why religiously stick to a budget that 10 months prior allocated additional resources to anticipated successful revenue streams when current reality indicates that the additional expenses aren't warranted? Wouldn't it be nice to be able to move resources across departments to invest in activities that are actually over-performing rather than those that we thought would over-perform?

In addition, chief development officers and chief marketing officers should share responsibility for the total revenue goal of the organization, thereby eliminating any territory related issues that may arise. Together, they should be charged with shifting resources on a regular basis to fund activities that reduce cost of sale, maximize return on investment and best position the organization to achieve the annual institutional revenue goal.

At the end of the day, performing arts organizations are having to use their limited resources much more wisely than in previous years, and that reality should force all senior managers to reexamine how resources are allocated and spent.

The Importance of Re-centering

A professor of mine while in graduate school at CalArts advised us that if we could envision ourselves doing anything else, we should get out now. He was very blunt. Life in the theater was hard. Long hours, low pay and full of personal sacrifice.

The past couple of years have been very difficult for the arts. State arts commissions are being eliminated, Tony Award-winning regional theaters are going out of business, corporate sponsorships are drying up and nationally renowned arts education programs are disappearing. If life in the theater was hard ten years ago when I was in school, it must be damn near impossible today in comparison, given the new realities of the "post-global economic crisis" world.

Being now a decade into the profession, I have found that most of my colleagues have seriously debated leaving the arts all together (and several have). And who could blame them? In fact, I find those that have never longed for a more stable livelihood a little suspect.

Last week was personally trying for me. Exhausted and spent after several weeks of very intense work, I found myself doubting whether or not I could sustain a lifelong career in the theater. Having recently received a couple of tempting phone calls from recruiters about chief marketing officer positions at various institutions outside of the arts (and one not so tempting inquiry from a construction company), the doubt continued to linger. However, at the end of several long days, I didn't rush out of my office and head for home, choosing instead to stay behind and take in a few performances at my theater. And as Robert Frost once remarked, "that made all the difference."

Sometimes it is easy when your nose is to the grindstone to get lost in the day-to-day, and forget why it is you chose theater as a career in the first place. Your day gets gobbled by sales reports, revenue forecasting, pricing models, customer service issues, copy writing and media buying, and the next thing you know, it is time to leave (and you're probably hungry because you forgot to eat lunch). Let too many of those days go by without returning to the art that attracted you in the first place, and you will find yourself in trouble. You can do all of the aforementioned tasks for any non-artistic venture in the world. The skills are transferrable, you'll have a more stable career and lord knows, you'll make more money. But you chose to work at a theater because you have the spirit of an artist. Take the art away from an artist, and you steal their soul.

So if you find yourself lacking motivation, or a sense of purpose, take a stroll into the rehearsal room, visit a class full of young artists or watch an audience react to a performance. Doing so will allow you to re-center, and remind yourself why it is you do what you do.

P.S. for those theaters that encourage closed rehearsals, I would encourage them to reconsider, especially if they want well-informed, inspired marketers promoting their shows

The Effects of Social Media on Traditional Journalism

In my role as Director of Communications at Arena Stage, I supervise media relations in addition to marketing and a few other areas. As originally intended, this blog was developed to discuss arts marketing, however from time to time, I stray a little and write about topics that affect media relations, as will be the case today.

A couple of weeks ago, I found myself participating in a very interesting discussion via Twitter with Howard Sherman, Peter Marks, Trey Graham, Nella Vera, David Loehr and Kris Vire. This impromptu panel discussion was centered around the affects of social media on traditional practices in arts journalism. With both publicists and journalists recognizing that the traditional media landscape is changing, it made me think about what's next. Below are my thoughts that formed in the weeks since.

For a primer on the subject, may I suggest the following articles:
"Should Theater Critics be Allowed to Tweet an Opinion Before Writing a Review?" Washington City Paper, 10/20/2010
"Hey, Broadway-Based Spiderman Boosters: Twitter's Not a Supervillain" NPR, 12/1/10
"Will the Embargo Hold?" 2amt, 7/12/11
"Stop Telling Me What to Think About Your Show" The Craptacular, 7/12/11

From my point of view, the affects of social media on...

New Play Development
The days of developing new work under the watchful eyes of millions of New Yorkers may be over. And the Broadway tryout in major metropolitan areas could be as well. Why anyone would make the choice to develop new work directly on Broadway itself baffles me, as there is no room for error. I couldn't imagine a worse place to develop work. To be extraordinary, one must be able to take risks. With the rise of social media, every risk taken (and failure made) is a potential headline in the now influential blogosphere. In the past, producers and publicists had to concern themselves with crafting stories for professional journalists and preparing for traditional reviews, but in today's world, before the first review hits, public opinion can be persuaded by millions of tweets, Facebook posts and blogs. In some cases, by the time the impartial and professional critic walks through the doors of a theater, the verdict in the court of public opinion has already been rendered. As information travels at the speed of light to every corner of the world these days, it would not surprise me if the major development work for high profile, Broadway-bound productions starts to occur at smaller and smaller venues in more remote areas of the country. Even major regional theaters in large metropolitan areas may become too "exposed" to be able to shelter the development process of new work. My prediction: Places like Virginia Stage Company, a LORT D theater in Norfolk, VA which just recently produced a highly acclaimed pre-Broadway run of Bruce Hornsby's SCKBSTD, will become the new go-to places for development of high profile projects.

Preview Performances
A production is never fully complete until it is performed in front of an audience. Preview performances used to be a testing ground that allowed creatives the ability to make adjustments to a production and then try them out in front of an audience. Previews are handled differently depending on the company. I have worked for companies where previews were very rough, often times being obvious that the creatives and the cast were still in the process of creation. However, I have also worked for companies where in most cases, the first preview looked as polished as opening night. As marketers, we know the most powerful marketing tool is word-of-mouth, and social media allows for the development of instant word-of-mouth campaigns. These days, artists and administrators have to be prepared that the first preview will bring instant feedback, and that feedback will have a direct impact on sales. Some administrators, as mentioned in the aforementioned article entitled "Stop Telling Me What to Think About Your Show," try to appeal to audiences to halt or slow social media. However, as a paying member of the audience, patrons have every right to say what they think to whomever they want using whatever means they want to. Trying to control social media is a waste of energy, and asking audience members not to discuss the play is like telling a teenager not to do something. Even more ludicrous are the producers that are charging $150+ for previews, and then asking patrons not to share their experiences. Whoever advised them to do so obviously has very little understanding of the value of transparency which drives so many social media mavens. My prediction: Producers will forgo long preview periods, and will in turn rely more heavily upon the developmental runs as discussed in the previous paragraph.

Embargoes
In his excellent blog referenced above, Howard Sherman predicts that the embargo "has begun to crumble and that erosion will only accelerate as every single person who cares to becomes their own media mogul and true stars of the medium begin to achieve influence akin to that afforded by old media." I couldn't agree more. As of today, traditional journalists are expected to hold back on reviewing until a producer settles on an opening date and then invites the critic to see the production. In the meantime, "citizen reviewers" are blogging, tweeting, posting on Facebook and Yelping, thereby allowing everyone except the professional critic the opportunity to weigh-in. However, to pull a line from Spiderman, with "great power comes great responsibility." Professional critics are expected to act with journalistic integrity and to honor embargoes as they are the arbiters of culture for, in some cases, millions of readers. But there are grey areas. What happens when the same producer that requests an embargo from professional critics invites Oprah Winfrey to attend a preview, and then Oprah tweets her thoughts to her 6.7 million followers weeks before critics can? or when an advertising firm uses pull quotes from comments on Yelp or Twitter to promote a show in ad campaigns weeks before a show is officially open to review? My prediction: The use of embargoes between producers and the media will change in the next few years as social and traditional media will compete directly with each over for prominence.

Reviews
For some reason, when Washington City Paper theater critic Trey Graham tweeted a response to a show that he was reviewing from the theater, it caused a little bit of a brouhaha. To get the facts straight, he was an invited reviewer attending a production that was open to review at the request of the theater. I guess a couple of actors who normally like to avoid reading reviews encountered the tweet, and were upset because a review caught them by surprise as it was delivered via social media, thus leading to a complaint. From a publicist's perspective, Trey was well within his rights to tweet his thoughts. Theaters can (as of now) embargo reviews based on time (when shows are available for review), but it is amusing to think that any institution would expect to be able to embargo based on delivery method. Social media is just a delivery mechanism, just like a newspaper is. Critics have every right to deliver their criticism via whatever mechanism they like. Journalism is a very competitive field, and often times being able to weigh-in first, or before others, creates a competitive advantage. As such, I am not surprised at all that critics are now sending immediate, albeit 140 character, responses. Although I disagree, Howard Sherman developed a well reasoned argument as to perhaps why critics should not tweet responses in his previously mentioned blog. That being said, as a publicist, I would argue that whether we think critics should or shouldn't tweet their responses is a moot point, as it isn't up to us. The fact is, they are doing it and we don't have any logical reason to ask them not to. My prediction: Many more traditional critics will start tweeting immediate critical reactions so that their responses are competitive in the fast paced environment of social media.

The Nonprofit Variant of Dynamic Pricing

I think for most of us that work in the nonprofit theater, our dream is to create exceptional art that is accessible to everyone. Speaking for me specifically, this is the reason I decided to make a career in the nonprofit resident theater, rather than some of my peers who opted for the commercial theater. There are times when I am envious of the visual arts, particularly in Washington, DC, which due to their funding models, many of which can provide exceptional art free of charge to the public. The predominant model for visual arts institutions in DC is based on uninhibited access. Wouldn’t it be great if the performing arts were the same way? The nonprofit resident theater model developed in a completely different manner however. In fact, Arena Stage was founded in 1950 as a for-profit entity, and thrived for years as such. From the very birth of resident theaters, patrons were charged to access the art, and we have had to fight to keep funding models in place that support accessible fees. With the development of the nonprofit model, it allowed previously for-profit resident theaters the opportunity to raise contributed funds (private donors, government entities, foundations, etc) in an effort to keep ticket prices as accessible as possible. Most resident institutions took advantage of this new found opportunity to improve access for all and to provide educational programs, however there were some that did not. Still to this day, in our community (not to mention on Broadway itself), nonprofit theaters and for-profit companies compete all the time, which seems to be somewhat unique to the theater world (do you know of any for-profit symphonies?).

Prior to 2008, few companies had experimented with dynamic pricing, primarily because the technology wasn’t readily available to operationalize what had previously been a well thought out theory. The idea was relatively simple -- if your house was playing to less than 100% capacity, it was symptomatic of the failure to determine an optimum price. If an optimum price could be determined, which perfectly aligned demand and supply, every house would be at capacity. The first use of dynamic pricing by a nonprofit organization to my knowledge was at the Chicago Symphony Orchestra. In 2003, Deborah Rutter joined the symphony as their new president, and introduced the idea of dynamic pricing (resident theaters would experiment with dynamic pricing much later). Tessitura, an advanced new database system developed by the Metropolitan Opera, had entered the market in the early 2000s, but was so costly that only major symphonies, operas, presenters and commercial entities could afford it. However, Tessitura was robust enough to handle the operationalizing of dynamic pricing for those institutions that could afford it. From 2003-2008, most marketing directors at nonprofit resident theaters were aware of a new “dynamic” pricing model, but we didn’t have access to the technology to implement it. While very large nonprofits were experimenting with dynamic pricing, so were commercial entities. The Producers broke records in 2001 by establishing an unheard of top ticket price of $480 (which by the way, The Book of Mormon just surpassed on June 16 with a top ticket price of $487). I immediately began to notice a difference in how for-profit and nonprofit entities were applying the principles of dynamic pricing. From my observations, Broadway producers did not consider accessibility in the least when establishing ticket prices. They had responsibilities to their investors, and would charge the maximum price they could for every seat in the house. On the other hand, I noticed many nonprofit companies increased their top ticket price when demand warranted in order to keep a significant portion of their houses at very accessible prices. And even the top “dynamic” prices at nonprofits didn’t get anywhere near $480 (I wonder if this is what Diane Ragsdale meant when she said that "nonprofits are expected to leave money on the table?"). Whereas both nonprofits and for-profits were using the same pricing theory, it has been applied and operationalized very differently.

A tipping point for nonprofits occurred in 2008. By that time, Tessitura had been on the market for almost a decade. Competing database products were being developed and tested, and the pricing for Tessitura had decreased to a level that most nonprofit resident theaters could now afford it. In addition, the world experienced the beginnings of the global economic crisis during September of 2008. That fall, I gave a couple of speeches at national conferences, and the predominant question on the minds of arts administrators was how a crisis at such an enormous scale would impact organizations. We had models from 1987 and the 1970s, but all indications were that this crisis would far exceed anything we had ever weathered.

Some organizations cut back programming and reduced expenses in a hope to ride out the storm. Others recognized the crisis as an opportunity to reexamine business models. Most correctly identified that contributed revenue sources would be heavily impacted. As nonprofits operate on two revenue streams (contributed and earned), in order to maintain the same level of artistic excellence, maintain living wages for artists and offer extensive educational programs, many organizations looked for ways to bolster earned revenues. Nonprofit resident theaters became very good at maximizing revenues from non-ticket sources in order to maintain accessible ticket prices. New sources of revenue were popping up everywhere from real estate ventures, event rentals, restaurants, parking, corporate visibility opportunities, summer camps, bars, consulting services, and partnerships with for-profit ventures. However, new earned revenue streams took time to develop and decreases in contributed revenue were coming quickly. In order to maintain accessible ticket prices for a significant portion of the house, many nonprofits had to seriously consider a dynamic pricing model that allowed for an increase at the top pricing levels when demand warranted it. With a decrease in contributed revenue, organizations had a choice to make:

1. They could reduce expenses, cut programming and lay off staff in an attempt to resize themselves to match the new levels of contributed revenue available.
2. They could increase ticket prices at all price levels to make up for lost contributed revenue, however in doing so, making themselves less accessible across the board.
3. They could increase top ticket prices according to demand, and keep a significant portion of their inventory at accessible prices.

Not surprising to me, many nonprofit resident theaters went for option #3. To my knowledge, almost all the nonprofit resident theaters in the DC metropolitan area now utilizing dynamic pricing, and none so far have seen the negative ramifications as forecasted by some experts.

In today’s debates concerning for-profit vs. nonprofit incorporation, I am mindful of something Arena Stage Founder Zelda Fichandler said in a speech she gave in the 1960s: “while we are gathered here in the name of the nonprofit corporation (and, indeed, without the nonprofit income tax code, our American theater would simply not exist), being nonprofit does not really define us—our goals, our aims, our aesthetic, our achievements. What defines us, measures us, is our capacity to produce art.”

Ultimately nonprofit resident theaters should be measured by their capacity to produce art, and to make that art as accessible as possible without sacrificing excellence or their ability to compensate artists at reasonable levels. Given today’s new realities of reduced contributed revenue sources for many nonprofit resident theaters, the development of new revenue streams and the implementation of dynamic pricing allows institutions to make up for lost revenue without sacrificing their ability to be accessible to their communities.