Friday, September 26, 2008

Navigating the economic turmoil...

If you are like me, by now you have been asked by your executive leadership and your board how you plan to address the failing economy. I would like to share some thoughts with you below. Some of these items are my ideas. Some are not. Some will be welcomed and popular, while others might be politically difficult to implement. But I found all the below strategies to be helpful.

1. Monitor your return on investment for all your advertising spends. If you have multiple productions running concurrently, and one production is showing a substantially higher ROI on your advertising dollar, then reduce your advertising spends on the lower performing production, and place those funds to promote the production showing a higher ROI. In doing so, make sure that you don't cut funds to the extent that the lower performing production is completely unadvertised--you still have a responsibility to that production and to those audiences. But place more eggs in the basket that is performing better. This strategy will ensure that you are maximizing the returns on each advertising dollar you spend, however it can become politically dangerous and could cause internal strife with your artistic team.

2. Stretch each dollar. Don't be afraid to negotiate with your vendors. This isn't a time to be shy. You have a responsibility to your organization and your employees. Get tough. Ask the tough questions. Demand more. Make your advertising representative work for you. Most likely there isn't an advertising medium that has cornered your market. In the past, newspapers might have been in that position, but with falling readership, this is probably no longer the case. In my market, for decades the Washington Post controlled the market. Organizations in the Washington DC metro area had to advertise with the Washington Post, and they controlled the relationship. No longer. Get the major players together, and tell them that you will sign major advertising contracts with those companies that play the nicest with you. Ask for free advertising. Ask for free promotion. Ask for freebies up to 50% of the value of your advertising contract. Don't accept anything less. You are the protector of your organization. Would you rather face a situation where you must cut expenses because you didn't hit your goals because you were too shy to ask for concessions or toughen up with your vendors and negotiate a deal?

3. Become more efficient. This economic downturn will have a silver lining. It forces us to examine everything that we are doing to find the inefficiencies in our marketing strategies. Be ferocious about monitoring every direct mail campaign. What segments are working? What segments aren't. Analyze your database for trends, and pay attention to the data. Eliminate mailings that aren't performing. Case in point: Arena Stage mails a package to every single ticket buyer that comes to its first couple of productions. If you are a first time single ticket buyer, you will get a letter from our Artistic Director thanking you for coming and a special incentive to return for another show (because we know most new subscribers were multiple ticket buyers in the previous season). We have a wildly successful show playing at Arena Stage at the moment which is attracting many more tourists than we normally get (in fact, we usually attract very few tourists). So I was proud the other day when our Director of Marketing came to me and asked if we should spend the money on creating and mailing these tailored packages to the first time single ticket buyers from more than 200 miles away from Washington DC. Of course not. These ticket buyers are interested in this one show because of the celebrity draw, not in attending Arena Stage on a regular basis. So we saved that money and put it toward other things. Way to go Shawn!

4. Be wise on what to cut in your expenses and what to keep. Never cut anything that sacrifices the quality of your product. That is never the answer. If your product lessens, you will have nothing to market. If you need to reduce your expenses, cut those expenses that aren't essential to the product, the experience or to the promotion of a production. So you might be thinking what do I cut then? Look at travel, software & hardware expenses, office supplies/furniture, research and development, and other niceties that might not be absolutely essential to the current fiscal year. If you want to be a friend to your executive director, don't spend the extraneous funds in your budget. Put those funds into an escrow account for use if you don't need to cut them later in the year. If you need to cut expenses later in the year because you missed your targets due to a fluctuating market, you will have those funds to cut. Remember that as a department head, you have more responsibility to the overall health of the organization than you do to a specific division or department. Don't bury funds in your budget, and be open and honest about what you can and cannot cut.

5. Always be on the lookout for new revenue sources. Just like diversifying your portfolio protects you from major losses in any one specific investment, diversifying your revenue sources does the same thing. Take a look at your merchandising, concessions, parking, sponsorships, advertising opportunities, partnership opportunities, space rentals, summer camps, education programs, etc. They are all important even if they are smaller sources of revenue. Diversify as much as possible.

6. Lock in those sales today! We have significantly increased our investment in group sales at Arena Stage this year. The best way to guarantee that your sales don't ride up and down with the market is to lock them in early (this is also the best way to protect your sales from bad reviews). Announce your season as early as possible, and put as much importance on developing your group sales brochure as your do on your subscription brochure. Group sales departments need time to sell your shows. Give them as much time as possible and the resources to sell. Invest in group sales. And a lesson I am learning currently--make sure the deposit that you require from your groups at booking is large enough to weed out the people who aren't serious in bringing a group, but small enough not to scare people away. We are working on this at Arena Stage.

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