Sunday, March 03, 2013
As my friend Rick Lester says, "prayer should not be a marketing strategy." On this blog, I've written several times about the importance of using data to make decisions. Often times companies have years of transactional data that can be invaluable when developing strategy for future campaigns. That said, I've somewhat neglected another important tool that I've used throughout my career to help guide decision-making - market research. Combined, market research and data analysis form a formidable team. One should not be chosen over the other, but they should be used in tandem, and if done so, the need to guess is almost virtually eliminated.
Data analysis is best used to help inform future operating decisions that closely align with past performance. For example, when rescaling a house, marketers can be relatively certain which seating sections can withstand a price increase by analyzing sales patterns and looking for sections that are in constantly high demand. We can also tell which households are most likely to subscribe and what package and price point to pitch based upon their interactions with us. But what happens when you are faced with the unknown? Over the years at Arena Stage, I've been faced with challenges that have very few, if any, precedents. There wasn't any data to pull from, either internally or from other companies. We were in uncharted waters. And that's when market research became critical.
Since moving to Washington, DC seven years ago, both at Americans for the Arts and Arena Stage, I've depended on the wise counsel of Mark Shugoll, CEO of Shugoll Research. Throughout the years, Shugoll Research has conducted many studies that have helped inform my decision-making, and below are just a couple of instances where market research was invaluable:
Arena Restaged. In January 2008, Arena Stage moved from its SW DC home into two temporary locations - a theater in the basement of a Marriott in Arlington, VA and the Lincoln Theatre in NW DC on U Street. We would remain in these temporary locations for two years and eight months while the Mead Center for American Theater was built. During that time, we had to minimize patron attrition caused by the move, and work to grow our audience base, as the new building would require a significantly increased patron base. I searched the country for a good precedent to learn from, but not a single one surfaced. Feeling on our own, I turned to Shugoll Research to help map out a strategy. I wanted to know what barriers existed for our patrons in moving to our temporary locations. What would motivate them to stay with us through the construction years? What competitive advantages existed at our temporary locations that were good selling points? How we could make the move less onerous? We tested messaging, sales strategies and tactics. From that, I learned a great many things. I learned that if our patrons got lost on their first trip to our new theaters, they wouldn't return. I learned that we had to make sure that parking and public transportation was readily available. I learned that dining options were incredibly important. From this, I spent months on signage plans. With the Crystal City Business Improvement District, we installed more than 100 new directional signs within a two mile radius of our temporary theater in Virginia. In coordination with the MidCity Business Association, we aggressively marketed the restaurants on U street and offered valet parking for every performance, as the neighborhood had very few parking options. We sent out personalized websites to each of our subscribers which among other things offered up step-by-step directions from their house to the new theaters. For these efforts, Arena Stage was recognized with the Box Office of the Year Award from INTIX and the Helen Hayes' Washington Post Award for Innovative Leadership in the Theatre Community. More importantly, we were budgeted to experience 7% attrition during the move and only realized 1.9% - and it all started with market research.
Branding. Forget the high gloss, four color brochures that list your mission statement and vision. We all know that our brands, regardless of what we say, actually live in the minds and hearts of our customers. Over the years, I've almost always found a disconnect between what an institution thinks their brand is and what their customers view their brand as being. In 2008, Shugoll Research conducted a series of brand focus groups for Arena Stage. Only two years later, we would be opening the Mead Center for American Theater, so as a new marketing director, I wanted to test the current state of our brand before launching a rebranding campaign repositioning Arena Stage as a national center for American theater. Inside the company, it was clear to most at the time that Arena Stage was a home for American voices, something that Molly Smith had focused on since coming to Arena Stage in 1998. But when tested in focus groups, less than 20% of our subscribers and donors knew that we focused on American voices, and almost none of the single ticket buyers. We had to be much more aggressive in marketing our brand, so we developed a tag line ("Where American Theater Lives"), commissioned a series of spotlight articles on the American voices in each season, developed a new color palette which was a play off of red, white and blue, and eventually put the word "American" in our new logo and name. Two years later, we retested and found that more than 80% of those asked knew our American focus.
Customer Service. As I've written about previously, I view customer service as a very valuable competitive advantage. So, how is your organization doing? Beyond diligently tracking and responding to complaints, what are you doing to monitor customer satisfaction? We've hired Shugoll Research to develop and deploy customer satisfaction surveys, and benchmark us against peer organizations and ourselves for the past several years. I'm proud to report that we've received "industry leader" marks every year since 2008. But more importantly, each year we learn where we can improve, and we know where we should invest time and resources to improve our customers' experience. For example, in our first year in the new building, we received exceptionally high marks for our parking lot; we were delighted to see that our parking attendants were routinely going above and beyond to take care of our patrons. And the patrons noticed. That said, some of our elderly patrons reported that it was a challenge to walk up the ramp from the parking garage to the main lobby. So we responded by offering valet parking at the same price as standard parking for those who needed some extra assistance.
Pricing. We spend a lot of time discussing pricing at Arena Stage. As marketers, we want to devise strategies that keep our institutions accessible to our communities all while developing price points that lead to sold-out houses. Get too aggressive with your prices, and your percent paid capacities will drop (hence why the Metropolitan Opera announced that it would be lowering prices next year). But if your prices are too low, then you are leaving money on the table, something that most non-profit arts organizations can't afford to do in today's economic climate. So are you charging the right price for the right seat at the right time? To help us navigate pricing, we sought the assistance of TRGArts and Shugoll Research. TRGArts created heat maps, advised us on the rescaling of our halls, and analyzed sales data to determine optimal price points. Shugoll Research conducted focus groups and surveys to determine price elasticity, and to procure feedback from customers. Did our patrons think we were over-priced? would they be willing to pay more for certain dates/times? what could we do to make our pricing more attractive to our patron base? One of the most interesting questions we ask is how satisfied patrons are with the value we provide. Each year we ask the question, our satisfaction ratings on value are in the "industry leader" range indicating that customers perceive that they are getting good value for the money they spend on a ticket. Something every marketing director loves to hear.
The days of reading tea leaves, consulting the gods, and leaping into the unknown are over. A healthy combination of data analysis and market research allow modern day marketers to make informed strategic decisions. I for one am thankful, as I've never been particularly lucky when it comes to guessing. In decades past, I know I would have been fired.
Sunday, February 03, 2013
And if you don't already, find ways to thank your subscribers throughout the year. For example, there is a theater on the west coast that partners with a winery each year to give their subscribers a free bottle of wine when they renew their subscriptions as a way of thanking them for their support.
Sunday, December 16, 2012
So, now you have a hit on your hands, and you know you have to strike while the iron is hot. Sometimes hit productions can be few and far between, so what you do next could make or break your season. When a hit does occur, many entrepreneurially minded non-profit producers start to consider an extension to their previously announced runs. Before announcing an extension, here are a couple of things you should consider:
[note to reader: I chose to use relatively large round numbers as the arithmetic is easier, and they illustrate arguments in a more succinct manner. These concepts are easily scalable for smaller or larger houses.]
Saturday, November 17, 2012
I attended a session entitled “The Curated Arts Experience” featuring Ceci Dadisman, Deeksha Gaur and Nella Vera. During this session, Nella started talking about something really fundamental – having fun. She gave several great examples of organizations that went out of their way to create fun and memorable experiences for their audiences. Immediately prior, we were treated to a lunch session featuring cdza, a trio of guys who create musical experiments. With their experiments, they make classical music fun and accessible, and in doing so have millions of viewers worldwide. I have to wonder how many people have been introduced to classical music via their performances?
Cdza’s success is really pretty simple:
Sunday, October 21, 2012
Just recently the theater world received news that veteran Philadelphia Inquirer arts writer and critic Howard Shapiro, after 42 years with the paper, was reassigned to cover South New Jersey in what seemed like an attempt to make him miserable enough to leave. And it looks like it worked.
Every great arts city has a great newspaper. Every great theater town, a well respected critic. If your city is affected by cuts to arts coverage, let your voice be heard. Activate your bases. Support outlets with extensive arts coverage with your advertising dollars. That said, I advise non-profit arts organizations to prepare themselves for the possibility that their local newspaper could go out of business. Cultivate relationships with bloggers, social media mavens and other influentials in your community. Develop online communities where your audiences can speak to one another. Produce and distribute original content yourself. Diversify your advertising strategies. Budget resources to grow your database. Hopefully these efforts will be for naught, but if the day comes that your local newspaper declares bankruptcy, you’ll be better prepared.
Sunday, September 23, 2012
But, artists and arts administrators are a resilient bunch. One of our strengths is our never say die attitude. We confront each challenge head on in a "show must go on" fashion. We are inherently hard working. To make it in this field requires years of rebounding from rejection. When the going gets tough, we redouble our efforts.
After years of struggle, the fight in us undoubtedly begins to wane, as we contemplate the permanency of the current climate. And this isn't necessarily a bad thing. In moments of crisis, we ring the alarm and all hands arrive on deck to face the upcoming challenge, but this response is unsustainable for years on end. After downsizing, one human being can only do the work of three for so long before collapse. Our initial reaction of working stronger, harder and faster must give way to working smarter.
In the past few months, I've seen a couple of instances where hard working marketing departments, desperate to keep their heads above water, were working well beyond capacity, but were resistant to taking measures to improve efficiency for fear that if they took any time away from their current tasks, they would risk imminent financial peril. All while knowing that the current situation was unsustainable, they continued each day just like the prior, hoping that the financial climate would improve before they hit the point of exhaustion.
But for those already at the point of exhaustion, I'd like to offer up a few quick suggestions to improve efficiency in hopes of lightening the load:
Maximize Success to Minimize Risk. Often times marketing departments get into trouble when they have one business line or product performing very well, and a couple of others underperforming. Our natural instinct is to abandon the overperforming product in order to focus our attention on improving the underperforming others. Please don't do this. If you are understaffed and under-resourced (and who isn't), where and how you use your limited resources is incredibly important. If you reappropriate resources to aid underperforming products, at best you will most likely see minimal results, whereas if you applied your resources to the overperforming products, your returns could be exponentially better. High tech firms have built incredibly successful business models off of failure. They expect a very high percent of their products in development to fail, banking on the revenues from the one or two that will take off. And when a product does hit, the entire efforts of the company are focused on maximizing results. A good rule of thumb - spend 75% of your efforts on improving the results on overperforming products, and 25% on improving underperformance. All too often, we do the opposite, thinking that helping struggling products is what is best for the organization.
Analysis & Measurement, Before Action. Just a few weeks ago, I was in a meeting with a senior marketing executive in charge of a sizable national advertising campaign. He had a hunch that he was under-promoting a certain section of his business in the New York market, and had set aside a significant amount of money to test a new print campaign in New York dailies. When I understood what he was trying to accomplish, I asked him how he would measure success. He responded by saying that it was very hard to measure the exact outcomes of his new campaign, and besides, with his reduced staff and resources, he was doing his best just to get the campaign done and out the door. This is a common occurrence. When resources are cut, one of the first things to go is analysis, tracking, reporting and measurement. But when looking to work smarter, the one thing you need is what you have just cut. Before launching any major marketing campaign, make sure you have the tools in place to track results, analyze sales and measure success. Over the years, I have had more than one staff member get frustrated with me when I asked them to set aside the time they would normally spend promoting a production in order to create more sophisticated reporting tools. But without clear and reliable data, your campaigns will never improve, and if you do see an uptick, you won't be able to replicate what worked.
Don't Save Your Way to Trouble. Several months ago, I visited a client that was deep into their subscription campaign. The campaign was going well, but the company was financially struggling for other reasons. The marketing director, being incredibly conscientious, thought that every dollar saved, was a dollar earned for the company, and started to decrease the amount of money he spent on his subscription campaign in order to come significantly under his budgeted expenses. He wanted to save, and give back the money in order to help the company. His intentions were admirable, but his plan would have placed the company in an even worse financial position. His cost of sales reports were showing that for every dollar he spent on the subscription campaign, he was selling five dollars worth of subscriptions. This wasn't the time to under-invest, in fact, this was the perfect opportunity to spend more if cash flow allowed. If your cost of sale is below $1, for every dollar you don't spend, you place your company at additional risk. You only want to consider cutting your marketing expenses if your campaigns are resulting in negative net revenue, and even then, it is risky if you are cutting acquisitions.
Sometimes working smarter means doing the opposite of what's intuitive. Have the courage to challenge systems, the ability to measure results and the good fortune to discover efficiencies.
Sunday, September 09, 2012
Early in the book, Gladwell discusses "The Law of the Few," which boiled down is a riff on the 80/20 principle - 20% of the people are responsible for 80% of the work. As marketers, we latch onto this principle, as it correctly argues that if we can identify and cultivate relationships with a select group of influential people called "connectors," then our returns can be maximized. One connector can be worth his weight in gold, and easily as valuable as ten non-connectors.
As I was giving my lecture, it struck me that most non-profit arts organizations have designed their business models on the "Law of the Few" principle, not just in their approaches to marketing, but in how we program, fundraise and communicate. A previous supervisor of mine used to say that a grassroots movement begins with the grasstops. But if we are all focused on the few, are we ignoring the many?
I ask this question, because as society shifted away from a one way, web 1.0 world towards an interactive, web 2.0 one, the ways in which we do business and view the world radically changed. Previously companies had much more control of their brands as they could carefully craft messaging, but today, brands have a life of their own in the virtual universe. We used to seek out experts when we needed information, now we rely upon the collective of Wikipedia or Google (when was the last time you consulted an encyclopedia?). At one time knowledge was proprietary, but presently, a growing number of us look to the commons (and companies trying to maintain business models built upon charging for knowledge are struggling). We used to rely on authority figures to inform us, but now in moments of crisis, millions flock to Twitter, where we learned an hour before President Obama confirmed it that Osama Bin Laden had been killed.
I believe that many of us used to defer to the knowledge and experience of a small few, placing trust in their expertise to guide the rest of us. But when a handful of very powerful and experienced bankers plunged the world into a global economic crisis resulting in the loss of 40% of the world's wealth, the masses started to wonder if the few could be trusted to lead. In the web 1.0 world, most were passive recipients, willing to receive content as delivered. Today, the least among us now demands a seat at the table, and via web 2.0 technologies, an even playing field has begun to emerge.
So how will this affect the non-profit arts? Here are just a couple of examples:
The Citizen Critic (and the Future of Arts Journalism)
A couple of weeks ago, Barry Hessenius, former director of the California Arts Council, issued his annual list of the most influential people in the arts. On the list were a handful of notable bloggers, including Ian David Moss, Diane Ragsdale, Clay Lord, Doug McLennan and Thomas Cott, however not a single traditional journalist was mentioned as there wasn't a category for journalists. Was this an oversight, or a trend? Nielsen recently reported that 92% of consumers trusted word-of-mouth from friends and family, while only 58% trusted editorial content such as newspaper articles. Harvard University recently published a study that contended that average reader reviews on Amazon.com were just as trustworthy as book reviews from professional critics. Even Maura Judkis, a writer for the Washington Post, in her article for the NEA's blog ArtWorks states "readers of my generation, the Millennials, are more likely to want to see a movie or play because their friends like it than because a critic does." Word of mouth has always been powerful, but advances in technology have allowed connectors to broadcast their thoughts to followers instantaneously, and others, the opportunity to feed into social networking, user review sites like Yelp.com. So where does that leave us? Ask yourself - if you were visiting New York, and thousands of patrons had described a Broadway play positively in online reviews, would it have more of an impact on you than negative reviews by professional critics? [could this explain the mysterious success of Spiderman?]
Crowdfunding and Microfinancing
In her article "It is Broke, We Should Probably Fix It," Alexis Clements argues that many non-profit organizations chase a few, large foundations, whose money would have been public via taxation but is now controlled privately. She goes on to say that via grants from private foundations, wealthy individuals can "funnel money to organizations that will uphold their personal beliefs." That is a pretty charged statement, but I do wonder how often arts organizations manipulate their missions in order to receive a large grant or donation from a private funding source? How many arts organizations are alive today primarily due to the generosity of one or two major donors, and for those, do the donors in question wield too much influence? In 2008, President Obama demonstrated the power of the collective when he raised unprecedented amounts of money from small donations. As of August, the crowd funding website Kickstarter has raised $275 million in funding for projects, and has grown exponentially since its founding in 2009. And we aren't just talking about tiny amounts of funding either. The top 10 projects funded on Kickstarter all raised more than $1 million. And Microfinance website Kiva has leveraged $346 million in funds from 823,474 lenders to launch projects aimed at combating poverty in 63 different countries.
Crowdsourcing Curation and Programming
When I was at the Smithsonian, an internal debate was occurring about the "Art of Video Games" exhibit at the American Art Museum. The Smithsonian invited the public to help curate which video games would be featured in the exhibit, and in doing so, more than 3.7 million votes were cast by 119,000 people in 175 countries. Pretty impressive. However, questions began to arise about the role of the curator. For the most part, non-profit arts organizations are lead by artists with extensive training and sometimes decades of experience. As the resident experts in their fields, they are regularly called upon to make value judgements on what art to present, and how to present it. In the past, the public has remained a passive receiver of said art, but a growing number of patrons today would like to play a more active role. Technology has changed what used to be a one way conversation into a dialogue, and in turn, many community stakeholders now expect to be able to exercise their voice. I believe this phenomenon prompted Arts Journal editor Doug McLennan to host the "Lead or Follow" debate early this year. If you didn't catch it, here is a good recap.
Understandably, non-profit arts organizations have built models based on the "Law of the Few," and I am not advocating for the abandonment of those models. I am however suggesting that there is wisdom, money and resources to be found in the collective as well. This isn't an either/or proposition between the few and the many; it's a both/and situation. There is a significant role to play for the few and the many. But to tap into the collective, I believe we must become vital and essential to our communities again. I fear that for many non-profit arts organizations, if they were to disappear, we'd barely hear a whimper, when there should be protests in the streets.