What if you didn't have to guess?

In decades past, the success of a marketing director depended heavily on his or her ability to predict the future, often times by guessing. Guess well, and you were a success. Guess poorly, and your marketing career was short-lived. Marketers became adept at reading the tea leaves, and depending upon their gut and experience to make educated guesses.

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.

The Subscription Equation (and other tactics)

Probably the most frequent question I am asked is if I believe subscriptions are dying.  And if you would have asked me five years ago, I would have answered in the affirmative. I, like many others, believed the subscription model was outdated--a worn out old chestnut that needed to be replaced. I even had data to prove it. From our peak in 2002 until 2007, Arena Stage had lost 40% of its subscriber base! I was convinced we had held onto a failing business model for far too long, until I started testing alternatives. 

In 2008, working with Shugoll Research, we developed several focus groups with specific target audiences, including current subscribers, lapsed subscribers, multi-show buyers and single ticket buyers. During these focus groups, we presented several alternatives to the traditional subscription, many of which had been recently introduced by other theaters, and to my complete horror, none of them tested anywhere near as well as the traditional subscription. Even if I wanted to abandon our subscription model, I didn’t have any attractive alternative.  Then the realization came – if our customers still want subscriptions and our subscriber base is rapidly declining, then the way we sell, market and promote subscriptions if fundamentally flawed (it should be noted that we also tested satisfaction with artistic product and found that was not a challenge for us). In short, we were killing subscriptions. 

As our 2012-13 season comes to a close, I’m happy to report that we have experienced significant increases in our subscription base for four consecutive seasons, almost achieving a record high number of subscribers and  since 2008, have increased our subscription revenue by 115%. Even more surprising, the turnaround started to occur in 2009 at the height of the global economic crisis and a full 1.5 years before the opening of the new Mead Center for American Theater.  

If I were to articulate the formula of our success, it would look like this:

great artistic product + best seats + best price + outstanding customer service = more subscribers

Artistic Product: Whether we like to admit it or not, the most important of the 4Ps of marketing is product. If your customers are not satisfied with the artistic product of your organization, you will not see an increase in your subscription base. 

Best Seats at the Best Price: Being able to get the best seats in the house at the best possible price is a powerful value proposition for subscribers. If you have a robust subscription base, often times the only way to get the best seats in the house is by subscribing. Make sure to message that in your sales materials. Also, be very careful of undercutting your subscriber average ticket price, particularly at the last minute. A substantial last minute discount may provide a lift to an under-performing production, but the long term side effects could be much worse. 

Outstanding Customer Service: Let’s be honest – customer service usually sucks these days. So it’s the perfect opportunity to shine. Steward your subscribers like development does their donors. Be proactive in finding ways to provide exceptional service. For example, if inclement weather is coming, instead of waiting for subscribers to call you to exchange their tickets, why not send them an email alerting them of the inclement weather and offering to make the exchanges on their behalf? 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.

Beyond the formula, below are a couple of significant strategic changes we made that made all the difference: 

Lengthen the Subscription Campaign: Prior to 2009, Arena Stage would announce its season in March and would continue to sell subscriptions until October, providing for an 8 month subscription campaign. These days we begin our subscription campaigns in January and sell through March of the following year, thereby lengthening our campaigns to 15 months.  Avoid delaying the start of your subscription campaign at all costs. Each week you lose will be very costly, and you cannot replace lost weeks. 

Don’t Forget About Upgrades: When I was taught how to market subscriptions, I learned to break a subscription campaign into two parts: renewals and acquisitions. Today, we have an additional focus on upgrades. Our goal is no longer just to renew our subscribers; we want to upgrade them as well year after year. Primarily we focus on getting subscribers to increase the number of plays on their subscription, but you can also have them upgrade into better seats, add parking to their orders, or increase their annual fund donation. This year we are even experimenting with add-ons for café meals to great success. In FY13, almost ten percent of our subscription base upgraded into larger packages, which doesn’t sound like much until you consider that amounts to roughly $175,000 in additional revenue. On top of which, full season subscribers have a renewal rate 25 percent points higher and give donations that are 4 times larger than partial season subscribers.  

Speak to Subscribers Like You Know Who They Are – Because You Do: Gone are the days when you can create one beautiful season brochure that speaks to all of your patrons, and then mail it over and over again until you beat people into submission. Subscription renewals and solicitations should be highly targeted. You know what types of productions each patron likes and on what nights they like to attend. If you sell café meals and parking through your box office, you even know if they like to park and what they like to eat. You know if they are a full price or discount buyer, how many shows they attend a year on average, and how many people are usually in their party. So why are we still wedded to one size fits all solicitations? Our job is to get the right offer in front of the right prospect at the right time. And we have all the data we need to accomplish that. 

Develop a Sales Pipeline.  Even up to a few years ago, we would mail subscription solicitations to traded lists. Then we started to look closely at our response and tracking reports. Guess what – we found that list trades were not working, not even close. It would have been just as effective to drop season brochures out of a helicopter over the city. And this was considered a “best practice” that every major arts organization in the city bought into. However, we were not measuring efficacy. The failure of these campaigns is easy to understand. In short, we were asking people to marry us before we went on a first date. Most of these targets had never seen a show at Arena Stage. Why would they invest hundreds of dollars when they had never stepped through our front doors? We changed tactics and concentrated our efforts on developing a sales pipeline. We would trade lists for single tickets, primarily to our most popular productions. This in turn would create an influx of new single ticket buyers. Once they had their first experience at Arena Stage, we would send them an offer to return to a second show. Once a patron had seen two or more shows, the likelihood that that would then respond to a subscription solicitation quadrupled. Don’t waste time and money mailing to poor prospects. Instead concentrate your resources on developing more multi-show buying patrons as those will be your best leads in your next subscription campaign. 

Testing and Failing. The only way to succeed is to fail. The key is to succeed on a grand scale, and fail on a small one. Aggressively measure the success of every campaign, no matter how small. And test something new at least every week. Tactics will change from year to year, and you’ll need to adjust in order to maximize return on investment. As we doubled our subscription revenue over the past four years, we actually started to spend less as we grew more efficient. For example, I like to test new offers in our telesales room. Over the period of a week, we may have three or four offers in the telesales room. By the end of the week, after a thousand or so calls, we usually have a clear winner among the offers tested. That offer is then rolled out in an email solicitation, and if it responds well, then we’ll include the offer in a large direct mail campaign and then test it against the current control package to see if we achieve a better ROI.  

If you are currently experiencing less than stellar results on your subscription campaign, before throwing the baby out with the bathwater, I’d encourage you to examine each of the variables in the subscription formula above, and then vary your tactics to see if you get better results.  Sometimes it isn’t the model that is dying, it is how we apply the model that is responsible for our underwhelming results. At least it was in our case.

I have a hit! Should I extend?

As I have written about previously, often times marketers get themselves into trouble because they focus too much of their attention on under-performing productions causing them to ignore opportunities to better capitalize on productions which are over-performing.

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: 

Feasibility. Is it even possible to extend your run? Oftentimes non-profit subscription houses have another show coming in right on the heels of the previous one, and there is no room to extend. Are your actors available for an extension? Many times actors have other projects already lined up, and they are unavailable for an extension. And if some actors are unavailable, can you continue a run with replacement actors?  

Extension Costs.  How much will it cost per week to run an extension? Make sure that you include all relevant costs, such as:

·         Casting and put-in costs for replacement actors

·         Any increases in fees due to extension clauses

·         Marketing and press fees to promote an extension

·         Applicable overhead costs such as house management, box office, etc.

·         Cost of sales fees such as credit card service charges

·         Increases in royalty payments

The higher the weekly operating costs, the more risky an extension will be. The decision to extend a popular play with a modest cast size will be much easier than the decision to extend a large musical, which can have weekly operating expenses 4 to 5 times higher than a play. 

Current Sales and Inventory. How many tickets did you sell in the previous couple of weeks and how much in single ticket revenue did you realize? Even if you are currently achieving more revenue in single ticket sales than what you are projecting as your weekly operating costs for an extension, it may not be a good decision to extend. For example: production X has sold 2,000 single tickets for $100,000 in single ticket revenue per week for the past three weeks. You have projected that your weekly operating costs for an extension will be $80,000 per week, leaving a $20,000 positive differential between current weekly revenues and projected weekly operating costs leading you to believe an extension is advisable. But, when you take a look at your available inventory for the remaining 6 weeks of your run, you notice that you have 18,000 tickets left to sell in your 1,000 seat theater. Selling at a pace of 2,000 tickets per week with 6 weeks left, you will sell 12,000 additional tickets which represents only 67% of your remaining inventory. In this situation, it may not make sense to extend, as you could avoid additional extension costs and maximize net revenue by selling out your remaining inventory.  [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.]

Burn and Sell Ratio. Are you realizing more in single ticket revenue for future performances than you are burning off each week? For example, in your 1,000 seat theater with an average ticket price of $50 and a 60% paid capacity for a performance schedule with 8 shows per week, you will burn off $240,000 in ticket revenue each week of performance. If you are selling more than $240,000 each week for future performances, and your weekly operating expenses for an extension are below $240,000, it is a good indication that an extension is viable. 

Time to Sell.  If you decide to extend a run in your 1,000 seat theater for an additional week, with an 8 show per week schedule, you will bring an additional 8,000 seats online to sell. Do you have adequate lead time to sell the extension? If you have relatively low weekly operating costs, the financial risk may be low, but you don’t want to announce an extension only to play to 30-40% paid capacity because you didn’t have enough time to adequately promote it.  

Other random thoughts…

·        Extending a popular production can ensure an influx of new patrons, which can lead to an abundance of excellent leads to develop new multi-show ticket buyers. That said, scarcity can also be a very valuable marketing tool. Nothing encourages early ticket buying behavior better than sold out houses.

·        Extensions are not always extensions. Some theaters have developed business models which involve “extending” almost every show they produce. At other theaters, extensions are very rare. Why is this? For those that always seem to have extensions, most “added performances” are likely built-in and planned as part of their original run lengths, but tickets are held off sale until a predetermined date, thereby creating the perception that when tickets are placed on sale, the production has indeed extended. It’s quite a clever marketing strategy until you go to the well too many times, and the public starts to understand what’s going on. At which point, I would guess that marketing a production as “just extended” starts to lose some of its value.

Is Your Organization Fun?

Last weekend was my annual pilgrimage to the National ArtsMarketing Project Conference hosted by Americans for the Arts. It has become my favorite conference of the year, not only because I get to catch up with friends from all over the country, but because it reminds me that sometimes the most profound marketing decisions are the most basic ones.

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:

1)      They feature the work of brilliant artists – Michael Thurber is the “chief music guy,” a young man who from age 14 spent his life in a music conservatory and graduated from Juilliard.

2)      They don’t take themselves too seriously

3)      They create memorable and fun experiences 

Their motto: “first build your audience by offering them dessert before you introduce vegetables.” Simple. Clear. Brilliant.  

In previous blog posts, I’ve mentioned that when building audiences, you must program “gateway drugs” – a couple of options that are easily accessible and offer up a fun evening of entertainment in an attempt at proving that the non-profit arts can be a viable entertainment alternative to audiences that currently don’t view them as such. Great art doesn’t have to be devoid of entertainment value. It is possible to have art of the highest quality that is fun. 

Earlier this week, Adam Thurman of Mission Paradox reminded us that we need new audiences more than they need us. And here’s the painful truth – since art is essential to our lives, we like to believe that they are essential to everyone. That just isn’t the case. A good amount of the population does just fine without the arts. That isn’t to say that I believe the arts couldn’t enrich their lives, it is merely meant to point out that in the hierarchy of needs, we’re closer to the bottom. In today’s economy, merely meeting basic existence needs has become difficult, so convincing someone to spend their remaining disposable income on a discretionary item like the arts is harder than ever.  

We have to make our organizations inviting, accessible and fun. And understand that providing a fun experience doesn’t equate to sacrificing artistic credibility. We don’t have to sacrifice the core of who we are to attract new audiences, and those that make that argument, in my opinion, are short-sighted. 

New audiences need to be cultivated carefully. Create a path for them. Give them an easy entry point. Provide an amazing experience. Steward them so they return soon after their first experience. Build their confidence with multiple experiences, and then provide an opportunity to sample something a little more challenging. Introduce them to new experiences. At some point, if you don’t provide them with a challenge, they will grow bored. We are responsible for cultivating our audiences’ artistic growth. If we lack audiences for classical, challenging or new work, perhaps it is because we try to short circuit the system, and ask that new audiences sample what they would at first perceive as vegetables before getting to the dessert.  

In some circles in Washington, DC, the Kennedy Center has been criticized for programming work that isn’t as challenging as some would like. I however, appreciate the role the Kennedy Center plays in our ecosystem. Each year they introduce thousands of people to the performing arts for the first time. This in turn acts as a feeder system to other arts organizations.  

A balanced meal is important, but so too is the order of consumption. Start with dessert, and the chances increase that the full meal will be finished. Roll out complex foods to a novice palate, and you may not make it past the first course. 

The Plight of the Newspaper (and Preparing for the Future)

A couple of years ago, I was speaking at a conference and someone from the audience asked me what I believed to be the biggest marketing challenge of the next five years. I answered with the death of the newspaper, which surprised many, who thought I would point to declining subscription bases or overall drops in arts participation.  We had just experienced the death of four major newspapers – the Seattle Post Intelligencer, the Rocky Mountain News, the Tucson Citizen and the Christian Science Monitor – at a time when most non-profit arts organizations had important symbiotic relationships with their hometown newspapers.  

So let me pause to ask – if your newspaper were to go out of business today, how would that impact your organization?  

And here’s why I am asking. According to the Newspaper Association of America (NAA):

·        Total print advertising has dropped from $47.4 billion in 2005 to $20.6 billion in 2011 – the lowest print advertising has been since 1983 (not factoring for inflation).

·        In 2011, the total daily circulation of all the newspapers in the United States was 44.4 million, the lowest on record since 1940.

·        Citing a 2010 Scarborough report for adults 18+, 47% of the U.S. population 35 years and older read an average issue of a daily newspaper in comparison to only 26% of the population under 35.

According to The Pew Research Center, since 2003, the Internet has been on par or more popular than newspapers as a news source, and currently just 21% of young adults report newspapers as their primary source of news. As the Internet has become increasingly popular as a news source, newspapers have invested tremendous amounts of resources in building their online presence, but here’s the problem – for every $1 gained in online advertising, newspapers lost $10 in print advertising in 2011. And the reason? In print advertising, newspapers are dominate, but online, they compete in a very crowded marketplace, where Google and Facebook combined will share just under 30% of total online display advertising revenue in 2012.  

Using the statistics provided online by the NAA, in 2005 1,452 daily newspapers shared $47.4 billion in print advertising for an average of $32.6 million in print advertising per daily paper. Six years later, 1,382 daily newspapers shared $20.6 billion in print advertising for an average of $14.9 million in print advertising per daily paper.  

In six years, the average daily newspaper lost more than 50% of its print advertising revenue, placing in jeopardy the entire business model of most newspapers and leading to drastic changes. Newspapers around the nation are slashing their newsrooms, laying off veteran reporters and in the best case scenarios, replacing them with freelance reporters with little experience. In worst cases, they aren’t replaced at all.  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.

With fewer reporters and less experience, not only has coverage decreased, but quality has diminished as well.  Many of us shook our heads when a small online magazine named Pasadena Now hired two writers in India to cover local events but just recently we’ve learned of Journatic, a company that outsources journalism to the Philippines for US newspapers.  Others have transitioned from primary reporting to aggregating content from other news sources and then providing commentary on the aggregated material. When I was at the Smithsonian, one such company drew inaccurate conclusions by providing editorial on aggregated stories. When I called to tell them of the inaccuracies and offer to set up interviews so they could report on the story directly, the freelance writer told me they didn’t pay him enough to do any original reporting. Unfortunately for us, other outlets picked up his story.  I understand cutting as much fat as possible from budgets during tough economic times, but at some point, there isn’t any fat left, and what remains is only muscle. Cutting further sacrifices your ability to deliver an excellent product, which is why I advise arts organizations to avoid cutting investments in the artistic product itself if at all possible when making budget adjustments.  By sacrificing quality, I’m afraid newspapers could be pouring gas on an already blazing fire.  

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.

Good Intentions Can Interfere with Success

To say that these are challenging times for non-profit arts organizations is probably an understatement. We're still struggling with the after effects of the global economic crisis. Previously viable business models are imploding. The elimination or severe reduction in government funding has resulted in a very quick need to replace public support with private funds. And who knows what is around the corner.

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.

The Law of the Few (and the Future of the Many)

About a year ago, I began designing a graduate certificate program for American University focused on technology issues in arts management, and this past summer, I taught my first course focused on the intersection of technology and marketing. To open the course, I asked students to read Malcolm Gladwell's The Tipping Point, which if you haven't read it, describes how social epidemics evolve, providing a great platform to discuss word-of-mouth marketing and how technology can be used to ignite a movement.

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.