Gene Carr's Patron Technology Blog

Is E-mail Dying? Digital Preferences of Arts Patrons Revealed

There is something that's been nagging me for years, and it has to do with marketing research, and the urge to compare what we’re doing against other such studies.

For the last seven years, in an attempt to advise our clients and inform our presentations and seminars, we've fielded a national survey of arts patrons' online behavior by working with a selection of our clients and sending a survey to their e-mail lists. I've used this as a proxy for arts patron behavior in general and quote from it extensively in our publications. In fact, the whole first section of our new book, Breaking the Fifth Wall: Rethinking Arts Marketing for the 21st Century, reports on our 2010 survey.

Each time I present this data, inevitably someone will challenge the results by pointing out that since the survey is fielded solely via e-mail, the data is skewed -- the results don't really give an accurate assessment of the arts-going public, because the survey over-represents online interest and participation.

That it is a purely online survey is true, and we’ve always taken great pains to point this out when we present the data. However, my assertion is that the sample is actually a very close approximation of the entire arts-going public because such a large proportion of the audience is in fact online.

That's why I was so interested to find out that the most recent study released by The Broadway League, focusing on the nearly 16 million attendees of Broadway touring shows across North America, was conducted entirely online. They too have gone to a 100% e-mail-based survey approach.

Since both pieces of research were done in the same way, and ask many of the same questions and examine a similar audience, I thought that comparing our survey results with the Broadway League’s might shed some additional light on the nature of the online arts community.

Here's what we found. (For purposes of simplicity I'll refer to the Broadway study as "BL" and ours as “PT.”)

●  72% of BL's attendees were female. In PT’s, women comprise 66%. 

●  The average age of the Touring Broadway theatregoer is 53.8 years old, and PT's is 58.6. 

●  74% of BL’s audience held a college degree; 38% of PT’s audience had a college degree.

●   BL’s survey showed 31% held a graduate degree and in the PT study 50% had a graduate degree. 

●  46% of BL’s national theatregoers reported an annual household income of more than $100,000, and in the PT study it was 45%. (This compares to only 20% of Americans overall.)

 

As you can see, the demographics are relatively consistent across both studies. My explanation for why the BL audience is more heavily weighted to women is that our study included all performing art types, including classical music and opera, which tend to have a higher percentage of men as attendees.

Going on, let’s look at online behavior.

● In the BL survey, 36% of respondents were subscribers to the "Broadway Series" at their local venue. In the PT survey it was 33%. 

● Nearly two-thirds of BL audiences looked to the theatre’s website to find information about the show. The PT survey results were similar: 68% said the same. 

● 35% of BL’s Touring Broadway theatregoers used the Internet to purchase their tickets. This was much higher in the PT survey: 73% of our respondents said they bought tickets online in the past year.

Most of the participatory aspects of the two audiences’ responses are similar -- what surprised me here was what’s different. 

The online ticket-buying ratio for BL’s survey is much lower than the average from our survey. My theory is that this may have something to do with the way these series are marketed, or the degree to which these series are sold online versus in a more traditional direct-mail and print-oriented marketing approach.

As for communication preferences, 69% of respondents to the BL survey said they would prefer to receive theatre information electronically, rather than via postal mail. In the PT survey we offered an additional option: while just 48% prefer e-mail alone, another 37% prefer receiving both e-mail and postal mail (for a total of 85% of responders being “e-mail friendly”).

Out of everything examined in both surveys, it’s this e-mail preference that shouts out at me. Over two-thirds of the touring Broadway audience says that e-mail is the preferred method of hearing about shows. This is a staggeringly high number and speaks to the continuing power of e-mail marketing, particularly for those who are already online. As I wrote in a blog post earlier this year, the persistent rumors that e-mail marketing is less relevant in a Facebook-dominated world can be put to rest. Among the older audiences in the arts sector demographic, e-mail use is actually increasing.

So what’s a big takeaway here? I think it’s that when you survey an audience online, you find that those who respond to it overwhelmingly demonstrate a preference for online communication. So even if traditional methods are still at work, you ought to exploit online marketing to these folks as much as you can because they prefer it, it’s less expensive, it’s faster and you’ll get a better response rate from them.

It may now be a good idea to simply ask your patrons how they prefer to hear from you. You can do this through surveys, during subscription renewals, and even when they are buying single tickets. Once you now have information about each customer, you can segment your marketing and reach those who tell you they are interested in online marketing in the way they prefer. They will be happier -- your response rates will be higher.

We’re living in a world in which there are two audiences out there -- those that have adopted online marketing and those that haven’t. Why treat everyone the same?

 

 

A Springtime of Discontent: Two Paradigms for Thriving Arts Organizations

I spent last week at the League of American Orchestras annual conference in Minneapolis, and came away confused, concerned, and frankly somewhat depressed. My reaction didn’t stem so much from the problems the orchestra field is facing as from what people are talking about – or NOT talking about – in terms of solutions.

The conference last week emphasized the fact that things are pretty tough in orchestra-land. For the last two decades, there’s been no disagreement among thought leaders that the aging of the audience for classical music and the difficulty in recruiting large numbers of younger people is a central challenge. Pair this with the reliance on significant individual philanthropy from an existing but diminishing older audience, and you’ve got a combination that spells trouble.

The trouble now abounds, particularly for some of the country’s larger orchestras, and the recent economic collapse has weakened the financial footing of orchestras across the board. Government funding (both federal and local) is being slashed in the double digits as we speak. Corporate leaders who care about the arts are having more and more trouble convincing their companies to go out on a limb and support them. Foundation support has dwindled because the argument that orchestral music is a vital part of society is now relevant to only a very few major foundations. Costs to run orchestras have risen faster than inflation, and individual giving is not making up the difference. None of these facts should surprise anyone.

The main message of the orchestra conference, eloquently articulated by League president and CEO Jesse Rosen, was that artistic excellence is no longer enough. The industry must face its business issues head-on.

There were plenty of thought-provoking sessions by some of the leading thinkers in the field, all searching for solutions. We heard about “right-sizing,” economic planning, board development, and financial planning. All of these are relevant and appropriate. But sadly, none of these are easy, they all require a LOT of time, and all require that arts boards be willing to embrace change – which is by no means a given. I came away thinking that not only are there no easy answers, there is simply no consensus about what can be done right away that will make a difference in the next six months to a year.

In the days since the conference, I’ve done some thinking about solutions and have come up with some ideas of my own – ideas not only for the orchestra field, but for all art forms and institutions both large and small. These are changes that you can implement today that will make an impact nearly immediately, and don’t require raising funds. One is a purely an artistic paradigm, the other purely business:

1. Organizations will thrive if they make art that attracts a growing (not a diminishing) audience.

2. Organizations will thrive if they run themselves in a more and more efficient, effective, and professional way, and new technology ought to play a central role.

The first idea comes directly from a short speech at the conference by Larry Wendling, Ph.D., vice president, Corporate Research Laboratory, for 3M. He clearly and matter-of-factly described 3M’s alarmingly simple business approach: “Innovate and then add value.” He said it over and over: if you truly add value, people will beat down the door to your company (or concert hall).

And indeed, in the hallways of the Hilton Minneapolis, I heard stories from small and mid-sized orchestra managers that backed this up. A handful of managers told me that despite the economy, they were holding their own, or even improving in some key ways. Ticket sales were up, or subscriptions holding steady, largely owing to refinements in programming, pricing, or overall strategy.

A more dramatic example came from our client, the Stockton Symphony, which I mentioned more obliquely in last month’s article. Jane Kenworthy, the executive director/CEO, told me that Stockton, California, has a 17.3% unemployment rate and the seventh-highest foreclosure rate in the country. She said that “by all rights, our orchestra should have folded by now.”  

But she went on to describe how they had recently sold 3,000 tickets for a pops concert – the most they had ever sold for a single evening in the history of the orchestra. She was brimming with pride in having sold out the house and added that it had taken “years” for the board and music director to agree to initiate a pops series.

Was she bringing Mozart and Beethoven, as (some might argue) was the mission of a symphony orchestra? No. It was a pops concert, plain and simple. But she sold tickets – and lots of them.

Here is a plucky orchestra manager pulling out all the stops when the chips are down. She added value to her community. And how did she do it? By taking risks and trying something new. Jane said, “We are still innovating in the midst of this economic crisis!”

This is my first point. Organizations will thrive if they make art that attracts a growing (not a diminishing) audience. If you find ways to continually fill your house, your economic engine will grow. You’ll identify new donors, board members, and you’ll look much better to prospective funders. Nothing breeds success like success.

My colleague Diane Ragsdale took me to task last month when I suggested that in this economy, filling the house must be job number one, and bending the mission of your organization might be part of that equation. For a few days others chimed in, and it was a spirited debate. You can read the whole comment thread here.

Perhaps because I straddle the fence between the for-profit and non-profit world, I have developed a particular point of view. In the end, I’d rather my local orchestra stay in business and do two pops concerts a year along with their two classical concerts, and have a growing budget, bigger audience, and a positive story to tell, than doggedly stick to what it’s been doing for decades and face extinction.

And lest you think I’m merely suggesting that everyone do more pops concerts, or more productions of Beauty and the Beast, I’m not. Witness the fact that the recent “Spring for Music” festival at Carnegie Hall sold out nearly all of its events, and presented not a single piece of standard repertoire – it was all modern music. Witness the fact that that Jacob’s Pillow Dance Festival presents nearly all new work each summer from both established and cutting-edge dance companies. They don’t do The Nutcracker. I’m not passing judgment on what the art is. I don’t have an agenda. I am simply arguing for the creation of something for which tickets are hard to come by as a prime objective in tough times.

Now, let’s turn to the business paradigm: Organizations must run themselves in a more and more efficient, effective, and professional way, and new technology ought to play a central role.

I spend a good deal of my business life immersed in the technology world. Every day my inbox is overflowing with announcements about new technology innovations to make businesses more productive. In corporate America, companies are constantly seeking new technology to streamline their operations, do better marketing, provide better customer service, and save time for their employees to focus on their jobs. 

What struck me at the League conference was this: If technology is seen as a central and critical solution for American corporations, why is it not a more central topic for discussion in the arts? For instance, if I told you that new technology could reduce the time your staff takes to do their jobs by 20 or 30 percent, isn’t that a worthy goal? If time is money – then the right new technology can literally manufacture time!

In an industry in distress, why isn’t technology front and center as part of the discussion? And if technology is driving innovation at every level of the corporate world, why aren’t arts leaders embracing it?

What I know for sure is that new technology is nearly always present when industries in crisis manage to wriggle out of their troubles. The much-maligned newspaper industry, which was teetering toward irrelevance a few years ago, has made valiant strides in this regard, and now some of the very best iPad apps are those created by The New York Times and more recently the New Yorker. So why isn’t this happening in the arts?

I’m now heading out to California this week for the Americans for the Arts Conference and TCG, where I suspect I’ll be hearing stories similar to the ones I heard at the Symphony League. As I do, I’ll be thinking about these two paradigms for the direction the arts field needs to head: making art that adds value and attracts a growing audience, and embracing technology that helps it cut costs, market better, and run more efficiently.

These may not be the only things the arts world needs. But I would bet that if these are nailed, a lot of other challenges will be a lot easier to manage.

 

We’re In the Business of Tomorrow

Along with 15,000 others in a packed convention center in San Francisco last week, I witnessed an amazingly inspiring event. President Bill Clinton took the stage (introduced by Stevie Wonder), and held court for more than an hour, talking about what’s on his mind. From physics to green energy to the earthquake in Haiti, he outlined his take on what’s wrong with the world, what’s wrong with America, and how to fix it.

He said a lot that resonated, much of it relevant to the arts. My ears continue to ring with this phrase from his speech: “We live in a world where the way people get information is filtered through yesterday's categories." Put another way: We’re constantly making decisions about the future based on the lens of the past.

Clinton explained that in highly evolved societies like the United States (as opposed to developing countries), entrenched processes and economic interests make profound change much harder than in other societies. People cling to the ways they did things in the past out of fear, and out of self-interest. This stops innovation and leads to stagnation.

He used as an example the fact that while the U.S. once held the lead in solar energy panel production, we bungled the opportunity, and the Chinese and the Germans are now the ones who will likely own the industry. Clinton said that unless things change, we are on a path to becoming a country in decline, rather than one on the move. A sobering perspective.

His antidote? America ought to be in the “tomorrow business.” We need to recognize and accept how the world has changed, and adapt to the future. We need to make our plans for the way the world will be five years from now, not the way it was five years ago.

All of this resonated personally, because his thinking is very much in line with our company’s philosophy. In 2001, we were first to introduce e-mail marketing to the arts industry, recognizing that e-mail would quickly become a “must” marketing technique. We built PatronMail, and nine years later, e-mail marketing has indeed become mainstream. (As a small bit of evidence of e-mail’s prominence, our 1,800 clients sent out over 30 million e-mails in the last month alone.)

And, as you may know, we made our second big bet this year, launching PatronManager CRM to introduce CRM to the arts industry. If you’ve not yet heard about it, here’s quick video:

 

 

 

 

 

 

 

 

 

 

 

For those who don’t want to watch the video, here’s the skinny: PatronManager CRM is a cloud-based CRM system built for small and mid-sized arts organizations. It offers 21st century technology for next to no cost. It’s not a ticketing system, and it’s not a fundraising system. It’s an all-in-one system built from the ground up that instantly provides collaboration and efficiency for your staff, because it combines ticketing and subscriptions, e-mail marketing, day-to-day tasks, calendar, and fundraising in one web-based system. There’s no hardware to purchase and maintain, no software to install, and no IT person needed to operate it.

In the past, arts organizations operated stand-alone systems for ticketing, fundraising, and e-mail. But the world is changing, arts patrons are changing, and the technology options that are available to arts organizations are changing, too. The lens of the future shows that as our society becomes more and more web-connected, and social media and mobile devices take off, what’s required is an entirely new way of thinking – and thus a new approach to arts management and technology. That approach is CRM (customer relationship management) and cloud computing - in which all of your patron data, and all of your transactions and operations, are on the same system, accessible over the web.

That’s why, when we decided to build a CRM system, we partnered with one of the most dynamic and successful CRM technology companies in Silicon Valley, the $20B salesforce.com. Salesforce.com pioneered cloud-based CRM for the corporate market, and today has over 85,000 corporate clients and over 2 million users. Mark Benioff, Salesforce’s CEO, is also a non-profit visionary who, starting on day one, mandated a corporate commitment to philanthropy by creating the Salesforce Foundation. The Foundation has already donated technology to 9,500 non-profits worldwide, and our partnership takes advantage of this philanthropic program. (It was at the annual salesforce.com conference that I heard Bill Clinton speak.)

Indeed, we are in the business of tomorrow. CRM and cloud computing are the future of business technology; that’s why we’re introducing and evangelizing CRM for the arts. Our mission is to revolutionize the industry by providing world-class cutting-edge technology to arts and non-profits, at a price they can afford, and CRM fits our mission.

I hope in the year to come, you’ll join me in looking at the world with your own lens of the future. The economic climate is challenging, and your jobs are not getting any easier. New technology is a proven way forward to building better, more robust relationships with your patrons, and maximizing every moment of every staff member’s precious time. And just as e-mail went from unknown to commonplace in five years, I predict that CRM will quickly become a “must-have” technology for the arts.

In 2011, as you wear that lens of the future, we’ll help guide the way. I’m pleased to announce that early in the year, we’ll publish (in print and for Kindle/iPad) a new book I’ve written with my colleague Michelle Paul, outlining our vision of arts marketing for the 21st century with a focus on CRM, e-mail, websites, and social media.

I hope as we travel around the country in this coming year, you’ll attend one of our seminars or presentations. Despite the efficiency of e-mail and webinars, there’s nothing like meeting you face-to-face, and we look forward to it.

On behalf of our entire staff, thank you for your support. We wish you a wonderful holiday season.

 

If you'd like to learn more about PatronManager CRM, click here.

Is the Recession Affecting Arts Patrons? It Depends on Who You Ask.

Last March, we surveyed over 10,000 patrons of 23 different arts organizations about their online habits and arts attendance. We found that the ongoing recession is affecting a large segment of the arts-going community, and that the segment that is being most affected is the audience of the future.

Overall, 62 percent of respondents said that because of the recession they have changed their arts-going behavior. For the purposes of this article, let’s call them the “recession-affecteds” (RAs). These RAs are slightly younger than the "unaffected" group - 53 percent are under 55 years old. 71 percent of them are women, compared to 60 percent of those who said they are not affected by the recession. The average income of RAs is about $101,000; those who say they are not affected have an average income of about $136,000.

Let's look at what the RAs are saying about their arts-going habits. 62 percent say they are attending fewer performances. On average, they say they're going to about six performances per year, compared to eight for the audience that is not affected by the recession. That’s a drop of 25 percent.

Unsurprisingly, the RAs are focused on affordability. 53 percent say that ticket prices are too high. 52 percent are seeking discount tickets, and 38 percent say they are buying less expensive seats when they do go.  Price shopping isn’t the only way that they are changing their habits. 16 percent said that they are now more open to “trying new things” because of the recession, which seems like good news for arts organizations seeking a new audience.  

So in summary, the people most affected by the recession are generally younger and less affluent, and are seeking discounts and buying less expensive tickets.  What this data suggests is that if your ticket sales are not diminishing despite this, it is likely because the slack is being made up by your older, wealthier traditional audience.   

That said, the research also suggests new ways of reaching those RAs. Consider this: Over 57 percent of RAs said that they use the Internet more than they did in the year before, and 63 percent said that when they're on your e-mail list they feel more connected to your organization. If there ever was a time to build your e-mail marketing program, now is it!

About 45 percent said that they visited a social networking site within the last week, and 18 percent said they follow an arts organization on Facebook or Twitter. What's fascinating is that 53 percent of those that follow organizations on a social media site claimed that they participated with that organization more often. Arts managers that still need to convince upper management or board members of the value of social media -- here’s your ammunition.

About 74 percent of the RAs said that it makes a difference to them when an arts organization seems to know them personally. We’re in a whole new world of arts marketing and audience development, and in next month's article I’ll explore this further.    

Overall, it seems that those organizations that can harness technology and techniques to build personal relationships with younger arts patrons have a better chance of engaging with them and motivating them to attend, even in this volatile and difficult economic climate.

Revolutionizing the Arts with Technology: Introducing Customer Relationship Management & PatronManager CRM

Last month at the League of American Orchestras annual conference in Atlanta, the Duke Foundation’s Ben Cameron delivered a knock-out introductory speech about the challenging world that confronts arts managers. Afterwards, the audience of over 400 orchestra leaders was asked to quantify the amount of change arts managers believe their industry needs, on a scale from “no change” (1) to “radical change” (5). It shouldn’t be a surprise that over 90 percent of the audience voted 4 or 5. People know that the status quo isn’t working.

Yes, it’s time for new approaches to arts management, and new technology is one way to get there. This article is all about Customer Relationship Management (CRM) — the most important new technology for arts managers to come along in the last 50 years. I believe it can, and will, revolutionize the arts industry.

A CRM system is used by a company to track and organize all of its contacts in one database. Every interaction with a customer is recorded in the system, and is accessible online by all employees across the organization.

CRM isn’t a newfangled ticketing system with a donation module bolted on. It’s an entirely new approach to managing your relationships with your customers. Remember when the iPhone was introduced, and the whole notion of what a cell phone is was instantly transformed? CRM is that kind of change.

Hundreds of thousands of corporations already use CRM systems. One of the industry-leading CRM providers, Salesforce.com, is a Silicon Valley company started about a decade ago that currently has 80,000 corporate customers. The corporate world has figured out that CRM is a better way to run their businesses!

Today, I am proud to introduce PatronManager CRM,

a product we’ve been developing quietly for the last three years. PatronManager CRM is an all-in-one system for ticketing, subscriptions, donations, fundraising, day-to-day activities, e-mail marketing, and calendaring.

Our goal in creating PatronManager CRM  was twofold: To build a system that could dramatically improve the way the industry operates, and to make it affordable for small and mid-sized non-profit organizations which make up the majority of our 1,750 PatronMail clients. We’ve achieved this through a partnership with Salesforce.com and the Salesforce Foundation, enabling us to offer a low-cost powerhouse of technology capability that has never been seen before in the arts industry.

Let’s look at why CRM really matters. 

The Problem That CRM Solves

Today, most arts organizations are hampered by the technology that they use to run their businesses -- it is outdated and conceptually flawed. We know from our clients that many organizations have an office full of PCs, and on each of these PCs are one or more “transactional systems.” These systems are:

• Stand-alone: The software program itself, and all the data it houses, are stored on a single computer, and accessible only to the person using that machine.
  
  
• Operation-oriented: The program is designed to help the user complete specific tasks in an efficient manner. Whether that’s processing a donation or completing a ticket sale, the system is designed to help office workers be more efficient in doing their jobs.
  
  
• Department-focused: The system is designed to help a single department run better. The development department has donation software, the marketing department has e-mail systems, and the box office runs ticketing software.

For the last few decades, these kinds of systems represented the state-of-the-art for business technology -- but in today’s world, they are not good enough. The fundamental shortcoming is that while these transactional systems help departments run better, none of them were designed to optimize communication with a patron.

With systems like these, you never have a 360 degree view of any one patron. And if you don’t know everything about a patron at a glance, it’s very hard to maintain a professional relationship with her and provide excellent customer service.

Additionally, for executive directors or boards, transactional systems cause difficulties on a larger scale. Without aggregated data, it's impossible to get meaningful reports that can help you run your organization. The box office manager might be satisfied with the ticketing system, and the development director is an expert at using the specialized fundraising software, but when it’s time for the executive director to prepare for a strategic planning meeting with the Board, and she wants to run a report of all the people who bought a ticket in the last six weeks who have also donated over $100 in the last six months, the shortcomings of those systems become clear. Gathering information like that requires an integrated system, not separate transactional ones.

How CRM Solves It

Enter Customer Relationship Management systems, an entirely different approach to office operations. What makes a CRM system so radically different is that it is fundamentally not a transactional system. Rather, a CRM system starts with a different goal: It puts the customer at the center by integrating the functions of all departments into one aggregated database and management tool.

CRM provides office workers and managers with a single place to capture and store all of their interactions with a patron. With customer information collected in this format, managers can report on it, act on it, and continually update it. Each and every e-mail campaign, ticket purchase, donation, or any other kind of interaction with a particular patron (including individual e-mail correspondence and documented phone calls) resides in a single database entry, all associated with the patron’s record. The history of that patron’s relationship with your organization is evident in the accumulation of all of those data entries over time.

Because all staff members can access the same system, everyone is empowered to help patrons get what they need. Imagine that Shannon calls the box office to upgrade her seats, and at the same time she happens to ask for a replacement copy of her last donation acknowledgement. Because she's got someone on the phone, she wants her problem solved right away. She's not thinking of this as a request that belongs to a different department; from her perspective, she has a relationship with the organization as a whole. Without a CRM system, it could take a while before Shannon gets what she wants -- the box office manager has to ask around and get someone from development to take care of it. But in a CRM environment that enables departments to be more integrated and collaborative, her request could be taken care of before she even hangs up the phone.

The Biggest Benefit of All

CRM systems create institutional memory.

Think of it this way: Every day when your staff comes to work, as they do their daily tasks and document all their interactions with your patrons as described above, they are, in fact, writing the history of your organization into your CRM system.

Because the CRM system is web-based, all of this knowledge is instantly accessible and searchable by everybody else in the organization, from today onward and forever into the future. There’s never a chance that your history with your patrons is going to get lost, misfiled, or walk out the door when a staff member leaves.

CRM Will Change Your World

I hope you can see now why running your organization with a CRM system will do far more than simply replace your current systems with better ones. Adopting a CRM system will enable you to do better e-mail marketing by segmenting your patrons better. It will allow you to do smarter fundraising because the inherent reporting capabilities will streamline your operations. It will allow your staff to collaborate and be aligned in a way that they have never been before, whether working in your office, at the venue, or even from their homes.

With a CRM system, your organization will be more efficient, you will run a more collaborative and professional operation, and your staff will be more productive.

Just as we started our company nine years ago with a bet that e-mail marketing would become central to the efforts of every arts organization, today we’re making that same bet with CRM.

If you’d like to schedule a live demonstration to see PatronManager CRM in action, click here.

If you'd like to learn more about PatronManager CRM, click here.

Testing for Fun and Profit

My colleague Michelle Paul came across this site a few days ago and sent it around to the staff. Though I had seen it years ago, it still amazes me. It's a whole site of nothing but A/B test examples and results.

Which Test Won?

Try the one on the front page: Look at the examples, submit your guess, and then see the answer...

Then look at the archive for more tests.

How many do you get right?

I think this pretty much makes the case for A/B testing. It's clear that in many of the examples, small changes in layout or copy make a very big difference in results.

If you're not doing this kind of testing as a matter of course, I hope this inspires you to give it a try.

2020 Predictions with 2020 Foresight?

My colleague Chad Bauman, who runs marketing at Arena Stage, wrote me a few weeks ago with an intriguing idea. He's invited a group of leading arts execs and thought leaders to write guest posts for his blog, responding to the question "what's the biggest marketing challenge in the next 10 years."

There are already two excellent entries by Rick Lester at TRG and Tom Cotts, from Ailey. His blog is http://arts-marketing.blogspot.com. Here's a preview of my entry, which should be posted in the next few days:

The biggest marketing challenge arts marketers will face in the next decade is not technology, budgets, or audiences — it’s THEMSELVES. As the Web continues to evolve, arts patrons and consumers will have more choices and options literally at their fingertips. Will arts marketers step up and innovate, or be left behind?

A decade ago, in the middle of the dot-com crash, few would have predicted the rapidity with which the Internet would not only rebound, but forge unexpected and profound changes in how we now communicate with each other. In a short decade the very fundamentals of marketing have been challenged and reshaped.

During these past 10 years, the corporate world embraced this transformation much more quickly than did the arts. It wasn’t simply because they had more money, because the truth is smart Web-based marketing doesn’t need to be expensive. Those entities that the arts compete with for consumers’ time quickly recognized the potential that new technology could afford them, and made huge strides in improving their Web sites, generating paid Web traffic, selecting easier to use e-commerce technology, and investing time and effort in leveraging social media.

In fact, the commercial entertainment industry was one of the first to embrace social media. Even Broadway producers (not often known for innovation) are catching on. Though a few forward-thinking arts organizations have made strides in improving their online presence, not enough have.

According to our 2010 Patron Technology National Arts Patron Survey (March 2010), in which 10,000 arts patrons responded, only 20% indicated that they “always, or almost always” rely on arts organizations’ Web sites for their arts-going planning. And just 39% indicated that arts Web sites had improved in the last year.  There’s a lot of ground to be made up here. 

Looking ahead towards the next decade, I think it seems obvious that the rate of change wrought by the Web will continue to accelerate. In the next few years, the computer monitor will morph into your home television screen. Watching a live theater performance or concert produced by a cultural organization streamed over the Internet will become commonplace. The Met Opera has already proven what that kind of thing does to generate demand for the live event itself.

Geo-location technology will also be a game-changer. Your mobile device will be able to tell you (while you sit at a restaurant checking your e-mail) what movies are starting within a mile of your location, in the next hour.  Will arts events be listed as well? 

Will arts leaders embrace changes like these and be like the creative entrepreneurial people they clearly are when they focus on producing for the stage? Or will they lag behind on the technology front and watch other forms of entertainment race ahead, as has happened during the last decade?

If arts marketers decide collectively to convince their boards and funding community that it is imperative that they get ahead of the technology curve, then there's a chance that the arts industry can blaze a trail that other entertainment art forms will envy.

The biggest challenge is not the change itself, but whether we've got the guts as an industry to embrace the change and go after it.

The Demanding World of Dynamic Pricing

If airline flight prices change daily, why is it that theater ticket prices are fixed? And why do we issue a zillion discount codes? Isn't there a better way?

"Dynamic Pricing," "Demand-Based Pricing," and "Variable Pricing" are all words that describe the notion of changing ticket prices day by day, like the airlines do. This concept has cropped up on a regular basis over the last few years in the arts, and it seems to be happening with increasing frequency. As a check on the state of the industry, I attended a session dedicated to this topic at a ticketing conference in January. Given that the room was packed with hundreds of attendees, it seems like dynamic pricing is the "it" topic across sports, live music, and the arts. And, as I found out, for good reason.

Before I went to this session, I thought that dynamic pricing was simply some new technology that automatically changes ticket prices in relation to demand from consumers. I thought dynamic pricing was a feature you could buy, as a new way to optimize theater pricing using a sophisticated technique to eke out every extra penny. While that's sort of true, it somewhat misses the point. Dynamic pricing is actually a good deal more complex than that.

Let's start with the facts. Dynamic pricing in the live-event world is still in its infancy. There are few if any fancy software systems in general use that are designed to handle dynamic pricing, and even large and well-respected venues such as the New York Philharmonic are only now dipping their toes in this water.  

Before we talk about dynamic pricing, it helps to review some general philosophy. First let's look at the notion of pricing itself. Setting prices for any product is perhaps the hardest aspect of any business, and in the live-event business, it's even harder. In my view, it is certainly is most underestimated and under-appreciated of any of the tasks of a marketer, and one that we spend disproportionately little time on relative to its ultimate impact. I've been in those pricing meetings, and if the ones you sit in are like mine were, pricing decisions are typically based on "gut feel" and/or comparisons to last year, and are driven mainly by one goal: to achieve budget. The problem is that none of those approaches has the customer's needs front and center, nor will they necessarily help you arrive at the best pricing scheme. 

And what's really frustrating about pricing is that you can't ask your consumers and get a reliable answer. If you research consumers and ask them what they would pay, you will get a different answer from what they actually do pay.  

 Now, an economist would have you set prices using a classic demand curve. The place where the two lines meet is the exact price you should charge to optimize your results.

But what would it take to understand the exact consumer demand for a single performance during a run of a show to create this demand curve? Well, you would have to consider all of the outside factors that come to bear in the decision-making of your target audience. You've got the particular performance on the stage (the art itself), the day of the week, the stars of the show, the weather, the venue. And that's just what you know before the show opens. Then you've got "stuff that happens," like traffic patterns, holidays, road closings, mass transit problems, and news. All of these things matter—even what's on television that night, such as the Olympics! 

If you magically had perfect information, you'd hit the demand curve, price perfectly, and sell out the house and maximize your potential revenue. The odd but unassailable logic is that in this case, dynamic pricing would not be necessary at all! Of course, the problem is that you never have perfect information at the time you price the show. Thus the need for something else.

Here's an analogy that might help:

Think about a pilot trying to land an airplane. He or she has a lot of technology, software, and guidance systems, as well as the window out front, to help aim the plane down a very narrow runway. The pilot makes mid-course corrections while descending 30,000 feet to the ground in about 20 minutes, based on a lot of variables including the wind, the temperature of the air, the weight of the airplane, crosswinds, and the length of the runway. As the pilot is descending he (and the computer) are making minute adjustments along the way. 

Let's superimpose this concept onto pricing. In a fixed-price world, you're like a pilot who sets the flaps and the rate of descent before before takeoff, and that's it. You just hope for the best. I wouldn't want to be on that plane!

Historically, we've printed the ticket price on the ticket, advertised that ticket price, and we're done. We are, very much like in the example above, stuck with what we've decided on before we even start. So no matter what the variables are, we end up steadfastly sticking to our initial guess, even if it's clear that we're way off course. And if we run into problems with too few tickets being sold, our current method of solving this is issuing discount codes, which are a crude way of lowering prices along the way. While discount codes can work, they only work in one direction—down!

Now imagine the opposite approach. It starts with the notion that you are going to sell tickets to a group of people for a particular night. Using my analogy, that night is your runway. Once you set your ticket prices, you start your descent (your onsale for that show). Your prices stay the same until you encounter information that causes you to make a mid-course change. All of the variables surrounding that particular performance come into play, such as the ones that I described above (perhaps it's very rainy, or perhaps your star is sick that night; or conversely, maybe there's a big convention in town that night, and you've got tremendous extra demand). These are, just like the changing wind patterns, things that alter the ultimate outcome, the demand for your product.

This is where dynamic pricing comes in. It's a methodology by which a marketer takes a regular look at the demand for a particular performance and adjusts the ticket price up or down depending on the nature of that event along the way. It's a mid-course correction based on inputs that you're getting from the marketplace. Dynamic pricing is really all about recognizing that you're not going to get your price right at the beginning, and you are going to need to make corrections to meet the demand curve as it changes.

Doing this means you'll probably end up with more revenue than you would have before. If demand is high, you raise prices, and vice versa if demand is low. There's also the possibility that you pull tickets from sale for a time as a way of generating demand. You may very well make extra money using dynamic pricing this way. The difference (the incremental improvement) shows the gap between your opening price with imperfect information, and your best guess at the proper ticket price based on varying the price as demand for a show changes. 

So isn't this the answer to our dreams and to meeting our budget every time? Well, the fallacy in this logic is that this incremental change cannot last forever. The more that you do dynamic pricing, and the better you are at matching the demand for your product, that increased revenue will begin to level off or diminish, because you're going to get better at pricing your performances in the first place.

Once I had digested this philosophy, I became convinced that dynamic pricing is very smart, and I wondered why our industry hasn't embraced it so far. In subsequent conversations, one industry expert suggested to me that the problem may be less about philosophy, and more about technology. The fact is that most incumbent ticketing systems can easily create discount codes on the fly. However, changing the actual face value of the ticket during the run is hard, if not impossible.

And there are also significant issues relating to budgeting and accounting. If you budget the gross potential of a show at the start then, with dynamic pricing, you are now essentially changing that gross potential number along the way. I'm sure there are a few accountants and bookkeepers whose heads are spinning at the mere thought of this. But the tail should not wag the dog.

The complexity doesn't negate the logic or the need. If you're wanting to start exploring this yourself, there are a few organizations that are worth paying attention to. In the larger sports and entertainment industries, as you might imagine, there are some sophisticated things happening. QCue claims it has "the world's only dynamic pricing engine for live entertainment events." But in our field, where the number of seats per performance isn't in the tens or hundreds of thousands, the approach is necessarily different. I'm aware of the success of two companies who are actively working in this arena. Both have their own "secret sauce" for how to do this, including consumer research, historical analysis, and day-to-day action. And both have results anyone would be proud of.

TRG, lead by Rick Lester, reports that it had recent success with the Arts Club Theatre Company (ACTC) in Vancouver. During ACTC's first season working with TRG (2008-09), ACTC monitored the houses as they were filling for each performance and made daily decisions—seating section by seating section—to adjust prices up or down based on demand. ACTC finished $1.6 million ahead of prior season results for single and group sales (not including subscriptions) for a total of $4.4 million. Of these sales, ACTC earned $430,000 from dynamic pricing strategies alone, about a 10% increase. The Pricing Institute (lead by Steven Roth, Tim Baker, and Alan Brown) has seen similar results from its clients. The Geffen Playhouse implemented a dynamic pricing strategy for a production that brought in an additional $60,000, which represents a 23.5% increase in sales for that production. And at the Yale Rep, dynamic pricing brought in an additional $50,000 of revenue for a production, which boosted single-ticket revenue for that production by 37%.

That said, relatively speaking, only a small percentage of organizations in the field are actually using dynamic pricing in this way, either with a consultant or on their own. Linda Forlini, director of customer relations at the New York Philharmonic, reported that she manually changes ticket prices for about 10% of the over 150 concerts that her orchestra presents each year. She has engaged in a sophisticated research study that showed her exactly where there were seats available on a per-performance basis using a pretty spiffy heat map. Linda says that she never changes the ticket prices by more than perhaps 5% or 10% in either direction. There is no wholesale ticket price slashing. Also, all of the price corrections that she makes are handled somewhere between the highest ticket price and the lowest ticket price. In other words, they never raised the price of their top ticket level, nor did they lower the price of their bottom—it all happens in the middle.

This begins to get us to the main point, which is how you can implement this on your own, if you have the conviction, the technology, and the staff to try it. There are some tips and tricks of the trade which make sense.

Someone in the audience at the panel I attended asked whether people who are sitting next to each other in a theater ever chat with each other and get angry learning that their tickets were different prices. Of course, Linda got a laugh when she reported that people in New York City don't talk to each other at all, so it wasn't much of a problem! But it's worth keeping in mind: If you're going to reprice, it's smart to change prices across an entire row rather than having seats next to each other at different prices.

Perhaps the biggest tip I learned about dynamic pricing is that if you want to do it at all, the most important thing is that you should not print your ticket prices anywhere. I don't mean you hide them. You just print a range—"tickets start at $15" or "tickets range from $15-$65." But don't print the actual prices on your tickets, or in your brochure, or at the box office. Otherwise you won't to be able to change them.

In the end, while I was surprised to learn that there really isn't any magic computer program that's running in the background doing this kind of dynamic ticket pricing, I was impressed with what I heard. All of this is in its infancy, and this is still very much a manual operation. And it makes sense that it's manual at this point, since it's as much an art as it is a science. Surely you have some productions you know will sell out now—that suggests that your top ticket price could move higher. And the reverse is true. If you lower prices along they way for performances that you know will not sell, you can meet the demand curve much more effectively, and reduce the number of truly discounted tickets you have to send off to third-party discount sites and services.

It seems clear to me that in 5-10 years, if and when dynamic ticket pricing is adopted broadly by the field, our halls will be more fully filled—and presenters will generate more revenue. I hope that this brief introduction to dynamic pricing offers food for thought. I am now convinced that dynamic pricing makes a ton of sense and has a role in the live-events world. I think it's time for our industry to start aggressively experimenting with this and start doing what other industries have been doing for decades with great success.

Now, THIS is a survey!

I just read Ken Davenport's blog post about "D & D" which stands for "Devoted and Disgruntled" - an event which in essence is a live survey of the city's most devoted theater-lovers. Kudos to the Public for bringing this to New York.

Read about the event here.

You want to bet how much amazing information is going to come out of this? How come this doesn't happen in every arts community every year? Shouldn't it?

Survey Me -- or Else

We had an interesting experience yesterday in the office, which is prompting me to write a short post about surveys.

I'm always amazed at how little many organizations know about their audiences, when finding out is so very easy. Given that the technology is inexpensive (we offer an unlimited SurveyMonkey account for $100/year), I think the main reason managers don't survey more often is that they somehow feel that audience will be annoyed at being asked a bunch of questions.

Nothing could be further from the truth. In fact, people LOVE to give their opinions. This was proved in spades today when, after sending out a survey to our clients, one of them responded as follows:

Sort of a waste of my time that you sent a message asking for my input. I
had to type in my contact info and then when you found out that I didn't use
an automated ticketing system, you terminated the survey. I'll be much less
likely to "help you out" next time.

The subject line of the survey was clear: "We want to learn more about your ticketing needs." Of course, for those that don't have ticketing needs at all, the survey itself was very short! But that data point itself (whether or not an organization uses a ticketing system) is still valuable information for us.

When this colorful response came in, a few staff members were taken aback. Why was this guy so upset?

After thinking about it for a while, it hit me that the reason this guy got pissed off is that we didn't give him enough of a chance to give his opinion!  He was dying to do the survey - he looked forward to it, and when the survey ended too quickly for him, he was frustrated.

Doesn't that amaze you? It did me.

Next time you wonder if your audience wants to give you feedback, don't think twice. They do - and they will.

So start surveying. You'll be amazed at what you will learn.