Friday, August 31, 2012

Purposeful Acquisition

Several years ago, I wrote a post entitled "You want to get into trouble? Concentrate on new audiences." At the time, I was confused and frustrated with the relentless focus on developing new audiences. The field's obsession with the new to the detriment of the loyal seemed illogical. My good friend Laura Willumsen, senior consultant at TRGArts, summed it up quite nicely by saying "we should find a way to love the one we're with, before we start courting others." Pretty safe advice that came at the perfect time for me.

Three years later, I have come to realize that healthy arts organizations have equally robust campaigns focused on new acquisition and retention, and increasingly we are focusing on improving the overall lifetime value of our customers.

For those with retention problems, I would still advise spending a majority of your resources reducing attrition before launching costly acquisition campaigns. There is nothing worse than spending a significant amount of resources enticing new patrons in the front door while your current customer base runs out the back door. And from a financial perspective, that is one of the easiest ways to sink the ship.

That said, if attrition and renewal rates are within the range of industry standards, more than likely it is time to concentrate on acquisition. Here are a couple of thoughts...

Programming. If you are looking to acquire new audiences, either you can dig a little deeper in your current well, or you can dig a new well altogether. If untapped audiences remain within your core programming, then continuing to dig deeper in your current well probably makes the most sense. If however, you find that your current programming has tapped out its audience base, digging a new well with expanded programming might be the key to acquiring new audiences. Digging a new well requires developing mission driven programming focused on an unmet need within your community. New programming initiatives are usually costly, and often times are prematurely abandoned when they don't hit a desired net revenue goal in a short period of time. Arts organizations need to view new programming initiatives as an investment in future audiences which will pay out over years instead of months. While digging new wells, it is important to maintain and cultivate your current well. Don't abandon the old for the new--let the returns from the old provide the investment capital for the new. Often times marketers are afraid of new programming because they don't want to risk offending current subscription audiences, but if you maintain a base level of traditional programming while offering an opportunity or two to test drive new programming, you will mitigate your risk of subscriber attrition. And for those who have highly subscribed houses, new programming might be the only opportunity that you have to get new audiences into your theaters which would otherwise be mostly sold out on subscription. During my final week at Arena Stage, I had to chuckle when a reporter asked me if we increased our number of musicals in the upcoming season because they were "cash cows." If only he knew that most musicals we produced actually lost money. Aside from artistic reasons, from a marketing perspective, we increased the number of musicals to attract more first time audiences, which we will then try to convert into lifetime patrons.

Direct Marketing. During the last year, I have heard of several companies eliminating acquisition efforts entirely due to budget cuts, thinking that investing exclusively in retention campaigns would result in higher returns over time because the ROI was better than comparable acquisition campaigns. Unless you are in desperate shape, please do not kill your acquisition efforts entirely. And here's why--if you currently have a healthy 80% renewal rate for your members/subscribers, it means every year you will lose 20% of your base. Statistics show that even if you have a flawless renewal campaign, you will still lose 10% due to changes in lifestyle or death. To replace those lost, you must invest in acquisition or budget for a reduced base each year that you don't. If you cut acquisition entirely, with an 80% renewal rate, you will lose half of your entire base in three years. And getting them back is going to be incredibly expensive! When looking at acquisition costs, often times it will take two to three years for a new member/subscriber to produce a net positive result, but over a lifetime, these new acquisitions will be responsible for years of renewal revenue.

Robbing Peter to Pay Paul. When the economy took a nosedive in 2008, marketers responded by looking for places to cut by thoroughly monitoring the cost of sale for individual campaigns. Normally, I would encourage such behavior. But I believe it has resulted in a zero sum game of gains and losses among the various theaters in the Washington, DC area. Studies show that even as venues have dramatically increased their capacities, theater audiences in our nation's capital have not grown. And as we all looked for opportunities to reduce our marketing expenses, we refocused our acquisition campaigns to aggressively target the list segments that performed the best, which frequently were qualified leads of theatergoers from other companies. The most cost effective means of acquiring "new" audiences was soliciting patrons from other theaters. Acquiring "new" audiences didn't actually mean developing new theatergoers as much as it meant marketing to previous theatergoers who had never visited your theater before. This wasn't dirty pool. It is standard operating procedure in any highly competitive marketplace. But as I left Arena Stage, being incredibly proud that we had almost doubled our subscriber base in three years, I found myself being more interested in the number of none theatergoers we were able to convert into theater patrons. And the truth is I don't know because we never tracked it. As a community, the greatest challenge we have is developing truly "new" audiences in Washington, DC. If we are using each other as a primary source for our "new" audiences, then we aren't creating a healthier community as our individual successes come at the expense of others. Therefore I encourage marketers to look at acquisition in terms of developing completely new audiences for the community as well as acquiring new audiences for your organization. The latter will improve your individual health, while the former the health of the artistic ecosystem.

Monday, August 27, 2012

Quick reflections on a changing media landscape

Just a few thoughts on the changing landscape of arts journalism...

Content aggregation vs. reporting.
As newsroom staffs are being cut, an alarming number of original source reporting outlets are shifting to content aggregation. Very few media outlets now have dedicated full-time reporters that are assigned to the arts. With an increase in content aggregation and a decrease in original reporting, editorial power is shifting to the fewer outlets that are creating content which in turn feeds the increasing number of aggregators. Just a short time ago, it used to be that a significant story would be covered by several local and national outlets, allowing a well-rounded view of the story to emerge. Today, whatever the view of the originating source becomes the defacto view of aggregating outlets, thereby often times giving a single reporter the responsibility of judge, jury and executioner. That said, I have found that there are some journalists who aggregate content, and then editorially expound upon amassed content. I have found that in doing so, these journalists feel the pressure to produce original editorial based upon what others have said, but they do not view themselves as primary source journalists, meaning that they will comment on previous work, but will not expend the energy to actually conduct interviews or investigate if forgone conclusions are accurate.

The rise of "gotcha" journalism. It used to be that purposefully snarky reporting was the realm of the social blogosphere, or at best, the weekly alternative paper. In a surprising turn of events, the Washington Post, one of the most respected new sources for arts journalism in the country, sent out the following message in late February: “Got a grievance to air about the Washington arts scene? Is complaining your favorite form of catharsis? Our Sunday Arts section is seeking critics like yourself, who are interested in giving our local and cultural scene some tough love.” Why would such a reputable news source specifically solicit grievances and nothing else? Wouldn't they want a balanced view from the community on the impact of the arts in our nation's capital? particularly at a time when arts funding is getting slashed? I fear that ill-conceived attempts at gaining readership will result in using tactics that just a few years ago would have been laughed out of the newsroom. Quality arts reporting, as it rapidly diminishes in communities across the nation, should become a strong competitive advantage for those that continue to invest in it. For another viewpoint, please check out Howard Sherman's excellent post here.

Pay to play, and the abandonment of journalistic ethics. I have a feeling that even prehistoric publicists had to deal with "news outlets" that refused editorial coverage unless advertising money was attached, but it used to be that these outlets were few and came with tarnished reputations in their communities. Today it is almost as likely that a marketing director will arrange an editorial feature via an account rep as it is a publicist via an editor. And outlets aren't shy about it. Previously a publisher might say to you with a wink that he would see what he could do, but now they flat out tell you if you want to be reviewed, you need to buy an ad! If a feature article, and much more so a review, is attached to an advertising buy, journalistic ethics have been thrown out the door. Just on principle, even when I did have the resources to make an ad buy, if an offer was made, I walked away from the table. There has to be a line.

To tweet, or not to tweet? If you are an executive of an arts organization, and you are considering joining Twitter, here are a couple of things to consider:
  • Twitter is a community. If you do not have the time to adequately nourish online relationships in Twitter, don't join.
  • You are always on the record. It is an open community in which anyone can ask any question at any time. Don't let the relaxed environment fool you. Every 140 character response is on the record. For a good laugh, please refer to the top 10 celebrity Twitter scandals. It is easy to understand why journalists encourage joining, as many a good story have come of it.
  • Silence speaks volumes. Thinking about joining, and then side-stepping the tough questions? Often times what you don't say communicates even more than what you do say. You should be prepared to answer questions that you won't want to. And in this environment, "no comment" doesn't go over quite so well.
That all said, if you have the time and are comfortable with complete transparency, then a Twitter feed can provide for strong relationships between you and a wide audience.

Tuesday, August 21, 2012

Learning from the Past, Looking toward the Future

A little more than a week ago, I announced that I would be leaving Arena Stage to lead the marketing and membership efforts at the Smithsonian Associates at the end of March. I've been overwhelmed by the kind words and best wishes sent my way. For that, I am very grateful.

Some have also asked if I plan to continue blogging. As you may have noticed over the years, my blog covers topics that I am passionate about, often times motivated by current trends and experiences. As I move from a performing arts organization to a museum and research institution, undoubtedly my perspective will evolve over time. However, I hope to continue to contribute to online dialogue and debate.

My four-and-a-half years at Arena Stage have been the most rewarding and exhausting of my career. When one decides to pursue a career in a field they love, like many theater artists I know, these two adjectives are not mutually exclusive; in fact, many would argue that you can't have one without the other. When joining Arena Stage, I knew there were very few precedents for what we needed to accomplish, and with the opening of the Mead Center and a 2.5 year transition ahead of us, a clear path wasn't always available. It was an opportunity that intimidated me, but I knew that I would get an education of a lifetime.

In looking back, I've learned quite a bit along the way...
  • Always give an "exclusive" to your best and most loyal customers. Trust me, if they read something important in the daily paper before they hear it from you, they won't feel like part of the family.
  • Customer service can be a significant competitive advantage. When the whole world has come to expect awful customer service, it creates an easy opportunity to shine.
  • When hiring, if you have to pick between the two, a "fire in the belly" always trumps experience. One can teach skills, but one cannot be taught to take pride in their work.
  • Resources are an investment--monitor and expect returns. Marketing directors have two primary resources: human and financial capital. Where and when to invest each is a critical decision. When budgets are tight, monitor cost of sale and make data driven investments rather than emotionally driven ones.
  • Decisiveness is critical. Leap or die. Would you rather sip champagne and listen to the violins on the Titanic, or slap on a life vest and jump into the unknown? The unknown may be scary, but the known isn't an option. A delay in decision-making will almost always be costly, as it is rare for circumstances to change, but options will diminish. The non-profit theater landscape in the United States is changing rapidly, and adjustments must be made.
  • Maximize successes to mitigate risks. Unless you present nothing but bankable commercial successes, risks are inherent in the theater. When you catch a break, ride it for all that it's worth in order to mitigate the risk that is right around the corner.
  • Looking for improvements? Track results. By tracking, you send a signal to the company that something is important. Important enough to monitor. By not tracking, you send an equally powerful signal that something isn't worth the effort. Know your vital statistics, and track them aggressively.
  • Marketers are masters of perception, not reality. Unless you are talking about financials, marketers should keep their attention on perception. Perception, as we know, is reality for most.
  • Subscriptions aren't dying, theaters are killing them. If patrons can get great seats at a significant discount at the last minute, the value proposition of a subscription doesn't exist. Best seats at the best prices = more subscriptions (as long as the product is good).
  • Develop a strong team, and hire to your weaknesses. Major accomplishments are always a team effort. Honestly assess yourself, recognize your weaknesses, and hire people that are better than you in areas where you need improvement.
  • Comp tickets are disrespectful. There are a few good reasons to give a comp here or there, but nothing devalues the work of an organization or artists more than giving away free tickets. Why do we expect society to value the arts if we don't?
  • Make decisions for tomorrow instead of today. Often times we are faced with decisions that could result in a short term gain, but a long term loss. Unless you are in desperate times, always set yourself up for a better tomorrow, even if it makes a more difficult today.
  • Take a Pavlovian approach to discounting. Use discounting as a means to encourage desired behavior. Want people to purchase early? Avoid late discounts whenever possible.
  • Marketing and Development are two sides of the same coin. Look at revenue generation as a team with the goal of raising the most revenue at the least cost. Consolidate resources, eliminate redundancies, invest in campaigns that perform the best across the departmental divide, and look at your customers holistically with an eye toward building loyalty and lifetime value.
I will always remember my time at Arena Stage fondly, and am thankful for the education I received.
Looking forward to catching a performance in the near future--this time though as an audience member (and yes, I will buy my tickets).

Thursday, August 9, 2012

Partners or Competitors

A little more than a week ago, the Washington Post in an extraordinary effort by a daily newspaper, published a series of articles on the state of theater in Washington, DC. As part of that series, Nelson Pressley, a frequent contributor for the Post, wrote an interesting piece on the financial status of the community. In it, he notes that in terms of capacity, the Washington theater community has grown tremendously over the past decade, while government funding has decreased significantly and according to theaterWashington, the annual theater attendance has remained the same since 1988. Mr. Pressley also cites that each theater that has expanded reports significantly increased audiences, and several have recently set all-time sales records.
In the Twittersphere, this article raised the same question that NEA Chairman Landesman asked in his now famous "supply and demand" speech given at Arena Stage in January 2011. Is there enough demand to support the increase in supply? This isn't a new question. It is something I questioned in this blog in 2008, and it is something that arts administrators discuss at every conference I have ever attended.
Setting aside for the moment the data from theaterWashington, on a positive note, I've seen some extraordinary things in the DC theater community in the past few years. I'd heard that the city can only support one or two major hits at any given time, however in the late fall of 2010, several theaters reported exceptionally strong attendance numbers for multiple shows running at the same time, including Oklahoma! and every tongue confess at Arena Stage, Candide at Shakespeare Theatre Company, Sunset Boulevard at Signature Theatre, and A Christmas Carol at Ford's Theatre. Well, there went that long held belief. When Arena Stage was considering a 13 week summer remount of Oklahoma!, I was told that the city could not support a long sit down production of a major musical in the summer as August was completely dead in these parts, and we couldn't succeed with Congress out of session and everyone heading to the beach. Surprise, surprise when not only Arena Stage experienced sold out houses at the height of the summer doldrums, but Woolly Mammoth Theatre Company did as well with their remount of Clybourne Park. As a community, I don't think there is anything we like better than being told we can't do something, and then proving that we can.

But to Nelson's point, we have a significant challenge ahead of us. In discussing his article on Twitter, playwright Stephen Spotswood asked me "how much do DC theater companies feel like they are in competition with each other?" Soon thereafter, Peter Marks, theater critic of the Washington Post, asked me to answer the question on the record. And this is my attempt...

Are DC theater companies in competition with each other?
Yes. In my opinion, to think otherwise would be naive. People have limited disposable income, especially during tough economic times. However, we are very lucky. Washington, DC is weathering the economic downturn better than any other city in the nation. Although we have had our challenges, we have a leg up on everywhere else, and perhaps this is why we have been able to expand during turbulent times. But in terms of how people are going to spend their leisure time, theaters are in competition with each other as much as they're in competition with movies, sports, other performing arts, museums, television, YouTube, video games, etc. To say that we aren't is simply untrue.

That being said, if I am in competition for discretionary spending dollars, I want it to be with another theater. Why? I can't get patrons to come to my theater if they don't see theater as an option in the first place. My primary responsibility as a theater marketer is to get people interested in the theater. To increase the stability of our community, we have to grow the base of theater patrons in our city. We don't have any other option, and to do that, we have to view ourselves as partners first and competitors second. If we focus on cannibalizing each other's audiences, it will be a losing battle. One theater may win one year, but inevitably it will lose the next. The only way everyone wins, including the city, is if we cultivate a growing audience for all of our theaters.

In responding to Stephen's question, I would also say that I tend to think that competition in the marketplace is good. When competition is stiff, it pushes everyone to do their best. To produce work of the highest quality. To provide the best customer service. To nurture the best local talent, and to present preeminent artists from around the globe. Please forgive the personal anecdote, but I know I have a more rewarding workout when there is a strong runner on the treadmill next to me. If there is no one by my side pushing the pace, I won't exert as much energy. I want to keep up. I want to compete. And because of our competitive spirit, DC audiences will get to experience the best efforts of all.

As I look into the new year, I resolve to elevate my gaze whenever possible from being exclusively on the theater where I work to the community as a whole. I hope that competition will improve us individually, and that working together will improve us as a whole.