Sunday, November 30, 2008

The rules are changing, and changing quickly

I have always believed that marketing success starts with the product. If the quality of the artistic product isn't there, there is nothing a marketing director can do to put more butts in seats. Audiences will leave no matter how thought out or brilliant the marketing strategy. That being said, if the product is strong, a primary function of a marketing director is eliminating the barriers to purchasing.

Several weeks ago, I began to feel that even with a strong product, in today's economy, we must give people a reason to buy. No longer would a strong artistic product marketed well be enough. I tested this hypothesis by developing the NEW DEAL program at Arena Stage, which resulted in sales significantly beyond our expectations. The reduction in ticket price, even if for a day, gave potential patrons the reason they needed to make the purchase, especially on something that was dependant upon very limited discretionary spending.

So I wasn't surprised by an article in the Washington Post entitled "Holiday Shopping in a Downturn: Deals or Nothing at All." The basic rule of retail businesses on Black Friday is to offer highly attractive "door buster" sale items to lure customers in the door. The idea is that even after the "door busters" are sold out, customers will stay and purchase non-sale items. It has worked well for retail businesses for over a decade. But it didn't this year. The rules have changed. Customers showed up for the "door busters" as usual, but once the deals were gone, so were the customers. They didn't stay and shop. Once the "reason to buy" was eliminated, the sales stopped.

It seems like all the rules have been thrown out the window. We know the small profit margin on new car purchases, right? Dealerships make most of their money on the financing. But to get people to purchase, there are several dealerships offering "buy one, get one" deals on cars. When have you ever heard of that?

Friday, November 28, 2008

Budgeting and the artistic product

I had the pleasure of hearing Karen Hopkins speak at the National Arts Marketing Project Conference in Houston. During her speech, she said several things that caught my attention. Because the conference centered around how marketing and development departments could work together to maximize revenue, she outlined the revenue breakdown between earned vs. contributed sources for the Brooklyn Academy of Music:

Brooklyn Academy of Music
Expenses $38 million
Box office income: $11.9 million (31% of expenses)
Other earned revenue: 4.6 million (12% of expenses)
Contributed revenue: $22 million (private and public) (57% of expenses)
· The Next Wave Festival
· Spring season of theater, opera, dance
· Education—serving 25,000 students at 219 schools

I have always admired the artistic work of BAM, and some of the nation's most creative work from the past several decades have been created and/or featured at BAM, including Peter Brooks' epic Mahabharata and Philip Glass's Einstein on the Beach.

One of the struggles that we are facing at Arena Stage is an imbalance between earned and contributed revenue. Arena Stage is more reliant on earned revenue than most regional theaters, and it puts the marketing department in conflict with the artistic department. I joined Arena Stage because of its long heritage of superb artistic work, and our artistic strategic plan calls for the exploration of new and challenging work in the future. However, the more reliant a company is on earned revenue, the less risk and new work the company can take on because it is reliant on steady box office revenue. Thankfully the communications department and the artistic department at Arena Stage work very well together, and we are in the process of hiring a chief development officer to increase our contributed revenue streams.

To test my hypothesis about how an imbalance between earned and contributed revenue streams can affect programming, I took a look at two institutions--one known for artistic risk taking and new play development (The Public Theater), and one known for presenting/producing only well known, less risky work (Walnut Street Theatre).

Here are their breakdowns:

Public Theater (New York Shakespeare Festival)
2006 990Expenses: $17 million
Box Office income: $5.2 million (31% of expenses)
Other earned revenue: $1 million (6% of expenses)
Contributed revenue: $8.6 million (51% of expenses)

Walnut Street Theatre (from their 2006 990)
Expenses: $13.5 million
Box office income: $11.5 million (85% of expenses)
Other earned revenue: $500k (5% of expenses)
Contributed Revenue: $1.4 million (10% of expenses)

To quote Michael Kaiser from his new book, "Not-for-profit arts organizations should be doing work that commercial producers won't consider either because the work is too large or too risky. This is what justifies the use of tax-deductible contributions." As I look at Walnut Street's financials, they are very close to operating like a for-profit institution, with only 10% of its budget coming from contributed revenue. So, don't look for them to do anything "too large or too risky." They can boast that they have the world's largest subscription base, and although I like Ralph Weeks (their Director of Marketing), it isn't because they figured out the "subscriber problem" or have exceptional marketing, it's because of their programming. Their shows for this season include 5 shows: State Fair; Hairspray; A Streetcar Named Desire; Born Yesterday; and The Producers (all musicals and/or well known products).

From the opposite perspective, the Public Theater can do "large and risky" productions, which they are well-known for because more than half of its budget comes from contributed sources. For comparison purposes to Walnut Street, check out the Public Theater's season: Road Show; If you see something, Say something; Taking Over; The Good Negro; Why Torture is Wrong; The Singing Forest; Khartoum; The Native Theater Festival. As a theater insider, I have only heard of three of these projects, mostly because Arena Stage has a history with two of them.

The more a company is handcuffed to its earned revenue streams and box office, the less it's able to concentrate on its non-profit mission. And in this economy, a heavy reliance on either contributed or earned revenue isn't a good idea since an organization's revenue streams should be diversified, so as not to put all your eggs in one basket.

Monday, November 17, 2008

Results from the Arena Stage New Deal

Round 1: Economy vs. Arena Stage

Tactic: Arena Stage's New Deal--25,000 tickets at $25 each for 24 hours
Good for the first week of any remaining production in 2008-09

Results: 6,661 tickets sold for almost $200,000 in revenue in a 24 hour period

  • The previous highest grossing day at Arena Stage was $90,000 in 2002, which we more than doubled.
  • We created 229 entirely new patron accounts.
  • Several preview performances sold out, and the remaining shows have very healthy houses which should go a long way in boosting word of mouth early.
  • We sold 1,400 tickets in two hours from 12am-2am on Friday morning.
  • We had a line at the box office at 12am, including a woman in her sleeping bag.


Asking the unpopular--is there too much art?

The economic crisis is starting to trickle down to arts organizations all over the nation. Recent casualties of the crisis include Opera Pacific, Milwaukee Shakespeare Festival, and several Broadway shows. To adjust for the weakening economy, planned productions have been abandoned at Seattle Repertory Theatre, Washington National Opera, the New York City Opera and even at the seemingly untouchable Metropolitan Opera. Not to mention the St. Louis Museum of Art postponing its $125 million expansion or the Shakespeare Theatre missing its gala goal by $300,000.

The impact of the crisis will be felt in communities all around the country. Quite simply, the casualties listed above won’t be the last. Arts organizations will fail and close as contributed income dries up, and earned revenue weans. Although tragic for the artists connected to these organizations, the unpopular question that continues to emerge with my colleagues from around the nation is: are the closings of these organizations necessarily a bad thing?

Is there just too much art? Take for example an article written in the Washington Post on April 23, 2008 which cites a study by the Helen Hayes Organization that says in 2007, there were 402 more performances by theatre companies than the previous year but attendance was down by 36,000 patrons. From this report, it would seem that supply has significantly surpassed demand, and this isn’t surprising when you take into consideration the boom of new theaters in the Washington metropolitan area.

Artists, including myself, like to point to ways to increase demand, revitalize arts education, court younger audiences, launch massive outreach programs—as the answer to this problem. But the supply and demand conundrum that many communities face can also be solved by eliminating the excess supply. This crisis will create a de facto “survival of the fittest” culture for arts organizations. Those organizations that are financially sound and create consistently good product might feel a pinch but should weather the storm. Those organizations who were limping along prior to the crisis will probably cease to exist, thereby eliminating the surplus in supply in competitive markets and returning the community to a sustainable stasis.
In the end, although painful in its process, this crisis might create stronger artistic communities throughout the nation.

Monday, November 10, 2008

Notes from Ed Keller's session at NAMP

Ed Keller, Word of Mouth Marketing Guru
Unleashing the Power of Word of Mouth
Plenary Speech
Monday, November 10, 2008

Recent example of great WOM marketing:
The Obama Campaign decided to announce his running mate via text messaging. That was the carrot to encourage people to sign up and provide their cell phone numbers to the campaign, which they used later to send out text messages to “get out an vote.” Those cell phone numbers were incredibly valuable to the campaign to set up their word of mouth campaigns.

3.5 billion brand impressions via word of mouth each day in the United States. Think about how expensive a brand impression is that you purchase via paid advertising.

Word of Mouth is the most influential touchpoint (from research done by AdvertisingAge). Word of mouth has more impact than any other touchpoint available.

What is word of mouth?
-people giving advice, insight and information to others in their own voice and in a natural, honest and genuine way.

Word of mouth marketing:
1. Encouraging word of mouth within a marketing objective.
2. Making it easy for consumers to spread the word about your brand
3. Making sure everything you do that touches the consumer is “TalkWorthy

Word of Mouth Marketing Techniques:
Online: Online buzz, viral videos, brand blogging and brand communities
Offline: street teams, house parties, referral marketing, customer activation and CRM, WOM sampling and seeding, evangelist marketing (finding the 1% of your customer base who are evangelicals about your product and helping them spread the word)

Key Questions:
1. What’s your story?
2. Who will tell it?
3. How can you facilitate the conversation (tools you can create to help WOM)

6 Key Insights:
1. Americans like to talk. The average American engages in 105 conversations a week about products and services. Those conversations contain an average of 69 brand mentions. Top three categories: Food and Dining, Media and Entertainment, and Sports, Recreation and Hobbies.
2. Word of Mouth has Impact on Audience. On a zero to ten scale, 55% rated 9 or 10 on a 1 to 10 scale. 49% of people say they are likely to purchase a product that is recommended by a close friend.
3. Word of Mouth is mostly positive. 63% of brand references in world of mouth conversations are “mostly positive,” which is seven times the rate of “mostly negative” references (9%). Research also shows that positive word of mouth has more impact than negative word of mouth.
4. Word of Mouth is mostly face-to-face. 73% of marketing-related conversations take place in person. The remainders are phone (17%), e-mail (3%), text message (3%), online chatroom or blog (1%) and other (2%). This remains true across all age groups. Offline WOM is more credible, more positive and more likely to inspire purchase.
5. Half of WOM driving by media/marketing. Nearly 1 in 2 brand conversations refer to brand marketing or media. Consumers tend to take things they hear from traditional marketing mediums and use it in their WOM mentions. 50% of consumer brand conversations refer to marketing or media, lead by television (15%).
6. When it comes to conversation, not all consumers are created equal. One American in ten tells the other nine how to vote, where to eat, and what to buy. They are called the influencers.

10% of population accounts for 1/3 for all WOM.
60% more conversations each day.
90% more brand conversations.
They are leading indicators of consumer trends.
They are consumer advocates.
They are “market multipliers” – two to three times as likely to talk to others as the average consumer.
Eager to sign up for WOM programs and more than 3/4ths of influencers like to pass along info, discounts and ads for brand they like.
More than 3/4ths of influencers invite friends to events for brands they like.
2.5 times more likely to post reviews and ratings.

Reaching Influencers
· Find them in your database.
· Media planning tools are available to plan media efficiently. More active users of the internet and heavy users of print media.
· Many times, they will self-identify. Active participation on your website. They attend your events, and contact your call center. They also post reviews and ratings.

How marketing needs to change to maximize WOM:
· new marketing objectives
· Need to focus on things that are “talkworthy” campaigns that will create a buzz
· Better integration across marketing channels and disciplines.
· New channels, tools and techniques.
· Target influencers who are predisposed to recommend.
· Focus more on current customers, not just prospects.

Sunday, November 09, 2008

First blog from NAMP

Today was my first day at the National Arts Marketing Project Conference in Houston. I opted to come in a day early to participate in the pricing institute, and although they presented some interesting information, I feel like they condensed their overall presentation down so far to fit into one day that it lost some of its value.

I did have one insight and a good reminder today. The insight: at the pricing institute, we discussed values based pricing. What value do you bring to your customer, and the importance of comprehending, creating and communicating your value. However, Tim Baker (one of the presenters) said something that really resonated with me about organizations that do a lot of new work. He said "if the customer doesn't know the play they are going to see, it is extremely difficult for them to evaluate value, so the value equation must rest on the reputation of the institution." I took that sentence to read that if you want to do a substantial amount of new work, you must increase your institutional marketing to brand the institution because the customer cannot make a values based decision on a product that is unknown to them. This coincides with a main argument that Michael Kaiser makes in his new book The Art of the Turnaround. Mr. Kaiser's main mantra: good art, marketed well. And he says one of the major mistakes we make as arts marketers is concentrating too much on product marketing and not enough on institutional marketing.

I had dinner this evening with several respected colleagues, one of which being Kory Kelly, the new Director of Marketing and Communications at Actors Theatre of Louisville. Actors Theatre does quite a bit of new work, especially when it comes time for their Humana Festival of New American Plays. As a consumer, I don't have to know anything about the titles or the specific products because that festival is so well branded. I feel like I could buy tickets to any of the Humana Festival productions and see a high quality production. In this instance, Actors Theatre has done a great job of institutional marketing around the festival to boost sales for individual products.

I was also reminded today that you have to sell the experience. People don't buy the product in many cases, they buy the experience, and for many different reasons. At the pricing institute, we discussed the many "types" of values that one could assign to an arts experience including educational, spiritual, therapeutic, ritual, social interaction, and relationship enhancement values. The guy who purchases tickets to the opera for his girlfriend for a special night on the town purchases for relationship enhancement and ritual value (getting dressed up, heading out for a night on the town, etc). The parent who brings his teenager to see Death of a Salesman is probably looking for an educational value. I remember while living in London that if I was having a bad day, I would pop on over to RENT and purchase a 10 pound ticket to escape life. Even though I had seen the show numerous times, it provided me an escape from everyday life. We have to communicate the intrinsic and extrinsic values of our product by selling the experience.

Tomorrow I give my first of two presentations. So off to bed to get a good night's sleep...

Saturday, November 08, 2008

Just landed in Houston...

I just touched down at George Bush International Airport in Houston, and I couldn't help but think that I am pretty sure the celebratory atmosphere that I left in DC following the election of Barack Obama probably wouldn't be the same here.

I am in town for my fourth National Arts Marketing Project Conference, where I will be presenting two sessions, leading a round-table discussion and hosting a dine-around. A packed schedule, but I like it that way. I have met so many interesting people at this conference over the years.

A highlight of this year's conference is a convening of marketing experts from major regional theaters that I have been invited to on Monday, November 10. Jim Royce, Director of Marketing, Communications and Sales at Center Theatre Group and Rodi Franco, Director of Communications at the Alley Theatre are hosting the dinner. The group includes Alan Brown (WolfBrown), Mary Trudel (Wallace Foundation), Tim Baker (Baker Richards Consulting), Bil Schroeder (South Coast Rep), Linda Garrison (Steppenwolf Theatre), Anne Trites (Yale Repertory Theatre), Kory Kelly (Actors Theatre of Louisville), Chad Peterson (Northlight), Nella Vera (CTG) and myself representing Arena Stage.

The main topic of conversation will focus on how our institutions are addressing the current economic crisis. The group has agreed to let me blog about the conversation. I must say that I am incredibly excited to be at the table with this group of folks, and I hope some interesting ideas are floated.

Just today, two major opera companies announced huge changes that were blamed on the current economy. The NY City Opera announced that it has separated ways with its incoming artistic director Gerald Mortier, and the Washington National Opera announced that it has abandoned its plans to present the Ring Cycle next year. I have also heard from my colleagues around the nation at some of the largest theaters in the country that they are preparing to make substantial changes in their season. The first out of the box seems to be Seattle Repertory Theatre.

We are all in the same boat, so hopefully we can create an agenda to address this crisis together.

Thursday, November 06, 2008

Arena Stage's NEW DEAL

As the anemic economy lingers, I have gotten more and more questions, from press, board members and colleagues, about what I believe the impact will be of the worsening economic crisis. As I wrote in an earlier post, the honest answer is -- I don't know. Truth be told, the first several shows of Arena's season have performed on par with previous seasons, and Wishful Drinking was one of our best performing productions in the past decade.

That being said, I am not so optimistic about the future. Money is getting tight, and some of the most talented forecasters in the retail industry are calling for an incredibly rough holiday season.

As a preemptive strike, Arena Stage announced its New Deal program today. At its core is a huge one day only sale. For one day, Friday, November 14 from 12:00am until 11:59pm, Arena Stage will place 25,000 tickets on sale for $25 each, which represents 60% off regular ticket prices. I believe we owe it to our community to make ticket prices more reasonable during these times, and this is the program we have developed.

I also believe that we have to give customers a reason to buy, and buy now. To a lot of people, a great product is no longer enough -- they need a deal that they feel they can't pass up in order to purchase. In turn, I need them to purchase their tickets now far in advance for shows months away. I refer to this as my security blanket in case the economy gets worse--almost like a subscription in a way.

Round 1 begins...