Sunday, July 12, 2009

Buying Trends and the Impact of Reviews


To say that this has been an odd year would be a drastic understatement. A little less than a year ago towards the end of September, I remember working with the leadership and board of Arena Stage on an action plan to address the stock market crash and the, at that time, anticipated economic crisis. It seemed we had an incredibly daunting task ahead of us -- exactly how does one forecast and prepare for an economic crisis on the scale that none of us have ever experienced before? At the conclusion of our fiscal year, I am happy to report that Arena Stage had an exceptionally strong year, both artistically and financially. Our success has afforded me the time and opportunity to look back over the course of the year and analyze some of the patterns we saw to learn from them as we embark upon the next fiscal year.

From an overall observation, I started to notice two things that struck me almost immediately after the market crash in September: late purchasing behaviors became common place, and many of our would be patrons put a much higher importance on reviews in making a purchasing decision. To confirm what I thought were changes in patterns, I input sales data into an excel spreadsheet which produced the graph above. Starting from six weeks out and then going through the week that most reviews hit, I tracked our weekly sales for all eight of our mainstage productions. A dominant pattern appeared--sales remained constant for almost every show until the opening week, and then several took off almost exponentially after reviews hit.

Because we had several very short runs for a couple of our productions (2.5 weeks and 3.5 weeks), I created marketing plans that started advertising campaigns much earlier than normal, in an attempt to secure significant advanced sales. But even with robust advertising expenditures, audiences weren't willing in most cases to plop down their money until the show opened or they read a great review.

Takeaways:

1. As I don't see an end to the economic crisis anytime soon, I expect this pattern to continue next year, so I am not going to waste valuable advertising dollars on advanced campaigns as this graph shows that despite those expenditures, patrons still waited. Instead, I am going to shorten the campaigns, and spend significantly more over shorter time periods and concentrate on pushing reviews. This most likely will mean where before we had about a 50/50 split (50% of advertising dollars spent before opening and 50% after), next year we will look at a 30/70 split (30% spent before opening and 70% after).

2. In this blog just a little more than a year ago, I was arguing that traditional reviewers were becoming less influential with the addition of citizen based reviews and user generated content. However, when the crisis hit, many patrons began looking for a "sure bet" when spending their very limited expendable income. So reviews became even more important than they previously were, and certain reviewers became more influential as several media companies cut their reviewers, leaving only maybe two or three major critics in a large metropolitan area. From the graph above, you can see at least four examples of shows that took off after the reviews hit. Also by concentrating more advertising dollars for after a show opens, you can put more money behind pushing exceptional reviews.

Overall:

I thought I was going to have several heart attacks this year as sales patterns for individual shows were completely different from previous years. So much so that there were a couple of times that I was forecasting that a show would miss its goal by a significant margin only to go over goal by the time the show closed. I am sure that I must have seemed a little schizophrenic to certain board members, but forecasting during this climate was exceptionally difficult. I will say however that I was very proud that our reforecasted income model that was developed in October was almost spot on. We ended the year with a 1% variance off where we forecasted we would in the box office. Next year, I will probably continue to have the minor heart attacks, but I now know what I am up against--extremely late buyers who are very sensitive to reviews. They say that knowing is half the battle, so now we have to shift our tactics to address our new reality.

13 comments:

nicholasjcoleman said...

Very interesting analysis... thanks for the info.

Russell said...

Great info. Thanks for sharing.

Jonathan said...

Aren't you just increasing your vulnerability to negative reviews by conceding that audiences are waiting? Your marketing strategy for this year is to maximize the effect of good reviews--but what happens when the press is disappointing?

Michelle Pendoley said...

This is great. It's going straight to my marketing team and other industry colleagues. But I do have a couple questions:

1. It seems that you're suggesting that the reviews were responsible for sales. Obviously there's strong correlation, but do you have evidence of causation? Couldn't it just be great word of mouth? You do have a pretty great patron base at Arena...maybe they're just talking you up?

2. Would you be willing to publish a key so we could see which lines represent which shows, and see what your Y axis is? Then we could better understand the strength of this argument and also cross-reference each show with its respective reviews and general press coverage.

As a publicist, I am constantly evaluating the value and the role of reviews. I often think that I'd rather have a strong advance feature than a review, but maybe I need to re-examine that argument.

I bet that not a lot of marketing directors would be willing to put this kind of data out there--it takes some real guts, but it's so vital for our industry to be thinking about these things and sharing information. Thanks!

Chad M. Bauman said...

Jonathan,

I think you make a good point, however here is my thinking...

1. You can't make yourself less vulnerable to negative reviews by throwing a significant amount of money at advance advertising if your patrons are dead set against buying early. I found it really interesting that it didn't seem like it made a difference how much money we spent in advance on advertising. The shows we did didn't have higher advance sales than the shows we didn't. So I believe you would be chasing something that will not materialize and therefore wasting resources.

2. We all get disappointing press now and then. By pouring more resources into advertising after reviews it will either allow you to highlight good reviews or to counteract the poor ones. That being said, we are always looking for a higher ROI on advertising spends, and I believe one of the few ways to achieve that these days is to spend more money pushing great reviews.

I am not advocating pulling back entirely on advance advertising, I am just saying you might want to distribute your advertising funds a little differently than you have in the past.

And as always...this blog is only one flawed man's opinion.

Kristine said...

Thanks for sharing this. As the Director of Marketing for a theatre with summer season, I'm currently experiencing the minor heart attacks to which you refer. Good to know that it all ended up alright in the end for you. Very encouraging and interesting.

Chad M. Bauman said...

Michelle,

Again, great questions. I'll hit on them below:

1. I am sure that word of mouth has significant impact on our sales, and I believe WOMM is the most powerful tool we have. That being said, the patterns show that sales didn't take off until the review week. If this happened to just one or two shows, I might file it away as a coincidence, but with almost every show?

2. I shared as much information as I felt comfortable with in this blog post. Arena Stage doesn't release single show sales figures, thereby I needed to eliminate the y axis figures. I also made the decision to eliminate a key that identifies the specific shows as I didn't want to bring positive or negative attention to a single production being that this post was about an overall pattern.

As the head of communications, I also supervise our media relations team and at this point, I would agree that a strong advance feature is the ultimate goal of our department. Mostly because we have an established reputation with local reviewers so most will cover us, and there is little one can do to affect the outcome of a review.

As to the gutsy part--I put this information out to talk about overall industry trends. I would have been truly gutsy (as well as irresponsible) if I had published sales figures and identified productions.

Jonathan said...

Thanks Chad; Of course it's wise to maximize the benefit of good reviews--but you're assuming that spending money will increase the bump you get. All of us will now be curious to learn if that turns out to be the case. You may not be able to improve on the numbers you got last year.

At my NYC theater I'm more concerned about minimizing the damage that comes from bad reviews--and advance sale is the key.

Yes, marketing expenditure alone cannot create sales if audiences are determined to wait for reviews--but it's worth wondering what else can we do to counteract the trend--discounting for advance purchase, etc.

cynseattle said...

Thanks for sharing this, Chad. I think we're all seeing the trend to later and later single ticket sales decisions, although we still find a significant variance depending on the title and/or any artists announced that are a draw.

We find a good advance feature to be of significant impact on sales. We're struggling with our local daily's decision to run very small, often without photo, "capsule" reviews in their print edition, then direct the reader to get the full review online. Obviously, it's clear a significant number of readers won't go through the trouble. Losing the stronger placement of the review and a photo can be really impactful.

I do think that word of mouth is still the stronger sales tool (nothing surprising in that statement to anyone, I'm sure). I've started sending a link to a quick online survey to our preview audiences (generally about 1200 households) asking them a few fun questions about the show, which varies for each production. But the one question I ask every time is "have you or will you tell anyone about your experience with this production? if so, what will you or what did you tell them?" It's amazing how accurate those responses are in predicting the success of the show. And I garner some great audience quotes which I use in ads and other promotions as much as I do critics' quotes.

Scott said...

Thanks Chad. In a city where the mainstream and alternative press are drastically reducing arts coverage, we're scratching our heads and sharpening pencils to maximize the scant coverage we get < and > doing everything we can to mobilize the patrons' blogs, yelps, etc. It's a strange new environment . . . and it was already difficult before all the changes in the media and economy! The trick is accepting that preview articles and reviews (even bad ones) may not be depended on anymore. Thanks for the insights.

Eric Smith said...

Great observation Chad!

We've been tracking our sales in this manner for at least 3 years and the sales trends are similiar. Here's what we did.

1. We have shortened our advance paid marketing to launch two weeks prior to the production.
2. Advertising during the run (our runs are 3 weeks) hasn't helped generate sales.
3. While reviews ARE important, what we have found is that WOM (word of mouth) is even more important. We've had shows with terrible reviews outsell shows with stellar reviews because the WOM was so strong.
4. It is the combination of WOM AND REVIEWS that are causing the increase in our sales.
5. We are creating WOM through event marketing in our previews to assist in sales.
6. Since we saw this trend over several years, we also are able to offer greater discounts to subscribers (incentive to stay a subscriber) and increase single tix prices to maximize the income of those last minute buyers.

Clay Lord said...

Hi Chad,

My question is more about the future than your current analysis - here in the Bay Area (as I'm sure with you) we're experiencing a fast and steady decline in arts coverage and reviews. Our major houses still get covered on every show, of course, but we've got over 400 companies in the region, so a lot of people get left behind (including people who formerly could depend on at least one review). We're thinking hard about the future, and what happens when those tentpole reviews aren't necessarily there (especially being in a city where the paper of record may stop publishing on paper within the next few years). What do you think is going to happen to your trending when the centralized arbiters of taste aren't as accessible? Or perhaps better to ask first, do you think that will ever actually become an issue?

Very cool analysis.

Oh, I did have one other question -- does this mean that you don't get a corresponding bump (even if smaller) off advance non-review press? It's the review itself, the opinion, that seems to generate the sales?

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