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Distraction: Blaming Admission Cost for Cultural Center Attendance (DATA)

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admission

Distraction: Blaming Admission Cost for Cultural Center Attendance (DATA)

Yes, it’s nice to get things for free – but it’s not why people aren’t visiting cultural organizations.

This week’s KYOB Fast Facts video is a bit of an experiment for the Fast Facts series. It’s a kind of IMPACTS “data attack” regarding cost as the primary barrier to visitation for cultural organizations. I’ve left out some of the more well-known economics that indicate that admission is not a primary barrier to visitation, and kept this to IMPACTS data.

This post does not say that cost is never a primary barrier, but rather that the true behaviors of the market indicate that our treating cost as the “go to” barrier may be serving as a self-sacrificing distraction. This post also does not suggest that access programs for low-income audiences are not important, but rather that they are a totally different thing than admission price. (Got it? Good.)

Simply put, stable cultural organizations have three, general means of access: 1) A data-based admission price based on what the market can and will pay to visit them; 2) Targeted (key word) access programs to allow for visitation of specific audiences without means to pay admission; and 3) Affinity-based programs (i.e. membership or donor societies) to engage and cultivate key supporters.

Access programs that reach low-income audiences are often central to an organization’s mission (or grant funding opportunities), and they are important. However, admission price is not an affordable access program. 

When cultural organizations convince themselves that cost is the primary barrier to visitation for likely visitors, we miss out on opportunities to remove the actual barriers to visitation that are keeping people from coming through our doors. Barriers to visitation that are generally more significant than cost include items such as schedule, negative attitude affinities (“Not for someone like me”), reputation misses, and simply lack of content interest/preferring another activity (as we’ll discuss below). This data is important for those organizations that avoid tackling true barriers by making sacrificial assumptions that “if we build it (or create this program) and make it free, they will come.”

Can admission price be too high? You bet. But it’s just not the primary barrier to entry that we keep on defensively thinking that it is within the industry. While it’s often easier to blame pricing than to examine more deeply-rooted issues for lack of sky-high engagement, it’s often a shortcut to even less earned revenue and a devalued brand.  I’ve written about this data and more in this post (Admission Price is Not a Primary Barrier for Cultural Center Visitation) and in this post (How Free Admission Really Affects Museum Attendance). There’s enough information on this topic to fill a dozen videos, but let’s power through some basics:

 

1) Time is more valuable than money

First, both high-propensity visitors and the composite market report that their time is more valuable than their money. A bigger barrier to visitation, then, is being considered worthy of someone’s time. If cost were the biggest barrier, these bars might be reversed. This finding is not surprising at all, as cost generally pales in comparison to schedule and reputation when it comes to factors influencing discretionary leisure activities.

When we blame admission price first, we are building this assumption on a simple fallacy: that one’s money is the most valuable thing that cultural organizations are asking for. Cultural organizations are asking for visitors’ time – and that’s often a more important thing to them than money.

 

2) Free admission does not significantly affect intent to visit

(And to the extent that it does, it’s the opposite of the “free is best” assumption.) If free admission were a cure-all for engagement, then folks would have higher intent to visit those organizations. Those would be the organizations that they want to and plan to visit! This is not the case. In fact, in most instances, audiences indicate greater intentions to visit organizations that charge more than $20 rather than those that are free.

I’m certainly not suggesting a specific admission price, but this data does fly in the face of arguments suggesting that people might not want to visit an organization that charges admission simply because it charges admission. It’s often the opposite. The popular tenant of pricing psychology is true: people value what they pay for. Organizations that offer free admission often unwittingly devalue their brands, and without a best-in-class reputation to afford wiggle room, their public perceptions often take a a bit of a pricing psychology hit.

 

 

3) Cultural organizations are generally perceived as worthy of their admission price

Organizations charging admission have similar value for cost perceptions as other activities. This data – like most data that I make accessible here on KYOB – is from IMPACTS and the National Awareness, Attitudes, and Usage Study. Sometimes it seems that professionals within cultural organizations have an inferiority complex when it comes to comparing their experiences to others. (Although, yes, there are plenty of museum professionals on the other side of the spectrum and that’s a problem, too.) But the idea that cultural organizations might be less worthy of having an admission basis than other activities is make believe. In fact, in many cases, cultural organizations are considered even more worthy of their admission price – when they have one- than a baseball game, football game, basketball game, or a rock concert. We really do, generally, give visitors bang for their buck.

 

4) People value what they pay for

This chart shows the overall satisfaction levels of visitors to paid vs. free admission organizations. It includes classical concerts, live theater, history museums, art museums, zoos, aquariums, and science museums. Notice anything? It’s true. People value what they pay for.

 

5) Admission pricing is not the primary barrier to visitation for those with interest

Finally, for folks interested in visiting cultural organizations but who haven’t in the last two years, cost is the 14th ranked reason why they haven’t visited. The top reasons are preferring another kind of activity, it being hard to travel to the organization, feeling that there’s nothing new to do or see at the organization, a conflict with holiday, work, or school schedules, and parking challenges. When we focus on admission cost as a primary barrier – especially for these audiences who have already reported interest in visiting – we deliver a hit to our own financial solvency. To reach these audiences, there is often a different barrier to be removed.

When it comes to targeting low-income audiences, access programs are often a necessity. That said, low-income audiences are not generally the audience segments that we rely upon to keep our doors open and our “mission execution” game strong. To support access programs for low-income audiences, it’s necessary for many organizations to have an optimal admission price for the people who can and will attend the organization. For those people – the people who keep us alive if we aren’t a government funded entity –  pricing is not the primary barrier to visitation.

On the whole, the kind of people who want to go to cultural organizations are willing to pay to visit them. The argument for free admission is often an emotional one.  It may feel warm a fuzzy to offer free admission, but for many organizations, it comes with financial and perceptual consequences – and much of the science just doesn’t support it. It’s often better to charge your optimal admission price, and then create effective, targeted affordable access programs for specific audiences. When we focus on admission cost as the primary barrier to engagement, we miss out on the opportunity to remove true barriers.

 

Like this post? Don’t forget to check out my Fast Fact videos on my YouTube channel. Here are a few related posts from Know Your Own Bone that you might also enjoy:

 

Interested in getting blog posts, tips, and some silly social media geekery periodically delivered in your Facebook newsfeed? Like my Facebook page. Or for more regular sharing of nonprofit marketing information, follow me on Twitter.

Posted on by Colleen Dilenschneider in Community Engagement, Fast Facts Video, Financial Solvency, IMPACTS Data, Myth Busting, Sector Evolution, Trends Leave a comment

Admission Price is NOT a Primary Barrier for Cultural Center Visitation (DATA)

Cost is not a primary barrier to visitation Know Your Own Bone

It’s time to get real about why many people aren’t visiting cultural organizations. Generally, price is not the biggest barrier. 

Cultural organizations have their work cut out for them today. These visitor-serving organizations (museums, historic sites, aquariums, zoos, theaters, symphonies, etc.) are experiencing negative substitution of their historic visitors, often resulting in decreased attendance – at least until organizations get better at reaching underserved audiences such as millennials and “minority majorities”.

It’s a big challenge…and the best way to overcome this challenge is to identify and remove the true barriers to visitation for likely visitors. In order to do this, we need to get smarter about which barriers are real and which are excuses for organizations to avoid the need to think critically about their audiences.

We need to knock it off with the excuse that folks aren’t visiting cultural organizations primarily because of admission pricing.  The simple fact is that scant data exist to suggest that admission cost is the primary culprit when it comes to barriers to visitation. When we mistakenly blame price as the primary culprit for lack of engagement, it holds organizations back from providing better access opportunities and more relevant content. Before we dive deeper into the data, here are four important reminders regarding admission pricing:

A) Admission pricing is a science, not an art.

Determining your admission price should involve neither looking around at other institutions nor sitting around a table of executives and saying, “I guess $20 sounds right…”

B) Admission pricing is NOT related to affordable access.

In other words, organizations that charge admission should charge admission and also have intelligent, targeted access programming for low-income audiences if this is part of their mission. Data suggest free days are not a magical elixir when it comes to attracting low-income and other types of underserved audience. Subsidizing admission prices as an affordable access strategy is neither effective nor sustainable because admission pricing is binary – people can either afford it or they cannot. When organizations subjectively lower their data-informed admission price, they hurt themselves AND they are still unable to better engage underserved audiences.

C) Free admission is not a cure-all for engagement.

In fact, data suggest that free admission has relatively little sustained impact on attendance. It is difficult to find a single celebrated economist who denies this fact.

D) Not everyone wants to visit cultural organizations.

The people who want to visit cultural organizations (i.e. they have the demographic, psychographic, and behavioral attributes that indicate an increased likelihood of visiting an organization), are NOT generally low-income audiences. Not everyone wakes up thinking that it would be fun to visit a museum…but the kinds of people who are so inclined do have some things in common. The reality is that the majority of the people who actually visit cultural organizations are able and willing to pay to do so.

Certainly, this is not to say that organizations can charge anything they’d like! But it is to say that this price issue that causes anxiety among the sector isn’t quite the issue that we make it out to be. Now that these baseline conversations are out of the way, here are three items to consider that underscore the fact that cost is often hardly the visitation barrier that many organizations believe it to be:

 

1) Cultural organizations charging admission have similar value for cost perceptions as other experiences

Consider this data from the National Awareness, Attitudes and Usage Study of Visitor-Serving Organizations (an ongoing study with a sample size that recently surpassed 100,000 US adults) that quantifies the value for cost perceptions of various leisure activities that charge admission. This is a measurement of how valuable an attendee believes the experience to be relative to the price of admission. (Or, how much bang that a visitor believes that they got for their buck.)

IMPACTS - value for cost of experiences

Cultural organizations that charge admission generally have very favorable cost perceptions – especially when compared to other admission-charging, leisure activities. In fact, folks paying admission to attend a museum, zoo, aquarium, live theater, classical concert, or ballet report – on average – getting better bang for their buck when compared to attending a rock concert or a sporting event (e.g. MLB, NBA, NFL)!

For some reason, it seems that even some cultural leaders who fiercely believe in the value of their organizations worry that people may be feeling ripped off by having to pay to visit a cultural organization. This is not the case. It’s not even close to the case. I don’t know why even our own industry leaders seem to think this, but it is a myth and we need to bust it.

Cultural organizations provide value to people – and this isn’t some inter-industry pep talk! Data demonstrate that cultural experiences are generally worth paying for. Period.

 

2) Organizations that charge admission generally have higher satisfaction ratings than organizations that do not charge admission

The data below measures overall satisfaction as reported by 1,639 individuals who attended these seven types of cultural organizations as both paying and non-paying visitors. In other words, each respondent attended the same type of organization (e.g. science museum) within the past two years, and had at least one experience in which they were charged admission, and at least one in which they were not – either because a similar organization of the same type offers free admission or they attended on a “free day.”

IMPACTS - Free vs paid admission satisfaction

The basic tenant of pricing psychology holds true that people value what they pay for. Organizations that charge admission do not have lower satisfaction metrics than organizations that do not charge admission. In fact, the opposite is true: Organizations that do not charge admission tend to have lower visitor satisfaction rates!

Long story short: Free admission is neither a cure-all for satisfaction nor for increased visitation.

 

3) Cost is not a primary barrier to visitation

This data also derives from the ongoing National Awareness, Attitudes and Usage Study of Visitor-Serving Organizations. We wanted to know why folks who reported having an interest in visiting a cultural organization hadn’t actually visited within the past two years. The results are probably not what some might imagine:

IMPACTS - Barriers to repeat visitation

With an index value far less than 100, cost (i.e. being “too expensive”) is hardly a significant barrier at all! True barriers to visitation revolve around relevant content (i.e. preferred alternate activity), access challenges, and schedule. Schedule issues are a very big deal – and they are among the most prominent barriers to engagement that cultural organizations of every kind prefer not to address.

 

There are many reasons why visitors may not be attending cultural organizations, but for those who are likely to attend, cost is not a primary barrier. We need to move this conversation forward, and in order to do so, we need to retire untrue assumptions and excuses about our barriers to engagement. Sure, people like free stuff. But what cultural organizations offer is valuable and people are willing to pay for it.

Let’s put cost to rest as the immediate “go to” excuse for lower visitation and start focusing on real ways to increase access and create programs that truly fulfill our missions of educating and inspiring audiences. There’s work to be done and we are delaying progress with this excuse that allows us to overlook our biggest opportunities for engagement.

 

Like this post? Please check out my YouTube channel for video fast facts! Here are a few related posts from Know Your Own Bone that you might also enjoy:

 

Interested in getting blog posts, tips, and some silly social media geekery periodically delivered in your Facebook newsfeed? Like my Facebook page. Or for more regular sharing of nonprofit marketing information, follow me on Twitter.

Posted on by Colleen Dilenschneider in Community Engagement, Financial Solvency, IMPACTS Data, Myth Busting, Sector Evolution, Trends Leave a comment

The Expensive Misconceptions Surrounding Membership Fraud for Cultural Organizations (DATA)

The Expensive Misconceptions Surrounding Membership Fraud for Cultural Organizations

Setting up ID checkpoints to spot “fake members” at your organization? Data suggest that you may be doing more harm than good.

Many cultural organizations treat “member fraud” as an urgent concern of the utmost importance. I’m talking about organizations that set up ID checkpoints at the entrance or membership deck and believe that their job is to find people getting in on their friend’s membership, and then do this. Data suggest that organizations that think this way may be doing themselves a grave disservice.

How big of a problem is membership fraud and guest pass fraud? How much is it costing organizations? We uncovered a data-informed line of reasoning that should make cultural organizations think twice before deploying the member fraud police (at least in the way that many have in the past).

 

1) Checking IDs is a top dissatisfier for members

This is a good – and obvious – place to start: What are the most dissatisfying elements of the member experience? IMPACTS surveyed premium members (defined as persons who have purchased an annual membership to a cultural organization costing $250 or more within the past 12 months) to better understand the nature and hierarchy of member “dissatisfiers.”

The data comes from the ongoing National Awareness, Attitudes & Usage Study of US Visitor-Serving Organizations, and contemplates the perceptions and behaviors of more than 98,000 visitors to 224 visitor-serving organizations of various types and sizes. For this component of the analysis, 1,096 “premium” members to these organizations responded to open-ended questions to identify the most dissatisfying aspect of their member experience. A consequent lexical analysis process organized these responses by general consideration, and these same considerations were presented to the studied members who were then asked to rank from 1-10 the considerations in terms of relative dissatisfaction (with 1 being the most dissatisfying aspect and 10 being the least dissatisfying aspect). The Mean Value is the average ranking that the member respondents assigned to each consideration.

IMPACTS- Premium member dissatisfiers

It makes sense that “proving identity” is among the most dissatisfying aspects of the member experience: “You know my name when you call me at home to ask for money. But you forget my name AND imply that I am trying to deceive you when I visit – a benefit for which I paid several times more than regular admission!” Exaggerated? Maybe (or maybe not), but let’s be honest: A premium member making this hypothetical statement would have an excellent point!

A reasonable person may consider showing a membership card and being asked to produce an ID to be excessive. And consider this: You’re openly asking for an ID in addition to the membership card because you believe that your members – the backbone of your organization – are conspiring to perpetrate a fraud against your organization. One need not be a philanthropy pro to realize that this is a pretty lousy way to treat current and potential donors. You know what they say in fundraising and membership development: “The best way to say ‘Thank you’ is to question a donor’s integrity!” Wait…people don’t say that?! Then why do so many organizations actually do it?

 

2) It is often more costly to AVOID membership fraud

“But if we stop checking IDs, won’t we suffer from member fraud and risk letting legions of non-members in for free?!” That’s a very sensible and intelligent question. Let’s look into it. The data below is from a 2014 IMPACTS membership study of 11 visitor-serving cultural organizations – seven of which have (or then had) ID check policies for members, four of which did not verify the IDs of members.

Market potential is a data-driven analysis that quantifies the number of people expected to annually visit an organization (and often at what price). Market potential analyses are the result of a modeling process, and enabled by the data typically acquired via the conduct of an awareness, attitudes, and usage study. The 2014 IMPACTS membership study further segmented the market potential by visitation type (e.g. admission paying visitors, members, etc.).

IMPACT - Membership ID validation market potential

Organizations checking IDs achieved 98.9% of their annual market potential (or 98,900 actual member visits per every 100,000 expected member visits). Organizations NOT checking IDs achieved 100.8% of their annual market potential (or, 100,800 actual member visits per every 100,000 expected member visits). Even if we attribute the entire member visit variance to member fraud (which is not a justified assumption), the maximum member fraud incident rate is 1.9% (or 1,900 fraudulent member visits per 100,000 expected member visits).

And, common sense suggests that attributing the entire variance to member fraud is, at best, a dubious practice. Why? Because at least two other, important factors may play important roles in explaining the delta: 1) It is extremely possible (if not likely) that some ID-checking organizations lose member visitation precisely because they check IDs and, as the data indicate, are dissatisfying their members. It is not hard to imagine a member being annoyed, offended, or inconvenienced by the ID check (or having a friend to whom they lent the membership card being turned away), and then not returning with the expected frequency to the organization. 2) Correspondingly, organizations that don’t check IDs may better satisfy their members with the relative ease of the entry process when compared to the ID police experience at other organizations. It is unlikely that the entire observed market potential variance has to do with member fraud when we know that checking IDs is such a strong dissatisfier, but let’s assume that the member fraud incident rate is 1.9% to be super safe. This begs the question:

Is a member fraud rate of 1.9% worth irritating your most closely held constituencies?

To find out how much money this amounts to for your organization, all that you need to do is plug in some numbers. As an (easy math) example, let’s assume that an organization receives 100,000 annual member visits and that the admission revenue per capita is $20. This would mean that member “fraud” poses a $38,000 annual risk to the organization (100,000 annual member visits x $20 admission per capita x 1.9% member fraud incident rate = $38,000 annual member fraud expectation).

(For easy math purposes, I chose a relatively large-sized organization for this hypothetical example. Extant data suggests that a visitor-serving cultural organization in the US with 100,000 member visits likely has a total annual attendance in the 400-500,000 range. The annual operating budget of this hypothetical organization is likely in the tens of millions of dollars – which may change the way you perceive that $38,000 if your organization is much smaller.)

Based on your own unique member fraud expectation, ask yourself: Is it worth this much money to risk alienating high-level donors and members? Or, here’s a better question: If you could invest that same amount to eliminate a major dissatisfier for members and donors, would you? The answer is probably a resounding “yes.”

 Also, when organizations use the word “fraud” they are making the assumption that everyone who is sneaking in using someone else’s ID would have otherwise opted to visit and pay full admission. These are flawed assumptions.  Sure – perhaps some of these “gate crashers” would have otherwise visited…but surely not all of them would choose to do so.  Some may argue that what we internally call “fraud” is, in fact, a bit like a trial program based on the most valuable kind of word of mouth – the recommendation of someone who is already an important constituent (i.e. the member who shared their ID with the “fraudulent” user).

Even if we assume that every single fraudulent visitor would have absolutely visited anyway and paid full price (which are both silly and dangerous assumptions…but let’s roll with them), checking IDs is still a bad financial practice. Organizations should consider the ill will that ID checks engender with their members (and what this means come renewal time), the onsite spending of “fraudulent” visitors at the gift shop and café, and the future value of these same visitors as potential endorsers! It may be reasonably safe to say that someone turned away at the door by the ID police may not offer a ringing endorsement for your organization. On the other hand, a person who visits at the express recommendation of a member who has shared one of their member benefits with this person may well thereafter visit on their own accord…and maybe even buy their own membership!

 

3) Guest pass fraud has been pre-paid and may be beneficial

But what about guest pass fraud? Many organizations report observing guest passes being offered for sale on Craigslist or offered as a perk for Airbnb rentals. Just how big of a problem is this?

The analysis below contemplates five nonprofit visitor-serving organizations in the US that offer transferable guest cards, tickets, or passes (i.e. the member need not be present for the guest pass to be redeemed) as a benefit of select membership categories. The purpose of the study was to assess if fraud was a major issue with this membership benefit. Here are some of the findings uncovered by IMPACTS:

  • People purchasing membership that included guest passes as a benefit spent on average $48 more than they would have for a similar membership category that did not include guest passes. The average premium paid by members of the five contemplated organizations to receive the guest pass benefit was $48.17.

 

  • Roughly four out of ten members who paid a premium to receive the guest cards didn’t redeem the benefit. 61.35% of eligible members who received the guest benefit actually redeemed the benefit.

 

  • People visiting using guest passes were worth 48.77% more to the organization then they would have been if they had bought a ticket. Explanation: Members who redeemed the guest pass benefit (i.e. shared passes for their guests to use), accounted for an average of 2.32 guest visits to the organization. In other words, of the 61.35% of eligible members who redeemed the benefit, the average usage rate per member was 2.32x. That means that overall, for every membership that included a guest pass as a benefit, actual usage of the guest pass accounted for 1.42 guest visits (61.35% redemption rate x 2.32 usage rate = 1.42 guest visits per eligible membership). At a price premium of $48.17, this equates to equivalent revenues of $33.92 per guest visit ($48.17 price premium / 1.42 guest visits per eligible membership = $33.92 per guest visit). The average per capita admission revenue for the five contemplated organizations was $22.80 – meaning that guest visitors were worth 48.77% more to the organization then they would have been if they had bought a ticket!

 

That said, guest pass visitors are likely worth even more than that. This math artificially demeans the value of guest pass programs as it includes the same, flawed assumptions that seem to plague many member fraud-related concerns: 1) The assumption that every person visiting the organization via the guest pass program would have otherwise visited the organization; and 2) The assumption that every person visiting the organization via the guest pass program would have not only visited but additionally done so on a paid basis. There are two critical factors to consider in assessing the value of a guest pass benefit for memberships:

  1. The people who choose to pay a premium to receive a guest pass benefit are likely among an organization’s best endorsers – they want to share the experience with other people and are willing to pay for it!
  1. If the guest pass program does nothing more than engender trial among new visitors, then this, alone, may be a benefit to the organization – organizations usually invest to engender trial. In the example of guest passes, a member is paying the organization to promote trial (and, these “trialers” likely contribute revenues to the organizations in terms of food and beverage sales, retail sales, parking (if you own that structure), and even potential additional admissions sold to accompanying visitors.)

Do guest cards contribute to fraud? It depends what you mean by “fraud.” Yes, there are likely folks visiting the organization that you didn’t intend to have a guest pass – but that’s not necessarily a bad thing. In fact, when you think about it from a trial perspective (i.e. reaching new audiences), it may be a good thing.

 

I was recently visiting a large museum in Chicago with my colleagues. The woman in front of us at the entrance had several children with her and, before entering the organization, the ticket-taker asked to see her identification. We overheard the woman explain that she was the nanny and that she was given the membership card to take the children and their cousin to the museum. The ticket-taker turned the nanny and three children away with a look of pride and accomplishment on her face as she explained condescendingly that only the membership holder could visit the organization with the children. The nanny looked extremely embarrassed. Is this what we consider a “win” in the visitor-serving industry?

“That’s extreme,” you may be thinking. Perhaps. But, remember: The person whom you’re turning away is the member’s mother, father, neighbor, nanny, grandparent, sister, brother, coworker, etc. (Believe it or not, folks trying to “sneak in” aren’t likely to be culturally erudite pickpockets and wallet thieves. Seriously. Is that who we think that they are?!) When you annoy members (or embarrass their friends), you’re probably more likely to lose them altogether than upgrade them to a membership that allows for more member entrances or guest passes. In a way, members (and especially premium members) have paid for the right to “defraud” us.

If you’re wondering what your “ID police” should do now, here is an idea: Train them to interact with visitors – which data suggest is the single most reliable way to increase satisfaction.

The member fraud crisis? It’s kind of a (mild) thing – but we’re hurting ourselves both in terms of our mission and financial future thinking it’s a bigger issue than it actually is. The sooner that we stop choosing to dissatisfy our members, the sooner that we can improve our member and donor relations to gain the critical support that we need to both fund our financial futures and execute our missions.

 

Like this post? Don’t forget to check out my Fast Fact videos on my YouTube channel. Here are a few related posts from Know Your Own Bone that you might also enjoy:

 

Interested in getting blog posts, tips, and some silly social media geekery periodically delivered in your Facebook newsfeed? Like my Facebook page. Or for more regular sharing of nonprofit marketing information, follow me on Twitter.

Posted on by Colleen Dilenschneider in Community Engagement, Financial Solvency, IMPACTS Data, Myth Busting, Sector Evolution 1 Comment

Fast Fact: Admission Pricing is a Science- Not an Art (VIDEO)

Organizations don’t have to guess when it comes to determining an optimal admission price.

Let’s try something new – starting today. I’d like to introduce you to a new project: Know Your Own Bone: Fast Facts for Cultural Executives. Traditional Know Your Own Bone posts will continue to be posted every-other Wednesday. In the weeks between, I will be posting short (around three minutes or less), Fast Facts videos featuring a key takeaway for cultural executives and staff members alike. I hope that you will provide me with feedback, and I am eager to know what you all think! Let’s start here:

Admission pricing is a science. Check out the video to learn why.

 

A deeper dive into data:

Unintentional collusion drives many-an-organization’s pricing strategy, but it’s a bad practice (or, at least a silly one). Today, your organization should be looking at data to inform its optimal price point for admission. Here’s an example of an organization’s data-informed pricing “sweet spot” that data suggest is neither leaving money on the table nor jeopardizing attendance. Every organization has this kind of optimal price point:

Adult Admission Analysis- Aquarium

Your pricing should be contemplative of the attributes of your organization’s high-propensity visitors (jargon translated: it should consider the people who profile as being actually interested in attending your organization). The above example indicates relative price inelasticity between $15.95 and $19.95 – suggesting that as many folks would visit the organization at a $19.95 as they would if the price were $15.95. If this is your organization and you are charging $15.95, you’re not losing visitors – you’re losing revenue that can help keep your doors open and your mission alive.

Different markets, different audiences, and different experiences demand different price points, so I want to emphasize that while this graph is a real example, it’s not necessarily a replicable model for your organization. (Read: I’m not encouraging everyone out there to charge $19.95. I would encourage THIS organization to change $19.95.)

To illustrate, here’s another example of a pricing analysis for a different organization and experience:

Adult admission analysis- performing arts

Finding an organization’s optimal price point has two, basic steps: Collecting data and modeling the data. Optimal pricing is informed by the type of data typically acquired via the conduct of an awareness, attitudes, and usage study that includes price-related metrics and perceptions from visitors and non-visitors alike. From there, price elasticity of demand models aid organizations in quantifying the demand for your experience. If you don’t have the know-how the collect this data on your own or you need help with the models, universities make excellent partners – as do professionals with experience working in this space! The point is: In today’s world – in which data is increasingly available, and more organizations are collecting it – there’s no excuse for blindly following the “leader” or simply guessing when it comes to your organization’s optimal admission price.

 

Words to Know to Be In-the-Know:

 

Unintentional collusion:

Many organizations unknowingly have strategies based upon unintentional collusion. Unintentional collusion is what happens when an organization follows the “leader” thinking the leader knows something that they don’t. Basically, it’s when somebody guesses and other organizations simply copy that guess. When organizations do this, they reaffirm one another’s unscientific strategies.

Value advantaged:

Admission pricing that is set too low and thus “leaves money on the table” for an organization. It is a price point that fails to maximize the data-informed level of revenue that an organization may be able to achieve.

Value disadvantaged:

Admission pricing that is set too high and risks jeopardizing attendance. It is a price point that fails to inspire visitation among those who profile as likely visitors because the high cost to attend poses a barrier to engagement.

Let’s stop guessing when it comes to admission pricing. Today, pricing is not an art. It’s a science.

 

I hope that these Fast Fact videos will provide thought-fuel for your organization! Please let me know if you have thoughts or feedback so that I may evolve these videos to be most helpful over time.  The next short video will be posted on August 19th.

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Posted on by Colleen Dilenschneider in Community Engagement, Fast Facts Video, Financial Solvency, IMPACTS Data, Myth Busting, Sector Evolution 8 Comments

Three New Pricing Realities For Visitor-Serving Nonprofits in The 21st Century (DATA)

Admission tickets

Want to keep moving your mission moving forward and your doors open? It’s time to end the debate on these pricing-related topics.

As the visitor-serving industry (museums, theaters, symphonies, historic sites, etc.) broadly struggles with declining attendance trends and a potentially unsustainable reliance on kindness and not commerce, “getting your price right” is more important than ever to nonprofits who depend on the gate to support their missions. Too high of a price may serve as a barrier to visitation. Too low of a price risks leaving money on the table and all of the attendant fiscal challenges associated with failing to maximize earned revenues.

Much is happening in the world that changes/challenges the way that traditional visitor-serving nonprofits operate: social media and technology, the need for real-time transparency, and changing demographics in the United States and beyond are just a few, prominent factors influencing our industry. And, these factors are changing everything from internal operations to membership products and the role of fundraising. And, unsurprisingly, the information age requires embracing new realities related to pricing.

Let’s end the debate on these three pricing-related topics and get on with the business of running effective businesses that enable meaningful missions:

 

1) Pricing is NOT an art (Pricing is now a science)

Determining the optimal price of admission is no longer a trial and error process. In fact, it’s anything but a “guess” (however well-educated). Data is playing an increasingly important role in the way that institutions operate for good reason.

A near-decade of research including hundreds of interviews with US visitor-serving nonprofit organizations strongly suggests that many pricing models are the product of “unintentional collusion” (AKA “the blind leading the blind”). This deeply-flawed model fails to contemplate two critical factors when it comes to informing a pricing strategy: (i) the fact that a proximate (or competitive, or peer) organization has established a price does not necessarily mean that it is an optimal price; and (ii) the market tends to view organizations – however “alike” they may be – in very unique terms, and this uniqueness frequently extends to pricing.

Unintentional collusion looks something like this:

IMPACTS unintentional collusion

Thanks to readily available data and analyses, there is no reason to base pricing on anything beyond an organization’s own, unique equities. For every organization, there is a data-based “sweet spot” in which admission prices are optimal.

Let’s consider a quick example of what an optimal pricing strategy looks like when charted (Note: This particular example is from a performance-based entity, but this way of considering pricing applies to any type of admission):

 IMPACTS ticket price analysis example

In the above example, the data-informed analysis suggests that pricing less than $75 for a ticket to the performance (more specifically, to a “premium” seat at a non-matinee, live performance) would be “value advantaged” – a polite euphemism for leaving money on the table! However, anything above $75 pushes the price into the “value disadvantaged” realm – a place where the price poses a needless barrier to entry (and, generally, one where the increased per capita revenues will not offset the decline in attendance). For every category of admission, every organization has an optimal price – one that is neither value advantaged nor value disadvantaged.

Organizations guess their price (without leveraging data to inform their pricing strategy) at their own risk. Getting the price wrong can alienate potential visitors and supporters if it’s too high, and make it difficult to raise prices to an optimal value over time if price starts too low.

Looking for ways to help support a price increase? Well, data suggest that a whiz-bang new exhibit or facility expansion isn’t necessarily coupled to an increased price tolerance. Instead, efforts to improving an organization’s reputation or the overall satisfaction of visitors are much more reliable indicators of increased value for cost perceptions.

 

2) Admission pricing is NOT affordable access (Admission enables affordable access)

A thought that sometimes emerges once an organization’s optimal pricing has been quantified is strangely, “but that’s too expensive to provide affordable access!” Admission is not a substitute for affordable access. Admission and affordable access programs are completely different things…and an organization needs to establish its optimal pricing strategy in order to support effective affordable access programming.

In other words, if you subsidize price in the name of affordable access (i.e. artificially lowering the price to create a value advantaged pricing condition), you are limiting your organization’s ability to fund quality programs that DO provide true affordable access. Making your entire pricing strategy an “affordable access program” leaves money on the table as folks pay an admission price below what they (the market!) indicate they were willing to pay for your experience.

When it comes to the truest definition of affordable access, an admission price point of $15 or $20 or $25 is functionally irrelevant to many of our most under-served audiences…most any price at all may pose an insurmountable barrier to visitation.

What if you aim to provide affordable access for the community? Won’t a high admission price deter folks? The data suggest “no” – at least not the people who were able to pay in the first place – but that doesn’t mean it’s not a good idea to develop true access programming to better engage constituents for whom price is barrier while also considering strategic promotions that celebrate your community. Speaking of which…

 

3) Discounts are NOT promotions (Promotions serve a purpose beyond cheap access)

Promotions celebrate community while discounts devalue your brand. These are very real and very different things. The biggest differentiating factor is the question “So what?” If the point of providing a discount is simply admitting folks for a lower price, then the discount is a bad idea that devalues your brand. (And, as a reminder, data suggests that all discounts provided through social media are bad business for nonprofit organizations.) However, if an organization’s answer to “so what?” is “to celebrate a community” and that purpose is made clear in external communications, then the program that you are describing is a promotion. The feature of a promotion may include a special pricing opportunity – think special pricing for mothers on Mother’s Day, or differentiated pricing for local residents.

Discounts make people say, “I got in cheap.” Promotions make people say, “I feel valued.” Discounts are not only meaningless, but data suggest that they also lead to less satisfying overall experiences and even increase the time before a return visit! While this may be surprising to some folks, it’s classic pricing psychology in action.

IMPACTS intent to revist

 

 

If visitor-serving organizations aim to keep providing inspiration and education to the masses, then the first imperative is to exist – and it’s hard to exist (let alone thrive) in the long-term without a sustainable revenue strategy that optimizes pricing.

Pricing strategies – and even pricing psychologies – are not mysterious so let’s stop guessing. The data is not uncertain.

 

Interested in getting blog posts, tips, and some silly social media geekery periodically delivered in your Facebook newsfeed? Like my Facebook page. Or for more regular sharing of nonprofit marketing information, follow me on Twitter

Posted on by Colleen Dilenschneider in Financial Solvency, IMPACTS Data, Myth Busting, Sector Evolution 4 Comments

The Relevance Test: Three Key Concepts to Future-Proof Nonprofit Organizations

Ivory tower

Ivory towers are proving fragile.

Many visitor-serving organizations benefit from “outside-in” thinking and have ceased depending solely on experiential intuition and other “inside-out” ways of thinking that have previously – and perhaps alarmingly – allowed a kind of Ivory Tower mentality to infiltrate many museums.

The dawning of the Age of the Internet has brought about many necessary changes in the way that people think and behave, and, thus, what people have come to expect from the organizations that they support. Digital, real-time tools now allow for transparency, the ability to communicate ongoing impact, and the ability to personally connect with organizations 24/7. Indeed, the market now expects – demands, really – transparent insights from organizations.

These changes shape the way that we interact and connect within our communities, create meaningful experiences, manage new demands for open authority, and inform our overall expectations of visitor-serving organizations.

While recognizing the progress that has been made, here are three new conflicting perceptions that visitor-serving organizations must internally resolve in order to remain relevant in our ever-evolving era:

 

 1. Prescription vs. Participation

What does your organization offer? Stale, outdated organizations offer a form of prescription. Today, however, if your organization believes that it is offering a form of treatment (i.e. to “teach” something, or to get people to believe something), then your organization is prescribing its experiences to folks who haven’t asked for a diagnosis. In short, if you haven’t first proven your relevance to people (let alone your unique relevance) then it’s hard to be relevant.

Offering participation and exploration encourages visitors to be active and uncover their own “truths”…for themselves. Thanks in large part to the amount of information available on the web, people expect to explore and make decisions for themselves. This is a big reason why open authority (basically, organizations finding ways to “open” their authority to the public) is increasingly important for visitor-serving organizations – and all other organizations for that matter.

This may trace back to the mission statements of visitor-serving organizations. Organizations aiming to “inspire” or “cultivate” may manifest themselves more dynamically than organizations aiming to “educate,” “demonstrate,” or “present” (exhibits, for instance). The former examples empower visitors; the latter examples remove this power. Many of our nation’s most prominent visitor-serving organizations’ mission statements are still self-oriented (and innately less relevant and impactful) rather than people or community-oriented. This may deeply affect how your organization functions…and, more critically, how your constituencies relate to your organization.

 

2. Tuition vs. Admission

Why are visitors paying to visit you? Most organizations call it “admission” – but is that how your organization internally considers the transaction?

When it comes to the overall satisfaction of a visitor’s experience, entertainment plays a leading role, and education is often used as a secondary or post-visit justification for visitation. Organizations that prioritize providing an educational experience may benefit by ensuring that it does not come at the cost of an entertaining experience.

Believing conceptually that your organization offers a form of “two-hour tuition” also demonstrates a misinformed viewpoint as to what makes a visit meaningful to your audiences. Namely, data demonstrate that who you are with and the memories folks make are more important that what they see at a visitor-serving organization. If you think that the thing that truly matters is the nuance of your unique collection of Monets, then you’re missing a bigger, data-supported benefit of what you offer your visitors: memories, experiences and opportunities for personal interaction.

 

 3. Institution vs. Community

What do you work to strengthen? Imagine how it would affect internal perceptions of your organization if you replaced every mention of the “institution” with the word “community.” Board members would sit at meetings and question, “How does this support our community?” and “What do we need to do to help our community prosper and grow?”

Because the market is the actual arbiter of your organization’s success (And, yes, I have been reminding you of that in nearly every single post), you need your followers infinitely more than they need you. Though it’s difficult to remember at times, your visitors could survive without your organization (though, yes, the world would be a little more drab and your mission more underserved)…but you cannot survive without your stakeholders. You need donors, visitors, supporters, evangelists…if you’re not cultivating them, then you aren’t serving your institution at all.

Ignore your community (both onsite locally and the potential national communities that you may serve digitally), and you risk ignoring the lifeblood of your institution. In other words: If you misunderstand or underestimate the deep connection between your institution and the socially-motivated community that you’re cultivating, then you risk rapid irrelevance.

 

Visitor-serving and other types of organizations must evolve – but this need for change extends beyond the obvious technology-enabled issues related to digital engagement. Perhaps the most important ways that organizations are evolving are more fundamental, more systemically pervasive than tactical: Ivory towers are proving fragile.  Instead of protecting and insulating an organization, they imperil and isolate its advancement.  Our opportunity comes not from on high (read: “in the tower”). It is born on the frontlines and lives at eye-level.  The organizations that thrive will connect and merge with the outside world.  “Inside-out” is yesterday.  “Outside-in” is tomorrow.  You choose where you want to be.

 

Interested in getting blog posts, tips, and some silly social media geekery periodically delivered in your Facebook newsfeed? Like my Facebook page (or ) Or for more regular sharing of nonprofit marketing information, follow me on Twitter

Posted on by Colleen Dilenschneider in Community Engagement, Myth Busting, Sector Evolution, Trends 2 Comments