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Cultural Organizations: It Is Time To Get Real About Failures

Hey cultural organizations! Do you know what we don’t do often enough? Talk about our failures. It’s a huge, Read more

How Annual Timeframes Hurt Cultural Organizations

Some cultural executives still aim for short-term attendance spikes at the expense of long-term financial solvency – and they Read more

Special Exhibits vs. Permanent Collections (DATA)

Special exhibits don’t do what many cultural organizations think that they do. If fact, they often do the opposite. Read more

budgeting

On Museum Layoffs: The Data-Informed Importance of Marketing and Engagement Departments

The data-informed importance of marketing and engagement staff

Need to increase support for your cultural organization during tough times? It is counterproductive to instinctively cut marketing and engagement experts.

I write about market data-informed tips for financial solvency for museums and cultural centers. That’s what I do. My job is to help keep cultural organizations alive and thriving. Considering this, it’s difficult to see some important museums buckling their belts and laying off staff members right now. It’s also a prime moment to provide an important reminder for the industry in general: Sometimes laying off staff members is an unfortunate reality, but cutting marketing and engagement professionals first is more likely to lead to suicide than it is to salvation.

When times are tight for operations budgets we often keep going back to the never-successful plan of trying to “save our way to prosperity.” This often involves cutting budgets or staff – and that can help to balance finances, provided that you have a plan to also increase revenues in the long-term. If you don’t have a plan to increase your revenues (regardless of why you are laying off staff), then your organization is sacrificing hard-working people in vain. The layoffs won’t better the organization. The layoffs are human payment for bad choices that probably weren’t made by the people who are being sacrificed. Again, though, sometimes organizations really do need to balance finances and do this – but it’s shortsighted to sacrifice jobs without also having a plan to increase revenues. And we know from research that the most effective and realistic ways to do this involve marketing and/or engagement professionals. It hinders the growth of our entire industry when we cut marketing and engagement professionals first.

When we go through rough times, it’s our AUDIENCES that are most important to our survival. After all, they pay admission, become members, spread word-of-mouth endorsements, and make donations. Thus, it can be counterproductive to immediately cut marketing (the people who hold that relationship and keep you relevant) and keep esoteric specialists who work in functions that audiences might consider irrelevant. (A museum philosopher question for the ages: If a specialized curator leads an educating and inspiring program but nobody is there to take part in it, did it educate and inspire?)

My purpose is not to point fingers at organizations that have chosen to lay off these – or any – staff members. Rather, I’m taking this timely opportunity to encourage a re-thinking of who we cut first when we make staff cuts. I talk about marketing a lot in this article because that tends to be the area where thoughtless cuts are made first, and have been made first in the past. But when I say “engagement,” I’m not only referring to marketing. It includes fundraising, floor staff, education leaders, program directors, and people who manage the connection between a cultural organization and living human beings.

While understanding that any layoffs stink and that organizations often do everything in their power to avoid them, here are four reasons why we need to think twice about cutting marketing and engagement professionals – and especially knock it off with our instinct to cut them first. These are arguably the folks who can play the biggest role in preventing further layoffs.

 

1) Marketing is the way to INCREASE revenues

This very obvious fact alone should make our industry kick – or simply rethink – the “cut marketing first” habit. Data suggest that over 70% of cultural organizations aren’t investing the necessary funds to optimize visitation – and this doesn’t even include salaries. Let me rephrase: Over 70% of cultural organizations are not securing as much visitation and support as data suggest that they could. Data suggest that many cultural organizations could earn more revenues, but they choose not to. (This is usually due to outdated and bad business practices that view marketing as an expense as opposed to an investment.) The investment equation for optimizing audience acquisition is shared below. It’s not guessing – it’s math.

Marketing is the only department that involves a tested, data-informed equation for actually MAKING MONEY for cultural organizations. (Though fundraising has rough best practice guidelines and obviously also helps raise funds.) Certainly, an organization can overspend on marketing, and that’s something that should rightfully be cut back if it is out of line with optimal spending. Also, it’s important to make sure that organizations are focusing on engagement strategies rather than gimmicks or carrying out social media for social media’s sake. Marketing funds need to be well spent in order to be effective… but if they aren’t spent, they cannot be effective. For cultural organizations, it costs (some) money to make (more) money. Heck, that’s generally true for all industries!

Marketing also plays an extremely important role in fundraising and building affinities for an organization that lead to memberships and donations. In a way, cutting marketing is also cutting fundraising capabilities in today’s world. And that’s a problem because for most organizations, that is the only other department that can be directly relied upon to help get them out of a financial funk.

 

2) Knowing your audience and community is critical for success

Marketing and engagement professionals are masters of kick-starting relationships with audiences and also –thanks to the connected world in which we now live – maintaining them! Personalization trends are affecting absolutely everything within organizations right now and marketing and engagement professionals are on the front lines. In order to create meaningful connection, today’s marketing and engagement folks need to be listeners first. They see what their online audiences are responding to and, at higher levels in the chain, they can see the entirety of the tapestry of engagement. No other department leader is positioned to do this – not even fundraising. A good marketing department considers its strategy and knows the relevance behind every ad it places or post that it promulgates. Our entire existence is dependent upon effectively connecting with people externally, but it is difficult to attract audiences to our brains (exhibits, programs, etc.) if we are missing a mouth, ears, and eyes. That’s what we do when we cut the marketing department first. I’m not saying that the brain is unimportant. It’s critical! But without professional listeners and strategic communicators, it’s difficult to get folks to CARE about what is happening in the brain. And we need to communicate to audiences on their terms, not ours.

We may be cutting marketing first because we still think of this department as a service department rather that what it is today: a strategic collaborator. Marketing is not a service department. Of the 224 cultural organizations that IMPACTS monitors, the ones that are the most financially solvent very clearly prioritize marketing and audience engagement. They include those experts in the room when initiatives are being formed rather than “tasking” them to market something once it has already been set in stone.

 

3) Reputation drives visitation and support

I write about this a lot because it’s a big deal: What people say about your organization is 12.85 times more important in driving your reputation than things that you pay to say about yourself. When people think of “marketing” they often only think of marketing of the past – or, advertising. Today, marketing is much more dynamic and real-time. It can be more accurately called “engagement” rather than “marketing” for many roles that are currently in that department. Today, marketing teams run not only the messages that the organization puts out, but they also manage the organization’s community. This plays a huge role in driving an organization’s reputation.

Reputation decision-making utility- IMPACTS

Reputation is a top motivator for visitation, and organizations that are cutting back budgets and laying off workers generally need more visitation and support. And, again, your reputation is made up of what people say about you and what you say about yourself – both of which are regularly managed and monitored by marketing departments. Organizations tend to underestimate the role that social media and digital engagement play in driving the gate. Again, yes, sometimes layoffs happen. But is it best to immediately cut people from a department with very direct ties to visitation?

 

4) Millennials are underserved and they are the most connected audiences

Of all of the points, this one may be the most important. Cultural organizations have a big millennial problem. These folks make up the majority of our visitors, but they are still our most underserved demographic. And they are underserved in a very big way. Millennials are the single most important demographic for our industry to engage in order to have a future. (I know, I know. I’m sick of talking about millennials, too, and I’m one of them! But we talk about them so much for a good, important reason. We are in a unique situation with this audience.)

Moreover, millennials are our most connected visitors. In fact, all high-propensity visitors to cultural organizations are “super-connected” with access to the web at home, at work, and on a mobile device. These numbers are not going down. In a world where a bunch of numbers are going down for museums (or not keeping pace with population growth), the number of people who qualify as “super-connected” is going up. When we consider this, cutting marketing teams first manages to be even more of a bad move.

 

Layoffs stink. There are no two-ways about it. I’m not arguing that ANY particular department should be cut in hard times. Indeed, other departments also fall under “engagement.” Fundraising helps summon support and education departments help organizations walk their talk – a thing that also pays off financially. Floor staff are particularly important for increasing visitor satisfaction.  And again, not all marketing professionals are super great by virtue of the simple fact that they work in engagement. This topic is a messy one, but my point is this: We need to stop instinctively cutting people who work in engagement (in any capacity) first. It’s a bad practice. It’s outdated. It’s holding us back and it’s making our organizations weaker.

We need more engagement with audiences when things get tight, not less.

 

And this indeed takes expertise. If we know that it is only our audiences that can reliably help us when we hit hard times, why do we immediately cut off our connections to them and the people who manage our precious communities? Marketing and engagement are not “extra” – they are particularly necessary for support and visitation. Let’s evolve and realize that our financial futures are dependent upon people and connections to our missions. 

 

Like this post? Please check out Fast Fact videos on my YouTube channel for more insights. 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, Digital Connectivity, Financial Solvency, Fundraising, Millennials, Myth Busting, Nonprofit Marketing, Sector Evolution Comments Off on On Museum Layoffs: The Data-Informed Importance of Marketing and Engagement Departments

How Much Money Should Your Cultural Nonprofit Invest in Getting People in The Door? (DATA)

Here’s how much money museums and cultural organizations should be spending to get people in the door – according to data.  

My post on optimal audience acquisition costs made its way onto the list of the top-ten most popular Know Your Own Bone posts of 2015. And I’m glad it did. It’s an important one. So to really hit it home, I’ve summarized the findings in a KYOB Fast Facts video here.

Let’s revisit the data in order to share some additional information on this audience acquisition equation:

Marketing budgets seem to be an unnecessarily emotional topic for many nonprofit organizations. Optimizing marketing investments – like determining admission price– is increasingly a product of math and science (read: decidedly not “intuition” or “trial and error”). They need not be based on fuzzy-feelings and inappropriate loyalties to failing business models that ignore the realities of the outside world.

We live in a pay-to-play world where organizations have to spend money to make money. When it comes to budgeting for audience acquisition costs, many organizations seem to have fallen into that familiar trap of “last year plus 5%” that lazily assumes the continued efficacy of the same old platforms and strategies. Of course, such a strategy completely ignores shifting advertising cost factors, evolving platforms and channels, and technological innovation. Say it aloud: Nonprofits do not operate in a vacuum and cannot afford to ignore the changed economies and technologies of the world around them.

Several organizations that have made this realization have asked IMPACTS if there is an equation to inform their audience acquisition costs so as to maximize their opportunities for financial success. And, the findings of a three-year study suggest: Yes, there most certainly is!

 

Determining audience acquisition investment

Let’s first establish a few definitions and “same page” this conversation:

Audience acquisition costs are the investments that an organization makes in advertising, public relations, social media, community relations…basically, anything and everything intended to engage your audiences. (It does not include staff costs unless an organization has internalized the media planning and PR functions that would ordinarily be accounted for within the agency fees line item.)

Market potential is a data-based, modeled outcome that indicates an organization’s potential engagement with its audiences. For most organizations, “market potential” primarily concerns onsite visitation. In other words, it answers the question, “If everything goes well, how many people can we reasonably expect to visit us this year? (NOTE: Market potential may not match an organization’s historic attendance – organizations underperform their market potential all the time…for reasons that we’ll soon explore.)

Earned revenues are the product of admissions, memberships, merchandising, food and beverage, facility rentals…basically, all revenues attendant to the onsite experience that are supported by audience acquisition investments. These revenues exclude annual fund, grants, endowment distributions and other sorts of philanthropy.

Here’s the equation to maximize your market potential as suggested by the recently completed three-year study:

IMPACTS audience acquisition equation

Expressed another way: Optimal Audience Acquisition Costs = 12.5% of Earned Revenues. For example, if your organization generates annual earned revenues of $20 million, then this would suggest an annual audience acquisition investment of $2.5 million.

Further, additional analysis would suggest that 75% of the audience acquisition costs should be earmarked to support paid media (i.e. advertising). So, of the $2.5 million suggested above for audience acquisition, nearly $1.9 million should support paid media.  The remaining 25% (or, in this example, approximately $600,000) would support agency fees, public relations expenses, social media, community engagement – all of the programs and initiatives that round out an integrated marketing strategy. Forget to invest that 25% at your own peril. Earned media is critical for success and many social media channels are also becoming pay-to-play.

Why such a large percentage allocated to paid media? Again, ours is an increasingly pay-to-play world. Rising above the noise to engage our audiences frequently means investing to identify and target audience members with the propensity to act in our interest (e.g. visit our organizations, become members, etc.). There is tremendous competition for these same audience members  from the nonprofit and for-profit communities alike.  Think of the most admired and successful campaigns in the world – do Nike and Apple rely on 3am cable TV “bonus” spots that they get for a reduced rate and that don’t hit target audiences? Nope. While earned media plays a major role in driving reputation, paid media plays an important role in a cohesive strategy – and doing it right costs money.

This equation determines how much your marketing budget should be and how to allocate that optimal budget. If you have a marketing budget that is arbitrarily determined or based on “how we’ve always done it,” then you may be working with a budget that doesn’t allow you to maximize any investment.

 

The equation in action

How does the study suggest this equation? Check out the chart below. It indicates the relationship between performance relative to market potential (i.e. how well the organization actually performed when compared to its market potential) and the audience acquisition investments made by 42 visitor-serving organizations (including aquariums, museums, performing arts organizations, and zoos) over a three-year period:

IMPACTS - Audience Acquisition

The data strongly suggests that there is a correlation between an optimized audience acquisition investment and achieving market potential. It also indicates the perils of “underspending the opportunity” – a modest investment intended to achieve cost-savings may forfend exponential revenues. (Though the data never has – and likely never will – support it, many organizations seem to foolishly hold dear to the notion that they might somehow “save their way to prosperity.”)

Additional analysis indicates that the studied organizations invested an average of 7.9% of earned revenues toward audience acquisition…but only achieved 76.0% of their market potential. However, the organizations achieving ≥95.0% of their respective market potentials invested an average of 12.7% of their earned revenues toward audience acquisition.

In no instance did an organization investing less than 5.0% of earned revenues on audience acquisition achieve greater than 60.0% of its market potential.

Overall, the data suggests that the “sweet spot” for audience acquisition investment is in the 10.0-15.0% of earned revenue range. Splitting the difference (and further supported by the findings of organizations achieving ≥95.0% of their market potential in the study) gives us our 12.5%.

NOTE: Before we start parsing the nuances of media planning and creative approaches to advertising, let’s baseline the conversation by acknowledging that each of the studied organizations were led by competent persons operating with the best of intentions. Yes – “great creative” matters – but it doesn’t offset an inadequate marketing investment. Sure, a viral social campaign helps…but it doesn’t negate the importance of other media channels. In other words, there aren’t exemptions from the need to invest in audience acquisition for visitor-serving organizations that rely on earned revenues.

 

If your organization is struggling to meet its market potential, it may have less to do with all of the usual suspects such as parking, staff courtesy, special exhibits, pricing, etc. and more to do with an antiquated view of the necessity of meaningful marketing investments. Can your organization overspend? You bet. However, that doesn’t seem to be the problem confronting most visitor-serving nonprofit organizations. If your organization is struggling to meet its market potential, then it may be that in today’s pay-to-play world, you simply aren’t paying enough to play in the first place.

 

If you have questions, please check out the original posting of this information. Several folks have weighed in with great questions and I have provided answers there. Don’t see what you’re looking for? Please comment below or on the original post!

 

Like this video? You can check out more 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, Nonprofit Marketing 1 Comment