Audience Insights: Organizations Overlook the Most Important Clues

Clues for increased satisfaction and visitation are often right under the noses of cultural organizations. I frequently hear executive leaders Read more

Do Expansions Increase Long-Term Attendance? (DATA)

Sometimes it feels like nearly every cultural organization is taking on a major expansion project. But do these projects Read more

Over 60% of Recent Visitors Attended Cultural Organizations As Children (DATA)

You may have guessed it was true – but here’s why this statistic matters. The idea that those who visit Read more

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

museum admission

How Free Admission Really Affects Museum Attendance (DATA)

Free Admission is not a Driver of Museum Attendance or Engaging New Audiences (DATA)

Spoiler alert: It doesn’t much…and misunderstanding this engagement tactic may jeopardize industry sustainability.

The debate about whether museums should be free is a big one right now. It’s the source of a lot of discussion in the popular press and nonprofit boardrooms alike. What seems to be lost in this discussion are due consideration of two very important factors: First, does eliminating the cost of admission actually help engage underserved audiences? And, second, in a time marked by increasing austerity measures that threaten traditional cultural funding, is eliminating a key earned revenue source sustainable as a long-term business model? The truth is that free admission comes with a cost. Free admission is far from the engagement cure-all that some of its supporters believe it to be.

Am I suggesting that free admission to museums and other cultural organizations is an altogether bad idea? Of course not. For those organizations whose financial models depend less on earned revenues (i.e. those with mega endowments or significant public funding), free admission may prove viable. However, for those organizations whose mission delivery depends on their business viability, then the issue of free admission is a far more complex topic.

Certainly, varying perspectives and important considerations inform this broader conversation, but I’m going to stick to the facts regarding only one aspect of this big issue. For the sake of facilitating intelligent, data-informed conversation about an emotional topic, let’s acknowledge some established facts regarding admission pricing and attendance: 

 

1) Not everyone is interested in visiting museums- and admission price is NOT the primary barrier to engagement

This is a fact that data folks know well, but it’s one that we often overlook as an industry. At IMPACTS, we gather a lot of information on the general public, but we focus particularly on high-propensity visitors (those people who demonstrate the demographic, psychographic and behavioral attributes that indicate an increased likelihood of visiting a cultural organization). These are the people who actually go to museums and cultural organizations. They are the people who say, “Yeah! I’d like to do that!” when the suggestion of visiting a museum emerges. Not everyone is a high-propensity visitor – not by a long shot. In spite of all of our best engagement and marketing efforts, some people simply aren’t going to visit our organizations for several different reasons. As it turns out, admission fees are generally not a major factor in their lack of inclination to visit a museum.

Volker Kirchberg’s landmark analysis, “Entrance Fees as a Subjective Barrier to Visiting Museums,” published in the Journal of Cultural Economics, found that admission cost is a secondary factor when considering a museum visit. A lack of time (i.e. schedule considerations) or a simple lack of interest (i.e. relevance) were far more important factors in one’s decision not to visit a museum than were admission fees. In other words, a decision not to visit a museum is often more a function of lifestyle than finances.

When we consider the population subset of high-propensity visitors (HPVs) – our most likely audiences – cost absolutely pales in comparison to schedule and reputation when it comes to factors influencing their discretionary leisure activities. A big contributor to this often-overlooked fact is that, for both the general public and high-propensity visitors in particular, their time is more important than their money. This data from IMPACTS shows this well:

IMPACTS HPV time verses money

Need even more supporting analysis? According to national survey of museum visitors in New Zealand (Ministry for Culture and Heritage, New Zealand, A Measure of Culture: Cultural experiences and cultural spending in New Zealand), convenience and time are more important factors than cost when it comes to considering a cultural experience. The study further revealed that for those persons who visit museums but are unable to visit more often, the main barriers are lack of time (54%), travel distance (30%), and a lack of transportation (15%). For those who had not visited at all, the main barriers were lack of time (49%), travel distance (29%), and a lack of transport (18%). In fact, for both visitors and non-visitors, cost was only cited as a factor 11% of the time – again, this finding doesn’t diminish cost as a factor…but it does lend perspective to its relative importance in the public’s decision-making process.

Similar results were found in the Visitors to Museums and Galleries Study published in the UK by The Council for Museums, Libraries, and Archives. 32% cited a lack of time as a primary barrier, 22% a lack of interest, 19% a lack of anything they want to see, and 11% noted difficulties simply getting to the site of the organization. Only 8% of those sampled cited admission charges as a negative factor.

In sum: Admission fees are generally not a primary visitation barrier.

 

2) Free admission does not significantly affect long-term attendance.

Admission price doesn’t significantly change intentions to visit for first-time visitors – further reaffirming that if an audience isn’t interested or doesn’t have the time, then “free” won’t get them in the door. There seems to be a sort of thought that free admission means that attendance numbers will go through the roof…and, if an organization does experience a short-term “novelty” spike, then this increase will be sustained. Again, data suggest the contrary. Check out this data from the National Awareness, Attitudes and Usage Study of Visitor-Serving Organizations (which is updated annually and has tracked the opinions, perceptions, and behaviors of a sample population totaling 98,000 US adults):

IMPACTS intent to visit by admission price

The data indicate that intentions to visit within any duration do not significantly increase as the price of admission decreases or is even eliminated. In fact, in most instances, audiences indicate greater intentions to visit organizations that charge more than $20 for an adult admission than those that are free.

It doesn’t stop there. The definitive work on the (negligible) impact of admission price on sustained museum visitation was published by noted economists William Luksetich and Mark Partridge in Applied Economics in their analysis, “Demand Functions for Museums Services.” Their study suggests that the adverse effects of admission charges on attendance are small and ”relatively easy to alleviate.”

That, “If it’s not free, people won’t go” argument? The data has spoken. It’s not a thing.

 

3) Free admission accelerates re-visitation- but for audiences who are already visiting

Free admission does accelerate the re-visitation process – but mostly from existing audience members. This finding is from a study by the UK’s Department of Culture, Media, and Sport (DCMS) – whose members instituted free admission in year 2001. The DCMS study found that attendance increases frequently attributed to removing admission fees were often due to the same audiences visiting more frequently – NOT necessarily from engaging new audiences.

Basically, to the degree that organizations consider an attendance increase as a successful outcome of eliminating admission pricing, the key visitor count to examine isn’t total visitation – it’s unique visitation. For example: Let’s say that a museum with an admission fee receives 400,000 annual visits from 300,000 unique visitors (1.33 visits per unique visitor).  Then, the same museum decides to “go free” and annual attendance increases by 15% to 460,000 visitors – but from the same 300,000 unique visitors (1.53 visitors per unique visitors). In this hypothetical example, annual attendance went up…but unique visitation remained the same.

Again, data from the National Awareness, Attitudes and Usage Study of Visitor-Serving Organizations reaffirms this finding:

IMPACTS intent to revisit by admission price

Whereas free admission does not impact intentions to visit for first-time visitors, it does increase intentions to re-visit for existing audiences. The implication? It may not be wholly accurate for an organization to declare success by citing raw attendance numbers as proof of the efficacy of a free admission policy. There isn’t evidence that free admission generally cultivates increased visitation from new audiences. 

 

4) We need to engage emerging audiences- and free admission is not a cure-all for greater industry challenges

Data suggest that cultural organizations need to be reaching new audiences right now if we want these types of organizations to be around in the future. Offering free admission in an attempt to appeal to emerging audiences isn’t a complete solution to a more complex problem. We need to reevaluate our strategy for engaging new audiences because the “free admission” fix may not prove sustainable. Moreover, focusing on free general admission may be distracting organizations from cultivating more effective engagement strategies and programs for reaching new audiences.

Consider that Smithsonian Institute museums – without admission fees – saw total attendance decline by nearly 7% from 30 million visitors in years 2012 and 2013 to 28 million visitors in year 2014. In the same duration, the US population increased from 314 million (2012) to 319 million (2014). Also, in the same duration, overseas visits to the US increased from 29.8 million in 2012 to 34.4 million in 2014. Visitation to many museums – even world-famous, free museums – is not keeping pace with population growth.

Our industry is rife with examples of how even organizations with free admission are unable to cultivate increased (or, in many cases, even stable) attendance levels – particularly when considered in the prevailing context of overall population growth and travel to the United States. Free admission does not serve as engagement panacea. For example, In 1997, attendance at the Baltimore Museum of Art – then with an admission basis – approximated 320,000 annually. In 2006, the Baltimore Museum of Art eliminated admission charges. Today, onsite annual attendance is down 44% to 180,000. The organization attributes this decrease in attendance to the BMA’s recent renovation project. There are many factors that affect attendance and admission pricing is hardly the cure-all that many imagine it to be.

 

This data simply scratches the surface of this controversial debate. There are other, incredibly important factors to consider: individual business models, the impacts of increased reliance on contributed revenues and government funding, opportunities to develop more agile operations so as to allow museums to be more audience-focused, and even the reputational equities attendant to being a “free” organization versus one with an admission fee.

One thing is for sure: Critical conversations are taking place and organizations are realizing that it’s time to evolve both their engagement models and their financial plans. We have too much to lose not to move forward in the most fully-informed manner possible. If we want to keep museums alive, we need to think about engagement, audience motivations and barriers, and actual economics.

 

Like this post? Here are a few related posts from Know Your Own Bone that you might also enjoy:

 

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Posted on by Colleen Dilenschneider in Community Engagement, Financial Solvency, IMPACTS Data, Myth Busting, Sector Evolution, Trends 27 Comments

There Is No Mission Without Money: Why Cultural Organizations Need To Get Smart About Pricing Practices

museum admission line

This article concludes a four-part series intended to help visitor-serving organizations understand and respond to emerging trends that will impact their financial and mission-related goals. Learn more about the series here. 

Austerity measures and the loss of heretofore “reliable” funding mechanisms pitched many European cultural organizations into a tenuous financial state and catalyzed a conversation concerning the sustained solvency of visitor-serving enterprise worldwide. In an increasingly competitive market where volume-based strategies (such as an ever-increasing attendance) are less likely remedies to the new economic reality that emphasizes earned revenues, 2014 will mark the year when organizations will need to “get smart” about leveraging data to develop intelligent, efficient price indices. In turn, analysis of an organization’s pricing structure will likely – and necessarily – foster additional discussion concerning the creation of more effective affordable access programming.

Nonprofits are increasingly competing with for-profit organizations as private companies capitalize on shifts in market behavior toward supporting social causes. The market – and especially millennials – are also increasingly sector-agnostic, meaning that simply being a nonprofit doesn’t necessarily indicate to audiences that your organization is providing more social value than a private company.   This is one of the reasons why visitor-serving organizations that highlight their mission outperform museums that market themselves primarily as attractions. 

It’s time to pause and think about your organization’s relevance – and relevance is determined by the market and the support that your organization is able to summon. In short order, museums that cannot survive a “natural selection” and appeal to audiences will sink due to lack of support (relevance), while those that remain solvent and vital (while also pursuing their mission), will enjoy sustained success.

 

1) Here’s why your organization needs to think about revenue and pricing right now (and more than ever before):

 

A) In general, fewer people may be attending your organization because of negative substitution of traditional visitors so increasing attendance may prove challenging in the near-term.

Visitor-serving organizations’ (VSOs) “historic” visitors are leaving the market at a faster rate than new high-propensity visitors are entering the market, creating a negative substitution phenomenon that does not paint a bright future (or present, for that matter) for VSOs. In fact, for every one historic HPV that leaves the market, they are being replaced by 0.989 “new” high-propensity visitors. That may sound like a small difference, but these people add up! Keep up your hard work reaching your traditional audiences and – for no fault of your own – negative substitution factors would suggest that an organization currently serving one million annual visitors will attract 946,000 visitors five years from now (that is 54,000 fewer people, and a likely corresponding decline in membership and program participation). This troubling “glide path” also considers that you’ll be doing everything that you can do to meet your current audience’s needs, and continue to market to them like exceptional rockstars! This data suggests that the key to long-term organizational solvency is to evolve our engagement strategies to include your emerging high-propensity visitors.

The good news: If museums begin to target and cultivate new audiences now, we should start to observe a broad attendance turnaround in year 2019 as emerging audiences (such as English as Second Language households) continue to acculturate into the “mainstream” market and if millennials (who will dominate the market in terms of number and purchasing power) have been engaged by VSOs. But the attendance trend still stands: In spite of overall population growth and even if your organization does its very best and starts evolving right now (as you should in order to get things back up when the market is ripe around 2019), there’s a good chance that your attendance numbers may flatten out these next few years.

 

B) Expensive special exhibits are often financial drains when compared to the potential alternative uses of these same funds.

Despite clear data that utilizing special exhibits to cultivate visitation is an ineffective long-term strategy and has particularly costly and detrimental consequences for organizations, many VSOs (and museums, in particular), get wrapped up in this bad, bad practice when times get tight.

In my world, we refer to organizations that prioritize special exhibits over building affinity for permanent collections as committing “blockbuster suicide.” And – though I won’t throw any organizations under the bus by mentioning their names – I’ll bet that you can think of an organization or two that has “committed suicide” in this way and is now in quite a financial pickle.  These museums train even their closest constituents to wait for expensive exhibits in order to motivate a return visit. Not only is this plan ineffective and ridiculously short-sighted, but it’s also very expensive.

In an economy that increasingly relies on maximizing earned revenues from a finite audience, the margin of financial success is very small. Many organizations cannot afford expensive vanity projects that do little to improve net revenues but add significant costs to their financial model.  Alternative uses of funds that focus on improving the visitor experience frequently realize better returns than the costs to actualize a “special” exhibit.  While many organizations have become very astute at calculating per capita revenues, it may also be wise to similarly calculate the per capita operating costs attendant to serving your visitors.  We reliably observe that exhibits increase per capita operating costs at a level that exceeds any short-term increase in per capita revenues.  In other words, there is little evidence to recommend the viability of special exhibits as a sustainable revenue maximization strategy.

 

C) Visitor-serving organizations that discount to increase word of mouth and drive attendance experience the backlash of negative reputational equities.

What about social media? Can’t we use that to drive attendance? Yes, data suggest that utilizing social media to increase reputation in order to drive attendance is effective and indeed you should! However, when times get tight financially, we see many organizations resort to offering discounts via social media…and offering discounts via social media is a big mistake. This practice cultivates a “market addiction” that has long-term, negative consequences on the health of your organization.

Moreover, the more steeply you discount, the less likely visitors are to return. (Here’s the data again). People also tend to value what they pay for. Those who visit your organization at a discount are also statistically less satisfied with their experience and report more negative reviews than those who come in at full price (Hey, you devalued your brand first!). So much for crossing your fingers for better word of mouth as the result of a discount…

 

 

2) Now look at how most organizations decide how to price for admission:

Many organizations price their admissions based on what we at IMPACTS have termed “unintentional collusion.” Take a look back in time to your most recent conversation about pricing. The origin of your pricing framework probably went something like this:

IMPACTS unintentional collusion pricing

This happens because organizations misunderstand a fundamental principle of pricing.

Museums actually have different reputational equities and thus differing values that the market is willing to pay for a unique experience. If you’re a zoo that is charging the same admission as a nearby children’s museum (or vice versa), then your organization may be ignorantly “leaving money on the table” by relying on the comparative price of a neighboring or “like” organization. Each museum actually has an optimal price index (often best derived as the result of data-based price analyses) wherein the optimal price to visit an organization maximizes revenues without demeaning attendance potential. Along these same lines (and for the reasons stated above), I’d like to offer up a concept that is increasingly critical for the long-term health and vitality of many VSOs:

The amount of revenue that your organization secures is more important than the amount of attendees that walk through your door.

Many executive leaders and board members have a shockingly hard time understanding this necessary – and completely pragmatic – evolution in visitor-serving “business” practices. Many have been hardwired over time to think of success as the number of people that walk through the door. (Why do we even think this way anyway?! It’s an outdated preoccupation with a relatively meaningless nonprofit output.)

The most direct and savvy way to reap the benefits of your labors cultivating evangelists and working to increase your reputation?  Utilizing it to increase your revenue. And when attendance plateaus at the time that your brand is at its most premium, the most efficient way to do this is to adjust your admission price accordingly.

 

3) Optimized pricing will necessitate conversations about affordable access programming that serves lower-income and other underserved constituencies (in other words, programming that actually works)

If your organization has been value-advantaged (“leaving money on the table”) when it comes to your admission price, then raising the price of tickets may, indeed, increase the barrier for low-income households to attend your organization. Because affordable access is often a key part of many organizations’ missions – or even required in order to be eligible for certain grants and government funding opportunities –  getting smarter about pricing will mean getting smarter about affordable access programs as well.

Experience at IMPACTS has shown time and time again that many affordable access programs are extremely inefficient. Specifically, many affordable access programs achieve startlingly little in terms of providing targeted benefit to low-income households and, instead, allow discounted access to those who would otherwise be able and willing to pay full price. These programs are neither capturing low-income households, nor are they increasing revenues so that museums may more effectively and efficiently fulfill their missions. They are glorified discount programs that organizations offer so that they may check off a symbolic box of “affordable access.”

As visitor-serving organizations realize the need to pay attention to pricing and maximize their investments, there will be incentive to re-evaluate affordable access programs so that they actually work. Namely, that they provide an opportunity for low-income households and other targeted underserved audiences to visit the organization without concurrently discounting admission for those who would be willing to pay full price for your unique experience.

All of this is a long way of saying that nonprofit organizations are finally going to have to think about money and stop defending outdated nonprofit dogmas that tend to demonize revenue as a “necessary evil.”  Museums, zoos, aquariums, performing arts and other cultural organizations are big business – accounting for $135 billion in annual economic activity and more than 4.1 million jobs.  Instead of considering volume of visitation as a key performance indicator, we ought to instead focus on meaningful outcomes and recognize that our collective ambitions to achieve social good require revenues.  In other words, there is no mission without money. 

 

*Photo credit: Telegraph, AP (The photo choice has nothing to do with the Metropolitan Museum of Art’s pricing!)

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Posted on by Colleen Dilenschneider in Community Engagement, Financial Solvency, Myth Busting, Sector Evolution, Trends 3 Comments