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

negative substitution

Negative Substitution: Why Cultural Organizations Must Better Engage New Audiences FAST (DATA)

Fewer and fewer people look, act, and think like “historic” attendees to visitor-serving organizations. Here’s how many fewer.

As we dive more fully into 2017, I wanted to take a moment to discuss negative substitution and take a deeper dive into how it is affecting cultural organizations. The bad news is that negative substitution of historic visitors is taking place for mission-driven, visitor-serving organizations (museums, theaters, symphonies and orchestras, science centers, botanic gardens, etc.). The good news is that the first step to evolution may be acknowledging our changing market. On that note, let’s do this…

 

Negative substitution is urgent

Negative substitution is a phenomenon occurring globally wherein the number of people who profile as historic visitors leaving the market outpaces the number of people who profile as historic visitors entering the market. It’s the driving reason for the decline in attendance to museums, zoos, aquariums, performing arts entities, and other visitor-serving organizations. Negative substitution is taking place because the market is growing more diverse, while perceptions of cultural organizations as being places for a certain kind of person have remained largely static. Simply, when there are fewer people in the market who profile as historic visitors year-over-year, and also growth in the number people who profile as “nontraditional audiences” year-over-year, the market potential risks fewer-and-fewer visitors over time.

The data below is an aggregate of all museum types that we monitor at IMPACTS (224 of them) crossed with visitation information from the National Awareness, Attitudes, and Usage Study of (currently) over 108,000 people. It includes museums related to art, history, and science, children’s museums, historic sites, performing art organizations, zoos, aquariums, and botanic gardens. The negative substitution rate for museums shows that for every one historic visitor who leaves the US market (by way of death, relocation, or migration), they are being replaced by only 0.948 of a person (by way of birth, relocation, or immigration). This may not sound impressive – but this is actually a huge difference.

Think of it this way: An organization with a stable attendance of 1,000,000 visitors may keep doing everything right by their current audiences (e.g. marketing, developing exhibits, etc.), and then might reasonably expect to engage 948,000 future visitors…and then 899,000 visitors…and then progressively fewer yet visitors over time absent interdiction. And they will be doing everything right by their current audiences!

 

In order to overcome negative substitution, we need to do a better job at attracting two, general audiences that do not visit cultural organizations at representative rates relative to their market size: millennials and not-white people (bluntly). Keep in mind, these are not entirely different audiences as millennials are the largest generation in human history and nearly half of us are of different racial and ethnic backgrounds than traditional historic visitors. Moreover, as sick as we may be of discussing it, data suggest that organizations must do a much better job at attracting and retaining millennial audiences. Negative substitution rates for different types of visitor-serving organizations generally correlate with attitude affinities – or to what degree the public perceives that an organization is “for people like me.” Though I will be referencing them later, you can learn more about different attitude affinities for different organization types in this post.

 

Overcoming negative substitution means changing the profile of the historic visitor to cultural organizations

Or rather, we need to evolve to be perceived as more welcoming to different types of people than our “traditional” visitor. Negative substitution suggests that, if we keep on keeping on attracting people that look and behave like our current audiences, we’ll slowly decline in visitation over time. Sure, we need to evolve to meet the changing expectations of historic audiences by honoring market trends of personalization, connectivity, and transparency. More than that, we need to do a better job at attracting different types of people and making them our regular attendees. (And not simply our “super special one-off-program” attendees.) We need to change up the very profile of the type of person who wants to visit a cultural organization.

Isn’t it funny that many museums are only now realizing the importance of data-informed decision-making…all the while focusing primarily on audience research that risks yielding deleterious long-term consequences by emphasizing the very programs and budget allocations that support negative substitution in the first place? To reach new audiences, we need to get smarter about market research and attracting the people who we want to visit but don’t yet attend. The people who we need to start attracting are not yet on our email lists and, by definition, aren’t onsite to fill out surveys. (Yes, Colleen. It’s… hilarious.)

The change that we need to carry out is a big deal – and we are (however slowly) progressing on the whole! In the history of museums and cultural organizations, this kind of shift has never been so urgent. Today, with evolving demographics and imperiled government funding, engaging emerging audiences matters more to our missions and financial solvency than ever before. And, indeed, many organizations are implementing new strategies to cultivate and attract new audiences. Successful organizations are changing up how we approach change.

 

How negative substitution is affecting organization types

While the overall negative substitution rate for museums is 0.948 people entering for every one person who leaves the market, we are able to further parse the negative substitution rates of specific types of cultural organizations. Here’s a sample of them and some notes that may contribute to the negative substitution rates of each visitor-serving type. Let’s go backward from those with the lowest negative substitution rates to those with the biggest opportunity.

Zoos: Among visitor-serving organizations, zoos are suffering least from negative substitution. This is true even amidst increasing discussions about animal care and welfare. Like aquariums (discussed next), zoos may more easily deliver on the promise of awe and wonder without facing some of the perceived intellectual intimidation that may be attendant to a science or art museum visit. Moreover (and interestingly), lexical analysis of data reveals that being outside may play a role in reducing negative attitude affinities for zoos. Conceptually, it makes sense: Being outside may feel more like a park or public area than being within the walls of an institution. Also, like aquariums, having the added “so what?” of conservation and the protection of animals provides an added level of reputational equity that works in this type of organization’s favor.

Aquariums: Aquariums are also suffering notably less than the museum industry average. That said, negative substitution is never a good thing – and there’s still important work to be done. A reason for these higher (comparatively) values may be that aquariums are among the types of visitor-serving organizations that are most dependent upon the market. Relatively speaking, as a sector, aquariums generally have the lowest levels of government support, the smallest endowments, and many have also emphasized their nonprofit-y conservation mission that engenders additional support. (Generally, this helps aquariums – and any organization that particularly highlights its mission.) Aquariums also may be able to capture awe and wonder without as big a risk of the perceived intimidation factor that may burden other content types.

History museums: History museums are a wee bit above the museum negative substitution average of 0.948:1.000. History organizations tend to rely most heavily on stories (or, talking about history) than other types of organizations that are perceived to revolve around specific, individual artworks or exhibits. While visitor-serving organizations are increasingly understanding the importance of creative storytelling in an effort to create relevance and resonance with visitors, history organizations may have storytelling most definitionally embedded within their reputational DNA. Storytelling and providing relevant, personalized connections are critical today – and this is also an area where history organizations have the ability to shine.

Art museums: Art museums fall just below the industry negative substitution average. Like science museums (discussed next), art museums may have distinct, perceived reputational barriers that may contribute to negative attitude affinities – or, people thinking they simply “aren’t places for people like me.” As the stern forefathers of “don’t touch,” “stay behind the line,” and “quiet, please” cultural engagement, it’s worth noting that art museums may have been starting from a rather uninviting place. With that in mind, this number still isn’t “good,” but it does show hope and acknowledge that there has likely been meaningful progress made by art museums in responding to these new market realities.

Science museums and science centers: Science museums and science centers are put together in this data because the market largely does not distinguish between science centers and science museums. I could (and likely will) write an entire post with more data on why the science museum/center market has higher negative substitution rates than the museum average and some possible superpowers for combating it, but here’s a very brief run-down:

Interestingly, among visitor-serving organizations, science centers/museums tend to be viewed comparatively as places to visit with children. While this was probably a good thing when millennials – the largest generation in US history – were the kids, it’s not great news now that millennial women are reproducing at the slowest rate in US history. Simply put, millennials are having fewer children (or no children), and they are having their children later in their lives – when they are more advanced in their careers and leisure time is particularly precious. If you’re an organization that has the public perception of being a place primarily for children, your market size is likely shrinking.

Moreover, like art museums, “science” content may be viewed as intimidating for nontraditional visitors. There may be a perceived content “language barrier” that contributes to folks thinking that science museums/centers “aren’t for people like me.” Science is a big topic with a lot of specialties! One can see how someone who doesn’t know much about the accessibility of science centers/museums might be intimidated. (Heck, even folks who DO know about the accessibility of science centers/museums may feel this way!) Combine this with the perception that these are places where you take your kids, and potential visitors may fear a “Dad looks dumb” situation.

Orchestras: Exhibit-based cultural organizations are far from the only cultural organization type in the market or included in the mentioned overall “museum” negative substitution number. Performance-based organizations are every bit as critical for a robust and vibrant cultural community. Unfortunately, orchestras (and symphonies, which have similar negative substitution rates) may be facing particular challenges in today’s world where folks can do many things at once. In fact, data suggest that multi-tasking is how many people like to enjoy music as well. But don’t write this high negative substitution rate off immediately on content disinterest or the menace of the modern world! Some performance-based organizations simply have not yet evolved to meet the desires of millennials (a critical audience!), and have instead chosen to “age” alongside their historic visitors.

Some symphonies and orchestras are mixing things up and trying out new programs – and that may be the key to their future. Certainly, among the visitor-serving organizations shown here, orchestras have the greatest need to reach new audiences – and fast. That doesn’t mean that they (or any other organization type) can’t do it. It means that some may have a longer ways to go.

Remember: Though 0.948 is the industry average, it’s still bad news.  There are no “winners” or “losers” here – but rather a look into the reality of the mission-driven, visitor-serving sector and some of the challenges facing both individual organization types, and also our industry as a whole. To change up these perceptions, we need all hands on deck. Our long-term vitality and relevance may be on the line.

 

Negative substitution correlates with attitude affinities

Interestingly – and unsurprisingly – negative substitution rates correlate with negative attitude affinities. Attitude affinities quantify how welcome and comfortable people feel at an organization. Therefore, it’s no surprise that the “ranking” of negative attitude affinities among the organization types mentioned (shown below) is a similar “ranking” as is the severity of negative substitution – with the exception of science centers and science museums. Being perceived as places “for kids” plays a large role in driving negative substitution for science museums and science centers, but it benefits these types of organizations as being perceived as relatively welcoming. There’s simply less perceived incentive to visit a science center/science museum if you don’t have small children – and fewer people do.

The data below comes from IMPACTS and the National Awareness, Attitudes, and Usage Study – and it is a summary of this data previously discussed on Know Your Own Bone. In short, it shows what percentage of people in the U.S. market do not feel like an organization type is a place for someone “like them.” How that is interpreted is in the eyes of the respondent. While data suggest that it may correlate with educational attainment (and, relatedly, with household income), it certainly does not correlate with an organization’s admission price.

Nearly four out of 10 people don’t feel like art museums or history museums are “places for people like me.” Just over three out of 10 people feel this way about science museums and science centers. Only about two in 10 people feel that an aquarium or zoo is “not for someone like me,” and almost five out of 10 people feel this way about orchestras. Again, you can read more about this data and attitude affinities here.

 

Within our industry, some tend to think of targeting “historic” audiences as the safe bet and cultivating new audiences as a secondary goal to be pursued “when funding becomes available.” This is short-sighted step on a long, slow march into obsolescence. The market is crawling with potential visitors – and they are ripe for cultivation if and when we decide to think outside of our outdated box.

The need to cultivate new audiences as regular attendees is critical for our long-term survival. The first step to overcoming negative substitution may be acknowledging this. Let’s take this information and welcome new folks through the door – not only because our world needs it right now, but because we do, too.

 

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, Millennials, Myth Busting, Nonprofit Marketing, Sector Evolution, Trends 3 Comments

Visitation to Increase if Cultural Organizations Evolve Engagement Models (DATA)

Tipping pointAttendance to cultural centers is on the decline, but data suggest that forward-facing organizations may see improvements by 2020. Here’s why.

Overall, data suggest that attendance to visitor-serving organizations is in a general state of decline relative to population growth – and this may suggest a problem with the current visitor-serving organization business model. For organizations that fail to adapt their engagement strategies to respond to emerging audiences, there’s abundant reason to believe that their attendance levels may continue to stagnate or decline. However, data suggest that those organizations willing to evolve their thinking about emerging audiences and access programming stand to benefit by overcoming the negative substitution trends that are currently depressing attendance. There is a reasonable expectation that evolutionary, agile organizations will experience sustained increases in attendance as this century enters its second decade.

Here’s what your organization needs to know about negative substitution, acculturation, and access programming opportunities…and how they are shaping the future of visitor engagement:

1) Negative substitution of audiences is affecting attendance (and it is happening NOW)

While the US population continues to grow, the historic audiences of visitor-serving organizations (i.e. those audiences with the demographic, psychographic and behavioral attributes that indicate a propensity to visit) have been in a state of general decline. One of the reasons for this circumstance is the negative substitution of audiences. Negative substitution is quantified by a deficiency of “replacements” for the historic visitors who exit our markets. For every one person who exits the market, there is fewer than one person to replace him/her.

Currently, for every one high-propensity visitor to visitor-serving enterprise that leaves the market (through death, relocation, or migration), only 0.948 similar high-propensity visitors are entering the market (typically via birth or relocation). When people leave the market without a sufficient number of “replacements,” we have negative substitution.

Why is this happening? For one, affluent, educated white people (i.e. historic audiences) are having fewer children and/or getting older and/or relocating to emerging markets, and visitor-serving organizations on the whole have yet to sufficiently cultivate the engagement of a newer kind of high-propensity visitor. In other words, on the whole, we’ve done a relatively poor job becoming places where emerging audiences (e.g. millennials, Latinos, etc.) feel comfortable declaring “This place is for people like me.” We refer to this as attitude affinity – a perceptual measurement of if a particular market segment believes that an organization is welcoming to them.

Incidentally, emerging audiences (most commonly Latino and other historically underserved populations) are playing a major role in population growth. Historically “underserved” audiences are increasingly the mainstream audiences of the future…and failure to cultivate their engagement may risk a generational alienation from our organizations.

Ultimately, this downward trend demonstrates the failure of access programming within visitor-serving organizations. If the past few decades of access-motivated initiatives had been successful, then we would not be experiencing negative substitution. Instead, we would have cultivated these audience members to become our current visitors. Demographers and researchers have been writing about this inevitability for some time.  If our programming had proven responsive to this opportunity, then we would be experiencing audience visitation that increases alongside population growth. That’s not what’s happening.

 

2) Misunderstanding access programming jeopardizes long-term sustainability

Many organizations incorrectly consider “access” primarily in terms of affordability.  If simply offering a reduced admission was a cure-all to access issues, then very few organizations would still have underserved audiences at all.  The presence of a continually underserved audience indicates the failure of an organization’s access programming.  In the past, organizations could perhaps put access issues on the back burner and get it away with it – there were enough traditional high-propensity visitors to support the organization.  However, as the traditional market shrinks and historically underserved audiences grow to become an increasing majority, the issue of access can’t be de-prioritized any longer.  The future well-being of many visitor-serving organizations hinges on their ability to connect with these audiences. The reality is that effective access programming engenders trial and usage by cultivating new audiences as eventual regular visitors – an organization’s lifeblood.  Access isn’t primarily about price. It’s about eliminating every barrier to engagement.

Do the data suggest letting everyone visit for free?  No.  Of course not.  The data indicate that time is more valued than money for the vast majority of audiences.  A person thinking about visiting a zoo on a Saturday in June is very unlikely to delay their visit until a Tuesday in November simply because of cost.

Access programming is significantly less about affordability than strategic sustainability. This is where organizations are being inappropriately emotional about business matters, and misguided ideas about “affordability” are lessening the solvency of some organizations. Today, there exists compelling, data-informed science that suggest that cost is overstated as the primary barrier to engagement (schedule reliably trumps cost). Think of it this way: If $34.95 proves unaffordable to select audiences, so will $24.95 or $29.95…or any other realistic “discount” from the general admission basis. In terms of true affordability, nearly any price diminishes the visitation potential for our most affordability challenged audiences.

Price is not panacea when it comes to affordability. And affordability is not antidote for access. Price is a revenue optimization tool that provides organizations with the resources to support access programming that, in turn, cultivates the engagement of future audiences.

If you want to be relevant to the audience of tomorrow, you better be working to engage them today.

 

3) Acculturation improves future outlook (provided organizations update engagement models)

IMPACTS- HPV substitution ratios

But there’s hope! Check out this graph from IMPACTS. It demonstrates substitution ratios derived from a predictive modeling process for US visitor-serving organizations. The Y-axis indicates the antecedent term (the first value) in the substitution ratio.  Thus, an antecedent term <1.00 indicates negative substitution – for every one person exiting the market, there is less than one person to replace them.

Why does the trend improve in the future?  Acculturation. Emerging audiences tend to adopt “mainstream” behaviors over time – including, potentially, engaging with visitor-serving organizations such as museums, zoos, aquariums, performing arts centers, etc.

Think of the observed differences between first, second, and third generation immigrants to the US. For example, the first generation of immigrants may not speak the language, may have gone to school overseas, may tend to live in clusters of like ethnicities, etc. The next generation was born and raised in the United States – and may be more acculturated than their parents…but still retain certain behaviors due to household customs (English as Second Language, etc.). However, the third generation tends to be even more acculturated, with fewer traces of “old country” behaviors.

Because population growth is being driven by births of second and third generation Americans, acculturation represents a tremendous opportunity to engage these emerging audiences – provided, of course, that organizations have cultivated a relationship with these audiences before they enter the mainstream. Significant research indicates that relationships with brands are often cast during a person’s early, formative years – a failure to cultivate the engagement of a less acculturated first or second generation audience member may effectively preclude the future engagement of a fully acculturated third generation audience member.

The good news about this data? Organizations that intelligently and diligently evolve their engagement models during this critical time stand to benefit from the positive impacts of acculturation in the near future. The perhaps challenging news? Organizations will need to be thoughtful and actively evolving before 2020 (i.e. the predicted “tipping point” in the audience acculturation projections) so as to cultivate the support of these future audiences before they enter the mainstream market.

This isn’t a “Let’s just wait until 2020 to get serious” situation. This is a “If you start thinking strategically and work hard now, then you’ll see a payoff in 2020” situation.

Interestingly (and unsurprisingly), technology accelerates acculturation. This means, of course, that utilizing digital platforms and cultivating real-time communications with emerging audiences is critical for organizations. This is also another compelling reason for leaders to listen to PR and social media staff members throwing around the word “innovation.” In many ways, the industry doesn’t need to “pivot” (that mindset created many of the challenges that visitor-serving organizations are facing today) – it needs to reset.

Organizations that invest in cultivating more strategic “access” models today will be able to take advantage of the engagement benefits suggested by the predicted acculturation trends. Yet again, the time-proven lesson proves true: You reap what you sow.

 

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, Nonprofit Marketing, Sector Evolution, Trends 3 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