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Why Offering Discounts Through Social Media Is Bad Business for Nonprofit Organizations

There’s significant data compiled by multiple sources indicating that “getting discounts” is the top reason why people engage with an organization’s social media channels. So it seems logical that if you want to bump your number of fans and followers, offering discounts is a surefire way to go. And it works – if your sole measure of success is chasing these types of (perhaps less meaningful) metrics. But, before you go crazy with the discount offers on Facebook and Twitter just to get your “likes” up, here’s another thing that’s true: Offering discounts through social media channels cultivates a “market addiction” that will have long-term, negative consequences on the health of your organization.

I recently wrote a post called “Death by Curation” within which I shared data indicating the non-sustainable cycle that museums enter when they must rely on new, progressively more expensive “special” exhibits in the hopes of achieving attendance spikes (what has since been referred to by a reader of this blog as “Blockbuster Suicide”). In many ways, offering discounts creates a similarly vicious cycle whereby a visitor-serving organization finds itself realizing a diminishing return on the value of its visitation.

When an organization provides discounts through social media it trains their online audience to do two not-so-awesome things:

 

1) Your community expects more discounts

Here’s where your organization breeds an online audience of addicts accepting discounts…and, strangely enough, becomes addicted to offering discounts itself. Posting a discount to attract more likes on Facebook (or to get people to engage with a social media competition, etc.) will very likely result in a bump in likes and engagement. But know that in doing this, you are verifying that your social media channel is a source for discounts. Discounting for “likes” attracts low-level engagers (they are liking you for your discount, not your mission), and prevailing wisdoms increasingly suggest that your number of social media followers doesn’t matter. It is far better for your brand and bottom line to have 100 fans who share and interact with your content to create a meaningful relationship, than to have 1,000 fans who never share your message and liked you just for the discount.

I can hear the rumbling now: Some of you are thinking, “But we’ve used discounts to attract more likes and it worked” (i.e. it generated more likes). Over time, however, these low-level engagers will stop following you if you do not continue to offer discounts. That is, after all, the reason why they followed you in the first place…and you have shown them that, yes, you will post discounts on social media. This is the start of the addiction: In order to keep these likes, you need to offer more discounts.

Try this: Simply stop offering discounts. Over the course of a few months, your number of likes will go down (because these people only liked you for the discount, not your awesome, socially conscious content). They were not actual evangelists – and cultivating real evangelists to build a strong online community is the whole point of social media. You want folks who actually care about what you’re doing and will amplify your message (not the “we are offering a discount” message – which is the content that, unfortunately, frequently gets the most shares and perpetuates this cycle).

 

2) Perhaps more importantly, your community waits for discounts

Here’s where becoming an addict takes a toll on the organization’s health. Data indicates that offering coupons on social media channels – even once – causes people to postpone their visits or wait until you offer another discount before visiting you again. Worse yet, the new discount generally needs to be perceived as a “better” offer (i.e. an even greater discount) to motivate a new visit. This observation is consistent with many aspects of discount pricing psychology, whereby a stable discount is perceptually worth “less” over time. In other words, the 20% discount that motivated your market to visit last month will likely have a diminishing impact when re-deployed. Next time, to achieve the same outcome, your organization may have to offer a 35% discount…and then a 50% discount, etc. You see where I’m going with this…

Here is the debunking of another popular misnomer that some organization’s use to justify their discount tactics: You are not necessarily capturing new visitation with discounts. In fact, data from the company for which I work suggests that the folks using your discount were likely to visit anyway…and pay full price! This is a classic example of an ill-advised discounting strategy “leaving money on the table.”

To compound matters, instead of hastening the re-visitation cycle, the “waiting for a discount” phenomena may actually increase the interval between visits for many visitors. The average museum-going person visits a zoo, aquarium, or museum once every 19 months. If you offer a discount, while you may not attract a larger volume of visitation to your organization, you may accelerate your audience’s re-visitation cycle on a one-time basis. This sounds great…until you realize the significant downsides to this happening: Your audience just visited your organization without paying the full price that they were actually willing to pay and they likely won’t visit your organization again for (on average) another 19 months. On top of all this, IMPACTS data illustrates that the steeper the discount, the less likely visitors are to value your product and return in a shorter time period.

Think of it this way: A visitor coming to your museum in May 2012 would likely visit again in December 2013 (i.e. in 19 months). Let’s say that you offer them a discount that motivates them to visit in October 2013. Now, you’ve linked their intentions to visit to a discount offer…and decoupled it from what should be their primary motivation – your content! And, by doing so, you’ve created an environment where content as a motivator has become secondary to “the deal.” In other words, you will have moved your market from a 19-month visitation cycle to a visitation cycle dependent on an ever-increasing discount. Can your organization afford to keep motivating visitation in this way?

So, how do museums get addicted to discounts, too? Well, we sometimes confuse the response (i.e. a visit) to the stimuli (i.e. a discount) with efficacy. Once a discount has been offered to motivate a visit, we regularly witness the market “holding out” for another discount before visiting again. And what are museums doing while the market waits for this new discount? Sadly, often times the answer is that they are panicking.

If you run a museum, you’ve probably spent some time in this uncomfortable space – we observe the market’s behavior (or, in this case, their lack of behavior), and begin to get anxious because attendance numbers are down. What’s a quick fix to ease the pain of low visitation? Another discount! So we offer this discount…and, in the process, reward the market for holding out for the discount to begin with. This is the insidious thing about many discounting strategies: They actually train your audience to withhold their regular engagement, and then reward them for their constraint. We feed their addiction and, in turn, we become addicted ourselves to the short-term remedy that is “an offer they can’t refuse.”

Like most addictive – but ultimately deleterious – items, there is no denying that discounts “work” – provided that your sole measure of the effectiveness of a discount is its ability to generate a short-term spike in visitation. But, once the intoxicating high of a crowded gallery has passed, very often all that we’re left with is a nasty hangover. My advice to museums and nonprofit organizations contemplating a broad discount strategy on social media: Just say no!

 

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Posted on by colleendilen in Community Engagement, Management, Marketing, Museums, Nonprofit Marketing, Nonprofits, Social Media, Technology, Words of Wisdom 6 Comments

5 Ways That Social Media May Replace NYC as the Center of Creative Development

Elizabeth Currid's book, The Warhol Economy, discusses the elements that produce NYC's one-of-a-kind creative industry. But what if these elements don't belong only to NYC anymore?

I let out a laugh when I saw last week’s Onion article, 8.4 Million New Yorkers Suddenly Realize New York City A Horrible Place to Live. It seemed especially silly to me, as I’d just finished Elizabeth Currid’s, The Warhol Economy- a book that identifies the unique characteristics that have made NYC an international mecca of creative production. Despite the fact that the book raves about the benefits of NYC’s unique environment for artists and the career development of creatives, the Onion article got me questioning the future of this city.

Some of the key social and economic qualities that have made New York City so successful as a place for creative and cultural career development have been (and, I would guess, will continue to be) replaced by online social networks. “Every generation has its own neighborhood,” Zac Posen said of NYC to Currid during an interview mentioned in the book. I predict that for Generation Y, and perhaps increasingly for the generations following us, that neighborhood will not be Chelsea or the West Village. It will be online.

Here’s how social media and online networks match up to the key elements that secured NYC’s reputation as an international center for creative development:

 

1. Low economic barriers to entry in the community

Utilizing social media is catching on quick, and is a relatively cheap endeavour. The rise of New York City as an international hub of creativity also arose from low barriers to entry. Namely, the recession of the 1970s created cheap rents that allowed artists to focus more time and energy on their artwork instead of taking up second jobs to make ends meet. Artists bought up low-rent spaces in many of the same neighborhoods, resulting in communities of creatives with a little more time on their hands and getting a little more bang for their buck. All you needed then was a little bit of money (to afford rent), something to say, and the ability to relocate to New York. In order to enter an online community today, the barriers for entry are even lower. You don’t need to move to New York. You just need a little bit of money (to afford a computer) and that same something to say.

 

2. Production with no real regard for economic growth

There are more than 900,000 blog posts put up on the Internet every 24 hours. Why do we blog? The answers may be shockingly similar to those of “why do we make art?” Some people blog for emotional release or to create a connectedness with the world. Some people blog to make money, but a lot more people (including myself), blog to create symbolic capital. In other words, to gain or maintain regard as a professional in the field you’re writing about. (I utilize my human capital to discuss social capital on this blog to build my symbolic capital! Yes, these are the things your brain comes up with when you are in grad school…) In fact, according to Pew Internet and American Life Project, to make money is the least common reason why people blog. The main reason? Creative expression. Social media and online expression share the same emotional (and similar economic) fuel that drives NYC’s creative community.

 

3. Utilizing and building weak ties

In her book on NYC’s creative economy, Currid cites the work of Dr. Mark Granovetter who has published significant studies on the importance of “weak ties.” He found that the ties that were farther away  from us (versus our close-knit friends) were most influential in creating success. People with the most weak ties are in the greatest position to “diffuse innovation.” While having social exchanges with random folks on the street in New York City does create weak ties, it’s much less hard to imagine how social media promotes these kinds of relationships. Also, social media makes it easier to track weak ties. One needs only to check their @replies on Twitter to get a good sense of the weak ties they’ve created. Social media is a large network of these weak ties. And more than that, they are more easily tracked and weak ties can more easily grow stronger through social networks than meeting someone on the street in NYC- a method that has worked for generations before.

 

4. The ease of peer review and access to gatekeepers

Listen to the story of any great artist in NYC and they will tell you the stain of people that they met that helped them get to the top. In NYC, there are places where ‘the cool kids’ hang out. There are places to see and be seen. It’s not a stretch to say that there are a hierarchy of sites upon which bloggers and social medialites aim to be mentioned or linked. My boyfriend’s startup sees a greater rise in visitors when it’s mentioned on Mashable than when it’s mentioned on a random blog. The higher the site is on the totem pole, the more likely your work is to be seen by gatekeepers- key people in your industry with the power to aid you in achieving success. This is the same way it works in posh nightclubs, bars, and museum events in NYC. The reason online interactions may have the upper-hand? They are remote.

 

5. More creative people leads to economic productivity

You don’t need to be in New York anymore to have access to the most influential gatekeepers, or to get attention for your cause or story. The game is changing. In New York City, the above factors created ideal conditions for the spread, sharing, and development of creatives. Similarly, on web, the above factors create ideal conditions for the spread and development of creatives– but also for non-creatives. In a sense, New York just got bigger. Now it’s the entire world. Or rather, anyone with a computer or access to the library.

Social media networks have other advantages that NYC (or any physical location) lacks. This may change our idea of location as ideas are spread freely with no regard to physical region. For instance, time plays a different role. You don’t have one chance to hand over your business card- as you might when running into an ideal client on the street that you may never see again. You can send a message (or respond to that message) at your leisure. This may lead to more strategic communications. Also, places with more people see more economic activity, and for that very fact, it is a good idea to know what’s happening online.

*These five points are based upon select points in Currid’s The Warhol Economy: How Fashion, Art and Music Drive New York City. Check out the book to learn more about how they relate to NYC’s economy and social structure.

Posted on by colleendilen in Arts, Big ideas, Blogging, Book Reviews, Social Media, Technology, The Future, Uncategorized 2 Comments