Recession Marketing

It’s official. The US Government now says we are in a recession. In case you hadn’t noticed.

It is unlikely we can stand before our boards and our musicians, simply shrug our shoulders, and attribute declining sales to the economy. It’s an easy excuse. It requires little imagination to declare an obvious issue. What is needed is a strategic response to the impact this economy may have on our 2009-10 seasons. Now is the time to plan and identify marketing tactics for these times.

I have considered a few and appropriated several from other colleagues. This list is by no means definitive. Consider this an open forum and feel free to share philosophies on how to retain, sustain, and even build audiences for our orchestras in this troubled economy.

Send Renewals the Week of January 19, 2008

If there is going to be any optimism in the near future, any inspiration to be discretionary with income, it may be during inauguration week. The timing is ideal to mail subscription renewals that week, and further, to make a priority new subscription acquisition offer. A simple letter pack can be swiftly assembled and mailed, with an irresistible offer on the outer envelope, and inside a compelling letter, a single sheet with the season’s programs, and an order form. If the economy continues to falter after the inauguration, we may well feel the effect in our renewal and acquisition campaigns if we hold the mailing until February or March.

If prices must be raised, raise them after the renewal/ priority period

This will be a difficult climate in which to raise prices, and we can presume subscriber price sensitivity will be high. If ticket prices must be raised, it would be best to hold the increase until after the subscription renewal deadline and the initial priority new subscription acquisition period. The renewal/priority offer can be presented: “No price increase when you order by March 15!” This leverages the impending price increase into a hard-to-resist urgency, a tactic that can be repeated each campaign by renewing subscribers at the previous season’s “final published price.” The price increase is presented almost as a benefit, telegraphed in advance to motivate the value of responding early for a lower price.

Comp Unemployed Renewals

In the course of on-going patron contact, should it be discovered that a subscriber has become unemployed and is now unable to afford his seats, provide him with a complimentary subscription. Such a gesture of genuine good will is certain to engender deep loyalty. Upon re-employment, which organization will be the first he will think of? Word of the organization’s compassion is sure to spread. Following the collapse of Enron and WorldCom, Houston Grand Opera made such an offer publicly. While other non-profits were reporting to the press the impact the Enron demise would have on their financial bottom line, Houston Grand Opera was cited in the press for putting its public first. Even with highly visible press coverage, only three subscribers requested the offer, negligible in relation to the depth of press coverage the offer received.

Secure an Annual Fund Gift from Non-Giving Subscribers

Subscribers are more likely to renew if they have given even a token Annual Fund gift. Securing that annual fund gift from the non-donating subscriber, particularly at-risk first-year subscribers, is certain to boost subscription renewal rates. Once vested, subscribers are far more certain to return.

Will non-donors give in periods of economic uncertainty? Blackbaud’s Index of National Fundraising Performance for the fourth quarter of 2007 notes that over the past four decades, despite economic ups and downs, annual individual giving has remained consistent, perhaps even increased, as more volatile corporate and government funding decreases: “Although the overarching industry of charitable giving generally flattens out during periods of relative economic weakness, performing arts institutions experience a slightly different phenomenon.Because arts patrons are most often linked to the organization as both donors and consumers, their attachment to the organization is considered deeper and therefore their wherewithal to continue significant support on all fronts is often stronger than in other non-profit industries.”

Family Pricing

In halls where available capacity exceeds reasonable demand, or for a series with a lower subscriber base, encourage families to bring children 8 to 16 for free. (Traditional discounted student prices can apply for those over age 16.)

Subscribers, too, can participate. The entire family can be accommodated in a section of the hall where seats are more plentiful, allowing everyone to sit together. In Europe, I have noticed that the both the Irish Chamber Orchestra and the Royal Scottish Orchestra have enjoyed great success with this.

While more of an “inventory management” tool than a true revenue generator, it is an offer that delivers greater value to the primary ticket buyer for the same investment.

Discounts for Under 30

Our most elusive demographic is younger, college graduates up to about age 35. They lead crowded lives that are constantly changing – college, career, marriage, and children. Not surprisingly, their slight disposable income is elsewhere committed. Additionally, this most splintered and fragmented demographic is also the most expensive to reach. Both the New York Philharmonic and the Boston Symphony have attempted to entice this group with a discount price. The New York Philharmonic’s “My Phil” program has just begun, and the Boston Symphony has made similar overtures directly targeted to this market. Perhaps, in a future article, we can explore the return of these investments.

The special offer for those under 30 (perhaps the price we are currently offering to seniors) can be made from a third-party sponsor, acknowledging them for underwriting the discount. Their philanthropy is certain to find resonance in the press, and can be credited in the orchestra’s marketing materials. This offsets any perception that the orchestra cannot sell its tickets and is slashing prices.

(Of course, with an under-30 price, a family price, a student price, a senior price, and group discounts, the universe of those actually paying the full, listed price shrinks commensurately with every new initiative. Building models and setting prices each year becomes a less meaningful exercise if too few are actually paying the prices we are modeling. Any new pricing promotion must be considered with caution from this perspective.)

While price may be a barrier, so may our traditional venues. We have seen classical performances in clubs attract engaged, capacity audiences, albeit in venues with much lower capacity. I have attended such events in several cities in recent seasons, and the audience’s enthusiasm is palpable. Developing a younger audience may involve where the concerts are performed, perhaps more so that what is performed – or what is charged for admission.

Perpetual Acquisition

When declines in subscription sales are discussed (it’s presumed to be a national trend), it would be more precise to frame the challenge as that of acquiring new subscriptions. Renewal rates are rarely the problem, though when new sales are in decline you must remember that steady, even growing renewal percentages are calculated on an ever-shrinking base. In the extreme, if only four subscribers remained – and three of them renew – the orchestra would still post a 75% renewal rate. In fact, renewal percentages increase as new sales falter. Only the most loyal subscribers remain, keeping the renewal rates high.

The barriers to new subscription acquisitions are time and process. New acquisition campaigns tend to happen between April and September. The window is relatively brief, and once the new season begins, existing series are stripped down into shorter, pro-rated series at lower prices. However, marketing expenses generally do not decrease. Thus, it costs proportionally more to sell lower-priced reduced series. Further, shorter series renew at lower rates than longer series. There is less commitment, less integration into the lifestyle, and concerts may be missed. When the renewal arrives for the new season at the full series price, well in excess of what was paid for the shorter, pro-rated series, the subscriber balks and the subscription lapses.

So let us consider a new model – Perpetual Acquisition, a year-round subscription effort. If single tickets are strong in February, capitalize on buyer enthusiasm with the offer for them to return immediately as a March through January subscriber. Three of their concerts would be in the current season, the remainder in the following season. Rather than a pro-rated package, a full season is offered and with it the frequency of concerts that is more likely to build commitment and higher retention. November buyers would be offered a January through October season, March buyers an April through February season, and so on. Each series is an eleven-month cycle, with the subscription renewing automatically during the twelfth month, in which the subscriber receives the announcement of her next eleven-month season. In this model, the renewal is not requested. If the subscriber no longer wishes to subscribe, she must “opt out” of the season.

There are, obviously, several low hurdles to clear when adding “calendar subscriptions” to our traditional “season” model.

1. The revenue (and, therefore, the marketing expense of acquisition) must be appropriately allocated to two fiscal years. This will pose a larger problem for the box office than for the finance department (who will appreciate subscription revenue flowing into the current fiscal year up to and including the last concert – single ticket buyers in April can be offered May through March concerts.) Modules unexplored in the ticketing system will need to be re-discovered, or manual management of this new subscriber segment will be required. 2. Season planning must be done somewhat further in advance, assuring that a full year’s worth of programs has always been set and can be sold. However, this is much less of an institutional culture shift than we might assume. Artistic administrators I have spoken with about this concept find it to be a rather easy process since much of the schedule is completed a year in advance anyway in order to secure guest artists. 3. Our sacred “season press announcement” becomes less pivotal. For some time now, it has been of far greater importance to the institution than of interest to the public. culture shift is needed here as well. Subscribers, press and public may need to learn of the season piece by piece – fall, then winter, then spring.

Establishing a 12-month perpetual acquisition cycle is all for the greater good, allowing far more time to sell and providing the single ticket buyer with immediate gratification and participation when committing to a subscription. In this economy, it will be more difficult to persuade our single ticket buyers to pay in March for concerts that begin in September, particularly when they know our seats may be plentiful and, perhaps, the first third of our season is not as strong as our last two-thirds. (In the Perpetual Acquisition model, a strong close to a season can be leveraged to drive subscriptions for two seasons.) Because the marketing expense is the same for a full series as for a pro-rated series of fewer concerts, the marketing delivers a greater return on investment. Telemarketing managers will appreciate having an immediate product to sell at a higher per-order price and will be the chief advocates of this new initiative.

This initiative is actually less radical than it would first appear. It is more along the lines of a membership than a traditional subscription. And, of course, once spring concerts are completed, the campaign reverts to the traditional model, selling the full coming season in the months of June, July and August. The subscription campaign continues year-round with full, renewable packages, selling at a higher price, engaging the subscriber in more concerts.

To paraphrase David Mamet – Always Be Acquiring.

Monthly Payments

How does this new breed of subscriber absorb this discretionary expense into his budget? By spreading the cost across the calendar year in easy-to-digest payments.

Let us presume the subscription costs $275.00. At the point of purchase, we ask for a modest 25% down payment – $68.00. This leaves a balance of $207.00. Over the next eleven months, the subscriber’s credit card is charged $19.00. The offer is clear and compelling: “Your Own Seat for Under $20 a Month!”

“Perpetual Acquisition” leads to “Perpetual Renewal,” as subscribers are renewed exactly twelve months later. Those who subscribe in October are renewed the following October, those in March, the following March. In the twelfth month the subscriber is sent information about the next twelve months, noting in the cover letter than his account has again been debited the 25% down payment, and his payments (presuming a modest price increase of 4%) will be $19.75 each month.

Devoting one weekend evening a month for concert going demonstrates a significant commitment of time. Monthly payments make the financial portion of that commitment easier for the subscriber to budget.

Perpetual new subscription campaigns, low monthly payments, “right pricing” to attract new audiences, annual fund efforts targeted to invest at-risk subscribers – all these are tactics for a challenging economy. It will be essential to anticipate the weakness of the market place by meeting the challenge directly by having strong pro-active, pre-emptive responses in place. Watching and waiting to assess the effect of this economy before reacting to it may lose the momentum of the subscription campaign.

The economy is already profoundly impacting our endowments, contributions, and audience development. Polyphonic presents a unique forum to share ideas. Reactions, additions and alternatives are enthusiastically solicited.

The music we present informs, inspires, and transforms. In troubled times it becomes ever more essential. We must ensure that a growing, committed audience is there to experience it.