The Art of the Upgrade: A TRG Master Class for Blackbaud

Editor's Notes

• #2: Ryan: I’m pleased to introduce Jill Robinson, president of the consulting firm TRG. Jill leads TRG’s day-to-day operations and service to the arts and cultural industry. TRG focuses on measurable, sustainable revenue results. That focus, led by Jill, has generated hundreds of millions in revenue — earned and contributed — for clients. Jill developed TRG's counsel on patron loyalty, bringing together colleagues across organization departments to build stronger, longer patronage. Jill makes frequent appearances at national arts conferences and is a contributor to TRG’s blog Analysis from TRG Arts
• #3: Jill: Hello and welcome.I’m so delighted to be here with you today. We were honored to be asked to do this special Master Class webinar for Blackbaud on how the concept of an “upgrade” can make your patron relationships stronger and longer. I know for many of you, this is your first time at a webinar led by TRG. So first, let me say a few words about TRG and our counsel.
• #4: At TRG, we use data to helpclients achieve results. TRG Arts was founded in 1995 by our latefounder – and my business partner – Rick Lester. Our firm has grown on pioneering strategies in pricing and loyalty that today have become proven in the results our clients achieve.We are based in Colorado Springs, Colorado with 35 team members, each focused on providing guidance and solutions that are patron-based for sustainable loyalty of patrons and sustainable revenue from those patrons. At TRG, we use the word “patron” for any PERSON engaged with an organization—visitors, ticket buyers, members, donors, event attendee) When you hear me say “patron”, know that I mean any PERSON engaged with any type of arts and entertainment organization—visual or performing arts; seated event or general admission.
• #5: We’ve worked with about 1,200 organizations in arts and entertainment over nearly two decades, in three countries: in the United States…these are some of our marquee clients…
• #6: ….in Canada, where our presence has expanded over the past few years, and in Australia.
• #7: What we do at TRG falls into 3 areas…
• #8: Our firm is the largest provider of community data networks in the US – 20 in all and located across the United States, with New York City coming on as network number 21 in 2014. You heard me say that we are a “data-informed” consulting firm. In fact, data informs every strategic solution we offer at TRG, and enhances the expert knowledge of the staff team on which TRG is built. We have a catbird seat from the data networks we manage to observe some 35 million arts consumers and their transactions. We study and learn who is investing in the arts, how, when, and where. We are constantly working to harness the power of this data to develop client solutions and to benefit industry knowledge for very practical operational applications. 
• #9: At TRG we often compare arts organizations’ patron relationships to dating. It’s rather like a love story that goes like this: You meet a patron when they first come through your doors. What happens next can be a one night stand or a long, committed relationship.  Together, you have a great first date—or a dud. You decide to call the next week to ask on a second date—or not. It all depends on what action you take to keep the romance going.We compare patron relationships to a romance because it IS passion-based connection. It’s about a patron’s love for the art, and for the organization that presents the arts they love. Like any good relationship, its strength depends on LOYALTY.
• #10: What do I mean when I say loyalty? We don’t mean loyalty is a kum-bah-yah emotional experience. It can be measured. And, we always say: what can be measured can be managed.Patron Loyalty is the measure of patron investment in your organization. Put simply, the stronger the connection with the patron, the more revenue for your organization--whether that revenue comes in through the box office, marketing, or development teams. With every patron transaction, we can measure increases in three factors, R F M: Recency, frequency, and monetary valueHow do we increase R F M? The best way to increase loyalty is to ASK the patron to take the right next step with you. That’s what we call upgrading. That right next step is different for each patron. And the right next step is informed by information in your database. 
• #11: Your audience has already written the plot line for their love story with your organization. Every record tells an individual’s story of ticket-buying, subscription, membership, donation, and more. This, of course, is where good data collection, hygiene and keeping that data in a good system become absolutely critical. Your caretaking of data is vital to loyalty and therefore vital to the health of your patron relationship. Let’s talk about what we typically see in a patron record as the sparks fly and a patron love story develops.[Photo by Todd Huffman http://www.flickr.com/photos/oddwick/2126909099/ ]
• #12: Almost every patron in your database begins as a new ticket buyer.-If they enjoy their “first date” with you, they’ll come back-The plot thickens if and when the patron buys twice in the same season or year. We call that a “multi-buyer”-When the romance goes to the Subscriber or Membership level, this is almost akin to getting engaged.-Donation: that’s like getting married, because once you have each other, and, if the relationship is well-developed and cared for, you often have them for life.-Finally, Advocate/Investor: that’s like celebrating a golden anniversary. Not many get here, but these relationships are worth their weight in gold. This evolution of patron development is a series of largely incremental “next steps” – each involving more active, more frequent, more current transactions that – cumulatively –represent longer, greater patron investments.
• #13: You’ll notice that we are very specifically saying that to get here (ADVOCATE)You cannot start here (DONOR)Or even here (SUBSCRIBER)
• #14: Twodecades of arts consumer behavior research tells us loud and clear:Subscriber or Members and especially Donors are MADE not FOUNDMost – 9 out of 10 – start here (new single ticket buyer)As a new or reactivated single ticket buyer who then comes back for a second date and subsequent, more frequent get-togethers.Why do we say that?
• #15: Loyalty can be viewed through the lens of what we call the Advocate, Buyer, Tryer Model.We can sort patron development steps into three more general categories.The layout of the pyramid demonstrates why upgrading is important.The tryers portion is the largest because the vast majority of the people in your database are tryers – lapsed and new single ticket buyers. Sadly, most tryers never become Buyers, which is why the buyers and advocates section is so much smaller? About 4 out of 5 of those tryers come once and never come back. That base of Tryers is unstable and left untended, it’s going to be the source of decline in your organization.
• #16: Getting that second ticket purchase—or any other upgrade--is vitally important to loyalty. It cements relationships, creating stronger bonds that can sustain you.
• #17: There is an upgrade for every patron at every phase of their relationship with your organization.Here are just a few examples of upgrading.-IfI’ve just bought a ticket or an admission to your exhibit, the next step is to get me back again – to buy another ticket.-If I’ve attended multiple times through several ticket purchases or a flexible subscription or entry level membership, my next step in our relationship may be a full series subscription or a higher level membership package-By the time I’ve been a subscriber or member for a couple of seasons, I’m ready for deeper engagement – we’re going steady now –ask me to add on a donation, or a ticket to a special performance, exhibit or Gala.
• #18: Looking back at our ABT pyramid, we see that there are two critical upgrades that are turning points in a patron relationship. First, moving aTryer to Buyer. Most often, this occurs in year two or three of a relationship, after a first time patron buys a second admission the same year and then again in a subsequent year. The turning point upgrade to Buyer status is the patron’s investment in something more—a subscription, membership, maybe even a class or special program.The second turning point is the all-important move from Buyer to Advocate. Here, the numbers are fewer, but the revenue stakes are higher. At this stage in the Buyer relationship, the patron becomes what we call a “Donor-ready patron”. Buyers – and their donor readiness --come in many different profiles, as we’ll see next.
• #19: This is a detail from one of TRG’s Advocate, Buyer, Tryer Analysis for a large symphony orchestra client. The chart is read horizontally left to right, beginning with the “PLI Rank” number (small circles).The blue lines divide the chart into four sections. (big circles) Each sections represents one patron household in the Buyer category of the database for a major orchestra. The dollar numbers are large because this orchestra offers a lot of product, a multi-million dollar revenue stream, and a huge database of many thousand households. This is also a snapshot of five years, not the entirety organizational history which goes back more than 100 years.
• #20: In this snapshot, we are identifying four patron households by rank – rank is the numbers you see here: #517, #585, #1037, and #2480. Their rank is a cumulative score we derived from analysis of the timing, frequency and dollar investment of each household’s transactions over the five-year period. For today’s purposes we are going to look at some key points.First, know that what each of these Buyer households have in common is their “and” behavior – they have done this AND this AND that. Or, they have transactions in this year AND this year AND this year, and so on. The top three have recent total annual investment levels of about $6,000 – But look at the differences in when and how they invested. Ask yourself: how would you be viewing this patron?
• #21: Patron #517 consistently buys a boatload of single tickets, and makes a small donation, but does not subscribe. We’d bet that the box office knows this patron by name because they are in the house so regularly. But does the development department know about this household? On paper, this is a $150 donor. Consider what a cultivation conversation with this loyal attendee might yield in the way of a next step. Might a larger donation make this patron eligible for a ticket concierge service that facilitates their frequent seat requests? Or develop an understanding about how this patron might share their love of music with others? Now look at a similarly-ranked patron #585. They have five consecutive years of consistent contributed gifts and no ticket activity. Is this a gala sponsor that’s not emotionally attached to the art on stage? What is their next step?How about patron number #1037? Here’s a more recently active single ticket buyer and subscriber – a patron who is in the house often. In two of their three active seasons, this patron gave $1,000 but not in 2011 – yet, their ticket spending increased in 2011. How was this patron cultivated? Did marketing and development compete for this patron’s investment and development “lost?” – that’s the way we sometimes hear these stories told. Or, were requests of this patrons not well coordinated?Similar questions might be asked about patron 2480. Look at their up and down investment pattern. This patron’s spending is at the $2,000 per year level and inclusive of several campaigns until 2011 – when all their investment went into single tickets. That’s a lot of information to take in, so let me distill a couple of key take-aways from this TRG Patron Loyalty analysis.
• #22: Loyalty trends are found in integrated data. By that we mean transactional information on each patron that details ALL they do with an organization, across their entire personal relationship with your organization. When you look at the whole patron relationship in its entirety, you can:1. See patterns. In the universe of Buyer relationships, you’ll find groups of patrons with similar behavior patterns. 2. Patterns allow you to develop segmentation so you can cultivate groups of patrons into next steps, AND [CLICK]3. Because you’ll understand current behavior, you’ll be able to cultivate groups of patrons into longer, stronger engagement that is meaningful to them. This is evidence-based patron development. You’re not guessing that the first step toward philanthropy is membership. Or annual fund. You are following data to discover the "and" behavior of a Buyer—and putting yourself in the position of growing engagement incrementally over time. [CLICK]
• #23: To build loyalty, we really have to start at the bottom of our Advocate, Buyer, Tryer pyramid, with Tryers. Remember, Tryers are the largest group of patrons in your database. Operationally, you can identify your TRYERS in your ticketing system in transactional terms. They are lapsed or new patrons and almost every single one is a single-ticket-buyer or has been. So…You’ll have patrons who have lapsed and haven’t done anything with you in two years or more. …..You’ll have brand new-to-file buyers – there will be a lot of them, especially after your most popular, highest-selling programs. Most of them – between 65-80 percent according to our research --will never come back unless you do something to get them to stick. When you get a new patron or long-lapsed patron to come back a second time in the same season, you are on your way to building loyalty.Getting that second date – RETAINING a new or reactivated patron – lowers attrition. And, the net result of more patrons coming back and doing more with your organization is growth – in relationships and their associated revenue.To get the second date, you MUST have patron contact information. Whatever else you do to improve loyalty and foster growth. Find a way in your organization to ensure that you are getting the name, full address, email address, and phone number. Without this information, you cannot contact this new and attractive patron for a second date. Here’s how upgrading can work….
• #24: Getting the second date is slightly different for each kind of Tryer patron. I’m going to give you some examples, assigning roles to different departments. At this point, the leading roles are most likely played by your marketing and box office or visitor services team. Lapsed ticket buyers – they haven’t seen you for a while, and from a dating perspective, you’ve got their number but having been in touch. They have forgotten how cute you are, so you’re going to have to start all over. Let’s say you have targeted lapsed patrons with an invitation to come back and now they are calling the box office. What’s the next step? Reactivate them! Ticket office staff using most systems can see from patron history that the patron in front of them has lapsed – they haven’t been with you in a while. Welcome them back. Treat them like a first timer and give them some orientation to how best to enjoy their experience. That’s an upgrade from inactive to active, and also an example of up-selling or suggestive selling. That’s right – you heard that four-letter word: SELL. Selling in the context of patron loyalty IS relationship building. Remember that!Then, there’s your first time buyers – they come in largest numbers with your most popular attractions. Once you’ve got a response from a 1st time buyer, your upgrade goal is make sure this first experience with your organization is a good one. CLICK Your message is “Welcome—thanks for joining us.” Remember, this is like a first/blind date. You’re building a relationship with this new patron. In advance, give them some orientation to your venue. Let them know where they can find out about parking or where to get a bite to eat. Hear me say this: The whole relationship rises and falls on the success of the first date. So, make sure they know what you look like, how to find you, and what to expect in the venue. This is a worthwhile investment, especially for new patrons who are excited about coming to see your biggest, most popular programs of the year. And, we cannot emphasize this enough: Make sure you have their contact information, because the next step for new patrons is that all-important second date. Your upgrade or upsell is to position this first date for success so newcomers will WANT to come back when you ask them for a second date.Now, you’ve gotten the second data and your patron is now a same season ticket buyer – a patron at the turning point of becoming BUYERS ….if and when you do a little more cultivation. Here’s where you pursue more get togethers. Your marketing invitation might be made in advance of your next big event. Or, it might be an offer to get specially priced admission to something similar to the program they saw when they first came. When you’ve got a patron who is responding to an invitation to come back again during the same season….that’s a cause for celebration. Welcome them back AND foster some kind of further engagement. Say “Thanks,” and suggest – while I have you –might you also want to see: a big season event, another show – even a short series or flexible subscription – some other event or activity that’s coming up soon or early in next season. The second or third date in same season is a turning point you’ll want to foster by making appropriate suggestions. Here’s the best news about cultivating your tryers: With Tryer upgrades and up-selling efforts, you will reduce the odds of losing these patrons who are most vulnerable to attrition. You’ll also move more patrons up the ranks of loyalty. So, let’s look at Buyer upgrades.
• #25: At this next level of loyalty –Buyers --you unleash …. “The power of And.” Buyers have come multiple times AND might add an annual fund gift AND subscribe AND become a member. They are getting engaged with you. These patrons progress to more frequent, more recent, and greater commitment of time and money. So, your upgrade strategy will pay off in growing deeper, longer, more loyal relationships.Your organization’s job with Buyers is to harness the power of “And” by considering all the organizational assets your relationship with this increasingly loyal patron may want to enjoy. So, think about what you have to offer….ALL you have to offer You’ll surely want to encourage multiple attendance of not just more, but different kinds of events and programs. Did they first attend a major show or exhibit? Invite them to the next similar event and invite them to something that shows another side of you and your art. Do you have a school or academy event for the public? Invite your buyers for a peek at other artistic assets your relationship with them can include.We’ve learned in two decades of arts consumer behavior study that an active patron can be encouraged to STAY active. Simply put: The more they buy, the more they keep buying. And, when you’re engaged with a patron, they stick with you.
• #26: We’ve seen in our patron behavior study that there is a huge escalation of loyalty growth among Buyers. There are many kinds of upgrades that you can offer Buyers. Today, I’m going to focus on three types of upgrades that can have a big impact on growing loyalty among this group.-First is renewing your multi-time visitors multi-ticket buyers--into whatever your full-series attendance package is. Or, at the very least, renewing their behavior into another package of their choice. We call choice packages C-Y-O, or Choose-Your-Own programs. In operational terms, that generally means: upgrading your C-Y-O and flex ticket buyers into full series subscribers. This is one of the most powerful and yet most overlooked strategies we know. With this single renewal or upgrade, you can exponentially deepened a patron’s relationship with your organization. It’s a separate, specific type of marketing campaign that requires techniques of cultivation, sales promotion and sales. And, it’s a worthy investment of your time and money as I’ll show you in a moment.-Next is the purposeful renewal upgrade that can happen with subscribers, members or donors who have been with you for a while. We still are amazed to find really good organizations that do not consistently and aggressively conduct renewal campaigns every year. Those are important. But a renewal upgrade is much more than that – It’s a subscription renewal into a better seat, a longer or additional series. It’s a membership renewal with the addition of an event or one of your blockbuster programs. It’s an annual fund renewal into that higher category that gets the patron’s name in the program or their car into the desirable parking lot – whatever is your “blockbuster” benefit or perk.-Finally, there’s the purposeful upgrade that achieves a three-figure donation from subscribers or members. Achieve this, and you’ll build passionate patrons who love your art, love your organization so much that they are on their way to being your most-invested supporters.Upgrades among Buyers pay dividends that we can quantify.
• #27: Let’s take a look at one recent analysis. This is an overview of our findings for a theatre client. The work goes in-depth to show the client just how much revenue, after expenses, each buyer type was contributing to the organization’s financial health. It has become a platform for the organization’s new patron loyalty initiatives.For purposes of today’s discussion… however, let’s look at the big overall takeaways:Look across the top and bottom rows of this chart --- Revenue yield and renewal rates INCREASE significantly with each successive buyer type – the more loyal a patron becomes, the more they spend and the more they continue to engage and invest.Now look at the middle line -- The cost of sale to create subscribers is high – the highest in this analysis. But look what happens to cost-of-sale after that – it does way down. It is indeed cost-effective to get a subscriber renewal or an upgrade to subscriber-donor.For another key metric in this analysis….look at the revenue yield for renewing subscriber-donors. This metric supports a research finding that comes up time and time again. The number one reason subscribers subscribe is ….love of the art form. The number two reason: they like the way your organization provides that beloved art form. So, subscribers are engaged at a passionate level – an affinity that can propel contributions. Yet, we find, that many organizations don’t have an active, integrated program to involve their loyalists as donors. Our analysis says: that’s one of the first steps you can take to develop an escalator effect.-Looking at their single ticket buyers, we see some pretty typical numbers here. On average, they paid around $53 for their ticket. Cost of sale—how many marketing dollars went into selling that ticket—was around 20%. And it was rather difficult to get them to come back. Only about 1 in 4 single ticket buyers came back the following season (check me on this).-Looking at new subscribers, it’s a different story. Cost of Sale has risen, but it’s paid off. Average order size tripled—this client is making a lot more money on a subscribers than single ticket buyers. As for renewal rates, another good showing. About half are renewing.-As you might expect, average order size and renewal rates rise with the more seasoned subscribers, but the real story here is the dip in cost of sale. They are spending a lot less to make a lot more.-Finally, this clients’ most loyal patrons: renewing subscriber/donors. Extremely high order size and renewal rate, and low cost of sale.
• #28: This case study…available on our web site…talks specifically of 5th Avenue’s subscriber to donor upgrade program that we call Super Subscriber. The case study describes their very first Super Subscriber effort, and the wonderful results that you see here. In just four months, they developed 453 Super subscribers who gave a total of $51,000. One-fourth of them were brand new, fairly new, or newly-returned subscribers. And nearly three-fourths – 70% -- had never donated before. That’s a great model for developing those donor-ready patrons.
• #29: Let me summarize. The art of patron upgrade is the process of finding in your data an appropriate plan for every patron’s next step.-Every patron has a next loyalty stepand it is possible to have an upgrade plan for every one of your active patron types. What are those patron types? Consider: First-time ticket buyers, First time subscribers, renewing annual fund donors. Think of them in logical, marketable groups. To get started, focus first on upgrades that will support your biggest opportunities.  -Consider the whole picture of your patron base and your upcoming season of activities. You can’t do everything at once. Don’t try. Look at some options we have presented today, and choose tactics that you can do best with the time and resources you have available. -Remember that collaboration – between marketing and the box office and with development colleagues –will get you further, faster. Develop –as a team --everyone’s best thinking about how best to cultivate your biggest opportunities with patrons.And, if your organization learns only one new technique: make itup-selling. This is a box office or visitor services initiative that your whole team can support. Remember:
• #30: Upselling and upgrading is everyone’s job. Each department can look at the same data in your patron histories. Each department has a slightly different role to play – whether that role is strategic like planning a campaign or tactical like speaking with patrons. Every department has a turn at leading, following and….sometimes….getting out of the way. Our point here is that it’s everyone’s job to develop more loyal patrons. And loyal patrons are the key to sustained, sustaining revenue and growth.