Monetizing Audience Engagement, A Love Story

Editor's Notes

• #3: TRG Arts is a consulting firm dedicated to the arts and entertainment field. We use data to develop strategies that helpclients achieve results. TRG Arts was founded in 1995 by our latefounder,Rick Lester. Our firm has grown over two decades on pioneering strategies focused on patrons and ways to develop pricing and loyalty that today have achieved results for our clients.We are based in Colorado Springs, Colorado with 35 team members, each skilled in 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) So know that when you hear us 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.
• #4: 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….
• #5: ….in Canada, where our presence has expanded over the past few years, and in Australia.
• #6: What we do at TRG falls into 3 areas:
• #7: 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. 
• #8: Today, we’re going to be considering engagement, and how we as arts managers monetize it.Let’s just talk about what the word engagement—aside from the arts managementFirst, though: What does engagement mean anyway? In the most literal sense it means getting togetherIt means getting and HOLDING someone’s attentionIt means commitment—as in “getting engaged”
• #9: In the arts industry, we add modifiers to the word, often these two words together: “Audience Engagement”And those two words are used to describe a few different things.It’s a buzzword—what does it mean?DiversitySpecial outreach or eventsThe term is often synonymous with: audience developmentAnd for us, and our work at TRG, loyalty is a very important synonym.For today’s session – here’s the definition we’re going to us.
• #10: Here’s how we’ll define itWe’re adding an action word in front of it. When we add an action word, we can DO something with it…Monetizing Audience Engagement means PURPOSEFUL cultivation of people’s passion for the art form that …..Builds a relationship, resulting inLoyalty and Revenue.Yes, you heard the word passion—because Audience Engagement is essentially a love story.
• #11: We at TRG have never regarded engagement as a kum-bah-yah emotional experience. Audience engagement is a real, measurable relationship that we see manifested in transactional data. What’s transactional data?It is in your ticketing and database systems that your audience writes the plot line for their love story with your organization. Every record tells an individual’s story through their ticket-buying and individual desires. They come every year to Nutcracker for a once-a year fling…They are a subscriber and we’re in a long-term committed relationship.They came once and never again—it wasn’t a good date..subscription…membership….donations….and more. What we can see and measure in the data , we can manage.[Photo by Todd Huffman http://www.flickr.com/photos/oddwick/2126909099/ ]
• #12: It CAN be measured, using loyalty metrics – specific transactional data that mark the progress of your hot and steamy patron relationship.Our study of data tells us that the stronger the RELATIONSHIP with the patron – as measured in transactions -- the greater LASTING revenue for your organization--whether that revenue comes in through the box office, marketing, or development teams. With every patron transaction, we can measure and look for increases in three important metrics, R F M: Recency – how current a transaction is….Frequency – how often a patron has transactions with you…. AndMonetary value –the revenues associated for all the transactions.By tracking RFM of loyalty metrics that any of you have in your ticketing and database systems, we can manage and grow patron relationships. At TRG, we also refer to this process as loyalty building.
• #13: At TRG we view loyalty through our own model that we call the Advocate, Buyer, Tryer Model. By examining data for loyalty metrics, we can sort patron engagement and development into the three general categories you see here: Tryers, Buyers, and Advocates. We organize them this way to make heads and tails of them and MANAGE THEM.The layout of the pyramid demonstrates is important.The base of the pyramid is the largest and most loosely formed. This based represents Tryers.These are the vast majority of the people in your database and generally are comprised of lapsed and new single ticket buyers. For those of you who have seen donor pyramids, take note that the TRG’s study of arts consumer behavior has show us that a true loyalty model must include all kinds of transactions, especially ticket-buying and paid admissions.As we look at the layout for Buyers and Tryers….we see a different type of construction. That’s because –sadly -- most tryers never become Buyers. As a result, the buyers and advocates sections are so much smaller – but they are stronger – cemented together by the ongoing frequency, recency, and monetary value of Buyers and Advocates more committed, longer-lasting relationships. What we have seen in our study is that in most organizations, the base of Tryers is unstable. Left untended, it’s going to crumble and be the source of decline in an organization. Our loyalty counsel was built on efforts to prevent that from happening.Let me elaborate.
• #14: Let’s talk about relationships that you’re in. Who’s married?5 or less years?10 or more? How did that start? How many dates?
• #15: Here’s what we typically see in a patron record as the sparks fly and a patron love story develops.Almost every patron in your database begins as a new ticket buyer-94% of newbies begin as a visitor or single ticket buyer.If they enjoy their “first date” with you – and if they are invited -- they’ll come backThe 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 akin to getting engaged.Donation: that’s like putting the ring on the finger and saying “I do”. Once you have each other, and, the relationship is well-developed and cared for, you often keep the relationship for life.Finally, Advocate/Investor: Here, we’re celebrating a long, happy life together. Not many get here, but these relationships are worth their weight in gold – for you and the patron.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.
• #16: You’ll notice that we are very specifically saying that to get here [(ADVOCATE)]You cannot start here [(DONOR)]Or even here [(SUBSCRIBER)]Two decades 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.But for any relationship to happen at all, you have to prevent a one-night stand.
• #17: Remember that unstable base of Tryers at the bottom of the pyramid?About 4 out of 5 of those Tryers come once and never come back. Our arts consumer study and research by others have corroborated this sad fact. Whether you call this high rate of patron loss “churn” or “attrition” or “turnover” it all means the same thing: You aren’t achieving growth – not in audiences, not in prospective subscribers, members, and donors, not in revenue of any kind.Too many new and reactivated patrons will churn out if you cannot retain them. Or….develop a second date or next step with them. In short, you’ll love em – by getting that second date – or lose them. Period.ASK: How do you CURRENTLY engage people for a second date?
• #18: So, chapter one in our love story? Achieve the second date. Here are the critical steps.Get their digits – their contact information. This is a must do. It doesn’t matter how cute they think you are or how much they’d like to see you again. If you can’t ask them back, you’ve lost them…it’s a one-night stand. Once you have their contact information, then you must ASK them to come back. If you don’t ask, they won’t come. On this you can be sure…8 of 10 of them will never be seen or heard from again. So, remember, it’s like a second date, your ask needs to personal, direct and as soon after the first date as possible.One of our clients, the Seattle Repertory Theatre has been working on their second date strategy, and theirs in a wonderful story we’d like to share.
• #19: Here’s the case study, which you can read in its entirety, which you can read on our web site: www.trgarts.comThe case is a retrospective look at Seattle Rep’s four-year, disciplined effort aimed at retaining new single ticket buyers. The first phase of their effort was to achieve that all-important second date in the same season. By doing that, retention among the specially cultivated group of new buyers was triple that of other new single ticket buyers…..as S-R-T’s cultivation efforts toward this group continued, so did growth.Here’s a quick outline of what they did.
• #20: Seattle Rep started in year one with efforts focused on getting that second date. And so, that first year, new single ticket buyers got offers to come back for a second show – and nothing else. No donation requests, although some newbies volunteered a donation as a round-up to ticket purchases….and no subscription offer. In year two, this group of households received a special direct offer – come to any three plays for $99. Again, that was the only special offer put in front of this group SRT was cultivating. And, in year two, households in this group bought on average five tickets in year two. In year three, this specially cultivated group got its own subscription offer, their first traditional subscription mailer and follow-up phone call. In year three, relationships developed further and this group of households bought on average six tickets that year.In year 4, which was the season just completed in June 2013, SRT’s specially cultivated group of subscribers were asked to renew….and they did – at an 81% renewal rate, which is a rate we normally see with long-time subscribers, not newbies.SRT’s retention program is a concentrated, patient, focused effort to get newbies to come back. They were building a relationship where none existed. Like a romantic relationship it took time and trust. Here are more results.
• #21: Here’s where we see retention. The red line tracks the rate of retention for SRT’s cultivation group – the households they got a second date with in their first year. The blue line tracks the rate of retention for other first timers. You can see that the second date really paid off – with 30% coming back in year two, while only 10% of other first timers came back. To be sure, SRT was fighting the forces of churn with both groups, but they DID achieve better retention, and the rate of retention among that specially cultivated group remained significantly higher throughout the period.
• #22: Now, let’s look at revenue growth. This chart tracks the average annual household spending among the new ticket buyers who had a second date with SRT in their first year together. You can see that in year one, the average spending was $122 and it rose slightly in year two – remember – SRT was holding back, trying to KEEP these patrons rather than bombard them with more and more offers. Then look what happens in years three and four – BAM, they are starting to subscribe and then renew – a huge jump in annual household revenue over four years of 75%.
• #23: Now let’s look at lifetime value. To calculate this metric, TRG looks at the cumulative average investment of each household that comprised all of the first-time ticket buyers in year one. We do this measurement to observe the value of retention in a perspective that normalizes for the size of each group. Of all first time ticket buyers that first year, those who agreed to have a second date represented only 11%, but see here the spending power they represented.Here, the red bars represent our cultivation group – the second daters, and the blue bars represent other first time ticket buyers who did not accept a second date. You can see that by the end of year four, each original household in the cultivation group represented $257 in cumulative average household spending –that’s more than double that of the value each of the other new timers contributed.
• #24: This case illustrates these key pointsRetention of new single ticket buyers is worthy discipline that requires focus. Seattle Rep found it difficult to keep that focus but chose to STOP DOING other things – specifically some of their time- and expense-consuming billboard and other mass media advertising – to make time for retention.Asking new-to-file single ticket buyers for a second date is THE right next step. SRT chose to follow-up mindfully but did not bombard their first-timers with other offers -- just a constant reminder to come back again.Growth is incremental – SRT saw increases in frequency and recency and monetary value, but it was incremental and occurred over a four-year period. Monetizing engagement takes time!Now that we see what it takes just to get that second date, let’s put next stages of our patron romance into a broader perspective.
• #25: We’re back to our Advocate, Buyer, Tryer Pyramid so that we can revisit the overall picture of the patron romance.With Tryers, our goal is to take our new patrons from their first date to a second date and our lapsed patrons – those who have not even flirted with you in a long time – from their last visit or purchase to a visit or purchase NOW. Yes, that second date is critically important, but there’s more to it as you’ll see in a minute.Once the frequency, ongoing recency and monetary investments continue over time, we begin to see loyalty metrics we associate with Buyers. We call BUYER behavior patterns “the magic of “AND” – that’s because BUYERS tend to purchase tickets for this event AND that event AND they come to the GALA AND they buyer their first subscription or make their first annual fund gift. In short, their loyalty metrics intensify and grow – they are more active and spending more. Then….with cultivation and timeyour most actively engaged patrons become Advocates. Advocates are universally donors -- your biggest, most consistent investors and your consummate loyalists. You or your development team can probably name them by heart because you’ve all worked hard to cultivate them. They were MADE not FOUND. They arrived at this strong level of relationship through your good, hard work.Now let’s go back to the foundation and explore more specifically the cultivation of Tryers.
• #26: We call this chapter in our love story: Courting and Commitment – you’ve had your first date, you have a second date, now what?ASK AUDIENCE: What are you all doing with people who have come twice? Do you ask them to subscribe?Hold your horses. Don’t ask them to marry you….yet. You’re going to use data in your systems to find the right next step.And you’re going to do so with an eye toward taking the relationship to the next level. You do this with an ongoing upgrade campaign that looks something like this:
• #27: In this phase, we going to look at Tryers in the way that TRG generally categorizes them – by transactiontypes that we see in buyer data. I’m going to use terms here that are most usually related to seated-event organizations. Museums and other cultural organizations likely talk about visitors rather than single ticket buyers, and I hope you’ll accept our lexicon for the sake of simplicity.These are the three common transactional types that comprise Tryers. The next step 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. Let’s start at the very bottom of the pyramid with 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 probably 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. 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. Then, of course, you’re going to ask them for that second date – as we’ve already described.Now, you’ve gotten the second date 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 in your patron relationship.
• #28: Patrons are moving from Tryers to Buyers and you’ll want to foster by making appropriate suggestions.Moving aTryer to Buyer may occur 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. It takes TIME to get to this point in our relationship--lots of dates. 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. It’s a new chapter in the relationship.
• #29: It’s in this chapter of your patron romance that you’re becoming committed to one another.– It’s like you’re moving in together – you’ve done a number of serious activities together and now the patron is ready for something more – a small subscription package or series of events, maybe a low level membership.-- Once you’ve shared that experience, it’s time to pop the question: Ask for that first real traditional subscription or membership, and perhaps an entry level annual fund gift. – Now you’re enjoying married life – your caring for your patron as you would any life partner, with an eye of maintaining their passion and loyalty and getting them to renew – subscriptions, memberships, and unleashing the power of AND we talked about earlier. Let me say a little more about that.
• #30: Your patrons at this stage are BUYERS. At this stage of relationship, upgrades play a big role in greater engagement and in growing loyalty. : 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.
• #31: 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.PAUSEUpgrades among Buyers pay dividends that we can quantify.
• #32: Now your patrons are poised for the all-important move from Buyer to Advocate. Here, the numbers are fewer, but the revenue stakes are higher. It’s at this point where donor cultivation comes in.
• #33: In this chapter, it’s all about being happy together and reaping the rewards of longevity and greater investment. It is in this chapter of your romance that development officers take the leading role.– You are celebrating anniversaries year after year – your patrons are now active donor-investors and–In your patron family, Advocates are your matriarchs and patriarchs – candidates for leadership roles both organizationally and within your audience.Its been a long time coming, but here you’ve arrived and you’ll have seen the benefits of the long relationship cultivation efforts in your revenue.
• #34: Let’s look at monetizing engagement over time through one recent TRG analysis. (Back to the action word) 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.And here’s the big pay-off—once a patron becomes a donor….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. Extremely high order size and renewal rate, and low cost of sale.So let’s put these numbers together and look at net revenue.
• #35: So, yes – it’s a love story. And, your efforts to cultivate loyalty….to monetize ongoing, growing engagement WILL pay off.How are you monetizing engagement?How do we get them in the first place?Getting contact infoWhen do you actually ASK for the subscription then?When do you ask for a donation?Thank you.We’ll now take your questions.