If you haven’t seen Monday’s Wall Street Journal special section Report on Philanthropy and Charitable Giving, go find it on line. Make sure your favorite funder gets a copy.

Pablo Eisenberg’s superb and provocative cover story, “What’s Wrong with Charitable Giving and How to Fix It” hits the nail on the head in calling for nine fundamental changes in the way that foundations of all sizes give out their money to all types of nonprofits. (See link in blogroll to the left.) His top three priorities are to increase the amount of payout from 5% to 6%; to increase general operating support; and to increase multi-year funding. The first priority takes an act of Congress. The other two are common sense. So are his other points, including simplifying application and reporting procedures and adopting rolling grant making.

Let’s get the first priority dealt with first. Eisenberg argues that “an increase in the payout rate to 6% in all grants would eventually add about $10 billion a year to the coffers of nonprofit organizations, to the approximately $40 million that it is estimated that foundations now give.” Yes, you read that right. $10 BILLION would be added to the $40 million. He goes on to say that “Foundations claim that such an increase would jeopardize the perpetuity of their assets, yet a number of studies argue that their assets could be maintained with a payout of 7% or 8%. The Obama administration and Congress should act quickly to increase the payout to 6% in grants, and the President should use his bully pulpit to pressure foundations to give much more than they are currently giving.” (Well, my sense is that most foundations are giving as much as they can to save nonprofit organizations in this dire time. But I fully agree: Congress has to let the payout go up to 6% or we will simply lose our vital nonprofit sector.)

As for Eisenberg’s other key recommendations – increased operating support, multi-year funding, and rolling grant making – they are essential changes that have to happen to keep the arts sector alive. Many foundations, to their vast credit, have already scrapped their various grant programs in favor of general operating support – at least through the predictable future. But the very notion is still politically charged among funders who have traditionally used grant making to address their own priorities. Equally charged is the idea of multi-year funding and overall larger annual allocations so that organizations have a chance to really do what they set out to do, rather than accomplish only a fraction of their goals.

In the arts, the past/current model has been proven, and proven, and proven to not work. In her report to Grantmakers in the Arts – the association of foundations and public agencies that fund the arts – Holly Sidford recently wrote that “the nonprofit arts business model is shaky, for many reasons. One important reason is that the practices of both nonprofits and funders have not recognized that there are different kinds of money (in the Nonprofit Finance Fund’s terms: build, buy, and burn capital), a financial diet too rich in project grants erodes the fundamental viability of any nonprofit organization. A commitment by more funders to better understand and respect capitalization principles in their grantmaking, coupled with more open-minded exploration of ways funders can support hybrid and alternative financial models, would increase responsible practices in the future. A corollary to this is the need to adequately capitalize collaborative ventures.”

For decades and through a number of recessionary cycles everyone involved in arts funding has known that the emperor has no clothes – the funding approaches adopted and used in both the public and private sector do not and have not and will not work to create a healthy nonprofit arts sector. It was 1966 when economists William J. Baumol and William Bowen first studied and wrote about the fundamental earnings gap within the performing arts and here we are today, still with the same earnings gap and the same undercapitalization and underfunding of the arts.

Write a letter to the President. We need that 6% payout rate.
Talk to your favorite foundations. It has been 44 years since the earnings gap was documented as undeniable. Isn’t it time to fix charitable giving so that the arts survive and (maybe) thrive?

Its time to notch up the science behind marketing the arts. Are your brochures tuned to elicit real responsiveness? Is your web site similarly tuned? Your post cards? Your promotional flashes in any form? Have you used consumer research to maximize your promotions?

I’m constantly surprised by inadequate visuals and graphic elements that are used to sell the world’s most visual and emotional of all products – the arts. My guess is that a lot of the poor field-wide promotions are due to: 1) A reliance on in-kind design or a utilization of lay graphics teams; 2) A lack of belief in marketing as a science, and as such, a portfolio of proven approaches that WILL make a difference if correctly used.

I’m happily posting a link here (see below) to the expert writing of Jean-Pierre Lacroix, President and Founder of Shikatani Lacroix and author of (among other booiks) The Blink Factor (1990), a book that has been on the “favorites” portion of my book shelf since it was published.

In his recent white paper on promotional packaging, Lacroix shares some critical elements of consumer responsiveness that will benefit any arts promotion. For example, he writes that “while consumers typically read from left to right, top to bottom, the research indicates that words are recalled better if they are perceived from the righthand side of the individual, or in the case of packaging, the right side of the face panel. Pictorial or non-verbal cues are more successful if coming from the left-hand side. Brain laterality will only affect material on the outer sides of the pack. There is no evidence of laterality for centralizing elements of packaging.

“In addition, based on other packaging studies, 40% of all communication consumers absorb is visually
oriented, and 80% is driven by the use of color and shape. These insights support the need for
promotional packaging flashes that complement consumers’ absorbtion of information, leveraging how
information is viewed and retained.

“For some packs’ copy, such as brand name or flavor description, it is important to enhance recall and
research suggests that these elements should be placed centrally or on the right-hand side of the pack.
Pack flashes function as pictorial devices despite containing verbal elements, and therefore should be
positioned on the left hand side. Nearly twice as many respondents who saw a promotional flash on the left-hand side of the pack were able to correctly recall the promotion. In addition to its visual effects, packaging also communicates its shape, size, weight, and texture through its tactility.”

Go read the balance of his white paper. Sure, he is writing about cereal packages and how we as consumers make choices as we move through grocery stores. But our field needs this level of detailed examination concerning consumer responsiveness to all sales and promotional materials.

And, by the way, think of testing your promotional materials even when you adhere to the level of science Lacroix describes. When was the last time you used a focus group or consumer panel to evaluate prospective responsiveness to your marketing and promotional materials? Can you be sure you have created materials that enhance recall, that ensure positive response, and that keep yoru targets from wandering somewhere (some other art/entertainment) else?

How many thousands of dollars are you betting on your next season? Can you risk all that expense, and all that revenue to anything less than research-based marketing?

http://www.sldesignlounge.com/wp-content/uploads/2009/11/PromoPackaging.pdf

Let’s say this clearly: it has never been harder to create, build, and maintain an arts audience. There has never been more attrition, lower retention, more ways needed to connect, more prospecting needed, to more numbers, to derive small incremental gains. Toss out yesterday’s level of investment. Take it up x 4. Or x 10.

There are more and more reasons not to attend, to walk through the doors, to sit and interact with the art on stage or with the art on the wall. The economy and lack of discretionary dollars, fragmentation in our lives and interests, inertia, lack of social connectedness with others in the audience or on stage, lack of time, lack of intellectual curiosity, lack of winningness to invest in the metal state of emotional and intellectual response and reflection that art demands of us. And, not to forget Shanon from Arizona’s comment in response to my last blog – the complete and utter self absorption that comes with endlessly customizing earphones/text/screen handheld/Twitter/Facebook to reinforce self rather than encounter with minds open to exploring the different and other that is art. She’s talking this problem v/v high schoolers, but it increasingly pervades all generations. It may be that new media’s foundational concept of 24/7 self-absoption is the greatest challenge that arts participation warriers have ever faced.

I think of the monster challenge, then, that is what arts marketing now faces every day, and the level of investment that HAS to be made to find, prospect, emotionally connect to and then retain audiences.

A couple of weeks ago, I concluded a year-long consultancy with a fine Canadian theatre company, during which we created marketing systems, tested them through fire, and evaluated what should last. They did significantly increase their audience count, but didn’t reach their revenue goals because it cost more than planned, and they needed more discounting tactics to get people in and back in the door than they planned. It left the board and staff collectively saying “it was so hard, so expensive, took so much time….was it worth it? Is this our future? Are you SURE there is no other way than a lifetime commitment to marketing at this level?”

Yes, yes, and yes. It will cost more, require more prospecting with lower returns, take more back office time, and be ever more strategic – requiring more and more organizational skill. It will be less fad, more investment. It will grow from detailed ROI projections, detailed Lifetime Value calculations. It will be more investment in the pipeline – constantly ensuring a stream of newcomers to enter the door, and then winning them back. It will be much more releationship marketing to build that return. It will take nothing for chance.

Today, we are marketing to the cultural market of one. It takes a lot of investment to find and connect to that “one,” to keep and nurture that “one,” so as to eventually realize the continued support of that “one.” Today there are hundreds of niche arts and cultural audiences and interests: no single “arts-interested potential audience.” Realizing this, and aligning your organization’s investment accordingly, will position you to gain the one-by-one audience growth that is the arts future.

Ignoring it is…denial.

There’s a must read column in today’s on-line Forbes by Silicon Valley technology entrepreneur and strategy consultant Saramana Mitra. Anyone who thinks about the role of creativity, of invention – the absolute thinking processes we learn from and through the arts – should ponder it.

Writing about our economy, Mitra says,

“We’re not having any recovery. We need the innovators, the entrepreneurs, the creators, the scientists, the technologists–those who build value, those who create jobs–to lead us out of this nightmare. Not a bunch of speculators who make money regardless of whether value gets created or destroyed. In fact, many of them are incentivized to destroy value by spreading fake rumors about companies and stocks, and they do so often. Some get caught, most don’t.

And our talented youth gets seduced by this profession of speculation known for its easy and abundantly flowing financial rewards, avoiding those that require much greater intellectual capacity. Most importantly, very early in their lives, our talented youth come to realize that fields that may earn them a Nobel Prize–cancer research or multi-core computing–may not make them rich. But moving money from here to there will.

And thus, we lose Berkeley Ph.Ds in nuclear physics to hedge funds and MIT computer scientists capable of delivering computing to 6 billion people to derivative manipulation on Wall Street.”

Mitra’s focus on nuclear physics and computer scientists could well have included the documentary film maker, the author, the composer, the designer whose creativity and innovation should also lead the way.

Until we see that creativity is fundamental to economic as well as social progress, and make creativity a fundamental (and attractive) value throughout our culture, we’re stuck. Intellectual property is the currency of the future. What drives its creation?

Creativity and innovation.

As an arts-facility planner whose teens are mobile-messaging, YouTubing, Ituning and 24/7 media engaged arts active kids, I can’t help but wonder about the vast divide in what we think arts facilities should be – most especially performing arts facilities – and what our kids will want them to be in the next ten years.

I’ve recently been facilitating some planning for a high school auditorium/performance center, and in the process have read hundreds of web posts from high schools all over the country planning new auditoria. In these searches, I keep looking for discussions of the ways kids learn and engage in the arts today – maybe not in class, but on their own – as a predicter of the arts facilities of the future. Its a whole different world out there, but the vast majority of high schools are still building performance halls for the band, orchestra, and high school musical.

Now, I love the band, orchestra, and musical side of arts learning as much as anyone could. But where are the sound-proof rehearsal spaces for the plugged in bands, the computer studios for the composers, or the film stages for the film programs? The editing studios? What about the black box theatres that also serve as the school television studio? For that matter, what about the small experimental theatre spaces, or the acoustically superb recital spaces? (There are more of these out there, to be sure, but still not that many…)

I’ve been reading Henry Jenkin’s report for the MacArthur Foundation, Confronting the Challenges of Participatory Culture: Media Education for the 21st Century, at the same time as thinking about arts facilities, and it is pretty provacative. Through the arts facility lens, Jenkins to me suggests we are living in two simultaneous zones. One zone is buildings (and teaching) that reinforce tradition. The other zone – which is where our kids are, right now – requires us to find new ways to enrich and transform arts learning facilities to match this amazing participatory culture that is no longer the future.

The USPS is in major deficit mode, but for once, rather than passing along its issues in rate increases, it is actually DISCOUNTING in ways that may really help nonprofits who do mass mailings over the summer months. You must apply by June 11, 2009, and there is some nuts and bolts work involved, but you can reap significant savings and, at the same time, reach more prospects. The cost savings comes in the form of a per piece price credit to postage paid based on the incremental volume mailed over the baseline.

The savings are based on using Standard Mail Saturation Mail. Saturation mail is defined as reaching 90% of the households in a specific carrier route. Now, many of you know that I advocate for very highly targeted prospecting – only reaching the very best households that match your desired households. So, you will want to use saturation mailing only on those carrier routes you or your market analyst/list preparers know will be productive. But if you can demonstrate to the USPS that you will increase over your baseline, the credit per piece mailed can be $.022. Think of it as stretching your budget to allow you to mail more, and right now that is good news when we know mailings have to be larger to yield the needed ticket sale results.

Talk to your USPS district manager. Requests have to come directly from your organizations, not from mail houses or agents. You’ll need some time to do the math, so don’t put this off to the last minute. You, your budget, and those added households you can now afford to reach will all be glad.

There are three things that can happen to an arts organization (or any nonprofit) during a recession.
1) You can close your doors and basically go dormant. 2) You can scrape by, maybe in worse shape, but making it. 3) Or you can thrive.

Sounds crazy, doesn’t it – THRIVE. Yet it is happening. People are lined up in the rain outside the Chicago Arts Institute for the Edvard Munch show. Movies are selling out hours before show time. Symphony concerts, popular artists, lecture series – shows in venues coast to coast are selling all tickets. People are responding to arts and culture.

How can you ensure this kind of good news? Follow these rules and tips as a start, and come back next week for more in the tool kit.

ArtsMarket’s Rules to Live By

1. Plan to thrive. That’s right. Plan for success. Even now.
2. Budget to thrive. Invest resources where you can see results.
3. Program to thrive. Do what will stand out, be noticed, and program what will “demand” an audience.
4. Market to thrive. Create a compelling story. Share it. Prospect. Link.
5. Brand to thrive and image to thrive.
6. Govern and lead to thrive. This is exactly not the time for fear. Careful stewardship, for sure. But thinking for long term success now will let you open the box of your thinking (see my logo, above), explore new opportunities, edit back that which will go nowhere, and focus on the goal.

Over the next few weeks, I will be translating these into tools for the month. We’ll start with marketing, because April is the start of prospecting season for most performing arts organizations. It is when major budget allocation decisions are being made for next year’s marketing budget. Next month, we’ll focus on governing and leading to thrive, so you can move forward with those plans in May in June.

Using the ArtsMarket Rules to Live By in Your Next Season Marketing.

Your marketing effort for next year isn’t going to work if it is only about survival. You have a brilliant chance, right now, to emerge from the shadows and be the answer to consumer needs and wants for great art, great entertainment, great food for the soul. THINK AT 40,000 Feet. Plan for increased participation, and increased revenue. I challenge you to NOT set low expectations.

When you plan and budget to thrive, there are 10 things not to do in the current economy. Address each of these, and you will succeed.

1. DO NOT cut direct marketing. There is so much less clutter out there right now that every piece of mail is noticed, and if written write, provokes a response.

2.DO NOT stop prospecting. Everything is about prospecting. Remember that the #1 rule of business is to get a new customer who WILL COME BACK. So first you get them in the door, then you provide a great experience, and they return. You must prospect. People who don’t keep your organization top of mind are probably – like all of us – a little too numb to pay attention to what play is on stage where next Saturday night. Remember, your house list faces bigger churn in a recession so you constantly need to find newcomers.

3. DO NOT stop PR. There are more PR opportunities out there now than ever, more keyed to age groups than ever. For your networking savvy folks, you have the cocktail party atmosphere of Twitter where you can drop a hint, ask a provoking question, start a dialogue. You’ve got the Starbucksian atmosphere of Facebook, and the ever so professional conference of Linked In groups. You can Flicker, YouTube (and I challenge anyone to take on Carnegie Hall to an even higher level of community building), and so much more. At the snail level, there is a plethora of new micro newspapers emerging with the demise and cuts of metro dailies – ever so accessible. The web sites of existing media, the newsletters and the links….we’ve never seen such ability to use so many PR channels. And let’s not forget the real essence of PR – doing good for the community. Any time you can get out there to help others, right now, you WILL be seen. A number of you have read my blog and Twitter notes on the organization that has been giving tickets to the local food bank so that families can attend performances. The tickets are on the shelf next to the canned soup, and anyone can take them. No one in the audience knows who used those particular tickets.

4.DO NOT sell extravagance. This isn’t the time to market to the luxury-for-me crowd. But it is time to market wonderful experiences that create lasting memories you can enjoy and replay in your mind for months to come.

5. DO NOT cut your back office investment in database excellence. If the fire alarm goes off what is the most important investment you must save that probably isn’t covered by insurance. You got it: your database. And it isn’t just the data, it is how the data is organized and how much it allows you to customize the offers you make. Well structured data lets you personalize your prospecting.

6. DO NOT think that e-marketing, alone, will save you. It will save you a lot, but every arts audience out there has a sizable proportion of older individuals who will not follow you via email and an equal portion of all ages that has opted out of the e-marketing grid for financial or philosophical reasons. They want to see if you care enough about them to get your info to them. Do you?

7.Do not disappear between events. This is particularly important for organizations that have only a few major events a year but are there all year. I know many museums in this boat – especially as special exhibitions have decreased. Find ways to be visible every week, and to create curiosity so that people have to follow what you are doing and thinking. It might be your blog. Or it might be that you start offering salsa classes in the galleries on Friday evenings.

8. DO NOT stop leading. Your organization signals hope, confidence, and meaning to your community. Be out there living the message. Help other organizations. Facilitate civic plans. Be visible, and be confident.

9. DO NOT cut advertising. Okay, you very well might cut advertising dollars, but you’ll do better if you rearrange your advertising dollars. To all of you who have cut back your major entertainment page spending: with so many fewer competing ads, yours will be more visible. To those of you who have wondered where to advertise: you have terrific options now between on-line news media (banner ads), civic calendar/ticketing sites, local cable (incredible deals), and even traditional media. It is turning into a buyer’s market, so take advantage of your opportunities.

10. DO NOT stop saying thank you. In fact, thank your audience and attendees more than you ever have in the past.

I want to come back to point 4, and really every other point about image, atmosphere, communications… I read a recent analysis of Allstate Insurance’s most recent round of TV ads. They are a brand and image marketing giant –i.e. “Like a Good Neighbor We’ll Be There”, “You’re in Good Hands,” etc… Do you remember this winter’s NFL ads, using the Frank Sinatra/Nancy Sinatra “Feeling Kind of Sunday..” tune? It would be hard to find something that did a better job, this difficult year, of creating a happy kind of glow…that tune and sensibility sticking with you until you felt hey, it was Sunday, and time to kick back….so you might as well be there with Allstate…

I challenge you to come up with your own “Feeling Kind of Sunday” imaging for upcoming season. Feeling kind of museum…feeling kind of theatre… Send your ideas and you may see them on the next tips and tools!

And, last but not least, I want to come back to prospecting. What you don’t want to do now is waste money. But you do want to get a call for action/great offer out there to people who will respond. We regularly put together prospect mailing lists like this to target people who wouldn’t be likely to know about a performing arts series through the web. It can be a real challenge, but we see how incredibly well it works. When your returns zoom up there, this is the kind of prospecting to use. For example:

These criteria for everyone on the prospect list (Sample criteria for a given geographic area)

Over 60 (figuring this is still the age group less likely to contain high level web searchers)
Self identified interest in performing arts
Self identified interest in gourmet food
Self identified interest in reading books
Take music/arts classes
Responsive to mail offers

It works.
Remember, PLAN TO THRIVE.

The Foundation’s Center’s wrap up on 2008 giving (“Foundation Growth and Giving Estimates”) is just out. It turns out that 2008 wasn’t quite as bad as it could have been. Foundation giving as a whole dropped by only 1.3%. Community Foundation giving was up by 6.7% over 2007. Given all the economic hell that went on last year, the results could almost be considered comforting, especially when placed in the context of the giant increase in foundation giving that happened in 2007. (There was a 17.3% jump in charitable giving in 2007 over 2006, so 2008 represents a 16% increase over 2006.)

This good news won’t hold true for 2009, however. The same report notes that foundation giving will be down anywhere from the high single digits to the low double digets this year. 75% of community foundations will be cutting their giving, and corporate foundations, especially those in the financial sector, will be cutting drastically.

How should the arts respond as you are setting your budgets for the next fiscal year? I think that the arts will see some good news despite the status of foundation and corporate giving. My projection is on increased earned income, based on consumer pent up need translating into increased attendance. And, I think we’ll see some modest gains in time for the arts’ fall season. I’m basing this on last week’s report by Forbes’ economist Noriel Roubini, pojecting that the first quarter 2009 economic contraction of -6% will ease by the 4th quarter, up to about -2%. (By 2010 he projects we’ll be back into positive numbers. This means that the capacity for giving may rebound.) But more fundamentally, consumer spending will be up by fall. Project 4% growth over what you are seeing right now.

So my vote for the fall? Modest increases in earned income. Offer a great season, and market to that pent up consumer need.

Grab a copy of this month’s Harvard Business Review. The lead article, How to Market in a Downturn
by John A. Quelch and Katherine E. Jocz, both at Harvard Business School, takes a look at consumer behavior in downturns since the 1970s. And as they point out, consumers never totally stop buying. They become more careful, more selective. But they still consume. They still come to the arts, but they consider their choices carefully.

And, in a recession, market segmentation takes on a whole new meaning. Quelch and Jocz have taken all the demographic and lifestyle clusters that exist out there and condensed them down into four segments:

The Slam on the Breaks segment. This group includes the hard hit, the unemployed – everyone whose world is upside down.
The Pained by Patient segment. The authors call this the largest consumer group in the US right now. Economizing, cutting back, but still doing and going. Carefully investing in whatever they purchase. Probably really looking for bargains.
The Comfortably Well Off cohort. Sure, this includes the upper 5%. But more importantly for the arts, this includes the carefully invested retirees who continue to have the resources to go to the arts.
The Live for Today group. Hey, they never had any savings anyway, so why change?

The authors point out that all four groups spend. Each spends on essentials that “are necessary for survival or perceived as central to well being.” For many, arts, cultural activity, and a way of weaving joy into life is central to well being. That’s a powerful offering that the arts have always had, and it is the message that people will best respond to right now. Anything that is an ‘indulgence’ is probably not going to be purchased right now. Anything that is the same old-same old can be put off for another season. Anything that is unjustifyable – an over the top ticket price, for example – may be looked at as expendable.

The authors point out that all four segments will be responsive to strong brands and good loyalty marketing, so that marketing can be extremely important right now. As they note, companies with excellent brands, like Johnson & Johnson, maintain high stock values through recessions based on continued brand-responsive consumer purchases. So, if arts-lovers can only spend on one event, or on one organization – make sure its yours they trust to offer them outstanding art experience.

Be sure your organization has the resources to market your best strengths. The authors recommend dropping programs/products that just can’t make it no matter what in favor of putting more resources into your core that will attract the most loyalty and new attenders. Focus on strength.

I also think there is great power in responding to the absolute need of the Slam on the Breaks folks. Put any resources you can into opening doors for those who can’t afford art any more. Last week, I was in Canada working with a group that noted the power of offering blocks of tickets at the local food bank. No one needs to know who gets the tickets there, or how large a share of the audience comes through that door.

What’s the number one issue you need to overcome? Retreating due to fear.

The best nonprofits are those that take the long view. That see the world – their art, culture, audience, funders, and future – at the 40,000 foot level. They see where they want to go, and they know that if they keep focused, they will reach their destination. It might mean a little slowing in the pace, but it doesn’t mean giving up.

Andiences and funders will come back, and in fact are coming back already. For audiences, demand is on the increase after months of negativity. For funders, donors, and folks whose discretionary income rises and falls with their portfolio – last month was the best stock market month since August. It still will be hard, but there are some spring flowers blooming out there.

What should you be doing? This is the season for renewals – in memberships, audience subscriptions, and looking ahead to a new year. Do not pull back on your renewal and new efforts. Plenty of people who dropped off your database last fall are ready to – need to – reconnect to art.