Tag Archives: Arts Marketing

A Crisis of Audience

We have an audience crisis on our hands. More grim news in the performing arts field this week comes from the New York City Opera, which is leaving Lincoln Center for someplace, somewhere, sometime. It wants a smaller hall which it hasn’t yet found, and it wants to eliminate fixed operating expenses. Why? On any given great performance evening, it can only count on what is reported to be an audience so small that it fills no more than 40% of the hall.

Sound familiar? My blog on the Philadelphia Orchestra noted that in their case, too, small audiences are at the root of the problem. In too many American cities and for too many great American live performing arts institutions, ticket sales are now making up the decided minority of overall revenue. And that’s the most serious problem in the field today. Without regular, repeat buyers – and I’ll take any kind of repeater, not just a subscriber, but anyone who cares enough to come back a couple of times a year – organizations can’t build loyalty. Without loyalty, there is no real personal identification, involvement, and investment. And without that personal identification, there is no annual gift. Without annual gifts, there are rarely major personal gifts, and even more rarely bequests and planned gifts that have long been the foundation for endowments and special programs.

So eventually, smaller and smaller audiences spell fewer and fewer donors. This is particularly critical as we move toward 2012’s Federal proposed cap on itemized deductions, including those for charitable contributions, at 28% of personal income. Not only will this have a highly negative impact on larger gifts from more affluent donors, it will place the burden on more smaller gifts from more people who will be essential to the survival of nonprofit arts organizations. That means we really have to hustle to get more repeat ticket buyers that will make a greater quantity of albeit smaller gifts.

A lot of what is keeping people away from ticket buying is cost; even a musician in the New York City Opera orchestra was noted as saying that he didn’t blame folks for not being able to afford tickets to the organization that has employed him. He’d probably just go out for a beer, he said, if he had any extra change. A beer out is about as much as many arts lovers can afford these days, and that’s flat-out tragic.

But others are fortunate enough to be able to pay the price of admission. And right now, we have to connect to them, woo them, and win them. We need an audience that can and will pay, will come back, and will stay. That means we have to find them, first; then win them.

Typically, development officers are the ones that put stock in donor research. Here at ArtsMarket, we believe in starting prospect research much earlier than in the development office: you’ve got to find likely markets that will be able to buy tickets, and begin with getting them in the door. That takes a lot of research and analysis, and prospecting that is pinpointed.

Yes, social media and mobile-marketing and advertising can do a good bit to get the last-minute buyers to your box office. Both are essential in connecting to younger buyers, and particularly to impulse buyers. But maybe institutions that budget too little for arts marketing – arts marketing has remained perennially underfunded – need to think again. We know of too many organizations that have just been kidding themselves into thinking that more and more (even all) of arts audiences can be won through low-cost social-media based marketing, alone.

This has to be the time when solid research-based prospecting and communications that can be accurately predicted and managed comes into play. We have to build a new pipeline of prospective audience loyalists. Those who take marketing seriously and do it comprehensively stand a chance of winning. And right now, we need a field-wide commitment to winning – to winning people back and into halls for great art. Before for others, like NYCO, it is too late.

Arts Marketing and a Bankrupt Orchestra

Now we know what makes the perfect storm that topples arts organizations. Yesterday in the Philadelphia Inquirer, Philadelphia Orchestra Board Chair Richard B. Worley laid it out. The story is classically cautionary.

”Today, our unrestricted endowment is nearly exhausted, our emergency fund has also been depleted, and our cash reserve has fallen to $3 million. Absent additional funding, we will run out of money soon.

“Our costs are too high, but the basic cause of our financial problem is declining revenue. The audience is the lifeblood of the orchestra, providing ticket revenue and a vital donor pool. But over the last two decades, attendance has declined from 250,000 to 150,000 annually, and half of that decline has been in the last five years. As a result, ticket revenue has declined to only a third of expenses, and donations have fallen to half the level of other major orchestras.

“For years, our costs increased as revenues declined, and our operating deficit is expected to reach $14.5 million this year. In the face of such deficits, we drew down our unrestricted endowment and, as that dwindled, raised $15 million in emergency funding from the board and a small group of donors.

“Second, the orchestra does not have $140 million in assets to meet obligations. The orchestra and the Academy of Music together have $140 million in restricted endowments. We are limited by law and donor restrictions to spending only the income from endowments, not the endowments themselves. And spending the endowments, even if allowed, would be a path to ruin, shrinking income and our ability to attract endowment gifts.”

The absolute centerpiece of this is the second paragraph. The orchestra has lost on average 10,000 ticket buyers a year for the past five years, meaning that earned income has fallen to only represent a third of all revenues. So, you ask, can’t this be the new normal? Can’t organizations survive just fine on a 33% earned-66% contributed revenue split? I’ve actually seen plenty who are attempting to say this is the new model of health.

But it isn’t, and Worley’s well chosen words say why. When audiences get too small, they don’t provide the lifeblood or pipeline to keep an organization healthy. In any given year, there is always huge audience attrition. People die, move, put their leisure money elsewhere. As a result, every organization needs enough of those casually interested ticket buyers to survive the attrition and stick around, ideally now as a more regular attender, eventually even as a subscriber. And there have to be enough of those regular attenders who stick to become new donors, to replace the donors who every year also leave through attrition. If the system has too small a base, you are mathematically out of luck. For example, draw your attender triangle on its base, then split it into four segments. Label each segment from the bottom up as follows: casual, repeat, sustained, supportive. How broad is your base? Broad enough to make sure that top section is large enough to do its job?

In the new normal, that top section of the triangle now has to churn out – inspire, win, give, cause to give –the staggering portion of the budget that now has to come from contributions. How realistic is that when the base is shrinking faster than ice cubes in July?

A lot of people will blame the marketers for not doing their job, and as the musicians’ leader John Koen correctly points out in his own letter to the Inquirer, crucial marketing and development positions at the Orchestra have long remained unfilled. No doubt, as so often happens, this was in an effort to save salary costs – but at the peril of generating essential revenue, and even more so, at generating that base of the triangle that has to be rebuilt.

Yet, there is a far, far bigger issue at stake here. Quite simply, marketing has to emerge on such a scale, with such ability to change consumer behavior as we have never seen before to save this orchestra and hundreds of other arts organizations and entertainment presenters around the country.

The issue is as much one for Hollywood and movie theatres everywhere as it is for symphony orchestras: Consumers have changed the way they spend their leisure money, and techno-apps gains have been live entertainment’s loss. Just last week, I took a look at some recent household spending trends with data available from the Bureau of Labor Statistics. I chose three variables: entertainment tickets and admissions; spending on audio-visual equipment, and a relative constant – spending on women’s apparel.

The game changer, of course, is audio visual. Our insatiable thirst for new apps, new eReaders, new tunes and tablets and a million new games has grown and grown and grown. That’s just fine as long as household resources keep growing and growing along with it. But say you only have so much money to spend – ah, the recession – and then say you spend more of it on new gadgets than ever before. Something suffers, right?

Notice how closely spending on clothing and entertainment parallel each other all along the way, until suddenly at the $200,000 + household earning level, entertainment springs loose. But really examine how vastly different spending is on apps and stuff: look at that huge chunk of household money.
This relatively fresh data (it was released in October, 2010) spells out the new normal for all live entertainment: you’ve got a far smaller slice of your consumer’s budget dedicated to you than ever before. Given this, how realistic is it to expect to build the bottom of that triangle to the level needed?

When we talk about a structural problem in the arts, it begins right here, not just on the balance sheet at the Symphony. Perhaps, if the recession vanishes, there will be more household money, more ability to blur the stark numbers above. But a blur is all it will be.

Only with herculean marketing efforts to pry dollars away from the newest cool stuff are we likely to survive. Only with equally herculean investments that insert the arts into technology to create new revenue streams will the badly needed new revenue sources really open up. The entire consumer system around entertainment has to change. And somehow, we’ve got to make that happen. Or what we see in Philadelphia will just keep playing and playing, coming sadly and soon to a city near you.

So take a good, hard look at doing marketing the right way. Just how aggressive does your institution need to be to chip away that household spending on apps and tablets and move those dollars into the fees and admissions column? Just what needs to happen to ensure that you have the audience lifeblood that Philadelphia so needs and lost?

The Grateful Dead and the Tapers: A Distribution Lesson for the Arts

I had the chance to tune into a great webinar yesterday led by Guy Kowasaki, the former chief evangelist at Apple and author of the new book Enchantment. The book is about how products and their marketers succeed in really enchanting audiences (buyers.) One of his examples was too good not to repeat. And it is a great follow-up to last week’s blog on how newly increased cable distribution will change the way we consume the arts.

Many of you may know how big the Grateful Dead community has been for all these decades. You know the ease of downloading recordings of their vintage concerts. What Kowasaki focused on was how the Dead fostered that community and all those recordings by creating and championing free seating for the tapers – the bootleggers and fans who got it all live. He noted that while everyone else works so hard to ban tapers and to control the distribution of concerts, the Dead’s free taper sections created – and continue to create – a lot of enchantment as the music and events live on and on.

I got a lot of feedback and emails on last week’s post about new distribution mechanisms in the arts, and a number of skeptics wrote me that we have to protect the live event and especially the artist’s ability to be heard and seen at the live event. (There seems to be some sentiment that too much distribution of classical arts via cable could somehow harm classical arts?) I love live events, witnessing art first hand. But maybe these guys had it right all along when they openly encouraged the free distribution of their work to make it live for everyone who couldn’t be there. What would happen to audiences if there was more of this, using today’s technology?

There’s a lesson there. Face to face interaction with content is what builds audiences far more than all the PR and marketing in the world. Face to face interaction – sure, including via digitized media – that is facilitated by people just like you and me, who think enough of the content to pass it along, is even more likely to build audiences. Too bad that 99.9% of the artists out there have contracts forbidding the very thing that, as Kowasaki puts it, is totally enchanting in the simplicity of methods to build and keep thousands of happy fans. Think of it – a taper section at the concert hall. A taper section at the theatre, the opera. YouTube content that never stops, that is fundamental to audience growth. Encourage distribution, facilitate it, champion it. And watch the line at the box office grow and grow, just as it did for the Dead.

A Way Forward? Rethinking the Distribution of the Arts.

Following so closely on the heels of the Philadelphia Orchestra’s bankruptcy, the sad news this week is that the wonderful Intiman Theatre Company in Seattle has gone dark for the rest of the season.(The hopeful news is that its board hopes to raise enough to re-open in the fall.)

I found the Intiman news that crossed my desk yesterday to form an interesting juxtaposition with a news release I received from Fathom Events. Fathom is the HD movie distribution company that brings us the Met at movie theaters around the country. And lately, its arts product has started to expand. This spring, for example, there are New York Philharmonic and L.A. Philharmonic HD concert/
productions. And they are also presenting – in movie theaters – two great Broadway productions, Memphis, and the Importance of Being Ernest. Locked as we are in this interminable spring of miserable weather, the prospect of Saturday or Sunday afternoons at the cinema over in the mall sounds pretty nice. And the ticket prices are painless, certainly compared to Broadway.

What Fathom is offering with its slowly expanding fine arts schedule is just the beginning little stumbles, I think, toward what could and should be something much larger – something that could eventually be a revenue generator for the struggling theater companies and symphony orchestras of this country. I have problems with Fathom because it is such an insiders-and-in-the-know thing. There is no marketing outside of Fathom or the Met or other institutions’ email lists, and it is so hit or miss. Just because my local cinema airs Fathom’s Met broadcasts is no guarantee I’ll get to see anything else. For example, I would love to catch the LA Phil’s all Brahms concert the first week of June, but no luck.

Let’s imagine, though, that the marketing was much better and that the product line up was there. One week the Met, the next week LA Phil, maybe the Chicago Symphony Orchestra the week after, maybe New York City Ballet the next, and so on. Pretty great, right? And imagine, too, that you didn’t have to even go to your local theater. As of this month, you don’t.

Roku, that little black box you can buy for $59.99, now lets you have access to free and unbelievably low-cost classical arts programming via its new ClassicalTV channel.(http://www.classicaltv.com) When I say low-cost, I mean it. You can catch the opening night gala from the 2009 Salzburg Festival with the Vienna Phil for the rental cost of $1.99 for 90 hours. (I know what I’m getting my mother for Mother’s Day.)

So we are on the cusp. Imagine making Saturday night popcorn and choosing what orchestra concert you want to see. Or spending Tuesday night’s pizza dinner in front of the opera broadcast of your choice. We are right there.

What will this mean to the repertory theater companies and the symphony orchestras and the ballet companies in your city and mine? The challenge and implications, and the prospective benefits and losses are all huge. For the finest – where the artistic product can stand up to the scrutiny of the screen – the benefits are incredible. For the others, it is clearer than ever that audience development will have to focus on the social and community aspects of attendance. (Why buy a ticket to an iffy production when you can gather your friends around, and enjoy a great evening at the Royal Shakespeare for about a dime a person? Clearly, the social aspects of actually “going” will have to be stupendous to balance that five-star event at its ten-cent-per-person cost.)

If this takes off – and I bet it really will – our entire arts world will be remade in front of us. We’re going to be rethinking everything about who our audience is and why people attend. And arts organization leaders everywhere are going to wonder anew what the opportunities and implications will be for product development.

The real excitement here is the chance to rebuild the market for the arts. As ever, the old question of “What is this, a pencil or a communications device?” is fresh. We may not be going to “live” performances and our performing arts centers may have to rethink their business models. But for those arts organizations that see opportunity through a new distribution mechanism and for the audiences that love arts, this is the dawn of a golden age, not the end of an era that one might think from all the recent bankruptcy news.

Invest in Arts Marketing: Its Your Future

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.

Good news for arts marketers!

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.

Arts Marketing for Success 2009. Part 1.

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.

Best strategy to bank on for the arts in 2009?

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.

A new way of looking at market segments

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.

Good News on the Horizon: Research from other sectors

A big part of what I do is bring trend information to the table for clients. I look beyond the arts to other sectors that can guide us. Today’s good news comes from Commercial Property News, a publication I regularly comb for trends regarding cultural center development, arts facilities in mixed use development, and even the trends witnessed by retailers who are the prime tenants in commercial properties.

This week’s issue focuses on a new study by RREEF Research, which is a highly regarded property research company, in this case through a study they did for Deutche Bank, on trends in US commercial real estate.

1. They see that the decline in sales of commercial properties will halt by mid summer, and that we will start seeing upturn by the last quarter this year.

2. Vacancies will decline by the start of 2010.

3. Neighborhood and community centers will be the first to start doing better.

What does this mean for our field?

1. Be ready. Those projects that you may think won’t be forthcoming may be just timed right for investment. Construction costs are lower by far than they were, and good deals can be found. Timing is great.

2. If yours is a community center mixed use venture, you should be working now to line things up. Developers will be ready to move by the last quarter of this year.

There’s one other interesting finding here. CPN reports that the “luxury goods” retailers will be among the first to see the uptick by the end of this year. I look at that and think that your subscription ticket sales next fall may be better than we could anticipate right now. A week ago, when I read that the Chicago Art Institute was increasing its admission prices to $18 come May, I thought it was not such good timing. But they seem to be right in line with this report of pent up demand meshed with a bit more expendible money. All in all, a good read of tea leaves that gives new energy to us all as we look to next season! Let’s banish fear, and get to work.