Tag Archives: loyalty program

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.

Recession, Loyalty and Frequent Attender Perks

With the back-drop of huge financial instability that is being felt by non-profits everhwhere, we just finished off an audience analysis study for a highly respected university presenter. They’d asked us to sift through data about ticket purchase patterns over the past four years to see what trends could be used to shape expectations of things to come. They know the economy is having real and dramatic impact on their revenues, but just how is the impact of a scary economy playing itself out? They wanted to know what to expect in the next six months or year of financial turmoil. What does it mean for marketing the arts?

We found some amazing trend data on what is happening right now, this season, that could be important to many presenters:

1) For this presenter, subscribers had always been able to pick the number of events they went to each year – a pick your own subscription package. We found that over the past two and a half years, the average subscriber had cut back the number of events they came to by 18%. That trend started last fall, and really can be seen with renewals from this summer.

2) The average size of the subsription party (household, friends going to the shows together, etc.) has shrunk by 8% from two years ago.

3) The single ticket audience has stayed more stable. The average number of events attended by STBs we examined has shunk by 6%, but the average size of the single ticket party, while down from a peak in 2007, has actually increased since 2005.

Subscribers who planned their season of entertainment while sitting at their desks and looking ahead to their finances basically have cut back their spending pretty dramatically, by shrinking the number of events they attend. They have also reduced the number of people in their party: someone has dropped out of the group of friends who always subscribed together, or a family member who used to come along stays home instead.

Meanwhile, single ticket buyers are still splurging, just a little bit less often. Their purchases are less planned, more spontaneous, and they reward themselves.

A lot of the volatility in the profile of lost/reduced subscriptions comes from households hardest hit by the economy. Those with the most limited discretionary spending – that includes households that have committed high levels of their budgets to mortgages and transportaion as well as middle and lower income households – are those that have basically dropped from subscription ranks or have cut back the most on frequency. But there is still good and consistent growth in single ticket sales among households not as badly hit, including renters and younger singles and couples.

One of the many take-aways from this is the importance of creating and rewarding loyalty, for subscribers and single ticket buyers alike. The secret lies in finding ways to get the single ticket buyers to come a little more often – just one more event – and keep their party size stable, while encouraging subscribers not to drop four events: give them back an event (or the equivalent) and then reward them again so they can add back yet another event.

Retail and the travel and hospitality industries are all racing to bolster their revenues through stepped up loyalty reward programs. They are forming cross-marketing strategic alliances that put real benefits in their consumers’ pockets. Holiday Inn just sent me a $50 spending card for Home Depot as an extra reward for staying five nights at various HIs last month, on top of the points I already get from them. You can bet I’ll keep booking rooms with them with tangible extra rewards like that! (They’re a terrific model. They have the highest ranked customer loyalty program in the hospitality industry.)

Imagine sending every one of your ticket buyers a loyalty card. (Or better yet, send them a post card to get them to sign up on line to get more of their email addresses.) Make it enticing and easy to get to the next perk level. Focus on getting them back for another event, and on making it easy for them to bring along another person. Then reward them, again, with another perk or benefit, maybe through a strategic partnership with a sponsor. (Let them choose between three or four different rewards/partner benefits. They get to choose what matters most to them, and you get valuable information on what motivates different households on your database.) Keep them enthused about your venue, so they don’t decide to spend less and just go to a movie at the mall. Give them better customer service as much as you can. And be sure to let them know what their loyalty means to you.

Do the math. It takes a lot less money to keep loyal customers and slightly enhance their current attendance than it does to get a brand new attender through the door. And everything you do to reward loyalty now will pay back over and over in the tough months ahead. Those rewarded and loyal attenders will tell their friends to go to your holiday events. They’ll use their reward points toward a pair of main floor center seats for a show in February. They’ll apply those points to bringing the kids for a family show in May. Suddenly, you have sold a lot more tickets. And when we pull a little out of the recession, your added bonus is that these newly rewarded and loyal buyers will be those who are the most willing to write a contribution check.