Going Back to Basics and Building for the Future
Or how we increased the return on marketing by 68% and put an opera company back on track
A little while ago, I presented a teleseminar for Opera Volunteers International about marketing on a budget. I talked about the year and a half I spent at the Austin Lyric Opera. I thought it would make an interesting blog post.
The scenario
In the summer of 2011, the Austin Lyric Opera found itself in a situation that was perhaps more dire than most opera companies around the country, but it also found a close family of supporters that—barely a year later—had turned things around.
The board did a tremendous job raising much-needed funds; emergency funds needed beyond regular annual funding to maintain operations. And the opera sold its biggest asset: its headquarters.
Without these drastic measures, the opera wouldn’t be here today. But it was also clear that without making some fundamental changes, the opera wasn’t going to be viable for tomorrow either.
Here are the changes that impacted our marketing most:
- A renewed focus on traditional repertoire
- A 25% cut in seating capacity by eliminating one performance night
- A 35% percent marketing spending budget cut
The prevailing thought was that in order to even have a company, we should be building back the audience it takes to sustain a company that delivers top-notch productions and more adventurous programming. And I know, we can debate programming and audience development until we’re blue in the face, but the proof of the pudding is in the eating.
Eliminating the least attended night from the schedule obviously cut costs. And while we still had the ability to host the existing audience numbers in this reduced capacity, it is important to realize that it’s not as simple as just that. Those last tickets are particularly hard to sell. And it makes sense: if you pay $135 for a top-level ticket, you want the best available, not the last available. In other words, the smaller capacity posed a challenge in managing the pricing and filling the last remaining seats.
The most immediate impact, of course, was the 35% cut in the marketing spending budget. The cut meant that we had to take another look at our marketing expenses and see where we could save. We had to go back to basics.
We had to—as the cliché goes—do more with less. There’s no such thing as giving it 110%. I’ve always hated that phrase (I’m looking at you, sports people). It’s mathematically and physically impossible. What it does mean is working smarter and more efficient. And that’s very possible.
You’ve maybe already read my blog posts on how we revamped the opera’s website and digital strategy. That was a key ingredient to the season’s success. But you haven’t yet read the rest of the story and the full results:
Subscriptions
The number of subscriptions sold increased by 22% compared to the previous season. This signified the first increase in the number of subscriptions since the opening of a new performance hall, and only the second increase in a decade. The renewal rate for subscriptions hit a record 84%, and new subscriptions outpaced the past average by more than 25%. How?
- If real estate has its “Location, location, location,” classical music might recognize something in “Repertoire, repertoire, repertoire.” You don’t have much room to play with just three operas in a given season, and they decided to play it safe. Remember the “proof of the pudding is in the eating?” Well, people at it up.
- Prior to my arrival, subscription prices were dropped by 30-40%.
- More than 25% of the renewals came in through in-house telemarketing efforts. While we still had an in-house box office staff, we focused much of their time on active selling. It paid off.
Unfortunately, the entire summer of 2011 was marked by uncertainty and a complete spending freeze, leaving only a small window to sell. We did well in that window, but ultimately, subscription revenue was down 11%. The increase in the number of seats did not offset the decrease in price.
Total revenue, as you’ll see in a little bit, still grew. And the important element here was the increase in the core audience once again. It really was a turning of the tide.
Single Tickets
The number of single tickets sold increased 21% compared to the previous season. It was the fifth best single ticket revenue year in the opera’s history and the best year when considering the reduced seating capacity. Furthermore, the a 46% increase in single ticket revenue offset the subscription revenue decrease; with combined numbers we saw a net 5% revenue increase.
Regular single ticket prices remained unchanged from the previous season, yet we were able to increase our average ticket price by 16%. Monitoring, analyzing, managing and targeting our ticket prices and inventory become crucially important, especially with the decrease in total capacity posing a challenge.
Pricing
Let me first start with an example of a small change that can have a big impact. The upper balcony section, farthest from the stage, was oddly priced $99, our second highest price point. We changed this to $19, our lowest price point.
Let me explain with simple math: $99×0=$0 and $19×273=$5,187. And that’s per performance! We previously hardly sold any tickets in upper balcony; we sold close to 99% of the tickets after the price change. Common sense, right?
And don’t underestimate the side effect of being able to claim that “Tickets start at just $19” in marketing collateral.
You’ve probably heard a thing or two about dynamic pricing. But in order to implement dynamic pricing well, you have to have a strong foundation of reliable data and a ticketing system that can handle it. We weren’t quite there yet, but we were able to implement some of the principles.
We monitored the seating map closely and on a daily basis. We learned how the house filled up, or where it didn’t. And we then offered targeted, specific discounts for those areas that did not sell well.
Contrast that with daily deal sites. In the two seasons prior to and partly after my arrival, the opera had done one of those popular daily deals every single production of the season. People were actually calling our box office with the question: “when will you have another deal?”
As you may know, you don’t keep much of the revenue by selling tickets through these sites. At its peak, we sold 1,000 daily deal tickets for a single production, which was a third of the total single tickets for that show! It sank our average ticket prices and trained our audiences to buy discounted and buy late.
We knew we had to move away from this practice, and a season with blockbuster operas proved to be our best shot. By segmenting wisely and targeting relevantly, we were able to send tailored messages, including to past daily deal buyers. We got them back in the door, and this time we kept all of the revenue.
With each production, we lowered the ratio of discounted tickets versus regular tickets, and we moved from offering last-minute discounts to offering early bird discounts. It worked.
Don’t sacrifice long term results for short-term gains.
Lastly, we cut the number of complimentary tickets by 32%. We got it down to the bare minimum: media, corporate sponsors, and some box office holds to solve problems. This increased the value perception. People couldn’t just wait for a last-minute free ride to fill those last seats; we created an environment where you had to buy a ticket, or lose out.
Marketing
We realized we had to go for the low hanging fruit and go where the low hanging fruit hangs out. Previously, our resources were spread thin across many channels, but we could no longer afford it.
Advertising is always a balance between reach, frequency and budget. We didn’t want to sacrifice frequency, we knew we had to limit budget, so what we had to do was focus on reach. Narrow the reach, but, again, reach the low hanging fruit, not a broad metropolitan populace.
Don’t get me wrong, it is important for an arts organization to reach out to new audiences. But to do so through advertising, in a cash-strapped environment, misses the point.
You cast a wide net, but catch few fish. And those fish you do catch will likely buy the lower-end or discounted tickets. You don’t want to spend a ton of money to get a small pool of $10 ticket buyers. When times get tough, you have to put your money where the results are.
And as we’ve seen in the Wyman study, contrary to popular belief, classical music organizations actually do a very good job at bringing in new audiences. We saw this very same trend in the ALO numbers. In previous seasons, more than half the single tickets were bought by people who weren’t in the system before.
So these “Unconverted Trialists,” as the study dubbed this group, are the low hanging fruit we should aim to get back. The Wyman study explained the importance of the entire customer experience. At the ALO, we put a lot of emphasis on customer service, from proactively working out gnarly traffic and parking situations to box office functions that were being outsourced for the first time to using social media as a customer service tool. We wanted to make sure a patron’s experience was nothing but extraordinary.
The other advice from the Wyman study was to target relevant messages and offers to these trialists. As we’ve seen in the daily deal example and the semi-dynamic pricing example, we were able to segment wisely and target relevantly and get results.
We also brought this kind of focus to our other marketing efforts. We cut the places we advertised in half and kept the staple outlets where our low-hanging fruit could be found: major print, classical and public radio, public TV. Because we narrowed, but specified the reach, we were able to keep the frequency, and even increase the size of our ads in those places. In other words, more visibility in a targeted, more concentrated market.
Another area of focus, one where I received tremendous benefit from working with a consultant, was messaging. Working with this consultant improved the ad copy and the sales messages, and made sure we had a sales message or a call to action in all our efforts. Everyone needs an editor, and everyone can use a coach to keep them on track.
Data and Customer Driven
In the end, when times get tough, there’s always a bigger sense and urgency for the need to account for dollars spent. Any marketer, whether they’re on a budget or not, should know how their dollars are performing.
Today’s arts marketing is decisively not like a Mad Men episode where every decision is based on gut and intuition; today’s arts marketing is based on data, and it is customer driven.
We were able to use data to direct our actions, from pricing to messaging, and we were able to enhance our data influx to better inform future efforts.
In just one season, despite some significant challenges, we were able to increase the return on marketing dollars spent by 68% and put an opera company back on track.
