A New Paradigm that Solves the Problems of Audience Attrition, Churn, and Aging
Three years ago, the California Symphony changed its approach to audience development, employing a long-term strategy that resulted in increased concert attendance, audiences getting younger, and more donors.
The problems in the orchestra world of declining audiences, aging audiences, and audience turnover have been well articulated, belabored even. In response to these problems, we as a field often talk a lot about incremental gains and successes such as an orchestra that sold 5% more tickets than last year or trimmed expenses enough to balance the budget. Make no mistake, these are big successes under the current model, but when we know as an industry that our fixed costs will continue to rise and outpace the operational tweaks and incremental revenue gains we can achieve, the model needs to be reexamined. This is a post about solutions.
To give away the end of this story, over the last three years, after a calculated change in approach to audience development strategy, the California Symphony has seen profoundly different results from the national trends for orchestras:
This post discusses first what the current/typical audience development model looks like, followed by reasons why organizations do it this way (spoiler alert: there is a long list of explanations in support of the traditional approach, which are barriers to change for many organizations), and ending with counter points on how and why changing the model is worth it, namely because there is big money on the table, which in turn allows us to better serve our mission.
“When we know as an industry that our fixed costs will continue to rise and outpace the operational tweaks and incremental revenue gains we can achieve, the model needs to be reexamined.”
What Audience Development Typically Looks Like
Arts organizations have a lot to offer to our patrons, which is why when a first time attendee comes to a concert, what ensues is essentially a marketing and development free-for-all: that person goes right into all our campaign mailings for subscriptions (“New blood! They came once so they must be willing to at least consider season tickets!”), right to the phone room for telefunding (“They clearly like us enough to attend, so they might be willing to make to a modest donation!”), into all the single ticket marketing efforts like email and online ads (“They completed a purchase on our website, so we are smart and savvy and have that tracking cookie showing them ads everywhere now!”), and into pretty much every direct mail solicitation for single tickets or for donation appeals (“Recent attendance is a great indicator of future engagement!”). That’s a lot of offers and messages…and by a lot I mean a deluge. Then, this same free-for-all takes place again if that person becomes a repeat attendee (“Now they really must be interested in us!”). Then all again if someone takes a chance on a season ticket package, large or small (“They drank the Kool-Aid! They obviously must want to consider donating now!!”). At some point around the time someone becomes a renewing donor or major donor, we sort of get our act together and often have a pretty clear path of next steps for cultivation and stewardship.
To a degree, the current model works. Organizations do make money, and a lot of it, this way. But when 90% of first time buyers don’t come back — a well-documented national stat from Oliver Wyman’s “Churn Study,” made famous by former head of marketing at the Kennedy Center and later Vice President of the League of American Orchestras Jack McAuliffe — this is a problem. And when first year subscribers — a critical group because we know that being a subscriber is the number one indicator of future donation proclivity — are the hardest segment to renew, averaging a 50% or less renewal rate for many organizations, that’s a problem. It’s a giant pipeline problem we have created for ourselves.
What We’ve Done
In short, the California Symphony decided we would do everything we can to create a flowing pipeline. For us, this meant calculated changes to the approach described above, shifting to a strategy focused on patron retention. Now, no matter who you are, whether a first time attendee, or repeat buyer, or new subscriber, or long time donor, or anywhere in between, we have a specific plan for you and a specific next step in mind, and everything we do points you toward that one next step and nothing else. Equally important to what we do now is what we don’t do now, that is to say we do not solicit a donation before a patron is a second year subscriber. (This is usually when jaws drop.) The new approach is a long-term, disciplined strategy, and one that has proven lucrative for us: we’ve grown our audience by a sizable 70% over the last three years — having to add concerts to keep up with the demand — and have nearly quadrupled the number of donor households. We completely reconstructed how we do audience development, and we’re in it for the long haul.
In the latest issue of Symphony magazine (summer 2017), The League of American Orchestras said it best: “Surely, if the military is learning how to become flexible and adapt, orchestras can as well. To do so, they need constantly updated sets of tools and assumptions.” That’s exactly what this is all about.
Why the Industry Does It the Current Way
Earlier this summer, I spoke on this topic — the idea of a focused and strategic audience journey — on a panel at a conference for NPR and public media marketing and development professionals, and during Q&A someone raised their hand and said to me, “Your industry is SO LUCKY to have this research [like the “Churn Study” mentioned above] …so why isn’t everyone doing what you’re doing?” The answer is because change can feel risky, and it turns out, there are several genuine reasons why organizations feel the risk and are reluctant to divert from the traditional model:
1. Revenue attached to old ways. Again, organizations do make money the current way. Some people do subscribe after attending one or two performances, and some people do make a donation when they’re called. And when we are dealing with a pipeline problem, it can be painful to purposefully limit that pipeline at first, such as when you’re pulling a list for a direct mail appeal — let’s say for a fiscal year end campaign when all the low hanging fruit for donations has already made their annual gift — and you know how many more people you could add to that mailing list if you pull recent single ticket buyers. It’s tempting to add those people to the prospect list because some will respond, and those moments make it hard to think about how we’re contributing to that 90% no-return rate because we’re making the wrong ask too soon.
2. Wrong metrics. Another reason change feels risky is because we often measure the wrong things. A bigger database is not the right metric, as an example. Bigger databases do not implicitly mean we are serving more people; a bigger database often means we serve a lot of people once, and that’s bad when our jobs are to cultivate loyal lovers of our art form. In the example above, a larger mailing list is the wrong measure. Looking at the response rate would be a healthier gauge of success (more on that below). Bigger is not always better, and bigger is almost always more expensive (more on that below as well).
“Bigger databases do not implicitly mean we are serving more people; a bigger database often means we serve a lot of people once, and that’s bad when our jobs are to cultivate loyal lovers of our art form.”
3. Short term emphasis. True especially post recession, there is incredible pressure to run our organizations with short-term outcomes. When I was first brought in to the California Symphony to lead a financial turnaround in 2014, one major institutional funder said to me that if we did not immediately have balanced budgets for the next two years, consecutively, then they would pull their funding. And they said this knowing the organization was in crisis and knowing I was implementing a three-year turnaround plan (largely built on the audience journey strategy outlined herein); nonetheless, the directive was firmly to balance the budget in one year. (Side note: we did it, but talk about pressure to NOT take a long-term approach to sustainability!) I pick on that one funder, but the truth is nonprofit leaders see that kind of pressure a lot. Not just from funders, but from watchdog organizations like CharityWatch and GiveWell, etc. And from our boards as well. When the budget does not balance, how often does the board want plans and ideas that promise a quick fix? By the way, if there truly was a quick fix (besides cuts, which are the epitome of a short-sighted solution), wouldn’t we all have implemented that fix a long time ago? The short term pressure is real.
4. No culture for failure. This stems straight from the point above. We all have lean budgets with little to no room for any experimentation to try new things. This isn’t because no one wants to experiment, or find a new model that we all know we need, it’s because we usually must have every penny go toward everything else we’ve committed to do as an organization. We all have top notch artists, quality programming, and education initiatives that make a difference. Failure to fund on any one of these fronts because an experiment did not result in a profitable outcome in its first iteration is not an option. As arts organizations, we need money in an organizational culture with no real appetite for failure — or innovation, or even delayed gratification — because a lot of us simply cannot afford to have a miss.
5. Don’t know how to do it differently. Having siloed departments — particularly siloed marketing and development departments — and a focus on acquisition (both patron and donor acquisition) make it so that our staffs don’t always intuitively know how to do work a different way. We are taught that acquisition is key, and in a broken system, it is, because we have to fill the declining audience and short-term revenue voids somehow. We are taught, in different words, to treat new patrons like a land grab. “Who ‘owns’ those names?” we ask when trying to figure out a way for marketing and development to play in the sandbox together, when the reality is that’s the least customer-centric question we could be asking. Patty McCord, who served for many years as Chief Talent Officer at Netflix, recently said (on the FRICTION podcast with Stanford Professor Bob Sutton) about maintaining a customer-focused culture, “Siloes are just gonna slow you down…Companies that are really, truly successful are collaborative and solving for the customer, and you can’t solve for the customer in siloes. You can’t do it.” As an industry whole, we sort of know only one way to do audience development and don’t really know how to do it any differently.
“As arts organizations, we need money in an organizational culture with no real appetite for failure — or innovation, or even delayed gratification — because a lot of us simply cannot afford to have a miss.”
6. Don’t have the discipline. Maybe this is in the category of “Don’t know how to do it differently,” or maybe it points back to an emphasis on short term revenue, or even not having a culture for failure. Back to the example of wanting to run that fiscal year end appeal mailing list, when we first instituted this new strategy, we could have mailed to twice as many people if we had included recent single ticket buyers, and we all know that some of those people would have made a donation. In a time when we were digging ourselves out of the ditch financially, it was incredibly difficult to have the discipline to say, “No, now is not the right time to be making a donation ask of this group. Instead, we will wait until people from this group are renewing subscribers when we know they are times over more likely to respond, give more, and ultimately renew that gift. We’re vying for a higher lifetime value of these patrons.” Also, having discipline takes time, and that’s a currency we don’t really have, which brings us to last reason we keep doing things the current way.
7. Don’t have time. We often don’t have time in two different ways: 1) no time to wait for results of a longer term strategy, and 2) no time in the work day to even think about changing the status quo. To the former, it takes a while for the full process of having a first time attendee come back as a repeat buyer, then get converted to a season ticket holder, and then to renew that subscription, and then finally to have the chance to solicit them for a donation. For the marketing folks, those first few steps from new attendee to subscriber can happen in a year or so if all goes according to plan (which when you are disciplined, it does nicely play out that way more often, but I’m getting ahead of myself). For development folks, however, that’s at least two years of patiently waiting to get their hands on those prospects, which is very different than the current approach. To the later point, changing the approach means time in the day is spent differently — not adding more to the plate (which feels impossible at times), but mixing up that plate a bit.
So when that person at the public media conference asked why everyone isn’t doing things differently like the California Symphony, I actually laughed a little. “You think public radio is slow to change?” I said, “NPR is not even 50 years old. Try working for an orchestra — we’re working against centuries here!”
A New Way is Worth It: Why
There may be revenue attached to old ways, but there is way, way, wayyyy more revenue attached to a disciplined, strategic approach. Through shifting our focus from patron acquisition to patron retention, the California Symphony has grown performance revenue by 145% over the last three years. That’s while increasing both single ticket and subscription sales. By comparison, the national average is 4% growth in performance revenue with subscription revenue on the decline (source: League of American Orchestras “Orchestra Facts” report, 2016). Yes, that’s insane. Lest anyone think this is through price increases alone, total subscriber households have grown by 37% over this same time period compared to the national average of 18%. Oh, and our prices have held flat the last two of those three years, except for dynamic pricing on single tickets, which when performances are consistently selling out as they are now, you better believe those last minute buyers are paying a pretty penny because supply is scarce and they didn’t plan ahead. We’re not talking about Hamilton tickets here; we’re talking about an orchestra defying the national trends for the industry by smartly responding to the ample research available to us.
Contributed revenue follows suit despite us actually soliciting fewer people than before. In fact, the California Symphony’s percentage of subscribers who also donate actually surpasses the national average: 28% nationally versus 52% here. If we take out first year subscribers from that count since we don’t solicit that group, this means 71% of all season ticket holders who are asked make a donation — two and a half times the national average. Total contributed revenue has grown 41% for us (national average is 20%) in conjunction with nearly quadrupling the number of donor households. One last data point: after adjusting for inflation, the national average for total income growth 2010–2014 is 5%; yet from 2014–2017 and also adjusted for inflation, the California Symphony has grown total income by nearly seven times that at 34%.
It’s worth mentioning that we’ve realized expense savings, too. Now that virtually every mailing list for marketing and fundraising appeals is smaller and more targeted, it simply costs less. We now put that money toward other things, like talent development and innovative programming.
If the wrong metrics are things like the size of our database and how many new names we’ve added to our list trades, then metrics that reflect how the audience is engaging with us and responding to our work are the right ones. In other words, metrics that measure retention and loyalty matter. If attending our organization is a bucket list item for people — meaning they come once and check us off the list — we’ve done something very wrong. And for 90% of new visitors nationwide, this is exactly what’s happening. Who cares if the database is gigantic if none of those people have any future value to us, especially when all the research shows that converting a customer to a second/repeat visit within 12 months of their first experience makes their lifetime value skyrocket. While lifetime value of a patron is incredibly difficult to measure with most CRMs, we can measure 3-year value or 5-year value of patrons who’ve gone through the old model vs the new model…which is very telling. Or in its very simplest form, we can measure annual patron revenue and associated expenses when the focus is acquisition versus patron revenue and associated expenses when the focus is retention.
A New Way: How
Take a long term view.
People often ask how we have achieved the financial results that so dramatically outpace our peers, and the answer we give is that we’re playing a long term game. We may have said no to some short-term revenue in year one of this transition, but by year two we were seeing across-the-board growth, and now long-term results heading into year four of this strategy are undeniably counter to the trends at most orchestras. When our organizations have such an over-reliance and emphasis on short-term revenue, admittedly the most difficult, risky feeling part is at the beginning. The opposite is also true though: doing it this way — this long term, disciplined, strategic way — feels really right and really smart, and the revenue follows. Our art form matters too much to not be in it for the long haul.
Less lean budgets.
This is easier said than done, but it can and must be done, and it does actually get easier. Going back to that foundation’s mandate to go from years of big shortfalls to a balanced budget in one season, we did it by recalibrating how we spend our money per this reconstructed plan, and that year the budget was indeed pretty lean. But by year two of the new model, the organization had built into the budget several new programmatic experiments. Yes, we actually had risk capital by year two. In year three (this past season), we ended the fiscal year with a 10% surplus and paid off/eliminated a portion of the organization’s accumulated deficit. In year four (the upcoming season), we have the most conservative budget we’ve passed yet and it includes another 10% surplus which will further eliminate deficit as well as pay for a feasibility study to grow our endowment (i.e. which would result in another expanded revenue stream for the orchestra) — what a virtuous cycle!
Structure the org so people know how.
If siloes make it difficult to do this work, discipline makes it easier. “Process slows you down 100% of the time,” continues Patty McCord, former Chief Talent Officer at Netflix (in the same FRICTION podcast quoted above), “But discipline can often speed you up.” At the end of the day, people want to be on a winning team, and sending the right message to the right people at the right time results in higher response rates, lower campaign expenses (marketing and development, digital and direct mail), and a lot more money to fund our mission. We’re no longer scratching our heads trying to figure out how we’re going to make the revenue goals when subscriptions are down, or stressing over who else we can add to that fiscal year end solicitation because we just need more names (side note: we didn’t even run a FYE campaign this year because we knew we were ending in the black, and instead sent a thank you mailing to all our donors…what a change of pace that was). It took us three years to get to this point, but it has worked.
As a tactical side note, for staffs that are reading all of this and wanting to know more about how exactly to implement the “only one next step for each segment” approach, see as a starting point the posts on what we do to entice first time buyers to return and multi-buyers to become subscribers, and how we treat first time subscribers versus renewing subscribers versus new donors. We also created a new position to oversee marketing and low-level annual fund functions because we were so serious about removing the siloes.
Spend time differently.
If all this sounds like a lot of work, it is. It does take a lot of work to pull a report of first time attendees after every single concert, and then to send each of those people a postcard inviting them back again, and then to follow up with an email reiterating how much we’re glad to have them and reinforcing the discount offer to come back, and then sending yet another email reminder approaching the expiration date of the offer. It takes work to pull the list of multi-buyers (i.e. repeat attendees) after each concert and send all of those folks a wine voucher to add value to their next experience, or to run three different versions of the season brochure and five different versions of the renewal invoices so the right people get a tailored solicitation for a donation upgrade and the not-right-yet people don’t. But it’s different work than what we were doing the other way. We’re not running all those lists and scripts for telemarketing and telefunding, we’re not paying for all those hours of phone calls because we’re not calling most of the people we used to. We’re not running around doing tons of list trades and flash sales because our acquisition mailings need to be bigger and prices lower if we have any hope of selling those empty seats. We’re not pursuing empty corporate sponsor leads with the board, and instead building the list and file notes for board members to call and personally thank donors who gave less-than-major-gift donations because calls to this group have made a dramatic impact on renewals and particularly upgrades (which is part of the “one next step only” plan to get that segment closer to major gift territory). We cut out all that old, somewhat desperate feeling work and replaced it with work that matters over the long haul instead.
Once again, in its simplest form, this is all about pipeline and solving a pipeline problem. At that same NPR conference session on audience journey earlier this summer, the moderator (Lauren Bracey Scheidt, Senior Product Manager of Listener Journey for NPR Digital Media) said to her colleagues in the room that we need to not call the audience journey a funnel, because things drop out of a funnel. “We need to call it a pyramid,” she said, “because that’s building up. Users climb higher when our place in their lives is more indispensable.” She was so right.
An added benefit in tandem with the revenue gains the California Symphony has seen due to reconstructing the audience development model — and also a direct result of the UX work we’ve done on audience experience, which has served to strengthen that first timer foundational level of the pyramid—is that our audience is getting younger. The graphs below show that among subscribers and single ticket buyers, fewer people are in the 65+ category, about the same percentages are ages 45–64, and more people are in the under 45 crowd.
So there you have it: through a new model focusing on the customer over the long haul, an orchestra has realized an increase in subscribers, a growing single ticket buyer base, more donors, and an audience that’s getting younger. Just like the League said in that Symphony magazine article this summer, orchestras can and do adapt, and all we need is an “updated set of tools and assumptions.” I hope this post helps to do exactly that.