Sunday, April 25, 2010

OUR BUSINESS MODEL IS OUTDATED AND HARMING US

Good morning.

“And the beat goes on……………………………….”

Apologies if you get this twice, we're still working out some of the bugs on the switchover.


THOUGHTS ON HOW OUR OUTDATED NONPROFIT ARTS BUSINESS MODEL HAMPERS OUR DATA COLLECTION, OUR RESEARCH AND APPLYING KNOWLEDGE AND THEORIES TO EFFECTIVE ONLINE MARKETING.

I remember a Peanuts comic strip from a long time ago where Charlie Brown and Linus are laying on a hill looking up at the clouds, and Linus says to Charlie Brown: “Look at that cloud Charlie Brown, it reminds me of Mozart playing the piano, and look that one over there looks like Beethoven composing a symphony. What do you see in the clouds Charlie Brown?” And good ol’ Charlie Brown answers him saying: “Well, I was going to say I see a horsey and a doggie.”

That’s about how I think the arts are in their understanding of, and involvement in, data mining and knowing how to effectively use online marketing via social networks. While those who understand the vocabulary of social networking like Facebook talk about Open Graphs, Granular data access, OAuth2.0 and other esoteric sounding tech speak stuff, most of us are still trying to figure out how we can somehow use these sites to get more people to give us money, buy tickets to our performances or in some other way connect to us – and we are a long way from understanding it. We see horseys and doggies. We remain far outside the loop of fully appreciating all the levels on which data mining and applications of the knowledge gained to social networks might benefit us.

Three things caught my eye this week.

The first was a new season brochure from the Marin Symphony I received in the mail. In the opening paragraph (of this well designed and not inexpensive to produce visually captivating piece), the Music Director Alasdair Neale, made a pitch to those who might ask – in response to a season ticket pitch: “Why bother”? by arguing that the “shared experience” of a ‘live, unedited, unprocessed, spontaneous performance (on one’s back doorstep featuring a quality Orchestra at the top of its game, couldn’t be duplicated at home, even with all the technological wizardry available to us today’. A good pitch to someone like me. I got this in the mail. And direct mail can still be effective with certain demographics and for certain organizations – though certainly no longer across the board. It wasn’t a blanket mailing to “resident” – it was addressed to me. But I don’t think it was targeted to me based on my interests or patterns as an arts consumer, but rather I am on lots of lists like this because I was once the Director of the California Arts Council and now I write a blog with a sizable reader base.

The pitch in this brochure was based, I am sure, on the growing belief in the research on the intangible benefits audience goers have expressed as meaningful from attendance at an arts performance. We in the arts want to embrace this kind of research, in part, because it clearly validates the passion and expectations we already have in our hearts. We are true believers and, even without confirming research, we intuitively believe that going to arts events, besides being competitively wonderful and worthwhile ways to spend our leisure time, have the added benefits of deeper and enriching bonding experiences that feed and nourish the soul and the brain on many levels. I am not sure the pitch was featured prominently enough in the brochure, but that is another issue.

The second item that caught my attention this week, was Facebook’s announcement  (a somewhat technical, but understandable and decent blog link on the subject) that it was expanding the ways users could include links to things, places, people, companies etc. that it “liked”, and share that information with those connected to Facebook user’s pages, and an expansion on how those to whom increased Facebook user data might be valuable might be able to access that data. The implications for business were obvious. The more Facebook users liked something, the wider that might be shared across an already virtual network that is larger than the population of every country in the world, save China and India. If there were a way to categorize the likes and dislikes, patterns of behavior, buying and spending habits and a host of other data from Facebook users, then use that data within the Facebook system to sell or hawk goods and services to which the recipient might already be sympathetic and open – well, that would be a very attractive marketing tool. Would it be to our advantage to be able to use this tool in our marketing efforts? Of course it would. The question is rather could we afford to figure out how, and then actually do it? Not likely for the typical arts organization.

The third item was a New York Times story  on web coupons and how much information about the user is carried in the bar codes. “While the coupons look standard, their bar codes can be loaded with a startling amount of data, including identification about the customer, Internet address, Facebook page information and even the search terms the customer used to find the coupon in the first place."

"Coupons from the Internet are the fastest-growing part of the coupon world — their redemption increased 263 percent to about 50 million coupons in 2009, according to the coupon-processing company Inmar. Using coupons to link Internet behavior with in-store shopping lets retailers figure out which ad slogans or online product promotions work best, how long someone waits between searching and shopping, even what offers a shopper will respond to or ignore.

The coupons can, in some cases, be tracked not just to an anonymous shopper but to an identifiable person: a retailer could know that Amy Smith printed a 15 percent-off coupon after searching for appliance discounts on Friday at 1:30 p.m. and redeemed it later that afternoon at the store.

“You can really key into who they are,” said Don Batsford Jr., who works on online advertising for the tax preparation company Jackson Hewitt, whose coupons include search information. “It’s almost like being able to read their mind, because they’re confessing to the search engine what they’re looking for.””

Should we use more web coupons and the data we might collect to more effectively market ourselves. Again, of course. Are we able to do that? That remains more problematic.

We spend a whole lot of time thinking and talking about our audiences (and about our donors and supporters). With good reason, for earned income and individual contributions are still the largest blocs in our total revenue stream. For the performing arts, earned income is mostly about ticket buyers. We do studies on what our audiences want and how happy or unhappy they are with certain aspects of what we offer them. We want to know what kind of experiences they enjoy and relate to so we can ostensibly try to provide them so more people will buy more tickets and we won’t have any empty seats.

Alas, these efforts are still somewhat primitive, if for no other reason than we have precious little money to pour into research and even less it seems to amass data on how our customers actually behave (as a precursor to asking “why” they behave as they do) that might guide our decisions about our marketing efforts. While we truly believe in our hearts (and have some research that bears out these feelings) that the “experience” of attendance at an arts event carries with it enormously valuable intangible benefits such as a sense of community and bonding with our fellow human beings, we take it as a matter of faith that somehow these types of visceral experiences are the key to convincing more people to attend our events. We have good research that shows people values these things, though we aren’t quite sure yet how to translate those findings into specific actions that will actually, demonstrably result in more tickets sold.

Of course, it is possible we are barking up the wrong tree and that the most important and significant reasons why people do or do not come to our performances may have less to do with the depth of meaningful experiences (not that they aren’t important and valued), and more to do with such mundane issues as ticket price and convenience of schedule, location and parking. More research that examined one theory in relationship to other theories of audience attendance would yield more data on which we could come to informed decisions. Again though, how on earth is a Mom & Pop sized organization ever able to do any of this (and we are almost all that size).

What we really lack is what private industry seems to rely on as the most important barometer in guiding their marketing decisions – and that is existent consumer behavior. Before Proctor & Gamble, or any major industry embarks on research and game changing marketing strategies and tactics, their first step consistently focuses on gathering data as to consumer preferences and identifiable patterns of behavior. We don’t do nearly enough of that. And so we still don’t know exactly who we should be targeting with whatever messages we ought to be using – let alone how we should send that message. Much of our research begins with basic hunches that we have about things. Guesses really. Many of which turn out to be right, and which we confirm, but which remain only part of the bigger puzzle. We really need much more data on how, then why our customers behave as they do towards our goods and services. As I have argued previously, we need to do more data mining. We remain in the dark ages.

All marketing today is a form of niche marketing – aimed at specific segments of the buying public based on whole sets of demographic characteristics and psychological behavioral models and all kinds of other sophisticated markers – and the hallmark of effective marketing has become knowing whom to target, understanding as much about the target’s likes, dislikes and behavior as is possible so that you can make informed decisions on how to reach the target and motivate them to purchase your goods or services. Theories are valuable of course, but their application is only relevant within the perimeters of your knowledge of the consumer.

So what the arts really need is more of this kind of raw data and then to explore the ways it might reasonably (and affordably) use what the data suggests to govern marketing strategies and tactics. Obviously it isn’t smart to spend a lot of an advertising budget trying to sell X Box games to senior citizens by advertising in the AARP Magazine. But questions about targets, vehicles and messages are infinitely more complex than what is common sense. It is both science and art form. The more we understand about those whom we are targeting the more we can begin to effectively craft the right message and determine how to best send that message.

This kind of data mining and analysis is simply too complex and expensive for the average arts organization to employ on any level. That is why we need to seriously rethink the business model we cling to in our sector. It doesn’t allow for us to participate at the level we need to. Somehow we must develop a model that allows us to use all the modern tools of marketing that are out there to effectively compete with the vast array of those producing other kinds of goods and services and have the same consumer targets as do we. This is yet another instance where (despite all kinds of reservations and other concerns) we must play the game by the rules that are now governing the area if we want to succeed.

We have questioned the business model before – on any number of planes. Many have previously suggested and urged us to mergers and consolidations. I have never been a huge fan of that approach – simply because I don’t think it’s practical, and also because it is too shallow a solution to apply to the whole sector. It is very difficult to bring divergent arts organizations, even within the same discipline, to the point where vastly different cultures, artistic visions, ways of doing things etc. can join their operations. Moreover, the problems we face as a whole sector aren’t likely to be solved by the few mergers and consolidations that might be joined in any given period of time. I applaud those few instances where it has worked, but they are few and far between.

Others have suggested we should simply figure out how to share some back office functions – from accounting, to marketing, to printing, etc. That makes more sense to me, but again very hard to actually make happen logistically. I think the better approach might be to consider some of the kinds of things we need to have the ability to do – like data mining and other market research, and form something akin to Trade Associations that might allow us to pool resources to compete in those arenas and then share the data, its analysis, and ways it might be applied at different levels with member organizations. The same might be true of how we more effectively conduct our advocacy efforts. Or any number of other business functions. Some kind of reasonable dues structure might justify the investment with deliverables that would otherwise be unaffordable. I think we have to look at a reinvention of our business model in terms of what we can, as separate (and even sometimes competing) entities accomplish by the economy of scale and thus afford and share – at least as the starting point for consideration of a new model. One of the first should be about date mining and market research and how we might apply whatever knowledge we might acquire.

We’re missing out on the future of marketing and falling ever further behind. Talking about how to use social networking sites in basic aggregation of target demographics is already so last decade -- and the conversation among people who understand and appreciate all of this is much farther along than are we.


Finally, and thanks to the daughter of two of my closest lifelong friends, Amanda Alef – now an intern at Americans for the Arts - for this posting on her blog.  Another sage piece of British advice.




Have a great week.
Don’t Quit
Barry

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