Stick with us! The Loyalty Business Model

Description: What does a loyal patron look like at your theatre? A major donor? A long-time subscriber? A group organizer? Every department and staff member seems to have an opinion. But assumptions about who these patrons are and what motivates “stickiness”--their commitment to theatre and your organization--can lead you to neglect your most valuable patrons. Learn how some theatres are using a “Loyalty Snapshot” to identify the patrons that they should value most (surprise—it’s not just major donors) and map out strategies to keep them loyal. Jill Robinson of TRG Arts developed the Loyalty Snapshot and leads this session on how to integrate loyalty into your business model.

A colleague of mine met this lovely woman and her husband Gilbert at a dinner for a seemingly random group of theater subscribers in Washington, DC some 25 years ago. The Meads were both – literally – rocket scientists, having spent three decades working for NASA. Dr. Mead and Gilbert LOVED the theater. Her eyes lit up as she talked about favorite shows and how she and Gilbert saw just about everything the Washington DC theater community had to offer. After this event my colleague asked why this unassuming theater lover who was about to retire had been invited to this special dinner. “We’re getting to know the Meads,” her development officer told her. Jaylee and Gilbert Mead did give a major gift to this organization. And, their generosity didn’t stop there. Since then, the entire arts industry learned a lot more about Dr. JayleeMead.

Dr. Mead – the theater subscriber – also got involved with Arena Stage.

Before Gilbert died, he and Jaylee gave thirty-five million dollars to Arena Stage – the largest gift ever to a regional theater.

It enabled Arena’s fantastic new Mead Center for the Arts, which you’ve likely heard Chad Bauman speak about. And that was just one way Dr. Jaylee Mead…unassuming subscriber and theater lover …has contributed to the arts. Every one of you could probably tell an important donor story likeJaylee Mead’s. And, so you’ll get this…

A decade of TRG patron behavior has led us to conclude about loyalists – the patrons whose attendance and investment keep our art on our stages and in our exhibition halls. Loyalists are MADE, not FOUND out of thin air. Like Dr. Mead…and all the other Major Donors that development officers all over the country are trying to find aren’t going to just materialize – YOU and your colleagues across the hall in marketing, the box office, and the executive offices are going to identify prospective loyalists and cultivate them.

How do we view loyalty? In the context of analysis of fully integrated behavior that we call a Loyalty Snapshot.For more than a decade, TRG has been doing a trademarked form of loyalty analysis that we call theAdvocate, Buyer, Tryer Pyramid. We look at all the households and all their transactions as recorded in an organization’s database. We study the recency, frequency and monetary investments by each household. The resulting analysis ranks every household from top to bottom. Patrons in the top rank, we call, Advocates – these are the organization’s most loyal patrons . One defining characteristic is: they are donors. More on Advocates shortly. The next group, Buyers, are actively engaged in the organizations we study. They are subscribers….members…frequent ticket buyers and visitors. “And” is the defining factor among Buyers….hold that thought. So two loyal, actively engaged groups of patrons, right? And, here’s the sad truth: Advocates and Buyers together account for 10% or less of all patrons. The rest of the story from our research over the past decade is clear– Nine out ten patron households in the databases of arts organizations are patrons we call Tryers. They are one-time or infrequent and long-ago lapsed customers. In our terminology – Tryers– are the least loyal, hardest to acquire and hardest to hold onto .And, they form the foundation of arts patronage today. The instability created by too many Tryers in the patron base – the cracks in the pyramid so to speak – is a real threat to our arts organizations. So we bring this news to you – not be alarmist, although the numbers are alarming. We prefer to think of it as a call to action. And, in that call – pay attention to the dominant behavior pattern among Tryers.

Study period: 2007-2011; Total households studied: 148,673

Tryers = 92% of all households – typical

385 households contribute 15% of all revenueAdvocates attend first, donate second

This is a large group of active ticket buyers -- 21,630 households contribute 54% of revenue.

A loyalty snapshot can also include demography

And an indication about how real estate is valued.

The place to start: leadership.Then, understand your data.

It’s a big sign that says: Exit.Large numbers of Tryers churn out from your active patronage pool every year. How so? Two ways.Tryers are predominately single ticket buyers. Every year most organizations generate large numbers of new buyers who take seats in our theatres and concert halls or visit our museums for the first time. And what does our research say about new single ticket buyers? According to national TRG statistics and other studies – 4 out of five make that first visit…and never come back. We have done client studies in recent years that say …among our clients, 2 out of 3 new patrons exit – better, but still more than any organizations can afford to lose. There’s a second kind of exit we need to attend to.

When we study the households that make up Tryers in an organization’s database, the major finding is that… a very high proportion of them – 87% according to our most recent studies – have NO ….CURRENT …TRANSACTIONS. Tryers are missing in action – they still show up in your database but not in your theatres, concert and exhibit halls. They are lapsed…not engaging….not loyal. You may have lost them or are in the process of losing them.So…many, many newcomers, come once and never come back or stay away for a long lapse period. What do we do about this?

Patron loyalty evolves…over a patron’s lifetime with your organization. Loyalty grows through a progression of mostly consecutive transactional steps. ……………Ticket buying is a consumer initiative that can be motivated.Donor behavior has to be sought – cultivated. Development officers know that. Without good cultivation – the kind that development officers do so well – sustained patron evolution is challenged if not stymied. …………..The longer and more engaged a customer is, the more they invest – in tickets, in memberships or subscriber, in contributions. The more loyal patrons an organization has, the more sustainable is that organization’s future. ……Building sustainability…through patron cultivation and evolution. We call this THE ESCALATOR EFFECT. It is conscious, conscientious cultivation to build stronger, longer patron relationships.Let’s break it down step by step.

Every patron starts off as a new buyer. Most come in for blockbuster productions and exhibits…. Your most popular attractions. OK….there they are…in your house for the first time….or back again after a long while. What is the most important thing you can do?

That’s right: Ask them to come back.With Tryers, it’s most important to create a second time for first timers, and…An attendance “now” for those who haven’t been back in a while.……………In order to do this right and well, use your database right and well: Make sure you have collected patron’s contact information.Tag newcomers and recent returnees for more personalized follow-up communication.Employ everyone on your team – especially the box office and front of house staff – in the welcoming process. These first impressions count.…………..Now, let’s revisit the escalator to talk about the next phase of loyalty development in the way it shows up in our research.

Now we’ve done the hard work to beat the odds and the patron has come back. This patron is on the escalator – moving up – and on the way to a greater loyalty level that we call Buyers. …………….At TRG, we’re data geeks so we think of Buyers as an analytic statement: The patron does this -- buys a subscription or membershipAnd this -- purchases an additional single ticketAnd that --makes a small donationIn other words, patrons become Buyers when they engage more–add “ands” to their transactional behavior. Buyers generally account for less than 10% of patrons in the database -- the more “ands” Buyers transact, the more likely they are to escalate to the highest levels of loyalty and investment. …………..According to our study, escalation doesn’t happen unless Buyers are appropriately and continually cultivated. There’s huge risk here….and the risk occurs when organizations don’t work productively together – across departments -- to leverage Buyer behavior. ……….Today, the numbers tell a sad story. Many patrons stay forever a Buyer. Or, worse yet, they are left unattended and take the Exit back into Tryer-land.…….Our data tells us that there are all kinds of ANDS….Buyers are a mix of all kinds of current and recent transactions. So let’s put a human face on the typical kinds of Buyer behaviors….the ANDs that make up this important loyalty group.

Here’s where your database really becomes helpful. If you don’t have internal prospect codes on each household in your ticketing and development systems, look to further cultivate same-season multi-buyers. What might some cultivation efforts might be right for patrons who have come a couple of times this season?

This group is generally are generally prime prospects for the value proposition of membership or subscription. Give them a reason to keep coming back by becoming a member or subscriber, namely a patron with benefits for deepening their loyalty.

New subscribers and members are really patrons who are really starting to blossom as loyalists. It can take a lot of effort to get someone to subscribe or become a member, but once they do, their value to the organization increases exponentially. So, now what’s next for this group?

New subscribers and members are really patrons who are really starting to blossom as loyalists. It can take a lot of effort to get someone to subscribe or become a member, but once they do, their value to the organization increases exponentially. Of course: Renewing. Renewing is a critical priority for this group. We know that, statistically, new subscribers and members renew at a much lower rate than long-term subscribers. Usually renewal rates among new subscribers and members fall in the 30 to 50% range, and with good cultivation, we’ve seen renewals for newbies go to 60% and beyond. ……………Achieving first-time renewals is a different kind of campaign. It requires different messaging and more aggressive follow-up. When does that renewal decision start? Like multi-buyers, everything about the experience will make an impression. Their decision to renew starts when they are making plans to come for the first time as a subscriber or new member. …………And one last point on renewal: How many of you have one annual renewal date for all members? Our data on this operational details still is being compiled. However, we’re really challenging ourselves and our clients to think about renewal the way the PATRON thinks about renewal. If I bought a membership in September….and then get asked to renew in January, I may just say no because I feel like I just signed up. We’re beginning to see real lift from rolling out renewals monthly so that patrons renew in the same month one year after their original membership. ………….OK…so….we’ve got that first renewal …and now…

They are coming back as subscribers, as members year after year. Typically it takes less effort and fewer budgeted dollars to renew long timers. These are folks who – research tells us – signed on because they love the art form you offer and they love the way your organization offers it. It is a passion-based decision. In consumerism, passion-based decisions are based on really strong affinity – loyalty – These are decisions that aren’t easily swayed by circumstance or economic logic. These are patrons that can support you, stick with you.What would you say is a good offer for this patron?

You bet – all subscribers, and especially long-time subscribers, are logical prospects for an annual fund gift. They have affinity and a history of investment that’s frequent and recent. It’s logical that subscribers or members are also donors. ………..That’s what our loyalty research shows. But, recently, we did a data scan of a broad cross-section of performing arts organizations to see how many subscribers are also donors. Overall? Just 32% of subscribers are donors. There was a wide range of cross-over—some organizations – opera, for instance --had cross-overs in the 50% range. The fact remains that often--subscribers and members aren’t being cultivated, aren’t being asked …or aren’t being asked in the right way. Again – your database is key here. An ask to a long-term subscriber is a different kind of cultivation than a patron who is new or only been with your organization for a short time….there are other factors, of course, too – and, that’s where database analysis can be helpful.………….So…now…let’s think about how we get from Buyers – those very active, engaged, “AND” transaction patrons. Now we’re at the top the patron pyramid and the escalator

Here….at the top…is this relatively small group, less than 2% …of most organizations’ patron households. They are patrons who have arrived at this most-loyal status with frequent, consistent and current engagement. Advocates are responsible for the largest revenue investments on a per-household basis. …………In 99% of cases, Advocates are defined through philanthropic behavior. Whatever else they do, they are also donors. And what level of giving do you suppose is the qualifier in most organizations for Advocate status? It’s $1,000-$2,500. Even in large organizations…..……..a relatively small gift will promote a patron into this top rank of loyalists. So, we’ve been talking today about a process thatConsciouslyConscientiouslyCultivates …loyalty in your organization.And, it’s everyone’s job.

Collaboration that creates good experiences for the patron and clear communications within the organization moves patrons up the escalator. This kind of integrated, collaborative functioning builds a network that strengthens the patron foundation – that otherwise cracked pyramid we talked about at the very beginning.……..How this is done….and how well this is done…can have a huge impact on sustainability.The big issue we see….as we talk to organizations all across the country….is how to get started.………..Once you’ve decided to work across departmental lines on one or several components of loyalty development, a good place to start is with your database.

BudgetingEndorse and enforce a new way of doing things from the top. Changing the way “we’ve always done it” takes institutional fortitude and change only happens when leaders insist upon it. Growth requires institution-wide commitment. It is not a departmental initiative.Analyze patron data across systems to see all transactions at the household level. Information is a powerful, galvanizing force in an organization. The minute everyone in the organization sees a ranked set of individual patron histories, new possibilities are apparent. Every organization’s data set can create the rationale and story line for patron cultivation and development. Seize an opportunity or two to pursue. Patterns that emerge from analysis invariably show where the biggest opportunities lie. That’s where to start– by focusing first efforts on cultivating one or two manageable patron groups or patron patterns with the biggest upside.

Finding and keeping donors is all about loyalty….loyalty is the key to sustaining our arts, our organizations. I hope you can take home some new thoughts that will help you make donors AND more loyal patrons.Thank you so much for attending.Now, may I take your questions?