COSI faced financial difficulties in the early 2000s due to an outdated business model. To address this, COSI cut costs, plugged cash leaks, raised prices, and created new revenue streams such as public-private partnerships, general admission add-ons, ancillary member income, special events, and partnerships. These efforts helped COSI double its budget and establish greater financial stability with a new sustainable business model.

1. Creating New Revenue Streams for Your MuseumSweet Successes & Hard Lessons at COSIDoug Buchanan COSI Education Programs Marketing ManagerOhio Museums AssociationMonday, April 26, 2010

2. About this presentation:Not everything COSI has tried will work for every museum. Still, many of the things we’ve tried are scalable for museums of different sizes. What we’ve tried to do is to be creative and to come at problems from many angles at once.

3. “Being a non-profit is a tax status, not a business model” - Kim Kiehl, COSI Senior Vice-President & Chief Strategy & Operations Officer

5. Annual budget of about $15 million

6. 574,312 visitors (2009)

8. The move in 1999 to a new 320,000 sq-ft home had great promise for the future.New building, new exhibitions, new vision…but an old business model.

9. COSI’s 2004 Financial Model

10. We were heavily reliant on earned income.But in the new building – twice the size of our old one - we were no longer earning enough to pay the bills.

11. In 2004, a COSI funding levy went on the ballot. It failed.We closed part of our building, laid off staff, and entered a dark period. Our budget shrank from $15 to $10 million a year.

12. Fast forward to 2010: COSI is still kicking.We’re growing.Attendance is up.We’re hosting a major blockbuster exhibition.What happened?

13. COSI’s budget is back up to about $15 million a year, but its revenue picture looks very different: 2010 2004

14. Wait a minute…wouldn’t we have increased the percentage of earned revenue even more by opening new revenue streams?

15. “You can’t live on earned income. That’s why we’re non-profits.” -Kim Kiehl

16. Less of COSI’s budget is now covered by earned revenue.What you don’t see in the chart is the $3.5 million COSI was able to earn or obtain, then save and invest.In the current recession, these funds have kept COSI from running aground again.

17. These critical funds came from: Cutting costsPlugging cash leaksRaising prices Creating new revenue sources

18. Sacred cows = tasty burgers.

19. Cutting Costs: Custodial SavingsWe’ve cut back on custodial services. We’ve also kept a close eye on guest feedback to make sure we’re not cutting too deeply.We’ve prioritized our custodial resources by paying close attention to entry and exit points, and especially bathrooms. Team Members clean their own offices, too.

20. Cutting Costs: Energy Savings Thanks in part to the results from a 2008 energy audit, we’re saving $140,000 a year in energy costs.We installed a variable air volume system, meaning our air handlers don’t run at 100% all the time anymore.

21. Cutting Costs: Energy SavingsCOSI also reduced its lighting time, allowed building humidity levels to climb from 50% to 60%, and eliminated paper towels.Getting rid of paper towels is saving over $5,000 a year. It’s reduced our labor costs, and it’s greener, too.

23. Eliminated free military admission (now a $2 discount)Teacher Admission: COSI was about the last big institution in our market still giving teachers free admission. We were giving away over $70,000 in free teacher admission every year. There’s been some pushback, but it hasn’t been too painful.

24. Raising Prices We spend a LOT of time debating pricing these days. Our pricing discussions are often intense conversations among large, diverse groups. Every month, COSI’s STAR Team meets to review attendance and revenue figures, debate the causes of successes and shortcomings, and to set and review pricing.

25. Raising Prices In many instances, COSI has elected to raise prices. Museums often undervalue and underprice what they offer. We often attempt to build access into a price point, pushing prices artificially and unsustainably low. We now separate our access discussions from discussions about pricing and consumer value.

26. Raising Prices “If you’re going to pull one lever, raise prices.” Emily RhodesTypical profit increase by action:Lowering fixed costs – 2.7% Higher sales volume – 3.7% Lower variable costs – 7.3% Raise prices – 11% increase** 1% improvement in price, variable cost, volume, or fixed cost with corresponding change in profit. Source: The Pricing Advantage

27. Raising Prices To set prices, COSI has adopted a value-based pricing system. Value-based pricing uses customer feedback to gauge what customers will pay for a given product or program. COSI uses data gathered through online surveys to determine how prospective customers value programs and products. Where to start raising prices? Look at programs and events that you typically sell out – it’s a good place to apply a value pricing study.

28. Raising Prices At what price do you think the program is too expensive to consider purchasing it? At what price do you think the program is so inexpensive that the quality cannot be very good? At what price do you think the program is beginning to get expensive, so purchasing it is not out of the question, but you would have to give some thought before buying it?At what price do you think the program is a bargain?

29. New Revenue Sources Public-Private Partnership InitiativeGeneral Admission Add-OnsAncillary Income From MembersMore Special Events New Adults-Only EventsWelcoming Building Partners (tenants)The Zula Patrol Partnership

30. Public-Private Partnership Initiative The PPPI is a combination of support from the City of Columbus, Franklin County and private investors. The PPPI was created to give COSI funding for two years that would allow for a period of re-engineering – a time to examine the best practices of COSI and the industry; identify, pilot and test opportunities and create a new business model.

31. Public-Private Partnership Initiative The PPPI has bought COSI time: time to break our “survival mode” cycle and to test and implement the cost-saving and revenue-generating initiatives in this presentation.

32. General Admission Add-Ons Upcharge experiences like Titanic: The Artifact Exhibition produce revenue and give COSI an opportunity to reach new audiences.

33. Ancillary Member Income COSI established a new “Premium” Membership category. It costs $37 more than our standard family membership. We’ve sold over 600 in about a year.

34. Ancillary Member Income We also created a new “Family Access” membership for low-income households that’s just $25. We’ve sold over 3,000 Family Access memberships.

35. (Lots) More Special Events We’re offering more low-cost “Fun Days” and “Science Days” to help drive attendance.Character appearances are inexpensive and drive foot traffic - sometimes too well!

36. Adults-Only Events This is a new venture for COSI, and we’ve had mixed success. Our numbers have been good, but we’re just breaking even. Still, we’re getting to know a whole new audience. Sweet Science

37. Building Partners We’ve opened our building to a number of “licensed use of space” tenants, including a TV studio, a high school, OSU researchers, and more. Pays dividends in many forms! OSU’s Labs in Life

38. The Zula Patrol Partnership COSI has partnered with The Zula Patrol children’s TV show to create a line of themed products for museums to buy and rent. Every sale means revenue.

39. Looking Ahead: COSI 2012 Greater financial stability, and a new business model for the 21st century. Kim Kiehl: Losing the levy was the “best thing” to happen to COSI – it forced us to reinvent how we do business.

40. Questions to ask? Ideas to share? Please contact Doug Buchanan COSI Education Programs Marketing Manager at dbuchanan@mail.cosi.orgYour support for OMA makes sessions like this one possible – THANK YOU!