Does Your Selling Process Need an Overhaul?

The 2011 Sales Performance Optimization survey by CSO Insights contains a wealth of information about the attributes and effectiveness of B2B selling.  One of the important findings in the survey is that sales success depends on how you sell as much as what you sell.

How you sell has two components in the CSO Insights framework.  The first is how customers (and potential customers) perceive the value that a company provides.  At the lowest level, customers see the company as nothing more than an approved vendor that provides acceptable products or services.  At the highest level, customers see the company as a trusted advisor whose products, services, and other contributions are key to their long-term success.

The second component of how you sell is the selling process you use.  CSO Insights says that companies fall into one of four levels when it comes to selling process.  Those at the lowest level don't have a defined selling process.  Every salesperson does his/her own thing.  At the highest level, a company has a formal, well-defined selling process, continuously monitors its use by the sales team, and adapts the process to changing market conditions.

The research by CSO Insights shows that the higher you are along these two dimensions, the more sales success you will have.  For example, high ranking companies have more salespeople who achieve their quotas and higher closing rates.

The quality of your selling process has become critical because of changes in the way business buyers make purchase decisions.  In essence, the buying process has become more complex, and you need a robust selling process to cope with this increased complexity.  Consider just three of the ways that B2B selling has become more challenging to manage (based on data from the CSO Insights survey).

• Sales cycles are longer - About two-thirds of companies have sales cycles for new customers that are four months or longer.
• It takes more calls to close a deal - Nearly six out of ten companies say it takes at least six sales calls to close a deal with a new customer.
• More people are involved in the buying process - Three quarters of companies say that a final buying decision requires input from at least three people.

Is your current selling process up to the challenge of managing the new sales environment?  Do you have a formal process that is used consistently by your sales team?  Is your process documented in written form, and is it part of your training for new sales reps?  Do you consistently monitor the effectiveness of your selling process and adapt it to changing market conditions?

If you can't answer "yes" to all of these questions, you should probably take a close look at your current selling process.  There's a good chance you're leaving substantial revenue dollars of the table.

Back to the future: a brand new model of trust?

 
Brands have been around for a very long time. 

A brick from the reign of Augustus

Bricks were branded in Rome. Brick kilns needed to earn the trust of buyers in distant markets to sell their product. The buyer had no way of evaluating the quality of the product until they’d used it, and by then it was too late. So to bridge the trust gap, each kiln stamped its unique logo on its bricks.

The debt-ceiling standoff: great taste, less filling

Just Marketing can't help but think of the debt-ceiling standoff -- the great tax more, spend less non-debate -- in terms of its marketing antecedents. 
Fierce but ultimately spurious opposition between two otherwise compatible positions, gets attention by creating a spectacle:The tug-of-war heightens the importance of the two attributes, and reinforces the semblance of polarization, when in fact

How Targeted Marketing Can Save Your Business

A few nights ago I was watching 'Minority Report' with Tom Cruise on Cinemax. There was a scene in the movie when Tom's character was walking through this futuristic mall and as he walked by various retail stores, these state-of-the-art eye scanners would move over his corneas and a personalized, digital marketing message was produced for only him to see/hear. These promotional messages not only addressed him by his first name, but apparently included his interests (as the scanner had access to archive information stored in his mind of past purchase patterns, consumer behavior, and more).



Sound hokey? It's not all that far off from what actually can be done today with personalized marketing (also known as one-to-one or targeted marketing).



Personalized marketing is more than just including someone's name in a subject line or salutation of a message. It's actually having some consumer knowledge albeit demographic, geographic and psychographic ('DGP') data about the person then crafting targeted promotional messages to suit certain data points. If you have the ability to collect even deeper data, such as purchase behavior, even more power to you.Some also call this type of marketing 'database marketing' or 'data mining', as you're mining and refining your in-house list.



In a nutshell it's leveraging the data you have and simply the art of crafting a specific, targeted message to a person or group of like-minded people. And studies have shown that this type of marketing skyrockets open and conversion rates.



Now, there is one important caveat to successful personalized marketing or database marketing efforts ... that's having a robust email interface that collects and stores consumer/client/prospect activity down to the user level and also can group them into 'buckets'. Those buckets could be categorized by DGP data points, website activity or purchase behavior.



For most small businesses, who tend to use the likes of MailChimp, Constant Contact, and similar cost-effective email marketing companies, that level of tracking is simply not offered.The email marketing companies that do offer such robust systems often have tiered pricing based on email volume (usually large scale), and even then, those rates are usually too steep for the start-up entrepreneur or home-based business.



So what's a small business owner to do?



The answer is quite simple (and affordable): Conduct periodic surveys, approximately one to two times a year, of your own list then store and group the data. Once that data is stored you can create universal 'buckets' of important group interests then send targeted messages to those groups of people.



This can be done even using cost-effective email marketing services, such as Constant Contact, and the help of Survey Monkey, to collect the data.Survey Monkey is a free survey service, but if you want the detailed level of data that needs to be tied down the user level (by email address), then you have to pay a nominal monthly or annual fee. But trust me, it's worth it.



You can easily set up your questions (I suggest 20 max) and have multiple choice or fill ins. I suggest multiple choice as it saves the user time. Most users want to complete a survey in a few minutes. So carefully think out your questions and answer options. Make sure to throw in your standard DGP questions as well as some competitor and interest related questions.



For example, let's say you have a list that has a combination of copywriters, marketers, and business opportunity folks. The copywriters may only care about things related to promotions and creative development. The marketers might only respond to messages that pertain to direct response and Web marketing. And your biz-op subscribers may only care about things related to entrepreneurship or home based businesses. Not segmenting your lists means you're alienating 66% of your list each time you send a promotion. That's huge! Talk about leaving money on the table.



However, if you're speaking to each group about their own specific interests, you're now engaged with 100% of that list group each time you send a promo, thereby boosting open and conversion rates. You're also likely to see a reduction in attrition as well, since people will be getting targeted messages.



Test this out for yourself. See the tremendous difference targeting your promotional efforts makes. Then, if you see hard results of improved open and conversion rates, try the same for your editorial (ezine) messages. This will increase bonding and reduce opt outs. It may also improved your viral marketing (forward-2-friend), as readers are going to be so pleased you're 'speaking' directly to them about they're interests.



Both of these tactics may be a little extra work, but it will also ensure no money is left on the table.Your survey results will not only prove useful in your personalized marketing messages, but can also be used as market research, product development, and even potential joint ventures and media buys.



To help entice your list to taking the survey, consider offering an exciting, immediate, easy to fulfill offer as well as compelling subject line in your email message for the survey itself.If you have buyers and non-buyers (i.e. clients and prospects), make sure you survey each list separately.



Not finding the time to survey your list is really doing a dis-service to your clients and subscribers as well as your business. 1) You're not really knowing and engaging with your audience as best as you could - and this will affect product development, promotional and editorial efforts; and 2) You're not reaching a level of maximized sales capacity.



So before you start wondering why your subscribers aren't buying, or why open rates are low, or why you're getting increased unsubscribes ... ask yourself when was the last time you surveyed your list?If it's NEVER, then you're long overdue.

The Effects of Social Media on Traditional Journalism

In my role as Director of Communications at Arena Stage, I supervise media relations in addition to marketing and a few other areas. As originally intended, this blog was developed to discuss arts marketing, however from time to time, I stray a little and write about topics that affect media relations, as will be the case today.

A couple of weeks ago, I found myself participating in a very interesting discussion via Twitter with Howard Sherman, Peter Marks, Trey Graham, Nella Vera, David Loehr and Kris Vire. This impromptu panel discussion was centered around the affects of social media on traditional practices in arts journalism. With both publicists and journalists recognizing that the traditional media landscape is changing, it made me think about what's next. Below are my thoughts that formed in the weeks since.

For a primer on the subject, may I suggest the following articles:
"Should Theater Critics be Allowed to Tweet an Opinion Before Writing a Review?" Washington City Paper, 10/20/2010
"Hey, Broadway-Based Spiderman Boosters: Twitter's Not a Supervillain" NPR, 12/1/10
"Will the Embargo Hold?" 2amt, 7/12/11
"Stop Telling Me What to Think About Your Show" The Craptacular, 7/12/11

From my point of view, the affects of social media on...

New Play Development
The days of developing new work under the watchful eyes of millions of New Yorkers may be over. And the Broadway tryout in major metropolitan areas could be as well. Why anyone would make the choice to develop new work directly on Broadway itself baffles me, as there is no room for error. I couldn't imagine a worse place to develop work. To be extraordinary, one must be able to take risks. With the rise of social media, every risk taken (and failure made) is a potential headline in the now influential blogosphere. In the past, producers and publicists had to concern themselves with crafting stories for professional journalists and preparing for traditional reviews, but in today's world, before the first review hits, public opinion can be persuaded by millions of tweets, Facebook posts and blogs. In some cases, by the time the impartial and professional critic walks through the doors of a theater, the verdict in the court of public opinion has already been rendered. As information travels at the speed of light to every corner of the world these days, it would not surprise me if the major development work for high profile, Broadway-bound productions starts to occur at smaller and smaller venues in more remote areas of the country. Even major regional theaters in large metropolitan areas may become too "exposed" to be able to shelter the development process of new work. My prediction: Places like Virginia Stage Company, a LORT D theater in Norfolk, VA which just recently produced a highly acclaimed pre-Broadway run of Bruce Hornsby's SCKBSTD, will become the new go-to places for development of high profile projects.

Preview Performances
A production is never fully complete until it is performed in front of an audience. Preview performances used to be a testing ground that allowed creatives the ability to make adjustments to a production and then try them out in front of an audience. Previews are handled differently depending on the company. I have worked for companies where previews were very rough, often times being obvious that the creatives and the cast were still in the process of creation. However, I have also worked for companies where in most cases, the first preview looked as polished as opening night. As marketers, we know the most powerful marketing tool is word-of-mouth, and social media allows for the development of instant word-of-mouth campaigns. These days, artists and administrators have to be prepared that the first preview will bring instant feedback, and that feedback will have a direct impact on sales. Some administrators, as mentioned in the aforementioned article entitled "Stop Telling Me What to Think About Your Show," try to appeal to audiences to halt or slow social media. However, as a paying member of the audience, patrons have every right to say what they think to whomever they want using whatever means they want to. Trying to control social media is a waste of energy, and asking audience members not to discuss the play is like telling a teenager not to do something. Even more ludicrous are the producers that are charging $150+ for previews, and then asking patrons not to share their experiences. Whoever advised them to do so obviously has very little understanding of the value of transparency which drives so many social media mavens. My prediction: Producers will forgo long preview periods, and will in turn rely more heavily upon the developmental runs as discussed in the previous paragraph.

Embargoes
In his excellent blog referenced above, Howard Sherman predicts that the embargo "has begun to crumble and that erosion will only accelerate as every single person who cares to becomes their own media mogul and true stars of the medium begin to achieve influence akin to that afforded by old media." I couldn't agree more. As of today, traditional journalists are expected to hold back on reviewing until a producer settles on an opening date and then invites the critic to see the production. In the meantime, "citizen reviewers" are blogging, tweeting, posting on Facebook and Yelping, thereby allowing everyone except the professional critic the opportunity to weigh-in. However, to pull a line from Spiderman, with "great power comes great responsibility." Professional critics are expected to act with journalistic integrity and to honor embargoes as they are the arbiters of culture for, in some cases, millions of readers. But there are grey areas. What happens when the same producer that requests an embargo from professional critics invites Oprah Winfrey to attend a preview, and then Oprah tweets her thoughts to her 6.7 million followers weeks before critics can? or when an advertising firm uses pull quotes from comments on Yelp or Twitter to promote a show in ad campaigns weeks before a show is officially open to review? My prediction: The use of embargoes between producers and the media will change in the next few years as social and traditional media will compete directly with each over for prominence.

Reviews
For some reason, when Washington City Paper theater critic Trey Graham tweeted a response to a show that he was reviewing from the theater, it caused a little bit of a brouhaha. To get the facts straight, he was an invited reviewer attending a production that was open to review at the request of the theater. I guess a couple of actors who normally like to avoid reading reviews encountered the tweet, and were upset because a review caught them by surprise as it was delivered via social media, thus leading to a complaint. From a publicist's perspective, Trey was well within his rights to tweet his thoughts. Theaters can (as of now) embargo reviews based on time (when shows are available for review), but it is amusing to think that any institution would expect to be able to embargo based on delivery method. Social media is just a delivery mechanism, just like a newspaper is. Critics have every right to deliver their criticism via whatever mechanism they like. Journalism is a very competitive field, and often times being able to weigh-in first, or before others, creates a competitive advantage. As such, I am not surprised at all that critics are now sending immediate, albeit 140 character, responses. Although I disagree, Howard Sherman developed a well reasoned argument as to perhaps why critics should not tweet responses in his previously mentioned blog. That being said, as a publicist, I would argue that whether we think critics should or shouldn't tweet their responses is a moot point, as it isn't up to us. The fact is, they are doing it and we don't have any logical reason to ask them not to. My prediction: Many more traditional critics will start tweeting immediate critical reactions so that their responses are competitive in the fast paced environment of social media.

Merchants of menace

This is a guest post by Jay Lebo. Jay is one of the founders of Gravitas Business Architects and has over a decade of experience helping companies of all sizes multiply growth and outperform the competition. Business leaders who work with Jay get actionable strategic insight that contributes directly to the bottom line. Startups, small, medium and large enterprises and government agencies have

Are You Buying "Smart Media?"

Media buying, or online advertising, is more than just a Web strategy to help grow your business. It’s both a science and an art. It involves a bit of finesse, competitive research, creativity, and good negotiation skills. Sadly, with most online advertising experiences, the lagging partner is typically the business owner by no real fault of his or her own … it’s simply from sheer lack of industry knowledge and media savoir faire. Here are some powerful "insider" tips and tricks to buying smart media.

Media buying, or online advertising, is more than just a Web strategy to help grow your business. It’s kind of like a dance between two people: you and the account executive (or publisher).

As with all dances, one person usually leads and one person gets led. Sadly, with most online advertising experiences, the lagging partner is typically the business owner by no real fault of his or her own...it’s simply from sheer lack of industry knowledge and media savoir faire.

You see, in buying online media for more than a decade, I can honestly say it’s both a science and an art. It involves a bit of finesse, competitive research, creativity, and good negotiation skills.
But if you don’t have time to go through trial by fire and want the crash course to not only dance, but lead, than you need to pay close attention to some powerful ‘insider’ tips and tricks to buying smart media.

The most common types of online media are banner ads or text ads (aka display ads). When you buy these forms of media you can buy them directly from a website or blog (the publisher) or buy them through an ad network.

Banner ads come in a variety of sizes and website placements, but I’ve found over the years the best performing ones are the medium or large rectangles that are closest to the content on the page. I have never had great luck with leaderboards or skyscraper[el]you know, those large horizontal and vertical ads that are either at the very top of the webpage or on the side.
However, you can also ‘rent’ lists have the publisher send a dedicated, solo email to their list on your behalf or place an advertisement (text or graphical) in their ezine. These are known as list rentals and are more costly, because of the publishers ‘implied endorsement’, but generally perform better.

No matter which form of online media your buying there’s some important things to know before you engage with the account executive and sign an insertion order (agreement).

Here are my 10 'must do/must ask' things when conducting online media buys.

1. Competitive analysis—Find out what is the typical industry rate for that particular ad spot and placement in your niche. For instance, if you're interested in running a 300x250 banner ad, do some research. Call some ad networks and find out what that ad unit costs on the home page and 'run of site' within your target niche.

2. Competitive analysis—What ad units typically get the best click thru rates (also known as CTR)? Read some online ezines or blogs and get an idea on average metrics so you have a benchmark to measure your campaign against.

3. Publisher placement—Ask your account rep. if your banner ad will be "run of site" (ROS) or "run of channel" (ROC). This will determine exposure and pricing.

4.Ad targeting—Find out if the publisher allows day parting (running ad during specific time periods). This can save you money on ad rate especially using the CPM (cost per thousand) pricing model.

5. Publisher placement—Find out if your ad position will be fixed or rotated (shared) with anyone else's ad. Again, this will give you a good idea of your potential exposure. Also, if your ad placement is being shared with other advertisers, you should try to negotiate a better rate, as the spot is not dedicated to your message.

6.Publisher placement—If shared placement, find out what percentage of impressions (or views) you will receive.

7.Dedicated email—Find out the size of the list you're thinking of renting, the frequency the list goes out, and the average unit sale (AUS) per subscriber.

8.Dedicated email—Ask the publisher who's mailing for you if there will there be a lift note (an introduction or implied endorsement). Lift notes help 'warm up' the list (subscribers) and boost conversions.

9.Out clause—Ask your account executive if the media agreement has an out clause or termination right. This is important as if your campaign is not working, you don't want to have to ride it out and waste money. You want the ability to end it and cut your losses. Also find out if you can pause your ad during a slow traffic times (i.e. summer, holidays) as not to waste impressions (CPM).

10.Reporting—Ask your account executive if you will I be given daily/weekly reporting OR access to the online ad serving system. This will allow you real-time access to click thru rates and more to evaluate if creative (banner and landing page) is striking a cord with the target audience.

Bonus Tips!
Ok, if the previous 10 tips weren’t enough, here are some key influencers to make sure you ask about to help you get the best pricing possible:

Seasonality—Each niche has their highs and lows, but generally speaking it’s typical to see drops in website traffic during summer (June – Aug.) and around certain U.S. holidays. Research your industry and use consumer purchase behavior to your advantage. For instance, in some industries, the days around Thanksgiving is slower than usual. If you’re running a campaign that falls on this timeframe, ask about getting lower rates or pausing your ad during the slowdown. DoubleClick [http://www.google.com/doubleclick/] and ClickZ [http://www.clickz.com/] is a great source of information and often releases quarterly consumer Web reports on buying patterns and traffic.

>>Exclusivity—Similar to economies of scale (where the more that’s produced the cheaper the unit price), if you’re banner ad is sharing space with other advertisers for less ‘solo’ time, you should be paying less. It’s important to ask whether your ad will get 100% of the rotations or sharing ad exposure. And if sharing, find out what percentage of exposure you are ultimately getting during your ad run. This is known as being “fixed ad placement” or “shared ad placement”. If you’re told you have shared placement, this is a great bartering tool to get a more competitive rate.

>>Site Targeting—You’ve heard in real estate it’s always about location, location, location, right? Well online real estate is no different. Find out if your ad will be run of site (ROS), run of channel (ROC) or on specific high traffic pages. Typically, the further you drill down the more you pay. It’s known as ‘site targeting’. Similarly, the higher you go up, the less you pay. ROS is the highest (most broad) level, so it’s usually the cheapest ad location. Next is usually ROC, whose ads appear on certain channels or sections of a website. Then there are also specific pages or demographic targeting. Your goals and budget will determine which placement is best for your needs.

>>Remnant Space—Often the forgotten about query, remember to ask if remnant space is available. Remnant ads are those ad units that the publisher or ad network is having a difficult time selling for whatever reason. They can also be last minute specials or units that are now available due to another deal falling through. With more popular, high traffic websites, you can save a fortune buying remnant media. Just pay close attention to the Terms and Conditions in the insertion order, as with most special deals, there’s usually lots of restrictions and little leeway.

All of these factors will help determine the value of your ad space, and ultimately, the cost you're willing to pay to access that audience.

For more powerful and cost effective strategies to compliment your online marketing efforts, check out my new book, Content Is Cash: Leveraging Great Content and the Web for Increased Traffic, Sales, Leads and Buzz [Que Publishing, Aug. 2011].

How to Make Difficult Marketing Questions Easier to Answer

To develop a successful marketing program for your business, you must make some critical decisions, and those decisions require you to answer several difficult questions.

• What kinds of organizations will make your best prospects?
• What individuals in those prospect organizations will be the target audience for your marketing programs?
• What "arguments" will you use in your marketing messages and materials to persuade potential buyers to purchase your products or services?
• How will you demonstrate the return on investment that your products or services will deliver to a prospective customer?
• What marketing channels will you use to communicate with your target audience?

How you answer these questions will define the shape of your marketing program and largely determine how successful your marketing efforts will be.  These questions are never easy to answer, but you can make the job a lot easier if you will first take the time to thoroughly understand and describe how your products or services create value for customers.

If you've ever watched someone install a tile or hardwood floor on a home improvement TV show, you may remember that the installer spends a great deal of time making sure that the first row of tiles or boards is straight and square with the walls of the room.  After the first row is in place, the rest of the installation goes fairly quickly.  That's because as long as the rest of the tiles or boards "fit" with the first row, the whole floor is almost guaranteed to turn out right.

A clear picture of how your products or services create value for buyers is like that first row of floor tiles or boards.  It provides the reference point for the decisions you will make when designing your marketing program.  Understanding how you create value will make it easier to determine who your best prospects are, to identify the individuals you need to market to, and to craft your marketing messages.

To understand and describe all of the significant ways your products or services can create value, you'll need to answer another set of questions.

• What are all of the significant reasons that people have for purchasing a product or service like yours? What problems or needs motivate the buying decision?
• What kinds of organizations are likely to have the problems or needs that underlie these reasons to buy?
• Who within the prospect organization is affected by each problem or need?  Who has the most to gain if the problem is solved and the most to lose if it isn't?
• What specific outcomes are these people seeking?
• What features of your solution will produce these desired outcomes?
• What will the economic benefits be if these desired outcomes are achieved (lower costs, increased revenues, etc.)?

The best tool for collecting and organizing this value information is called a customer value map or a customer value matrix.  We have a customer value matrix template that we use when working with clients on new marketing projects.  If you'd like a copy of this template, send me an e-mail at ddodd(at)pointbalance(dot)com.

Marketing Superpower

The world’s consumers are American – they wear Levi’s jeans, Nike runners, have Kellogg’s cereals for breakfast, McDonald’s burgers with Heinz ketchup and a Coke on the go, while listening to Dr Dre and Katy Perry on their iPods; they play Call of Duty on their Xbox, use Microsoft Office at work, Facebook at home, Google to answer questions, visit Disney theme parks on holiday, and over the

Why the "Swiss Army Knife" Approach to Content Marketing Doesn't Work

Whenever I talk with prospective clients about starting a content marketing program, one of the first questions they ask is, "Why can't we create one content resource, say a white paper, that tells the whole story? It could include a description of the problems we can solve and the benefits our solution can provide, and we could include a couple of customer success stories to demonstrate that we can deliver what we promise."

At this point in the conversation, the image of a Swiss army knife always flashes in my mind.  As most of you probably know, a Swiss army knife is a tool that's about the size of a large pocket knife.  In addition to regular knife blades, it has several other attachments, such as a bottle opener, a can opener, a screwdriver, and a file.  So, a Swiss army knife is a real multi-tasking tool and a handy thing to have on a camping trip or a hike.

Many B2B marketers believe they can create one marketing content resource that will fill all (or most) of their content needs.  In essence, they want to create the marketing equivalent of a Swiss army knife. It's an appealing idea, and it would certainly simplify the job of content marketing.  Unfortunately, however, the Swiss army knife approach to content marketing doesn't work well for a number of reasons.

Diluted Relevance - When you create an "umbrella" content piece, you will inevitably include information that's not all that relevant to some potential buyers.  Suppose, for example, that you offer a technology product that must be "sold" to plant managers, IT Directors, and CFO's.  Each of these buyer types will have distinct issues, concerns, and priorities.  If you create a single content resource for all of these buyer types, you are essentially asking each potential buyer to wade through material that doesn't particularly interest him or her in order to find the information that addresses his or her primary interests and concerns.

Excessive Length - Even if the relevance problem doesn't exist, when you try to "cover all the bases" in one content resource, you are likely to end up with a very long resource - a 40-50 page white paper, for example.  The problem with long content pieces is that most potential buyers now have short attention spans.  They prefer to consume content in small doses, especially when they are in the early stages of the buying process. Most early-stage buyers simply won't be willing to invest the time it takes to read a 50 page white paper.

No Ammunition for Lead Nurturing - If you plan to have a lead nurturing program (and you should), you'll need several content resources to provide the "fuel" for the program.  Offering the same content asset over and over just won't work.

Reduced Credibility - Having only one content resource can also create a negative perception by potential buyers.  When I visit a company's website and see only one content resource, I can't help but question the company's expertise and capabilities.  Many potential buyers probably react in the same way.

The bottom line?  You need several content resources to have an effective marketing program. The good news is that creating multiple resources is not as difficult as it might appear.  The key is to repurpose your content.  For example, you can usually take one white paper and use it as the basis for two or three shorter content pieces.

Why crowd-sourcing innovation is worth it

This is a guest post by Mike Dover. Based on the success of his recent book, I asked Mike (Ivey MBA 1997) if he'd like to share with us what he's thinking about nowadays.  Mike is Managing Partner of Socialstruct Advisory Group. He is the co-author of Wikibrands: Reinventing your Company in a Customer-Driven Marketplace. Mike is a highly-connected research executive with more than a decade’s

The Nonprofit Variant of Dynamic Pricing

I think for most of us that work in the nonprofit theater, our dream is to create exceptional art that is accessible to everyone. Speaking for me specifically, this is the reason I decided to make a career in the nonprofit resident theater, rather than some of my peers who opted for the commercial theater. There are times when I am envious of the visual arts, particularly in Washington, DC, which due to their funding models, many of which can provide exceptional art free of charge to the public. The predominant model for visual arts institutions in DC is based on uninhibited access. Wouldn’t it be great if the performing arts were the same way? The nonprofit resident theater model developed in a completely different manner however. In fact, Arena Stage was founded in 1950 as a for-profit entity, and thrived for years as such. From the very birth of resident theaters, patrons were charged to access the art, and we have had to fight to keep funding models in place that support accessible fees. With the development of the nonprofit model, it allowed previously for-profit resident theaters the opportunity to raise contributed funds (private donors, government entities, foundations, etc) in an effort to keep ticket prices as accessible as possible. Most resident institutions took advantage of this new found opportunity to improve access for all and to provide educational programs, however there were some that did not. Still to this day, in our community (not to mention on Broadway itself), nonprofit theaters and for-profit companies compete all the time, which seems to be somewhat unique to the theater world (do you know of any for-profit symphonies?).

Prior to 2008, few companies had experimented with dynamic pricing, primarily because the technology wasn’t readily available to operationalize what had previously been a well thought out theory. The idea was relatively simple -- if your house was playing to less than 100% capacity, it was symptomatic of the failure to determine an optimum price. If an optimum price could be determined, which perfectly aligned demand and supply, every house would be at capacity. The first use of dynamic pricing by a nonprofit organization to my knowledge was at the Chicago Symphony Orchestra. In 2003, Deborah Rutter joined the symphony as their new president, and introduced the idea of dynamic pricing (resident theaters would experiment with dynamic pricing much later). Tessitura, an advanced new database system developed by the Metropolitan Opera, had entered the market in the early 2000s, but was so costly that only major symphonies, operas, presenters and commercial entities could afford it. However, Tessitura was robust enough to handle the operationalizing of dynamic pricing for those institutions that could afford it. From 2003-2008, most marketing directors at nonprofit resident theaters were aware of a new “dynamic” pricing model, but we didn’t have access to the technology to implement it. While very large nonprofits were experimenting with dynamic pricing, so were commercial entities. The Producers broke records in 2001 by establishing an unheard of top ticket price of $480 (which by the way, The Book of Mormon just surpassed on June 16 with a top ticket price of $487). I immediately began to notice a difference in how for-profit and nonprofit entities were applying the principles of dynamic pricing. From my observations, Broadway producers did not consider accessibility in the least when establishing ticket prices. They had responsibilities to their investors, and would charge the maximum price they could for every seat in the house. On the other hand, I noticed many nonprofit companies increased their top ticket price when demand warranted in order to keep a significant portion of their houses at very accessible prices. And even the top “dynamic” prices at nonprofits didn’t get anywhere near $480 (I wonder if this is what Diane Ragsdale meant when she said that "nonprofits are expected to leave money on the table?"). Whereas both nonprofits and for-profits were using the same pricing theory, it has been applied and operationalized very differently.

A tipping point for nonprofits occurred in 2008. By that time, Tessitura had been on the market for almost a decade. Competing database products were being developed and tested, and the pricing for Tessitura had decreased to a level that most nonprofit resident theaters could now afford it. In addition, the world experienced the beginnings of the global economic crisis during September of 2008. That fall, I gave a couple of speeches at national conferences, and the predominant question on the minds of arts administrators was how a crisis at such an enormous scale would impact organizations. We had models from 1987 and the 1970s, but all indications were that this crisis would far exceed anything we had ever weathered.

Some organizations cut back programming and reduced expenses in a hope to ride out the storm. Others recognized the crisis as an opportunity to reexamine business models. Most correctly identified that contributed revenue sources would be heavily impacted. As nonprofits operate on two revenue streams (contributed and earned), in order to maintain the same level of artistic excellence, maintain living wages for artists and offer extensive educational programs, many organizations looked for ways to bolster earned revenues. Nonprofit resident theaters became very good at maximizing revenues from non-ticket sources in order to maintain accessible ticket prices. New sources of revenue were popping up everywhere from real estate ventures, event rentals, restaurants, parking, corporate visibility opportunities, summer camps, bars, consulting services, and partnerships with for-profit ventures. However, new earned revenue streams took time to develop and decreases in contributed revenue were coming quickly. In order to maintain accessible ticket prices for a significant portion of the house, many nonprofits had to seriously consider a dynamic pricing model that allowed for an increase at the top pricing levels when demand warranted it. With a decrease in contributed revenue, organizations had a choice to make:

1. They could reduce expenses, cut programming and lay off staff in an attempt to resize themselves to match the new levels of contributed revenue available.
2. They could increase ticket prices at all price levels to make up for lost contributed revenue, however in doing so, making themselves less accessible across the board.
3. They could increase top ticket prices according to demand, and keep a significant portion of their inventory at accessible prices.

Not surprising to me, many nonprofit resident theaters went for option #3. To my knowledge, almost all the nonprofit resident theaters in the DC metropolitan area now utilizing dynamic pricing, and none so far have seen the negative ramifications as forecasted by some experts.

In today’s debates concerning for-profit vs. nonprofit incorporation, I am mindful of something Arena Stage Founder Zelda Fichandler said in a speech she gave in the 1960s: “while we are gathered here in the name of the nonprofit corporation (and, indeed, without the nonprofit income tax code, our American theater would simply not exist), being nonprofit does not really define us—our goals, our aims, our aesthetic, our achievements. What defines us, measures us, is our capacity to produce art.”

Ultimately nonprofit resident theaters should be measured by their capacity to produce art, and to make that art as accessible as possible without sacrificing excellence or their ability to compensate artists at reasonable levels. Given today’s new realities of reduced contributed revenue sources for many nonprofit resident theaters, the development of new revenue streams and the implementation of dynamic pricing allows institutions to make up for lost revenue without sacrificing their ability to be accessible to their communities.

Out the door first with personalized debit

I love early morning trail runs! The best part? Serenity ... peace ... solitude. The worst part? Spiderwebs!

The point? There are great benefits to getting out the door first.

We have a client who offers instant issue debit cards. When we shopped their branches, the staff talked about the benefit of receiving the cards instantly ... which, to us bankers, is really cool. What they were missing was the true, differentiating benefit to the consumer. With the instant issue debit, they also offered card customization. Their members can have a debit card with a picture of their wedding day, a close up of their brat's mug or a shot of their refurbished hot rod ... whatever they want! Sure custom cards aren't "instant," but they are darn fast (a few days wait). The unique benefit is emotional.

Now, I don't know about your specific market (yet!), but in this market, while other banks have "free checking," no other competitor is marketing personalized debit cards. It's a unique product, it's tied to the almighty checking account and it has emotional appeal. It's the perfect storm! We rolled the print campaign out last week and will be focusing there for some time.

By getting out the door first with custom debit, I expect that this client will enjoy the serenity, peace and solitude of a less crowded competitive marketplace. And I'm sure it'll be better than running back in the crowded pack of "Free Checking."

Take care,

Eric

The "good enough" strategy

The average consumer purchases products and services in thousands of product categories every year.







In each one of these categories there are anywhere from a few to a few hundred alternatives to choose from.



And each of those alternatives is a bundle of features and attributes, some of them quite esoteric or difficult to understand -- do you really know what makes one digital camera