It has become business vogue to utilize “big data” to make better decisions, whether it be from Google Analytics to IBM’s Watson. Businesses have become more adept at using data to acquire more customers, increase loyalty, and maximize revenue opportunities. Cultural Attractions have this same opportunity, even though the data may not be as “big.” For 20+ years, we’ve been fortunate to work with attractions all over the US to help them increase attendance, loyalty, and revenue. The data is collected from them and their peers, to identify success, efficiency, and opportunity.
We collect information on attendance, advertising, membership, and service costs and analyze it via our proprietary modeling. From there, we compare results to peer organizations and identify organizations who perform optimally. Then, we use the data and characteristics to guide future marketing, loyalty program, and pricing decisions.
Generally, attendance is the most important metric attractions use to identify success and we tend to agree with this. However, attendance does not have unlimited potential. Market size, advertising expenditures, advertising placement, quality of the experience, and pricing can impact attendance. Using data and comparative analysis, we can identify successful organizations, as well as those who have an opportunity to grow. In our experience working with zoos, we’ve found that, on average, zoos convert 52% of their market size to attendance; however, some of the best performing zoos may have attendance twice as high as their market. This single piece of information, put in the context of their peers, is very important to our zoo friends, if they are converting 150% or 35%. Some realize there is a strong opportunity for growth, typically in your mid-to-larger markets, and additional marketing efforts should be funded. Conversely, zoos in smaller markets who are capturing a large percentage of their audience should be pleased with their position and invest their efforts in other areas.
How is this relevant or applicable to me, you may ask? Let’s say your organization does have an opportunity to grow based on prior analysis. How can this growth be achieved? Data can offer some insight. Based on our research, the average art museum spends $1.89 per visitor on advertising. As is often the case; however, we work with an art museum who is spending approximately $.35 a visitor, a gross underspend. Should the museum choose to invest in additional advertising, history would suggest an increase in visitation is likely. In another example, if an art museum is spending $2.71 per visitor, but has lower than average attendance, we know this museum is properly funding marketing, but they may not be properly executing marketing. In cases like this, we encourage a shift to more digital advertising. In fact, we strongly recommend organizations allocate 25-50% of their marketing budgets towards digital spend. It’s where your audience is and you get a clear picture of your return on investment.
Just about every cultural attraction has a membership program in place. Now, how should these programs be priced? How should they be serviced? What is a good size? What is a proper retention rate? These are all common questions and data can be used to provide clear direction. If maximizing revenue is the most important goal, we will look to attractions who are currently maximizing their revenue and the characteristics of their program. They may convert 5% of their attendance to membership, spend $9.50 on member services, and retain 55% of their members annually, but most importantly, their member lifetime value (the amount of revenue received over 5 years minus services costs and retention) exceeds their visitor lifetime value by 2.5 times. We recently completed an analysis for a zoo who had a ratio of 1.6. While this signifies their members are 60% more valuable than their visitors, it also indicates there is a lot of opportunity for improvement. Through our report, we identified their dramatically low admission price, and subsequently their membership prices, as the primary indicator for their low ratio. We also encouraged them to limit the resources allocated to membership acquisition as this is not a profitable venture for them given their current structure.
And finally, to us, the most important metric is revenue. On average, cultural attractions are not realizing approximately 25% of their admission and membership revenue, which can represent $7 million for some inappropriately priced attractions. Data helps us with this, too. Attractions who maximize their admission pricing tend to price just below a price threshold. What is a price threshold? It’s simply a price at which a percentage of people (usually less than 5%) negatively reacts to a price—meaning they don’t visit. Price thresholds within this space usually occur in $5 increments, like $15, $20, $25, and so forth. Attractions who optimize their revenue charge just less than a threshold, $14.95, $19.95, $24.95 (believe it or not, but $.05 can make a big difference). Market research can help an attraction identify the barrier price in their market by comparing the performance of other attractions in similarly sized markets.
If an attraction gets its admission pricing right, they tend to get their membership pricing right, too. Conversely, if they undercharge for membership, they can have too many members. Yes, despite what many may say, having too many members is a reality. Too many members can negatively impact the visitor experience by increasing crowds and lines, negatively impact parking, and in extreme cases, prevent additional ticket sales. Each one of these scenarios has the potential to leave a significant amount of money on the table, especially if it’s a regular occurrence. In our experience, those who optimize their membership revenue charge 2.0 times the cost of admission for a family membership (2 adults, 2 kids) and 3.0 times the cost of admission for an individual membership (or season pass).
Are you unsure of how to use data to make decisions about admission and membership? We have over 25-years of combined experience helping cultural attractions maximize their potential and reach their goals related to admission, membership and/or revenue.
Contact us to see how we can put a strategy in place to help your attraction have its best year yet.