Ticket sales are an essential part of their operations for theaters, film houses and museums. It is waiting for the end of the Covid-19 crisis, after which the promotion machines can run at full power again. Ticket sales! Or is this the perfect moment for the culture marketing leaders to explore another revenue model? A model that strives for long-term customer relationships and recurring revenues?
The cultural sector has been hit incredibly hard by Covid-19. Almost all institutions, from theaters to museums, are facing serious shortages due to the loss of a substantial part of their public revenues. In order to survive, many cultural organisations have been forced to innovate their business model and culture marketing approach. Music schools introduced online versions of their lessons. Film houses sought to collaborate with streaming partners.
Despite these kinds of initiatives, additional subsidiary support from the government will be necessary to keep the cultural sector going in the coming period. But the sector would do well to also think about the post-corona period. The question is whether the current earning models are sufficient to keep cultural businesses financially healthy. There may be other, better ways to generate revenue streams and involve the public…
What do Netflix and HelloFresh have in common?
Before I go into the situation within the cultural institutions, we first make a trip to the commercial world. To the world of Netflix, Spotify, Disney, Microsoft, Dollar Shave Club, Salesforce, Nike, HelloFresh and many other companies.
What all these organisations have in common is that they do not (only) provide a one-off product or service, but enter into a long-term relationship with the customer, often in the form of a paid membership or subscription. Usually different versions of this subscription are offered, for example:
- Starter (free or low monthly costs)
- Medium (middle price range)
- Intensive (most extensive functionalities, highest price)
The basis of this model has become known in recent years as recurring revenue.
Subscription versus membership
For the sake of convenience, I lumped the terms subscription and membership together above. That’s not entirely justified. Chris Lema describes a membership as a “notion of belonging, a relational concept”. As an example he gives a frequent flyer program. For many people this is not just about the hard benefits, but perhaps even more about the status of being part of a group that receives certain exclusive privileges or gifts. (Think of KLM’s famous Delft Blue miniature houses, reserved for World Business Class members).
A subscription is in the words of Chris Lema a “revenue agreement, a financial concept”. There does not necessarily have to be an emotional connection between the subscriber and the organization, or between the subscribers themselves.
There are also plenty of intermediate forms in which memberships and subscriptions essentially coincide. A good example is the gym. You pay a fixed monthly fee to make use of the facilities and in that respect you are a subscriber. At the same time you can feel connected with like-minded sports enthusiasts, making the commitment also a membership.
In other words, subscriptions and memberships can be close to each other. In the rest of this blog I therefore use the concepts interchangeably. Paid memberships and emotionally charged subscriptions are both excellent means of generating recurring income.
It is no coincidence that many organisations are charmed by paid subscriptions. To start with, it is nice for an organisation to know that a fixed monthly amount of income is credited to the bank account. This makes the financial planning of a company a lot easier and less risky.
Marketing efficiency can also be greatly improved if the focus is no longer on one-off transactions, but on entering into longer-term customer relationships. After all, the acquisition costs are no longer fragmented over countless separate campaigns, but are focused on getting the right customer once.
From the customer’s point of view, the subscription model also offers a win-win situation. The strongest proof of this is of course the fact that the aforementioned companies have been highly successful in attracting and retaining customers. This success has not only been achieved through slick marketing campaigns. The subscription or membership model really benefits the customer.
Sometimes these are financial benefits (e.g. free shipping for Amazon Prime-members), sometimes convenience (such as cooking recipes and ingredients delivered at home by HelloFresh) and often a feeling of ‘connectedness’ plays a role. A nice example of the latter is the Nike Adventure Club. With this Nike offers subscriptions for children’s shoes and builds a strong emotional bond with the target group. Undoubtedly in the hope that today’s Adventure Club members will become tomorrow’s Nike community. In this example, the concepts of membership and subscription come together in a strong way.
Culture marketing: acquisition, acquisition, acquisition
Back to the cultural sector and culture marketing. Theaters, pop venues, concert halls, film houses, museums and other institutions strive without exception to find a large and diverse audience. This requires a continuous effort in promoting individual offerings, such as an exhibition or a theater concert. And that effort is almost never sufficient.
For those who have ever worked in a cultural institution, this is a familiar image: the general director rushing into the marketing department in panic and demanding that more ‘promotion’ be done, given the disappointing ticket sales. More advertisements and (above all) more emails should save the event, is the idea.
Although the marketing practice of theaters, among others, has improved in recent years, the basis of the marketing approach has remained unchanged. The focus is still on the promotion of separate cultural events, again and again.
Subscribers without a subscription
This observation does not seem to be consistent with the presence of ‘subscribers’ in most Dutch theaters. So do these theaters actually work with subscriptions, including a recurring stream of fixed income? Unfortunately not. In the eyes of theaters, a seasonal subscriber is someone who has bought an x number of tickets prior to the new season (during pre-sales).
In other words, the seasonal subscriber has not committed to anything in advance. He determines during the presale which performances will be added to the shopping basket. Strictly speaking, of course, this is not a real subscription, let alone a subscription that leads to recurring and predictable revenues.
Subscriptions and memberships hardly seem to be part of the revenue models in the cultural sector. Yet there are exceptions, usually initiated by umbrella cultural organisations.
One example is the Dutch We Are Public platform, which gives members access to a series of exhibitions, films, performances and concerts for a fixed monthly fee. Another successful set-up is Cineville: a pass that gives unlimited access to the offerings of 40 film houses in the Netherlands. Also well known is the Museumcard, which allows 400 museums to be visited. Also theaters sometimes work with these kind of cultural all-you-can-eat propositions.
Culture marketing focus on short-term transactions
Although cultural organisations do sometimes work with subscription-like constructions, these play an extremely modest role in their business operations and marketing. I think this is also an important reason for subscriptions not becoming mainstream in theaters, film houses and museums. The subscription is currently no more than an add-on to the total offer and is aimed at a limited part of the target group.
The marketing focus is and remains on achieving as many short-term transactions as possible (ticket sales), instead of binding the various customer segments with the help of well-considered subscriptions.
From ‘ticket sales’ to ‘memberships’ in the cultural sector
Cultural organisations would do well to seriously investigate how they can move from ‘selling tickets’ to building valuable membership or subscription forms for their audiences. Undoubtedly, this is not an easy job. Below I outline a few points of attention that can help in the search for promising propositions.
1. Put the customer first
An important starting point for defining the right memberships is understanding the customer. Which customer segments do we have? What drives them? What ‘pains’ do they experience and what ‘gains’ can our proposition bring them? What are they willing to pay for this?
2. Involve the entire customer experience
Look beyond the content of the cultural program (the exhibition, the concert, the film) and reflect on the whole experience the client gains in relation to your organisation. From the ordering process, to parking, to the drinks during the break. It might be smart to include these kinds of service elements in the membership formula as well.
3. Differentiate your offer
Develop different types of subscriptions that appeal to different segments of your target group. It is also worth considering developing a ‘free’ proposition that can help seduce audiences that normally experience a high threshold to get acquainted with your cultural offerings.
4. Arrange the financial settlement with cultural partners
Switching to a membership model will mean quite a lot for the mutual settlement between cultural partners. For example, it is often the case that a theater company determines in advance what amount the artist will receive for the performance as a ‘guarantee’. How will this work with a different revenue model in the future? The good news is that we can learn from similar cases, such as that of Spotify in relation to artists.
5. Test small, roll out if successful
It is always exciting to experiment with completely different revenue models and culture marketing approaches. Will the customer accept and appreciate the new proposition? To what extent will we achieve at least the same financial results with the new model (and hopefully better in the long run)? To make the downside risks manageable, it is therefore a good idea to start with a series of small-scale tests. If successful, it can then be rolled out on a larger scale.
This blog was also published (in Dutch) on Frankwatching.
Subscriptions are a common thread in Bas Verhoeven's career. As a marketing manager, he introduced numerous subscriptions to the market for multinationals such as Wolters-Kluwer and Vodafone. As a consultant and interim marketing manager, he also helped many SME organisations to increase their recurring turnover.