Pricing Expert

Erik Gensler: Welcome to CI to Eye. I’m Erik Gensler. I’m an entrepreneur, an arts marketer, and on a lifelong quest to learn and grow personally and professionally. In this podcast, I interview leaders and thinkers inside and outside of arts marketing to understand how we can grow to be the best we can be. My goal: to see eye to eye, I sat down with Steven Roth, president of JCA Arts Marketing. Steven is an expert in pricing and revenue management for the cultural field.

Steven Roth: We have a concept we call shopping in your closet, which is instead of going to acquire a subscriber of someone you don’t know and you don’t have permission to talk to, let’s talk to that lapsed subscriber. Let’s talk to that person who’s been with us for two years and now they’re ready for that.

Erik Gensler: We talked all about pricing theory, how to increase revenue even if you have a small venue, how to avoid what he calls panic discounting, and what to do if your show is not selling. Steven, I’m so happy that you, you’re here for this conversation. I’ve been a big fan of your work and I’m really excited to learn more about it.

Steven Roth: Thank you, Erik.

Erik Gensler: Thanks. So for the folks that don’t know you, can you just give us a quick professional bio, the highlight reel version?

Steven Roth: Okay. I’m born and bred in New York, so it’s great to have an opportunity to come back here. Thank you. I have an undergraduate degree in English and Theater from Overland College and an MBA from BU. I was fortunate enough to be able to combine both of those. In my first job I was the marketing director for the Schubert organization in New York. Way last century. So it was great. Every morning I woke up and I said, I work on Broadway. Isn’t that cool? And so it was great to work for Broadway’s largest theater owner. From there, I moved on to CRM consulting with some more typical companies like Price Waterhouse Coopers and that type of thing. And from that opportunity I really learned the value of data and the value of analytics. And then in 2009, I co-founded a company called The Pricing Institute with Alan Brown and my British partners, Baker Richards: Tim Baker and Debbie Richards. And JCA — Jacobson Consulting Applications — was our technology partner, and about two or three years ago, it made sense for us to combine forces. So I’m now president of something called JCA Arts Marketing.

Erik Gensler: So you’re an expert in revenue management.

Steven Roth: Thank you.

Erik Gensler: Can you tell me what is revenue management and why is it important for arts and cultural organizations?

Steven Roth: Sure. So revenue management simply is maximizing earned income from ticket sales. So it’s focusing on the ticket side, not the donation side at the moment, there are three components of that. The first is what we call yield management, and that’s a strategy where you maximize revenue from your buyers who may not be price sensitive. So that could be setting up a premium section in the theater, designate that like the Broadway houses and the Broadway road houses are. Much of our clients have special sections where people will willingly pay more, so that’s sort of getting as most that you can from those patrons. The second piece of it is what we call variable pricing, which is really something that a number of arts genres have been doing all along, charging more on a Saturday night than you might charge on a Tuesday night, or if you had a really a star turn or you had a great artist or ballet dancer, you might charge more for them than you might charge for a new sort of edgy new work. So that’s variable pricing. And then the last piece is what we call dynamic pricing. And dynamic pricing is when you change your prices up or down once the tickets are on sale. So that’s where you might find that a ticket might cost X today and more than X tomorrow, and that’s just based on what you see, what we can look at the data and we have some software that helps us do this to see what’s selling, what’s not. What do you want to change, how much those types of things.

Erik Gensler: If you have a good understanding of how your theater typically sells or you’ve been in an institution for a long time, do you see people who know that flow better have to dynamically change it less because they can predict better?

Steven Roth: I’ll answer that a little differently. I think the more data you have, the better you can make those changes. For instance, in our software, we allow our clients to say, this show is coming to a certain touring Broadway roadhouse. We think it’s going to sell like these other three shows from the past five seasons, or this is the second time Lion King has been in the market. So the more data you have, the more nuances you have, and I think the better you can do your pricing, and I don’t think you necessarily ignore what happened in the past. This can add to what you can do in the future.

Erik Gensler: Right. Christopher Williams here likes to say that you’re through a run and you freak out because something’s not selling and at that point you’re desperately sending 50% off emails and he says by that point, it’s too late. Move on to the next one. Do you see that?

Steven Roth: It’s true. We used to work together when Chris was at New York City Center and he was a great client because he would recognize those types of things. There are a couple instances. The key is to decide do you have a price issue or do you have a demand issue? And frequently the things Chris was thinking about is unfortunately there just aren’t enough people who want to see what you have on the stage on that particular evening. The answer is not to then lower the price. It’s not like there’s this huge line of people outside saying, if they only dropped it $5, I’d really want to go. If you start doing what we call panic discounting, you are taking money off the table. There are people who value that. There are people who want to see what’s there. There may not be enough of ’em, but responding with a big price dump is only going to lose you money. It’s probably not going to bring you more people. So that’s recognizing that that’s a demand issue and not a price issue.

Erik Gensler: Yeah, I mean the size of our theaters versus our programming is sort of arbitrary. The size of the theater is fixed, and just because you have 3000 seats doesn’t mean there’s 3000 people that day that want to see that, right?

Steven Roth: Correct.

Erik Gensler: So how can pricing help with that?

Steven Roth: So there’s two issues. What do you want to charge? And then there’s what we call scaling, which is how many seats do you want to have at each price? And you can vary both of them. We talked about ways of dynamic pricing of, okay, this shows selling well the Saturday night looks like it’s really selling well. We want to raise prices right before the audience is ready to raise prices. In other words, some organizations say, I’m going to raise prices when we get to 75% full. Well, what if your show’s selling really quickly and you’ve gotten to 25% full faster than you ever had? Why wait because then you have 75% of the tickets you can move versus just waiting till this magic number. So that’s one thing. The second thing is what we call flexing inventory. So on a Tuesday night, your top price might go from rows A to D on a Saturday night.

You might want to take rows E, F, and G and make those your top price. You haven’t raised prices, but you’ve increased the amount of inventory available at those raised prices. So we sort of like to look at both levers of those and to make the move as early as possible and as dramatic as possible. We’ve seen some software out there where people say, raise your ticket price $2. There’s no value in that. What you want to do is raise it a number that says to the Paton, here’s the value, price and value are the different sides of the same coin. So you really want to think about making a strong move and also making sure that the relationship among your prices also indicates the value that you’re trying to sell.

Erik Gensler: How does this work with your blockbusters versus your say, mission work where for an organization to retain and grow their patronage, they have to do blockbusters to bring new people in the door, but they have to do more perhaps challenging or different work for their tried and true. How does the pricing strategy impact that?

Steven Roth: I think the pricing strategy needs to fit in with your economic plan. So if I know I’m having a blockbuster coming in, take full advantage of that, use my data, recognize how that will sell, make your price move strong and early on and keep going. Then for those more challenging performances, shall I say that you want to make the most that you can out of it, but don’t burden that show with a really high goal because you need to so you can make up the dollars with the blockbusters and where you might be struggling with the goal. One of my favorite quotes from a client is tickets aren’t selling. Let’s raise prices. And this was an organization that was putting on what they called heritage concerts or aging rock stars. And what happened is the front of the house sold out because those were the fans of the aging rock stars and they money and they have money. They expanded that section because more and more people thought those were premium prices, but the house didn’t sell out because there weren’t enough people who wanted to see those aging rock stars, but they were able to focus on, you’re a patron, you will pay extra to see that person. Let’s charge you a good rate for that and let’s not discount or worry about the people who aren’t going to show up.

Erik Gensler: And as long as I know just enough about pricing to be dangerous, but as long as there are not empty seats in front of you, as long as the empty seats are behind you, it’s less of a problem.

Steven Roth: That is less of a problem that has a lot to do with what we call the range and relationship of pricing. If you have a 10 or $15 gap between price one and price two and then you have a smaller gap between three and four, you start to confuse the patron and you will end up having a hole in your house where you arrange in relationship is off. So those seats being empty in front are probably because your house isn’t scaled properly. You might have a $12 ticket next to a $40 ticket and that’s a no-brainer, but the person who sits in the $12 seat can probably afford the $40 ticket. So you want to be careful.

Erik Gensler: Careful. So what would you do in that case?

Steven Roth: I would make sure that there’s a good strong value message for that price. I probably wouldn’t have the $12 ticket there. I probably would. I narrow the gap between those seats so that people could make a good decision about that.

Erik Gensler: Wow. Now if you buy late, is the general knowledge that it should cost more like an airline? I mean I don’t even know if the airlines do that, but that’s the sort of mythology airlines want is if you buy late, you’re going to pay.

Steven Roth: Correct. We have data that shows, so two types of people buy late the first time is what we call a once, which is someone who is just coming to see Wicked because there’s a whole nother group of 13 and 14 year old girls who will always want to see wicked and you want take the family. Same with blue man group for 10, 11 year old boys, they will buy late and pay more because that’s important enough to them. The other side is the people who either got a discount or don’t make up their minds, so they may pay a little bit less or they might say it doesn’t matter. I’ll give you an example. There’s something very interesting about a $40 ticket and we asked a box office person. One of our clients said, what is that? And he’s a millennial. He said to me, $40 is two 20 out of an ATM and that’s my currency. And I would go see a band that I didn’t know for 40 bucks. So the decision price could be it’s all about value and how they compare that. We hear people say, that’s too expensive and my response is, it’s too expensive compared to what?

What is your option? And a lot of that unfortunately has to do with the customer experience. If I had a tough time buying my ticket, if parking wasn’t great, if the usher was rude to me, I’m sitting down and I’m not to use an Alan Brown term, I’m not ready to receive that art because so many things have gone wrong and the curtain hasn’t even gone up. And then I’m going to say I paid $80 for that. My meal was the things you can’t control. So it’s a lot about consumer psychology and a lot about how people behave and if you can match what they think the value is with their own personal value equation, then that will all work.

Erik Gensler: Yeah. We have a speaker coming to our Boot Camp named Michael Barber. He spoke last year about email this year he’s going to speak about what he calls friction and he said marketers focus should be about reducing friction. Like you said, the website is too difficult, the parking is a pain, the ushers are not helpful. If you reduce that friction, it probably really helps that value proposition.

Steven Roth: And the scary thing is when you’re going to the purchase path, when you go to buy a ticket, no matter how big or small your arts organization is, your competition is Amazon. When I have a shopping cart experience, I expect two clicks and done. If it takes me three pages down to be asked to be a member on a museum, you’ve lost me. And it’s really hard to tell a small performing arts organization that Amazon is your competition, but for that particular part of the purchase process, they are.

Erik Gensler: I say that all the time. I said the expectations and it’s particularly when it comes to millennials and people who have grown up with the internet and with certain expectations. If it takes you 90 seconds to get to the place where you’re then asked to log in and it’s not clear and it’s an easy path is not made for someone new, it’s like a big stop sign in your face.

Steven Roth: I remember you saying at your Boot Camp last year, if you are giving what you called, I think a pinch and stretch opportunity on your phone, don’t do that. People don’t have the time to do that. That’s not the experience you want to get.

Erik Gensler: Absolutely. So many questions about pricing. What if there is no demand? What if you’re doing work that the artistic department or the artistic leader has determined something that they want to do and then it gets whatever decided it is put on the season and the thing is just not selling?

Steven Roth: So you are going to have those, again, back to what I said before, you need to budget accurately for that. I know most artistic directors, we all know think everything’s going to be a hit, but it may not be. And so you have to be honest with yourself and say, this is on our program because it’s part of our mission, but if we’re fortunate, maybe we’ll sell 50% and let’s budget that. Now that’s a great opportunity for using papering for trying to do. Maybe you do a group on that type of thing, but also remember there are people who will pay a decent price for that. Now you may want to price that lower than the blockbuster, and I think there’s nothing wrong with doing that, so price it accordingly so that somebody might take a chance on that. That may be one of those $40 things.

Erik Gensler: It does go back to realistic expectations and realistic budgeting. You work with many organizations are most people that self-aware or most organizations where they acknowledge that, okay, we’re going to be happy with 50% because this is mission work.

Steven Roth: I think more and more organizations are, I’ll answer it this way, they’ll recognize it. They may not be happy with it. Now, some of that works in a subscription environment where if you buy the whole season, you can fill the house up at some level, depending on how big your subscription base is, it’s getting the single ticket buyers to come in and give a try. You may have an in-house email list of people who love edgy work. We’re doing a project with the Goodman Theater right now to look at, they have a bunch of new work in their season, like six out of nine productions.

Erik Gensler: Yeah, we’re working with them on this too.

Steven Roth: We have a lot of clients together and it’s like, okay, how edgy is edgy? What do people want to see? If they’ve seen something, can you bring them back in? I mean, that’s so interesting about it. So you might have an audience who at the right price and says, sure, I trust your stuff. I’ll be willing to give this a shot. I may not give it a shot for all nine of ’em, but I might see one or two.

Erik Gensler: And the Goodman’s being very smart about this. Our clients there have said, you know what? We really need to think about how we’re going to market these new plays that don’t necessarily have big names or stars, and we’re not going to go out with the broad acquisition advertising. We’re going to target that to our tried and true, and if it gets a good review, then we’ll open it more broadly, which is really sort of fresh thinking around this. It is fresh thinking. It’s like, let’s not try to sell this really hard work to an audience that doesn’t know us. Let’s really creatively stretch people in our database, people who follow us on social media, people on our email list, people in our remarketing pool. Let’s start there, get the buzz about it and then if it’s good buzz, we’ll go broader.

Steven Roth: So that’s a great combination because we’ve done some we call customer behavior or baseline analysis work, and we sort of found those type of people. The next step is where you would take it. Okay, now we know who they are, how do we talk to them? And I think you’re doing exactly the right thing there to connect with them.

Erik Gensler: What about smaller houses? Say you have a house that has just 200 seats and the experience in the first two rows is not very different from the experience in the back corner. How do you variably price that?

Steven Roth: So that’s one of those. Every seat in the house is good. However, if you had a general admission ticket and you open the doors, where would the first people choose to sit?

Erik Gensler: Right in the middle.

Steven Roth: Right, okay. So what we recommend is you have at least one, if not two other prices and designate that as a premium section, charge a few more dollars for it because that’s what people’s perception is. Now, for instance, if it were nut cracker, they’d all want to sit in the first row. None of us want to sit in the first row for anything. We know the show plays right over our heads, but if it were something like that, you might take the first two or three rows, so people’s perception of where they want to sit, if they think one seat is better than another, charge them accordingly, then you might want to have a third price that would be the far corner, so you can differentiate your prices. B, you could differentiate, you could do variable pricing depending on day of the week. You could do variable pricing depending on what the performance is or the production is. And the last thing is you could do dynamic pricing if things are selling well. So even though that’s a 200 seat house, we’ve seen, we’ve worked with small organizations who have made tens of thousands of dollars just by following these through. So it is possible to do that.

Erik Gensler: Now we talked about Broadway and we talked about not-for-profits, and I think Broadway was really perhaps earlier, I don’t know for sure it could be part of the question, but they were earlier and started this premium pricing and we’ve since seen nonprofits really many do to aggressively and many do it very successfully, where you hear stories of organizations making a million extra dollars for a holiday show just by pricing smartly. Now, as someone who loves the arts and cares about the success of these institutions, that’s super exciting for me. But I’ve heard people say that it’s problematic in that it’s making the art elitist, it’s making it unaffordable for people. It’s going to have a long-term negative impact on the health of the industry that it’s only for wealthy people. How do you confront those sort of questions?

Steven Roth: Great questions, and yes, we hear that. I’m going to go back to the price and value conversation and when people will say, this is too high, my question is compared to what is it compared to another theater? Is it compared to your expectations? So that’s one thing. Most organizations will have different prices in the house. You don’t always have to buy the most expensive ticket. There are many of arts organizations who would love to have you on a Tuesday night, and they will price that accordingly than they would necessarily on a Friday or Saturday night. So I think this is all about people’s perception of price and people hear things like, oh, that show’s really expensive. Well, maybe the top price for that show is very expensive, but if you don’t mind sitting upstairs, then come on in. So I think that we frequently see, we worked with an organization whom we suggested they get rid of their senior pricing, and they were very scared about that, and it turned out at the end of the run we said, did anybody complain? They said, yeah, four people. And we said, did they buy? And they said, yes, there’s this. And it happens in all organizations that one email gets written and it becomes…

Erik Gensler: Oh, the squeakiest wheel.

Steven Roth: Exactly.

Erik Gensler: Yeah, you can just take a whole day distracted. I remember when I was in New York City Opera, one or two emails and it gets sent to someone and then it’s becomes a thread and an issue and your spending your whole day on it.

Steven Roth: Exactly. So you really have to think about, and there are going to be certain people, you’re a big fan of Seth Godin is in my, he has that.

Erik Gensler: I got an email from him today.

Steven Roth: Oh, good for you.

Erik Gensler: I mean I wrote to him because I check in with him every now and then he wrote me back, which is always a thrill anyway.

Steven Roth: And he has that 98% rule that if I were to walk in your office and get everybody an Apple watch, 2% of the people wouldn’t want it. And there’s always going to be 2% of the people who will find their way around your policies and procedures. Don’t sweat them, make your decisions for the 98%. So if there’s 2% of the people who just feel either offended or that’s too high, then don’t come. It’s not like the 98% are responding that way. Right,

Erik Gensler: Absolutely. I mean, I think you can even go broader, and this is also Seth Godin, which is about leading a tribe and your work and what you do is just not going to appeal to everybody, nor should it. It’s like do it really well for the people that are going to care and focus so much of your efforts on those people and make it even better for the people who care and then they’ll tell their friends and really grow from there. So not being hearing, but not being overly influenced by the margins.

Steven Roth: Yeah, definitely. Definitely.

Erik Gensler: So how does this work for say, a visual arts or visitation organization? We see a much lower instance of organizations that have exhibits, selling tickets online. It’s just much lower and there’s not the urgency unless it’s a timed ticketing situation, people will just meander to the museum when they want to and buy their tickets there. How can museums take advantage of this thinking?

Steven Roth: There are a couple ways. We’ve worked with a museum client who had a blockbuster special exhibition. We looked at data from five years worth of what they considered to be blockbusters, and there was a very consistent sales pattern that for the first two weeks it was low, then it would pop up, and then towards the last month you assume something’s here all summer and then the summer’s over and you’re like, oh, I got to go see it. So we with a little bit of prodding, convinced them to try a dynamic pricing approach to that where they kept prices low for the first two weeks. They offered discounts to people they knew, and the whole deal there was let’s get people in. Let’s get word of mouth. That was very successful. Then the price went up a dollar or two, we were talking about a special exhibition for the next month or two, and then for the last six weeks it went way up.

They blew the heck out of their goal and they were comfortable doing this. So I think that’s one thing that museums can do or exhibition. The other, which I’ve heard them experiment with, which is charge more for a Saturday than you might on a Wednesday. The other thing where we apply pricing theory to is to membership and benefits, and that’s where that range and relationship of prices comes in. And you want to make sure that what are you getting for $90? What are you getting for $120? At some point it switches from being a math issue to a philanthropic issue, and so that can work. But we are working with one visitation organization where 90% of all members were at the premium level and it’s like, what’s wrong with that picture? Either there were too many benefits there or the idea of premium is you want a few people to take advantage of that. Right?

Erik Gensler: The majority should be in the middle.

Steven Roth: Exactly. So either raise your prices or decrease the benefits or raise the benefits so that you sort of want to look at that as well. So that’s a little bit of pricing theory apply to both membership and exhibitions.

Erik Gensler: I once read an article in New York Magazine that was about pricing theory, which I think about a lot, and it has to do with the concept of anchoring and they showed a menu and on the menu they have the seafood tower and the seafood tower, like the grand seafood tower is $90, which are like $90 for an appetizer. That’s crazy. Then below it, there’s the mini grand seafood tower and it’s $50. $50 is still a lot of money to pay for an appetizer, but anchored next to the $90 grand. It seems like a bargain.

Steven Roth: That’s exactly right. So this happens for those of you who buy handbags when you walk into a handbag store, they will put a $1,600 handbag right in the center with no intent of selling that to you. But you may walk in saying, I’m going to spend $300. There’s this beautiful $600 handbag, which looks like a real bargain compared to the $1,600 handbag. So yes, that happens. A few years ago, my wife and I were celebrating a milestone anniversary and we went to a restaurant in Boston where we live and they had a tasting menu and it was ridiculously expensive, and then they had a second tasting menu. I’m in this business. I knew exactly what they were doing, but we bought the second tasting menu, still paid more than we thought we would. So that anchoring happens all the time. An interesting anchor is people will pay how much for an iPad, four or five, $600, and an app will be 99 cents and they’ll say, I’m not paying 99 cents for that app. And that anchoring is because apps are also free and free. A real interesting and dangerous number. I learned this from Dan Arieli, that people will say, if Apple would’ve come out with a 15 cent app introductory price, nobody would complain about the free you have free day at the museum. That doesn’t always go so well, right? It’s crowded, you can’t park. There’re all things, your customer experience isn’t great, and then that person may or may not come back. So again, free is an odd anchor as well, I guess is what I’m trying to say.

Erik Gensler: Right. I don’t understand the 15 cent versus free thing.

Steven Roth: Because it would always have a value. Free is sort of valueless.

Erik Gensler: If they started at 15 cents, it would be easier to sell 99 cents.

Steven Roth: Exactly.

Erik Gensler: Because it’s not free. Now you mentioned papering. If you paper and someone gets a free ticket, I’ve heard it’s then harder to get them to come back and pay.

Steven Roth: It is. I mean let’s take Groupon or any of those things where you pay 50% for some massage or something, you’re probably not going back for the full price because they’ve devalued their product by half. So papering should be used when it works for the organization. If you have one of those situations where you have, we’re only going to sell 40 or 50% of the house and you have a papering list, the one thing you shouldn’t do is put those people in the front of the theater. You want them to sit where you want them to sit and manage those expectations. And yes, there will be some people who could afford to pay that ticket, but maybe only a few of them. So papering is just another strategy. It needs to be used with caution, but not to be eliminated.

Erik Gensler: Thoughtfully. Yes.

I want to switch to some of your client experiences and we’re both providers that work with arts institutions and we’ve talked on this podcast and we talk obsessively internally here about being true partners to our clients rather than service providers. And we think of ourselves as community members and arts marketers. First, I’m interested to hear what, when you can work with clients in a certain way, does it lead to better results? Meaning what are the instances of a client’s going to hire you? What can the client ensure that they do to get the most out of that experience? And then what can you do to make sure you’re more than just a service provider?

Steven Roth: We do a couple things. I’m sure you do this as well. We start a project with a lot of discovery. We want to ask a bunch of questions. Anything from how many venues do you have, how many subscriptions do you have, how many subscribers do you have? All sorts of sort of name, rank, serial number stuff. But it lets us understand and all of a sudden they’ll say, oh yeah, and we also do shows in this little theater. Oh, okay, well we need to know about that. So we want to make sure that we cover all the bases and asking.

Erik Gensler: Kicking the tires, looking under the hood.

Steven Roth: Exactly. All that.

Erik Gensler: Digging between the backseat.

Steven Roth: Exactly. We want to know all of that. We want to know things like when we looked at your data three seasons ago seem to be problematic. What happened there? One of the things we make clear, we do a lot of analysis is this is not judgmental. This is data. We just ask questions. We’re not coming in and saying, Erik, how come ticket sales were off last week and you’re the marketing director? So we try and get sort of that comfort that we’re partnering with them to create what we call an evidence base, and then we always say, which is true, they know their data and their organization better than we do. We don’t come in and say, this is what you need to do. When we do that and we show them slides, we’ll say, what do you see here? They will tell us, we have always have an issue getting off the first three or four slides because they’re really digging into all the questions of what we did.

So that’s one thing. The other is they have good data, they know how to get it and they know how to use it so that we can share on that They’re collaborative. So when we come in, the right people are around the table. They’re not afraid to ask for help. They’re not defensive. They’re like, we want to do this, so we want to improve so we can bring them best practices, we can do all of that. They put themselves, they’re able to put themselves in the shoes of their patrons. We normally want talk to, we talk marketing, we talk to development. We talked to box office and box office is the one that’s hearing the complaints and what are you hearing? What do you hear about your pricing? Even if it’s only a couple people. We want to get that they’re comfortable taking reasonable risks. We sometimes say with pricing, we will push you until you say ouch. And they’re okay with that. We have to earn that respect to do that, and that they set realistic goals that they can buy into. Those are the organizations that I think benefit the most from our services. And we also are comfortable in a teach you to fish. We’re not going to hold anything back if the client learns from us and can move on on their own. Good for them.

Erik Gensler: Right. I know you also work a lot on audience segmentation and we hear a lot about organizations segmenting on subscriber versus single ticket buyer or donor versus subscriber. How do you think about segmentation and how can organizations push their thinking in order to use segmentation further to drive their results?

Steven Roth: So what you described as what we would call sort of like a buyer type segmentation, we want to dig deeper into that and figure what are the metrics that actually drive customer behavior such as we look at five years of data. How many times have they shown up? When’s the last time they showed up? What have they paid? Have they paid above average price? Have they paid below? When do they buy a ticket? If they’re a subscriber, do they also donate? We’re trying to look at all that array of customer behavior and then start doing some segmenting based on how they behave. So for instance, we want to start having discussions about what we call those once-ers. Well, the data says that they’re happy to pay more than average price. So maybe there’s a segment where you’re going to offer them your highest price tickets, but we also know they buy late. So you don’t want to contact those folks four months in advance with a discount. You’re taking money off the table. So we want to figure out what their behavior is or how you might connect with those people.

We had a client who wanted to do a campaign for a subscription acquisition within its own database, and we started looking at something or what would the criteria be for someone who could buy a subscription? It might be someone who has bought at least two tickets a year over the past three years. It might be someone who has come three times a year over the past two years. But the other thing they looked at is we want to make sure that they can afford a subscription. We want to look at someone, we have segmentation software, which will say, this group of people over the past two years has averaged, I’m making a number up $150 with us. They can buy a subscription versus here’s a group of discount folks who have spent $50 with us, we’re wasting our time. The other issue is with the multi-buyer, which

If you bought something twice, some organizations are going to say, okay, Erik has come make a donation, subscribe now. Exactly. And they’ve probably told you six or seven times, politely or not so politely, no thank you. Well, let’s take that group and just get them to come back one more time next year. What’s the value that, and we’ve actually done something I think you’ll appreciate. We’ve also segmented using the concept of permission marketing. So we have permission segments, which is this is someone who’s new. We have permission to email them afterwards and say, how’d you like the show? But he or she has not given us permission to subscribe now or donate. Right? Here are folks who have recently in the past couple years, they’ve bought more. That’s okay. Now we have permission to talk to ’em about that. So that’s sort of fun for us doing these permission segments.

Erik Gensler: That’s really cool. So that software pulls from their CRM and kicks out lists that they can then use.

Steven Roth: It ultimately kicks out lists. The first things we do is we choose which behaviors do we want, are we concerned about, did they donate frequency recency? And we also do a value score of that person based on how much they’ve spent both on tickets and on donations. So we get a sense of we want to do this campaign to multi-buyers, but we really want to talk to the people who have the highest value scores before we go down somewhere else.

Erik Gensler: How does that roll out over a season? So say you’re a theater company, you have one or two things that you think are going to be blockbusters, you have some of this new work, and then you have this segmentation of the audience that is scored. How does that roll out over the year through campaigns?

Steven Roth: It probably starts with when they’re going to, as the season is announced, and whom do we want to bring in as subscribers? We have a concept we call shopping in your closet, which is instead of going to a acquire or subscriber of someone you don’t know and you don’t have permission to talk to, let’s talk that lapse subscriber. Let’s talk to that person who’s been with us for two years and now they’re ready for that. So that’s a segment based on their behavior. And then the client and working with the client will also work. They’ll make more of the decisions of, we want to send an email or we’ll have a discussion of saying, what’s your touch strategy? Is development and marketing piling on the same person and are they getting 15 emails a month, even though you aren’t aware of that? So again, you don’t have permission to bombard people like that. So that’s the type of thing we were, and that goes on. So they’ll do a campaign, we’ll take that data and put it back in the CRM system so that you can be tagged as a possibility for this, a possibility for that. Then the client will work with the client to measure the results of that and then say, this worked, this didn’t. Let’s tweak it as the season goes on.

Erik Gensler: Fascinating. Shopping in your closet. I’m going to borrow that if that’s okay.

Steven Roth: Okay.

Erik Gensler: I think it’s such a great concept or it’s a great way to name and visualize that concept because there is such a desire to reach new people. And I think marketing budgets and time and effort is over index on acquisition. And I’ve been saying this since I started about having realistic goals for your relationship that you’re building. If you’re doing any acquisition, the goal is turn that stranger into a friend. You don’t turn that stranger necessarily, and a customer start with your friends and get your friends to become customers and then get your customers to become evangelists. And that’s calling it back to Seth Godin.

Steven Roth: We’ve found some data, we’ve done this about put six organizations together where roughly an organization’s going to get, let’s say 80% of their subscribers to renew to sort of fill that leaky bucket. You need another 20%. The data shows that we’re going to get about 10% of those from people you don’t know. And another 10% of people who you do know the cost to get the people you don’t know is astronomically higher than getting the people you do know. So maybe you back off on the huge brochure, you back off on the direct mail, you go more for social or digital or something like that and see what happens.

Erik Gensler: Or is that money better spent to just focus on the blockbuster? Yes, correct. Rather than trying to get people to subscribe better the cost per acquisitions higher than they’re even worth. Exactly. Spend that money on the single ticket where you’ll have better results.

Steven Roth: Exactly. Exactly. Or getting, again, that multi-buyer. If you can get, we’ve done this math, and I’m sorry, I’ve forgotten exactly numbers, but if you can get a multi-buyer to walk through your doors one more time or even half of them, that’s a lot of money. And it builds the relationship, it gives you another opportunity, it puts you in another permission level, and maybe that should be the focus.

Erik Gensler: So in your role, you’ve had experience working with many different arts organizations across the country. I’m curious in these experiences, what are the common characteristics you see that in organizations that are consistently meeting their goals,

Steven Roth: They’re setting realistic goals, and we have conversations with them of saying, what’s your goal? Well, we need to increase our revenue by X. Well, how are you going to do that? You can get that from subscribers, you can get that from single ticket buyers, you can get it from newbies, people you don’t know. But in order to do that, what’s the value of those patrons? And that means you are going to need, I’m making a number up 5,000 people who are new to you or who haven’t been here in the past two years. So how are we going to get those? How many of them do you have in your database? You’re going to need way more than 5,000 to that, but is that the path you want to take? If so, let’s segment those folks and talk to them.

Erik Gensler: Right, and what’s the cost of acquiring those?

Steven Roth: Correct. Exactly.

Erik Gensler: And it drives me insane when I’m talking to these organizations and they’re spending so much of their money on television. I mean, to this day it’s just all acquisition and you’re screaming at people who just don’t give a shit.

Steven Roth: That’s correct.

Erik Gensler: Stop screaming at people that don’t give a shit. At the very least, put that money in YouTube where you can at least get it in front of people that care about theater or care about classical music. You just don’t have the money to be buying broadcast television. You probably don’t have the money to be buying cable. And if you are, please only do it for your blockbusters.

Steven Roth: The other thing we think about is if you can tie the revenue management to those blockbusters, you can put that in your coffers. You could also put that on your stage. You can say that we can now afford this director or the rights to this show or this conductor or something like that. So how to think about that makes a lot of sense as well.

Erik Gensler: It’s just smart budgeting and it’s thoughtful budgeting. And I know certain organizations, like the public theater says that we put most of our money on the stage. So they’re not an organization that I don’t think you would ever see a TV commercial for the public theater because they’re putting their money on the stage. And if you do great work and you have a reputation for artistic excellence and you create an experience that is lovely and positive, and the people who love you will tell their friends and they’ll keep coming back. Exactly. And so investing that money that you’d spend on a TV commercial in the experience in the art, that’s marketing too.

Steven Roth: One of the things that I know — they’re a client of yours as well — that I’m really excited about, is working with Opera Philadelphia. And that’s an organization who has decided to totally reinvent. They’re going with this hybrid, both a regular season and a festival, and they’ve been really gutsy and really smart, and they have great data, and I can’t wait to show up for their festival in this coming fall. But they totally, they changed their name, they changed their business model. They had a lot of courage to go out and do all of that. And they have really smart people and good people working there.

Erik Gensler: Absolutely. And it always comes back to the people. I’m doing a panel at the Opera America Conference this year, and I spoke actually yesterday to Frank, their vice president of communications, and we work with Ryan Lewis, who’s their vice president of marketing. And it’s fascinating because on the outside you say, oh yeah, you have a vice president of communications and you have a vice president of marketing. Well, Frank is in charge of, he really works closely with the artistic department and he’s in charge of content and he’s making these amazing videos. He works the brand. And at the same level, you have Ryan who is really in charge of the revenue and is such a revenue strategist, and they have both of these really smart people working at a very high level on very different things that are so important. And you see the results of

Steven Roth: That. Yeah, definitely. And their videos are great.

Erik Gensler: Their videos are great. Yeah, I’m really excited to talk to those guys. What is something that you’ve learned in the last year or so that’s been profound or a game changer in how you work or think about this?

Steven Roth: This may sound a little new age-y.

Erik Gensler: I’m all for woo woo.

Steven Roth: I would say the quality of what I call generosity, and that’s being open with people versus being closed, being trusting versus doubting, giving versus taking, listening versus talking, those type of things. I think I’ve found that type of person works better for me, but also brings out the best in the people of my colleagues and my family and all that kind of stuff. So that’s what I found.

Erik Gensler: That’s lovely. I think this idea of giving, giving, giving, giving, and again, we keep talking about Seth Godin, but that’s been his concept around permission marketing, which is just give, give, give, give. And our philosophy and capacity around our marketing, our email that we just sent this week has, I think seven or eight stories. And they’re all just giving ideas, giving inspirational things, and we’re not asking for anything. We’re geeks and we love this stuff and we love making it, and we just want to give it to the field. And when I speak as well, I just give whatever I know. And people will say to me, if you keep giving it away, you’re not going to be able to people. You’re not going to be able to charge for it. And I say, well, that’s just not true. It’s going to force us to think even deeper and push our thinking even further and get better if you just give it away.

Steven Roth: So without embarrassing you too much, when people ask me who are organizations that I admire, Capacity Interactive is up on my list. So you guys are really good at what you do. You have great client relationships. I remember walking into your office when it was just you and Christopher was downtown somewhere, so you’ve done a great job with it.

Erik Gensler: Oh, thank you. That means a lot. So what is something you think you’re really good at, and what is one thing that you’re working on?

Steven Roth: I think I’m good at building and keeping relationships.

Erik Gensler: I think you’re good at that too.

Steven Roth: Thank you. I am a crappy multitasker, and that’s not something I want to get better at, but I want to start eliminating that. I find that there’s just too much going on, and when an email comes up and I got to look at that where I really don’t. So I think I need to train myself to sort of be more focused and not get distracted with all the stuff that’s going around.

Erik Gensler: That would be, that’s a lifelong struggle. And when you’re anything, it is just prioritization of your time. And the most limited thing we have in the world is time.

Steven Roth: But you said something in your conversation with Chris about when someone wants your time, it’s not an interruption. They’re looking for help. And that really resonated with me. Instead of saying, I can’t answer, it’s like, well, maybe I can not have to answer it right now, but that person needs some help from me or some guidance or wants to tell me something. So I should respect that. I thought that was right.

Erik Gensler: And it depends who that person is. Is that person on your team? I would say absolutely. Is that person a client? I would say absolutely. Is that person a salesperson trying to sell you something you don’t need? Don’t go down that rabbit hole.

Steven Roth: Right. Someone who doesn’t have permission to talk to me, definitely not. And you must get a ton of those emails and phone calls, as do I, so yeah.

Erik Gensler: Yeah. And it’s like I find myself sometimes getting pulled in that direction. And a strategy coach once said to me, you need to think of your time as worth a thousand dollars an hour. So is going down this rabbit hole worth a thousand dollars an hour. And it is not like I charge a thousand dollars an hour. It’s just a concept of that’s how important you have eight, nine hours a day. Maybe you want to take some vacation, you want to have some time for yourself. How can you get the absolute most out of those eight, nine hours a day? And I’m a terrible multitasker too. I don’t think multitasking is really a thing.

Steven Roth: No, but there’s data that says it’s impossible to do these two things at once, and you end up doing both of them badly. Right, right.

Erik Gensler: And this is just something to chip away at. I it just can get a little better, but I mean, I think I have an easily distracted. Right. So where do you look for inspiration?

Steven Roth: I definitely look for inspiration from the arts, from the field we’re in. I think that being taken to a place where you can be consumed and engaged and escape or involved for anywhere from one to three hours, I think is just amazing. So I do that. I know this isn’t your gig, but I’m going to say sports and what I love about that.

Erik Gensler: It’s okay. It’s a safe space.

Steven Roth: What I love about sports is that you never know how things are going to end. And I find that’s exciting. Living in New England, the Super Bowl a few weeks ago was pretty darn inspiring. So I enjoy that. I frequently find my family, my friends, my colleagues. I have so much to learn from watching people how they solve issues. So I find that inspiring. Also, my students, I teach a graduate level arts marketing class at bu, and last year we had a segmentation session and I threw all this data at them and they were really unhappy with me. At the end of the class, they were like, you are wanting us to do what? And they came in the next week and they nailed it. And it’s like they were committed to doing it. And I found that really inspiring that they were willing to do that.

Erik Gensler: I think you did them a huge favor of just, I used to think that getting people unhappy about things was a bad thing, but on the other side of that is what they learned, and now they’re just going to be so much stronger for it.

Steven Roth: That’s right. So that’s where I get some of that stuff from.

Erik Gensler: That’s great. Have you ever worked with sporting organizations? Because I imagine the pricing theory is very similar.

Steven Roth: The pricing theory is similar. The whole issue is volume. So a number of our clients, their full house is as many seats that are in the bleachers at Fenway Park. So you start talking about $3 here, two, I mean, you’re talking about 30, 40, 50,000 tickets. And that’s just very, there’s not a lot of nuance there. And so we find that it can be, and we haven’t done any of this, but we find that it can be more applicable when you really can dig into a 2000 seat house or 200. Now the sports organizations are doing variable pricing. They charge more to play one opponent than they will another when the season starts. So they’re adopting some of that, but we haven’t had, and managing all that volume of data, we haven’t gone there yet. It doesn’t mean we won’t.

Erik Gensler: Have you ever been brought into a conversation of right sizing a house? So I thought before it is arbitrary that this theater has saved 3000 seats because 50 years ago they decided to build it. And when the world was a very different place when there was less competition for media or for people’s attention because there was less media, and now a lot of these organizations that have been around a long time may have houses that are inappropriate for the size of audience that they should attract. Have you ever been brought into those conversations?

Steven Roth: So we’ve done this a couple ways. The Cincinnati Symphony has a 3,400 seat house.

Erik Gensler: Cincinnati Music Hall.

Steven Roth: Yes, correct. And they have 3,400 seats every night, and there’s a lot of obstructive views. So they are redoing that a lot of money. They did it at City Center a couple of years ago as well. We helped them first move to a hall where we had to think about where your subscriber’s going to sit. It turns out that the front of the mezzanine, every seat is an aisle seat 2, 2, 2. And we said, well, maybe some of your good, but now you’re telling someone that you’re sitting upstairs versus downstairs. So that was a lot of math to sort of size into a new house, and now we’re doing the same thing to bring them back and figuring out, I think another question is, is it acceptable to keep some seats off sale if you’re not selling well, do you keep the rear of your balcony off sale, force people down? Maybe the price comes down with it and it feels a little more intimate. Definitely. That depends on —

Erik Gensler: I know Ailey does that at certain nights at City Center because City Center is so huge and has that additional balcony that if they close that off, and if they have the demand, they’ll open it. But it starts off sale because they know that it’s not right size for that particular evening.

Steven Roth: Yes. I remember working with Christopher when New York City Center did, and they redid the mezzanine, and my memory was the mezzanine wasn’t a great place to sit. It’s far away. But then it became a better place to sit, and you had to train the audience who said, no, this is really a pretty good seat now because we’ve changed it.

Erik Gensler: Absolutely. I mean, I love sitting in the front of a mezzanine, especially for Broadway and some of those small thousand seat houses. That’s one of the best seats in the house. But there is a perception thing, right?

Steven Roth: Exactly. Which is why you might see a premium seat in the first two rows of the mezzanine and extending onto the aisles a little bit. But not everybody thinks there are many people who would rather sit under the overhang than in the first couple rows of the mezzanine. That’s all about perception.

Erik Gensler: Wow. So rather not. Right.

Steven Roth: Exactly. But you’re in the field. Right. So that makes a huge difference of where the other thing, when we go to a client, we always walk their house and we probably spend a couple hours in there, but we also say to the client, where would you sit? Then we get a sense of what did they think are the best seats in that house? But we will spend, they sort of look at us. We’ll go sit in seats, we’ll walk around. We’ll help put someone on the stage. Can we see someone? Because we want to get a full sense of what the value of each of these sections are.

Erik Gensler: Yeah, I think there’s a lot of work probably to be done around making a really better selector and seat platform that incorporates photos. We’ve seen anecdotally here or there that when people use select your own seat, they tend to spend more, the average order value is higher because if they can see where they’re going to sit, they’re going to then pick closer seats. I think it would be fascinating to just a larger and broader study about that.

Steven Roth: I would be curious on how accurate — is that photo accurate? And they always say, here’s your view of the stadium or the stage, and does that really, you’d really be able to give me a good sense of why I would want to sit in this seat versus section.

Erik Gensler: Yeah, we should A/B test that actually. I’ll bring that up to Yosaif because that would be a really fun thing to actually have. We have analytics data about it, but the true A/B testing would really get to the bottom of that. So we’ve come to the end of the conversation. This has been really fun. I’ve learned a lot. I hope everyone listening has learned a lot. So this is your CI to Eye moment. So if you can broadcast the executive directors leadership teams and boards of say a thousand arts organizations, what advice would you provide to help ’em improve their business?

Steven Roth: My advice would be to pay a lot of attention and put a lot of energy into managing what we call your patron journey, your customer experience. What are all the things that you can do to impact that so that the price value will work, that people will want to come back. There’s way back when I was at Price Waterhouse Coopers, we did sort of what they call industrial consulting where they had the concept of staple yourself to an order. So go to the manufacturer and walk through all the parts. What’s the equivalent of that? In our world, it’s the pre-performance email. It’s were people polite to you? Was there even a restaurant next door that you can’t control afterwards? Too many emails. Not enough emails was the usher saying the right thing? All that stuff. So if you sort of mentally staple yourself to your patron and walk them through all the instances, and then what we do with our clients when we do this study, we say, here’s a flection point.

What can go wrong here? And is that a process thing? Do you not have the right people? Do you not have the right technology? What’s impacting that? And I’ll give you one example and then I’ll say done the National Arts Center of Canada, which is the Kennedy Center of Canada. We did a CRM study with them. We had all the stakeholders in one room. The guy who runs the parking lot stood up and he said, my people in the parking lot are the first people and the last people that your patrons see. How cool would it be if I said, how was the evening, Mr. Gensler? How was the concert? Thank you for being a subscriber. I mean, how much would that impact?

Erik Gensler: Amazing. Or a branded piece of chocolate, anything. How cool would that be?

Steven Roth: Anything like that. It’s sort of, and if the parking guy gets that, marketing can get it and development can get it, but you really need to step back and say, what do we want that patron experience to be? That would be my message.

Erik Gensler: That’s fantastic. Thank you so much.

Steven Roth: Thank you. And I want to thank you because in bringing me down to New York, I’m going to ride the Second Avenue Subway, which was being built when I was in elementary school.

Erik Gensler: Oh wow. It’s finally here. Enjoy.

Steven Roth: Thanks.

Erik Gensler: Did you enjoy the podcast? Please join Capacity Interactive on email and on Facebook so you can be the first to know when we release new episodes. You’ll also get content all about digital marketing for the arts, and you’ll be the first to know about our webinars, workshops, and our annual digital marketing Boot Camp. Thanks for listening.