Read this before your organization offers a general discount on its admission price.
Many cultural organizations have reopened or are planning to reopen in the United States. Those that haven’t yet will open to a new environment – one that is impacted by a surging novel coronavirus, political turmoil, and an economic recession.
Though demand has increased for some organization types, intentions to visit cultural entities are relatively low in the immediate near term. On top of this, many organizations have reopened to limited capacity, significantly restricting the number of people in their buildings.
Our job is to provide high-confidence data to help cultural organizations not only weather this storm but come out of it stronger. And, well, that means that we’re focusing a great deal on financial solvency right now in terms of motivating attendance and securing revenue. Cultural entities are not able to educate and inspire guests – not to mention have or pay staff – if they are not able to survive.
Ticket sales are an important source of earned revenue for many cultural organizations. It will play a meaningful role is not only staying afloat but also in recovery once attendance stabilizes and the United States has a better grasp on the virus. Even when navigating charted territory during precedented times, having a data-informed, optimal price point is a key to maximize successful financial sustainability.
The pandemic and the recession beg an important question when it comes to successfully re-engaging audiences:
Do people generally think cultural entities are less worthy of their admission prices now?
In a word: No.
What are value-for-cost perceptions?
Value-for-cost is a metric that helps us understand how much perceptual value is derived from an experience relative to its admission price. This is the key metric that we consider when working with organizations to uncover their optimal price point.
Don’t think of this as a matter of “the higher the admission price, the lower the value.” Just because something costs less doesn’t mean it’s a better value! The quality of the experience matters just as much as the admission cost when determining value. Some free organizations have low value-for-cost perceptions, indicating that they are not comparatively worthy of the intrinsic value of one’s time. Value-for-cost perceptions are unique to individual organizations. This is one of many reasons why admission pricing is a science rather than an art.
When considering value perceptions, the data informs three conditions:
- Value of 100 = Optimally priced. This is the goal! This value means that the organization is priced and perceived such that the cost is not a significant barrier to engagement… while also not leaving money on the table!
- Value less than 100 = Value disadvantaged. The lower the value, the proportionately greater the potential barrier to attendance the price point poses. For some organizations, this also represents an opportunity to improve the experience so it’s perceived as more worthy of one’s time and money.
- Value greater than 100 = Value advantaged. The higher the value, the more money the organization proportionately risks “leaving on the table.” People would pay more for this experience without it jeopardizing attendance numbers.
Value-for-cost perceptions are dynamic and subject to change based on a multiplicity of factors over time. Factors like inflation, improving or decreasing visitor satisfaction, or an organization’s reputation can make that ever-elusive 100 (i.e. “optimal”) value challenging to achieve and maintain. For this reason, we are especially interested in seeing if current conditions are impacting optimal pricing for cultural entities.
Have national value-for-cost perceptions changed significantly during the pandemic?
Oh, the second quarter of 2020…
It is that fascinating and terrible quarter in United States history from April through June when a vast majority of museums and performing arts entities – not to mention gyms, bars, restaurants, movie theaters, and sports arenas – were physically closed. Much of the US population was parked on the couch under stay-at-home orders as the virus surged, unemployment skyrocketed, and the economy took a major dip.
The data below comes from the National Awareness, Attitudes, and Usage Study and our ongoing monitoring of 224 organizations in the United States. In this case, the chart considers value-for-cost perceptions of likely visitors to cultural organizations in the United States with a paid admission basis. At IMPACTS, we call likely attendees high-propensity visitors – and they represent people who profile as both current and potential visitors. Simply, these folks are defined by having a heightened interest in visiting cultural entities.
The pandemic hasn’t changed the perceived value of cultural institutions. Even when asked during the second quarter of 2020, likely visitors did not report a significant change in value-for-cost perceptions for these organizations. They believed them to be just as worthy of their price points as they had been in the recent (pre-pandemic) past.
Cultural entities are perceived to be as worthy of their admission price points as they were prior to the pandemic.
The changes are not significant. When we expand the data to include the perceptions of the larger US composite market (adding those who do not demonstrate an interest in attending cultural entities), the change is also not significant. Cultural organizations remain generally worthy of their admission prices.
Though the changes are not significant, you’ll notice some slight dips for performing arts institutions as well as science museums and science centers. This correlates with the decrease in demand we’re observing for experiences that are either perceived to be touch-dependent (like science centers) or do not allow for freedom of movement (like performing arts experiences). We’re watching these numbers and will make note if they become statistically significant and/or these perceptions prove durable.
This chart shows the general lack of change in perceptions, but remember that specific value-for-cost numbers are highly dependent upon individual organizations. This information is an aggregate from multiple entities with the purpose of exploring how and if value-for-cost perceptions have changed on the whole due to the pandemic and the recession. This does not mean that your own organization is (or is not) priced optimally. There is notable variance in the pricing and quality of experience even within organization types. We’re publishing this research in order to underscore the change – or lack thereof – in value-for-cost perceptions at the end of the second quarter of 2020 when compared to a pre-pandemic period.
Data (still) does not support general discounts on admission
There is no shortage of behavioral economics data on why discounting cultural experiences is a bad business decision. Discounting risks declining attendance and revenues alike in the long term in exchange for the ephemeral high of a short-lived spike. Discounts decrease visitor satisfaction and often make people think you’re worse at your mission, they more often attract people with higher household income (not lower), they result in more repeat than first-time visitors (so much for engendering trial), and they alter visitor engagement cycles so that people are less likely to return later.
Cultural executives sometimes forget that time is more valuable than money, and by far the biggest barrier to visiting cultural entities is not being worthy of someone’s time – especially compared to an alternative leisure activity. When we think about it critically, it should be no surprise that cost is the fourteenth biggest barrier to attending cultural entities among people who have interest in attending. Not the first or the second – the fourteenth! Blaming admission cost for lack of engagement often distracts from bigger issues such as relevance or being perceived as welcoming.
Discounting may be especially detrimental at the moment. Attendance capacities are generally limited and the quality of the experience may even be higher now for some institutions that tended to get crowded prior to the pandemic. And the wallets of many organizations are tighter, so they can afford fewer engagement inefficiencies.
General discounts are different than promotions or targeted discounts. General discounts are available for anyone who can find “the deal.” Data shows they devalue your brand and the experience organizations provide. (If you’re posting it on social media, it’s a general discount.) Promotions, on the other hand, celebrate specific audience subsets, providing added value to the experience for these current or potential community members. There can be targeted discounts for underserved audiences provided to a church or community group, or special promotions intended to incentivize members to renew. These are not general discounts. Instead, they are considered, contained opportunities that celebrate current audiences or provide targeted access for new ones. Unlike general discounts, these thoughtful initiatives may prove beneficial for engaging audiences and strengthening affinity.
A lot has changed in the United States and around the world since the arrival of the coronavirus. It is a difficult time, steeped in overwhelming emotions. For this reason, we encourage leaders to be thoughtful and responsive to current conditions rather than reactive. With the future of organizations on the line, making data-informed decisions is paramount.
On the whole, cultural organizations remain worthy of their admission prices.
Likely visitors are not undervaluing your efforts and the meaningful experiences cultural entities provide.
So please, don’t undervalue them yourself.
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