The cultural organizations leading the industry in attendance recovery seem to have made a similar strategic decision during the pandemic.
At IMPACTS Experience, we monitor market potential for the exhibit and performance-based cultural sectors. We originally started publishing this information twice a year to aid organizations recovering from the pandemic with potential attendance conversations.
However, by the end of 2022, we began to observe a major delta between organizations that had largely regained their past attendance levels and those organizations that were still struggling to return to pre-pandemic levels of engagement. Some of the museums that have returned to their respective market potentials were physically closed for over a full year, while at the same time, other institutions whose businesses were more modestly disrupted are still struggling to recover their 2019 attendance levels. In fact, we’ve noticed different paces of market potential recovery even within some of the same geographic market areas! Even taking redistribution of demand into account (zoos, for instance, struggled notably less than science museums), some organizations recovered faster or increased attendance far more than others within their same organization type.
We’re not the only ones paying attention to this happening. Clients, partners, and board members began to ask us a thoughtful question:
“What do those organizations that recovered attendance the fastest upon reopening – and therefore now have the most revenue to pursue and invest in their missions – have in common?”
The answer? They generally sustained their marketing investments during the pandemic.
“But we couldn’t have done that at my museum!” Not so fast. To understand what’s going on here, leaders and board members will need to set aside their defenses and consider what executing a museum’s mission really means.
Let’s start by looking at a sampling of eleven exhibit-based cultural organizations in the US to demonstrate a pattern. In the scatter array chart below, we have aggregated data concerning institutions for which we have historic information tracking both their paid audience acquisition investments (“advertising and marketing”) and their annual performance relative to market potential. All eleven of these organizations are exhibit-based (i.e., museums, zoos, aquariums, etc.) as opposed to performance-based organizations such as theaters or symphonies.
The Y-axis quantifies actual market potential, or more specifically what percentage of 2019 attendance that organization achieved in year 2022. The X-axis indicates year 2022 audience acquisition spending relative to 2019. Again, “audience acquisition” is essentially a measure of how much the organization paid for advertising and marketing (excluding staff, administration, and overhead).
As an example, consider the orange triangle representing an organization that achieved a market potential of 102.8 in the chart below (denoted within the red circle). This organization realized a market potential 2.8% greater in year 2022 than it did in 2019. This organization invested 99.8% of the advertising and marketing costs in year 2022 that it spent in 2019. They invested at a similar level of audience acquisition spending in year 2022 as they did pre-pandemic and were rewarded with a market potential that exceeded the pre-pandemic condition.
We immediately observe in the above summary analysis that those organizations that invested in audience acquisition at levels substantially similar or greater in year 2022 than they did in 2019 saw a significant payoff in their attendance.
The next chart shows the same eleven organizations, but instead of showing only their 2022 investment relative to market potential, we’re showing their average annual audience acquisition investment for years 2020-2022 compared to 2019. Why indicate these data in this manner? Well, advertising and marketing tends to have a cumulative effect. We wanted to see if any benefit was realized by organizations that sustained investments during periods of business disruption/interruption. Did they recover more quickly? And did they merely recover, or were they able to achieve market potential growth?
While these two charts are potentially rich for ranging interpretation, implication finding, and conversation fuel, our work at IMPACTS Experience underscores the importance of three key findings from this case study:
There is a clear correlation between sustained investment during the pandemic and maximizing market potential.
Those institutions that didn’t drastically slash or eliminate their marketing budgets during the time of financial crisis are those that rebounded and more rapidly recovered their attendance levels. Many of these organizations are driving positive attendance results for much of the industry.
Remember, some of these institutions were closed for almost a year or more due to the pandemic. Of course, these audience acquisition investments were used to remain visible in the market, but attendance-motivated messaging such as “visit us now” wasn’t always possible or advisable. Instead, these audience acquisition investments were used to remain top-of-mind during closures and point people to how relevant these organizations are even beyond their walls – from virtual programs to stay-at-home curriculum resources for parents. Of course, once these investments could operationally transition to “visit us today” messaging – at different times depending on where the institution is located and the respective local safety protocols – they restarted these campaigns.
Resist the urge to think, “Wow! These organizations must have been exceptionally revenue-efficient before the pandemic to not even have their marketing budgets – the first thing on the cutting block in most institutions – impacted!” Therein lies the issue…
Many of these organizations had to cut costs tremendously just like other institutions – they had to furlough staff, reduce programming, and make other challenging decisions. However, their leadership teams seemed to understand the dire consequences of cutting marketing budgets during times of financial crisis (especially when recovering earned revenue as quickly as possible was paramount to the long-term vitality of the organization). Amidst a sea of seemingly impossible decisions, many successful organizations chose the business lifeline of favoring investments that maintained engagement with their audiences.
Why would some organizations make the hard decision to maintain audience acquisition investments? Here’s why:
Buying back audiences is significantly more expensive than the more modest cost savings realized from slashing marketing budgets.
When it comes to audience acquisition investments and related earned revenues, you can’t save your way to prosperity.
There’s no doubt about it: As an Excel spreadsheet exercise, dramatically slashing marketing spending is among the most impactful budget decisions that an organization can make. However, when organizations cut marketing budgets, they also should realize that they will need to eventually buy back (“reacquire”) the same audiences that they chose to abandon in the process. Bain & Company famously uncovered that it costs 6-7x more money to reacquire lost audiences than it costs to keep them.
If that’s not enough, here are some cultural industry case studies to reference the next time an executive or board member says, “Let’s cut marketing to save money” that show the multi-year impacts of this potentially short-sighted decision. If your museum (or zoo, aquarium, science center, etc.) thinks that you cannot afford to sustain a marketing investment during a down cycle, ask yourself how you intend to invest 7x more to buy those audiences back later.
Now is an important time to underscore these findings so that organizations make more informed decisions to weather future storms.
We know how too much of the museum industry “has always done it.” Things get tight within nonprofit organizations and certain leaders might say, “First on the chopping block – marketing! Do we really need it anyway?”
You do need it. You really, really need it.
Among the most successful boards with which we work, audience acquisition is considered more of an investment than a cost. These are often very savvy businesses with a proper proportion of “smartly spend money to make money” sensibilities. In the case of museums, marketing investments are a “spend money to sustain revenue to educate and inspire our communities” phenomena. Targeted marketing is becoming the standard, alongside ever-increasing competition for people’s leisure time. Not only is there increased out-of-home competition this year, but there’s also fierce competition with the couch. (Speaking of which, who else sobbed during Episode 3 of “The Last of Us?”)
The point isn’t necessarily that over-investing in marketing during closures is a wise idea – there is an appropriate and unique level of investment for every organization and spending beyond that point risks superfluousness. The point is that cutting off communication, engagement, and outreach with our communities when we need them most is NOT a wise idea.
Many of the organizations that cut marketing – and especially those that dramatically reduced or eliminated it as a first line of savings – are paying for it now. In fact, research suggests that they may be paying for it seven-fold. In the long run, this threatens a museum’s ability to retain employees, develop new programs, and serve their communities.
Budgeting is difficult in times of financial crisis, and it’s painful when anything needs to be cut. But when museums must value-engineer their fiscal plans during challenging times, it’s important to also budget for a way out of them. What some museums missed over these last few years may be that cutting communication with their communities and losing top-of-mind awareness was a costly decision – not only for their financial sustainability, but also potentially for their missions as they continue to struggle to regain market relevance and achieve attendance.
IMPACTS Experience provides data and expert analysis to many of the world’s leading organizations through its workshops, keynote presentations, webinars, and data services such as pricing studies, market potential analyses, concept testing, and Awareness, Attitude, and Usage studies. Learn more.
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