Recently I came across an academic paper examining the relationship between performing arts organizations and their patrons that includes a description of a patron loyalty program developed by the Bach Choir of Bethlehem in the early twentieth century (Kushner and King, 1994).* BCB’s model is unlike any current model I have yet encountered (though this may be due to my lack of awareness not to a lack of similar models) and it strikes me as both simple and enlightened. Here’s my summary of the 1994 description of BCB’s model in the paper:
The BCB is a nonprofit organization that has been operating continuously since 1912. Its orchestra members are full-time professionals most of whom live in New York or Philadelphia and its choir is made up of volunteers. It has paid administrative staff. It presents an annual festival over multiple weekends. Its performance facility has just over 1,000 seats and is scaled. Since 1912 BCB has employed a system of “Guarantees” which give patrons the opportunity to book first and to choose seats according to the number of years they have supported BCB with an annual minimum pledge (in 1994 this was $50). The average (mean) pledge has exceeded the minimum each year and no discounts are offered on ticket prices. The Guarantee pledge is made in advance of the Festival but is not payable until after the Festival. Importantly, Guarantors are not asked to pay the entire amount pledged, but are only “assessed” a percentage, which is based on the actual deficit resulting from the annual Festival operations. Approximately one third of the Guarantors opt to pay the full pledge amount rather than the lower assessment amount. The number of Guarantors who do not honor their commitment is negligible.
According to BCB’s Web site it still offers the Guarantee program and the Gurantor minimum pledge for 2010 is $125, or $50 for those under 35. I like many aspects of this model but the part I find particularly compelling is that by assessing Guarantors at an amount lower than they have pledged, BCB essentially ‘redistributes’ back to them any Guarantee surplus donations at the end of its season (as opposed to taking the opportunity to beef up the annual budget in order to make ‘good’ use of them). It’s clear that demand exceeding capacity (most years) has been a key to the success of this model for BCB.
However, I wonder if there is a way to modify this idea for a nonprofit arts organization facing the opposite problem: a tough-to-sell show. Could patrons that buy early and first be provided with an incentive to try to help fill seats to such shows by offering modest ‘consumer surplus rebates’ if a show that is not expected to sell out does better than anticipated? Imagine the following scenario on a show in which the producers have budgeted ticket revenues conservatively, at 50% capacity:
You reserve a top-tier ticket to a show for which the house is scaled and the prices are listed as $30, $42, $58, $75; your credit card number is taken but your card is not charged at the time of purchase. Instead, you are told that the organization will charge you the day after the performance and that the organization will reward you with a lower price as more tickets are sold to the performance. It also provides you with an easy method for alerting friends that you have bought tickets for a particular night and encouraging them to do the same.
For instance, if the performance reaches 62% capacity, your $75 ticket drops to $71.25; at 75% capacity it drops to $67.50; at 87% capacity it drops to $63.75 and at 100% capacity it drops to $60. At each level, the ‘new’ ticket price would be extended to all new purchasers of a ticket in the ‘$75’ section.
With tough-to-sell shows those that buy early are often ‘penalized’ as they end up paying a higher price than those that buy later (who are able to find a discounted ticket). But with this BCB-inspired model, the more tickets that are sold the more everyone benefits (including the organization, which earns more than it would if tickets capped out at 50% as projected). The model assumes that those who buy early are the most enthused about the show and thus most willing to pay more initially and most willing to help spread the word to others if given some tools, encouragement, and incentives to do so.
No doubt some are thinking, “But if the tough-to-sell show gets a positive review and starts to take off at the box office, just at the point when the organization could have been pocketing some significant surpluses (by employing dynamic pricing, for instance, and increasing prices in response to increased demand), it would be lowering prices and leaving money on the table – that makes no sense!” It makes no sense if one’s only motive is to maximize profits. But perhaps it’s not entirely lunatic if one’s primary motive is to create greater social value and develop a loyal, invested, fan base.
There may be many reasons why this particular idea would not work. Nonetheless, I am compelled by the concept of, in essence, ‘redistributing surpluses’ back to those patrons that regularly jump in feet first. It strikes me as a way of conveying to them that they are viewed as genuine partners (and thus worthy of sharing in rewards as well as risks) and not simply reliable sources of cash.
Image of hand with cash by Mikeledray licensed from Shutterstock.com.
* Kushner, Roland and King, Arthur E. (1994) “Performing Arts as a Club Good: Evidence from a Nonprofit Organization”, Journal of Cultural Economics, 18: 15-28.Related