Can right-sizing be as sexy as expansion?

On Thursday of last week, Thomas Cottfeatured several articles on "right-sizing" in the arts in his daily "You've Cott Mail." As many of his emails tend to do, it has stuck with me for days. See his email came at an opportune time for me. I had just given the plenary speech at American University's Emerging Arts Leaders Symposiumwhich partially focused on NEA Chairman Rocco Landesman's "supply and demand" speech, and soon thereafter, Rebecca Novick authored a blog entitled "Please, Don't Start a Theater Company."

A central theme from these various sources began to emerge, which was packaged quite nicely by Rebecca when she said: "In the past fifteen years, the number of nonprofit theater companies in the United States has doubled while audiences and funding have shrunk. Neither the field nor the next generation of artists is served by this unexamined multiplication of companies based on the same old model. The NEA's statistics on nonprofit growth, set against its sobering reports on declining arts participation, illuminate a crucial nexus for the field, a location of both profound failure and potential transformation."

If data indicates that the field continues to expand at an unsustainable rate propagating the continuance of a model that is considered by some to be out of touch with current realities, then why do we continue in such a manner? My thoughts below...

It's as American as apple pie. Let's face it, expansion is sexy. We are the children of manifest destiny. Starting from nothing and growing an empire. Conquering new frontiers. These are all American ideals. Hell, many of our childhood boardgames indoctrinate this philosophy. Is it any surprise that as adults we equate expansion with success? And this perception of success is handsomely rewarded. Grow your audience and your revenue, and you will increase your likelihood of additional contributed revenue. But if those metrics decline, you'll need to do some explaining.

Follow the money. In the 1990s, educational programming became a funding priority, so every theater across the nation rushed to create an education department. To some, it didn't matter if the programming was sub par, they just knew they needed a department to be competitive. In the 2000s, capital projects became a priority, and more than a decade later, we have new buildings all across the country. Some were desperately needed as aging infrastructure was failing, while others were less of a necessity but were built on hopes of significant future returns. After opening, some organizations thrived in their new facilities, while many others struggled almost from day one. In his article "New Facilities Aren't Always a Qualified Success"in the Kansas City Star, Scott Cantrell discusses the challenges of several major new performing arts centers, including Dallas's AT&T Performing Arts Center, Philadelphia's Kimmel Center and Miami's Adrienne Arsht Center. All of which opened without finishing their fundraising campaigns and operated with multi-million deficits. Two years into the new decade, it seems that funders have started to realize the magnitude of the problem, and are now beginning to focus on sustainability as a priority, providing working capital to companies to right-size, rather than providing incentives to expand.

Build it, and they will come. Prior to launching a capital campaign, most organizations commission at least one feasibility study to determine whether or not the company has the capacity to raise the necessary funds to pay for capital improvements. But how many thoroughly study whether or not there is enough support in their communities to sustain an expansion for decades to come? When Arena Stage opened the Mead Center for American Theater, I was thankful that the new building only increased overall capacity by 6% in comparison to the previous structure. Although renovations and improvements were desperately needed, I wasn't convinced that we could introduce a large amount of additional inventory into a city which was already trying to support five previously built new theater complexes. If desired and demand warranted, Arena Stage was able to increase inventory by expanding beyond its typical 9 month season, but they weren't forced into an expansion due to a large increase in the capacity of the new complex. The challenge for Washington at this moment is clear--we have dramatically increased supply over the past decade, and with our capital projects now complete, we must develop and support new audience development campaigns with as much gusto as our capital campaigns. We have to build our audiences, which up until now, we haven't successfully done in the last decade. This is the real challenge. Ten years from now, will our new theaters be empty?

Can you display it? I find it fascinating that many museums have an aggressive acquisition plan but only display a very small percentage of their current collection. There seems to be a commonly accepted premise that major museums only display 10% of their collection because they are limited in terms of space and resources. I can understand acquiring new objects that aren't in display condition for research purposes, but why expand a collection of display quality objects if you don't have the opportunities to display what you currently have? Again, I'm a novice in museum studies, but it would seem to me that before expanding, a museum might consider shifting its resources to developing traveling exhibits so its current collection can be seen. What's the point of acquiring items with very little likelihood of every displaying them to the public?

What's going on in Ohio? I've been closely following two non-profit arts organizations based in Ohio over the past few years, as I believe they can be an example to us all. The first, the Columbus Symphony, was featured in Thomas Cott's aforementioned email. After struggling for years, they conducted a study that indicated that the city of Columbus could only support a symphony with an $8 million operating budget instead of the $12.5 million budget they currently had. From this, they decided to "right-size" their organization to match the current demand in their market by joining forces with the Columbus Association for the Performing Arts. Meanwhile across the state, the 90 plus year old Cleveland Playhouse laid off several senior staff members, dropped two productions from its season and trimmed its budget by 18% in 2009, prior to moving to the newly renovated 515 seat Allen Theatre in 2011. Previously, the Allen Theatre boasted 2,500 seats, but when the Cleveland San Jose Ballet left town, the Cleveland Opera downsized and Broadway tours dried up, the Allen Theatre was only in use 90 days out of the year because it was too big for most productions. The solution--the Cleveland Playhouse, Cleveland State University and PlayhouseSquare partnered resulting in a newly renovated Allen Theatrewith 1,985 fewer seats! And it seems that it has worked out quite well for all involved. Revenue for the Cleveland Playhouse more than doubled and an underused space became the new talk of the town.

This isn't to say that expansion is always bad,  sometimes it is absolutely necessary. However, it isn't always beneficial, even during moments of great success. If your theaters are playing to capacity, perhaps you have discovered the sweet spot for your organization. Push just a little further, and too much of a good thing could tip the scales in an unfavorable direction, leaving you wondering how you managed to snatch defeat from the jaws of victory. Expansion can be attractive, but stability is pretty damn sexy too.

Purposeful Acquisition

Several years ago, I wrote a post entitled "You want to get into trouble? Concentrate on new audiences." At the time, I was confused and frustrated with the relentless focus on developing new audiences. The field's obsession with the new to the detriment of the loyal seemed illogical. My good friend Laura Willumsen, senior consultant at TRGArts, summed it up quite nicely by saying "we should find a way to love the one we're with, before we start courting others." Pretty safe advice that came at the perfect time for me.

Three years later, I have come to realize that healthy arts organizations have equally robust campaigns focused on new acquisition and retention, and increasingly we are focusing on improving the overall lifetime value of our customers.

For those with retention problems, I would still advise spending a majority of your resources reducing attrition before launching costly acquisition campaigns. There is nothing worse than spending a significant amount of resources enticing new patrons in the front door while your current customer base runs out the back door. And from a financial perspective, that is one of the easiest ways to sink the ship.

That said, if attrition and renewal rates are within the range of industry standards, more than likely it is time to concentrate on acquisition. Here are a couple of thoughts...

Programming. If you are looking to acquire new audiences, either you can dig a little deeper in your current well, or you can dig a new well altogether. If untapped audiences remain within your core programming, then continuing to dig deeper in your current well probably makes the most sense. If however, you find that your current programming has tapped out its audience base, digging a new well with expanded programming might be the key to acquiring new audiences. Digging a new well requires developing mission driven programming focused on an unmet need within your community. New programming initiatives are usually costly, and often times are prematurely abandoned when they don't hit a desired net revenue goal in a short period of time. Arts organizations need to view new programming initiatives as an investment in future audiences which will pay out over years instead of months. While digging new wells, it is important to maintain and cultivate your current well. Don't abandon the old for the new--let the returns from the old provide the investment capital for the new. Often times marketers are afraid of new programming because they don't want to risk offending current subscription audiences, but if you maintain a base level of traditional programming while offering an opportunity or two to test drive new programming, you will mitigate your risk of subscriber attrition. And for those who have highly subscribed houses, new programming might be the only opportunity that you have to get new audiences into your theaters which would otherwise be mostly sold out on subscription. During my final week at Arena Stage, I had to chuckle when a reporter asked me if we increased our number of musicals in the upcoming season because they were "cash cows." If only he knew that most musicals we produced actually lost money. Aside from artistic reasons, from a marketing perspective, we increased the number of musicals to attract more first time audiences, which we will then try to convert into lifetime patrons.

Direct Marketing. During the last year, I have heard of several companies eliminating acquisition efforts entirely due to budget cuts, thinking that investing exclusively in retention campaigns would result in higher returns over time because the ROI was better than comparable acquisition campaigns. Unless you are in desperate shape, please do not kill your acquisition efforts entirely. And here's why--if you currently have a healthy 80% renewal rate for your members/subscribers, it means every year you will lose 20% of your base. Statistics show that even if you have a flawless renewal campaign, you will still lose 10% due to changes in lifestyle or death. To replace those lost, you must invest in acquisition or budget for a reduced base each year that you don't. If you cut acquisition entirely, with an 80% renewal rate, you will lose half of your entire base in three years. And getting them back is going to be incredibly expensive! When looking at acquisition costs, often times it will take two to three years for a new member/subscriber to produce a net positive result, but over a lifetime, these new acquisitions will be responsible for years of renewal revenue.

Robbing Peter to Pay Paul. When the economy took a nosedive in 2008, marketers responded by looking for places to cut by thoroughly monitoring the cost of sale for individual campaigns. Normally, I would encourage such behavior. But I believe it has resulted in a zero sum game of gains and losses among the various theaters in the Washington, DC area. Studies show that even as venues have dramatically increased their capacities, theater audiences in our nation's capital have not grown. And as we all looked for opportunities to reduce our marketing expenses, we refocused our acquisition campaigns to aggressively target the list segments that performed the best, which frequently were qualified leads of theatergoers from other companies. The most cost effective means of acquiring "new" audiences was soliciting patrons from other theaters. Acquiring "new" audiences didn't actually mean developing new theatergoers as much as it meant marketing to previous theatergoers who had never visited your theater before. This wasn't dirty pool. It is standard operating procedure in any highly competitive marketplace. But as I left Arena Stage, being incredibly proud that we had almost doubled our subscriber base in three years, I found myself being more interested in the number of none theatergoers we were able to convert into theater patrons. And the truth is I don't know because we never tracked it. As a community, the greatest challenge we have is developing truly "new" audiences in Washington, DC. If we are using each other as a primary source for our "new" audiences, then we aren't creating a healthier community as our individual successes come at the expense of others. Therefore I encourage marketers to look at acquisition in terms of developing completely new audiences for the community as well as acquiring new audiences for your organization. The latter will improve your individual health, while the former the health of the artistic ecosystem.

Quick reflections on a changing media landscape

Just a few thoughts on the changing landscape of arts journalism...

Content aggregation vs. reporting. As newsroom staffs are being cut, an alarming number of original source reporting outlets are shifting to content aggregation. Very few media outlets now have dedicated full-time reporters that are assigned to the arts. With an increase in content aggregation and a decrease in original reporting, editorial power is shifting to the fewer outlets that are creating content which in turn feeds the increasing number of aggregators. Just a short time ago, it used to be that a significant story would be covered by several local and national outlets, allowing a well-rounded view of the story to emerge. Today, whatever the view of the originating source becomes the defacto view of aggregating outlets, thereby often times giving a single reporter the responsibility of judge, jury and executioner. That said, I have found that there are some journalists who aggregate content, and then editorially expound upon amassed content. I have found that in doing so, these journalists feel the pressure to produce original editorial based upon what others have said, but they do not view themselves as primary source journalists, meaning that they will comment on previous work, but will not expend the energy to actually conduct interviews or investigate if forgone conclusions are accurate.

The rise of "gotcha" journalism. It used to be that purposefully snarky reporting was the realm of the social blogosphere, or at best, the weekly alternative paper. In a surprising turn of events, the Washington Post, one of the most respected new sources for arts journalism in the country, sent out the following message in late February: “Got a grievance to air about the Washington arts scene? Is complaining your favorite form of catharsis? Our Sunday Arts section is seeking critics like yourself, who are interested in giving our local and cultural scene some tough love.” Why would such a reputable news source specifically solicit grievances and nothing else? Wouldn't they want a balanced view from the community on the impact of the arts in our nation's capital? particularly at a time when arts funding is getting slashed? I fear that ill-conceived attempts at gaining readership will result in using tactics that just a few years ago would have been laughed out of the newsroom. Quality arts reporting, as it rapidly diminishes in communities across the nation, should become a strong competitive advantage for those that continue to invest in it. For another viewpoint, please check out Howard Sherman's excellent post here.

Pay to play, and the abandonment of journalistic ethics. I have a feeling that even prehistoric publicists had to deal with "news outlets" that refused editorial coverage unless advertising money was attached, but it used to be that these outlets were few and came with tarnished reputations in their communities. Today it is almost as likely that a marketing director will arrange an editorial feature via an account rep as it is a publicist via an editor. And outlets aren't shy about it. Previously a publisher might say to you with a wink that he would see what he could do, but now they flat out tell you if you want to be reviewed, you need to buy an ad! If a feature article, and much more so a review, is attached to an advertising buy, journalistic ethics have been thrown out the door. Just on principle, even when I did have the resources to make an ad buy, if an offer was made, I walked away from the table. There has to be a line.

To tweet, or not to tweet? If you are an executive of an arts organization, and you are considering joining Twitter, here are a couple of things to consider:

• Twitter is a community. If you do not have the time to adequately nourish online relationships in Twitter, don't join.
• You are always on the record. It is an open community in which anyone can ask any question at any time. Don't let the relaxed environment fool you. Every 140 character response is on the record. For a good laugh, please refer to the top 10 celebrity Twitter scandals. It is easy to understand why journalists encourage joining, as many a good story have come of it.
  
• Silence speaks volumes. Thinking about joining, and then side-stepping the tough questions? Often times what you don't say communicates even more than what you do say. You should be prepared to answer questions that you won't want to. And in this environment, "no comment" doesn't go over quite so well.

That all said, if you have the time and are comfortable with complete transparency, then a Twitter feed can provide for strong relationships between you and a wide audience.

Learning from the Past, Looking toward the Future

A little more than a week ago, I announced that I would be leaving Arena Stage to lead the marketing and membership efforts at the Smithsonian Associates at the end of March. I've been overwhelmed by the kind words and best wishes sent my way. For that, I am very grateful.

Some have also asked if I plan to continue blogging. As you may have noticed over the years, my blog covers topics that I am passionate about, often times motivated by current trends and experiences. As I move from a performing arts organization to a museum and research institution, undoubtedly my perspective will evolve over time. However, I hope to continue to contribute to online dialogue and debate.

My four-and-a-half years at Arena Stage have been the most rewarding and exhausting of my career. When one decides to pursue a career in a field they love, like many theater artists I know, these two adjectives are not mutually exclusive; in fact, many would argue that you can't have one without the other. When joining Arena Stage, I knew there were very few precedents for what we needed to accomplish, and with the opening of the Mead Center and a 2.5 year transition ahead of us, a clear path wasn't always available. It was an opportunity that intimidated me, but I knew that I would get an education of a lifetime.

In looking back, I've learned quite a bit along the way...

• Always give an "exclusive" to your best and most loyal customers. Trust me, if they read something important in the daily paper before they hear it from you, they won't feel like part of the family.
  
• Customer service can be a significant competitive advantage. When the whole world has come to expect awful customer service, it creates an easy opportunity to shine.
  
• When hiring, if you have to pick between the two, a "fire in the belly" always trumps experience. One can teach skills, but one cannot be taught to take pride in their work.
  
• Resources are an investment--monitor and expect returns. Marketing directors have two primary resources: human and financial capital. Where and when to invest each is a critical decision. When budgets are tight, monitor cost of sale and make data driven investments rather than emotionally driven ones.
  
• Decisiveness is critical. Leap or die. Would you rather sip champagne and listen to the violins on the Titanic, or slap on a life vest and jump into the unknown? The unknown may be scary, but the known isn't an option. A delay in decision-making will almost always be costly, as it is rare for circumstances to change, but options will diminish. The non-profit theater landscape in the United States is changing rapidly, and adjustments must be made.
  
• Maximize successes to mitigate risks. Unless you present nothing but bankable commercial successes, risks are inherent in the theater. When you catch a break, ride it for all that it's worth in order to mitigate the risk that is right around the corner.
  
• Looking for improvements? Track results. By tracking, you send a signal to the company that something is important. Important enough to monitor. By not tracking, you send an equally powerful signal that something isn't worth the effort. Know your vital statistics, and track them aggressively.
  
• Marketers are masters of perception, not reality. Unless you are talking about financials, marketers should keep their attention on perception. Perception, as we know, is reality for most.
  
• Subscriptions aren't dying, theaters are killing them. If patrons can get great seats at a significant discount at the last minute, the value proposition of a subscription doesn't exist. Best seats at the best prices = more subscriptions (as long as the product is good).
  
• Develop a strong team, and hire to your weaknesses. Major accomplishments are always a team effort. Honestly assess yourself, recognize your weaknesses, and hire people that are better than you in areas where you need improvement.
  
• Comp tickets are disrespectful. There are a few good reasons to give a comp here or there, but nothing devalues the work of an organization or artists more than giving away free tickets. Why do we expect society to value the arts if we don't?
  
• Make decisions for tomorrow instead of today. Often times we are faced with decisions that could result in a short term gain, but a long term loss. Unless you are in desperate times, always set yourself up for a better tomorrow, even if it makes a more difficult today.
  
• Take a Pavlovian approach to discounting. Use discounting as a means to encourage desired behavior. Want people to purchase early? Avoid late discounts whenever possible.
  
• Marketing and Development are two sides of the same coin. Look at revenue generation as a team with the goal of raising the most revenue at the least cost. Consolidate resources, eliminate redundancies, invest in campaigns that perform the best across the departmental divide, and look at your customers holistically with an eye toward building loyalty and lifetime value.
  

I will always remember my time at Arena Stage fondly, and am thankful for the education I received.

Looking forward to catching a performance in the near future--this time though as an audience member (and yes, I will buy my tickets).

Art or Audience; Chicken or Egg?

Doug McLennan, Editor of ArtsJournal, invited me to participate in an online debate on leadership in the arts. To kick things off, a panel of bloggers were asked to respond to the following prompt:

"Increasingly, audiences have more visibility for their opinions about the culture they consume. Cultural institutions know more and more about their audiences and their wants. Some suggest this new transparency argues for a different relationship between artists and audience. So the question: In this age of self expression and information overload, do our artists and arts organizations need to lead more or learn to follow their communities more?"

There has been vigorous debate on this issue, and to check out all the arguments, please visit the "Lead or Follow" online discussion here.

As for me, below is my response to the aforementioned prompt:

This week we examine the nature of leadership in the context of developing the most fruitful relationships with our audiences. Good relationships often strike a healthy balance between competing interests, and frequently this balance is forged over the course of many years. Arts organizations have relationships with their patrons, donors and communities, and those relationships are constantly evolving. As such, I find the framework of this debate limiting, as I would argue that great arts organizations lead and follow, and that we shouldn’t be asking if we should do more of one than the other, but instead ask if we are doing the leading or the following at the appropriate times.

There are moments when arts organizations must lead, and that leadership becomes a catalyst of great change. In 1948, the National Theater in Washington, DC closed its doors rather than integrate, and a twenty-four year old Zelda Fichandler decided it was time for the city to have a producing theater of its own. She was an early proponent of the idea that communities should reclaim ownership of their theaters, and now sixty-one years later, there are more than 1,900 non-profit regional theaters in cities across the nation. It took a leader.

There are also times when we follow. As of 2008, minorities accounted for 48% of all births in the United States. The U.S. Census Bureau projects that by 2050, the Asian and Hispanic population will double, African-Americans will increase and the white population will decline by 9%. In addition, the percentage of the population that is elderly will almost double. Look at your board of directors, staff, donors and audiences—do they reflect your community? Is the physical structure of your building suitable for a growing number of elderly patrons? As a field, we are behind the curve, and we have much to learn from following as our communities are changing faster than we are.

In terms of audience development, it is important for arts organizations to play both roles well. Our principal challenge as arts marketers is presenting art as a viable option for leisure activity. We have many barriers—ticket prices, transportation and parking, lack of arts education in our schools, inaccessible and aging infrastructure, etc. Not to mention, the abundance of free and easily accessible alternatives from our competition. A 2008 Survey of Public Participation in the Arts published by the National Endowment for the Arts (NEA) found that American arts audiences are getting older, and their numbers are declining at significant rates. In 2011, NEA Chairman Rocco Landesman delivered his now famous “supply and demand” speech from Arena Stage, indicating that demand for the arts is currently outpaced by supply, and suggesting that we consider pruning our numbers. We have a problem in this country. And if we have to produce more populist work in order to overcome potential barriers for first time patrons, I am fine with that. In fact, I am more than fine—it is what we should be doing.

Populist work is often, for lack of a better term, a gateway drug. Lure them in with a musical, roll out a comedy, put in a Broadway touring production. Do what it takes. Once they have an exceptional first time artistic experience, art becomes an option and then we work to get them addicted. From the perspective of an arts marketer, once a new patron walks through our doors via a “gateway” play, my job is to get them back. Once they have had a few experiences, my responsibilities shift. I now focus my attention on broadening their experiences and pushing their boundaries. And they will be ready. But forcing them to run before they crawl will end up in a disappointing experience for all.

Each patron has an individual relationship to an arts organization. We have a responsibility to offer up a balanced diet that feeds each artistic soul. For those with a developed palate, we lead, push, challenge and sometimes offend. And for those new to us, it is perfectly appropriate to offer up a piece of cake in order to get them to sample the exotic quiche.

Currently at Arena Stage, we have a tremendous production of John Logan’s Red directed by Robert Falls. In the script, painter Mark Rothko’s assistant Ken delivers a powerful speech, in which he says:

“You know, not everything has to be so goddamn important all the time! Not every painting has to rip your guts out and expose your soul! Not everyone wants art that actually hurts. Sometimes you just want a fucking still life or landscape or soup can or comic book.”

Remarkable arts organizations are more than just temples of art. We are relationship builders. Today we lead, tomorrow we may follow, but we take our cues from our communities, for whom we were built to serve.

Partners or Competitors? My Favorite Frenemies

A little more than a week ago, the Washington Post in an extraordinary effort by a daily newspaper, published a series of articles on the state of theater in Washington, DC. As part of that series, Nelson Pressley, a frequent contributor for the Post, wrote an interesting piece on the financial status of the community. In it, he notes that in terms of capacity, the Washington theater community has grown tremendously over the past decade, while government funding has decreased significantly and according to theaterWashington, the annual theater attendance has remained the same since 1988. Mr. Pressley also cites that each theater that has expanded reports significantly increased audiences, and several have recently set all-time sales records.

In the Twittersphere, this article raised the same question that NEA Chairman Landesman asked in his now famous "supply and demand" speech given at Arena Stage in January 2011. Is there enough demand to support the increase in supply? This isn't a new question. It is something I questioned in this blog in 2008, and it is something that arts administrators discuss at every conference I have ever attended.

Setting aside for the moment the data from theaterWashington, on a positive note, I've seen some extraordinary things in the DC theater community in the past few years. I'd heard that the city can only support one or two major hits at any given time, however in the late fall of 2010, several theaters reported exceptionally strong attendance numbers for multiple shows running at the same time, including Oklahoma! and every tongue confess at Arena Stage, Candide at Shakespeare Theatre Company, Sunset Boulevard at Signature Theatre, and A Christmas Carol at Ford's Theatre. Well, there went that long held belief. When Arena Stage was considering a 13 week summer remount of Oklahoma!, I was told that the city could not support a long sit down production of a major musical in the summer as August was completely dead in these parts, and we couldn't succeed with Congress out of session and everyone heading to the beach. Surprise, surprise when not only Arena Stage experienced sold out houses at the height of the summer doldrums, but Woolly Mammoth Theatre Company did as well with their remount of Clybourne Park. As a community, I don't think there is anything we like better than being told we can't do something, and then proving that we can.

But to Nelson's point, we have a significant challenge ahead of us. In discussing his article on Twitter, playwright Stephen Spotswood asked me "how much do DC theater companies feel like they are in competition with each other?" Soon thereafter, Peter Marks, theater critic of the Washington Post, asked me to answer the question on the record. And this is my attempt...

Are DC theater companies in competition with each other?
Yes. In my opinion, to think otherwise would be naive. People have limited disposable income, especially during tough economic times. However, we are very lucky. Washington, DC is weathering the economic downturn better than any other city in the nation. Although we have had our challenges, we have a leg up on everywhere else, and perhaps this is why we have been able to expand during turbulent times. But in terms of how people are going to spend their leisure time, theaters are in competition with each other as much as they're in competition with movies, sports, other performing arts, museums, television, YouTube, video games, etc. To say that we aren't is simply untrue.

That being said, if I am in competition for discretionary spending dollars, I want it to be with another theater. Why? I can't get patrons to come to my theater if they don't see theater as an option in the first place. My primary responsibility as a theater marketer is to get people interested in the theater. To increase the stability of our community, we have to grow the base of theater patrons in our city. We don't have any other option, and to do that, we have to view ourselves as partners first and competitors second. If we focus on cannibalizing each other's audiences, it will be a losing battle. One theater may win one year, but inevitably it will lose the next. The only way everyone wins, including the city, is if we cultivate a growing audience for all of our theaters.

In responding to Stephen's question, I would also say that I tend to think that competition in the marketplace is good. When competition is stiff, it pushes everyone to do their best. To produce work of the highest quality. To provide the best customer service. To nurture the best local talent, and to present preeminent artists from around the globe. Please forgive the personal anecdote, but I know I have a more rewarding workout when there is a strong runner on the treadmill next to me. If there is no one by my side pushing the pace, I won't exert as much energy. I want to keep up. I want to compete. And because of our competitive spirit, DC audiences will get to experience the best efforts of all.

As I look into the new year, I resolve to elevate my gaze whenever possible from being exclusively on the theater where I work to the community as a whole. I hope that competition will improve us individually, and that working together will improve us as a whole.

Who are your best customers (and why many don't know)?

Some time ago, I was at the box office when a major donor who lives out of town came up to the window. I instantly recognized her even though she hadn't visited us in quite some time. After warmly welcoming her back, I stepped away briefly to attend to another matter, and when I returned to continue our conversation, I was startled to see that she was being charged an exchange fee to transfer into another performance. When I inquired, the box office associate rightly told me that she wasn't a subscriber, and that waiving exchange fees was a subscriber benefit. In this case, the patron wasn't a subscriber because she lived thousands of miles away, however she was an incredibly generous donor, giving both to our annual fund and our campaign. Her giving over the years easily made her one of our most valuable customers, but because she wasn't a subscriber, the box office didn't grant her one of our entry level benefits.

This wasn't a human error, but a systemic one. At the time, we were operating a ticketing software that didn't reflect giving history, so there was no way the box office associate could have known the patron's lifetime value. And even if the ticketing system notified the box office associate of the patron's giving history, the associate would have had to override the benefits structure we had in place as complimentary ticket exchanges were a subscriber benefit, not a donor benefit.

We had a problem. Fundamentally, how we defined our best customers changed depending upon which department was asked, and the company as a whole had yet to identify our best customers in a holistic manner.

Two years ago, we took the first steps to address this issue. First, we replaced our antiquated ticketing software with an integrated database that housed all transactional data across our various departments allowing users to see an overall picture of each patron. Once in place, we had to develop a system for defining our best customers from the perspective of the entire company. We hired Target Resource Group to develop an algorithm that incorporated all transactional possibilities with our company, and then apply that algorithm to our database to develop a Patron Loyalty Index score for patrons in our system based upon transactions over the previous five fiscal years. The index scores allowed us to separate our database into four major categories, and today, certain overriding benefits are assigned to the higher level categories.

If the aforementioned major donor were to come to our box office today and request an exchange for a single ticket purchase, an associate would enter her information into our database, and the database screen would immediately turn red--our signal that we are interacting with someone with a very high Patron Loyalty Index rating. The associate would then know that an exception to the exchange rule would be in order as a result of the major donor's lifetime value to the organization.

The way the communications and development departments do business at Arena Stage has fundamentally changed over the course of the past two years. We view ourselves as full partners in building patron lifetime value. We work together to increase loyalty, reduce attrition and grow revenue. Subscriber renewal rates are at an all-time high, patron churn has decreased by 7%, the number of full season subscribers has increased 18%, and our membership program is pacing well ahead of last year.

Knowing who our best customers are has made all the difference.