Subscriptions Dead? Maybe Not.

When I joined Arena Stage in 2007, I came to my new job with a couple of preconceived notions about subscriptions. Perhaps it was in part a reflection that I am on the Generation X/Millennial cusp, but I was certain that the subscription model was outdated and ineffective. Many mature organizations that had developed their business models on subscriptions were seeing significant declines in subscriber numbers, and were literally caught between a rock and a hard place — should they dump their subscription model and leap into the unknown, or keep putting band aids on a failing and timeworn strategy? Reports from major performing arts organizations at the time seemed to indicate a trend of declining returns, forcing a feeling that immediate change to a staple in our business model could be warranted.

In early 2008, Arena Stage along with a few other LORT theaters, began to test subscription alternatives in focus groups. In doing so, I was absolutely certain that the results would show at least one, if not several, attractive alternatives to subscriptions. I was wrong. Our work indicated that each option we put forth was less attractive to target single ticket buyers, multi-buyers and current subscribers than what we currently had. I was so surprised that we conducted a second series of focus groups with similar results. Amazed and confused, after a few months, I concluded our market research indicated that the subscription model wasn’t outdated, but that our execution was flawed.

With the help of Target Resource Group, we conducted a thorough audit of all subscription related practices, and started making significant changes in mid-2008. Since our 2008-09 season, Arena Stage has experienced substantial growth in subscriptions, increasing our subscriber base by 57% and revenue by 73% in three fiscal years, beginning 1.5 years before the opening of the Mead Center for American Theater at the height of the global economic crisis and during a time when we were performing in transitional spaces throughout the metropolitan area. Even more surprising, during the same time period, our subscription related marketing expenses decreased, which along with increased revenue, effectively doubled our return on investment (ROI).

Below is a brief summary of major tactical changes:

Simplified Pricing. Our previous subscription pricing strategies were incredibly complicated. I remember spending hours poring over pricing strategy, and at the end thinking that one would have to be a CPA to understand how our pricing model worked. We decided that in order to create an effective value proposition, subscription pricing would have to be clear and easy to understand. We worked for weeks to develop a simple pricing structure that could be messaged easily, such as “buy 6 plays, get 2 plays free.” The new pricing structure allowed us to easily communicate a value proposition and to eliminate complicated order sheets, replacing them with order forms that could be filled out easily. Clear, concise and transparent pricing was pivotal to effectively communicating the value of a subscription.

Introduction of Dynamic Pricing for Single Tickets. In 2009, Arena Stage introduced dynamic pricing for single tickets, and we immediately started to see an unanticipated outcome. Due to our new subscription pricing structure and the introduction of dynamic pricing for single tickets, we were able to guarantee subscribers “the best seats in the house at the best prices.” Dynamic pricing eliminated last minute discounting on premium tickets, and rewarded single ticket buyers with a lower price for better seats if they were willing to purchase earlier. In turn, our patrons soon started to understand that the earlier they purchased, the better “the deal” they received, with the ultimate deal being given to subscribers. As we religiously track all customer service issues, we can say with full confidence two years later that dynamic pricing has not caused distress with our ticket buyers or donors, and in fact, from the moment we introduced dynamic pricing to current day, we have increased the number of single ticket buyer households by 84%.

Focus on Retention and Customer Service. We were allocating too much resource on subscription acquisition, and not enough on subscription retention. We developed a “say yes to the customer” approach with our subscribers, thereby earning us “industry leader” marks on our most recent customer satisfaction survey conducted by Shugoll Research. Year to year benchmarks for customer service have increased steadily as we focused on providing our subscribers the best experience possible. Given today’s sad state of customer service at most establishments, we were determined that our customer service would be a competitive advantage. In addition, we allotted resources for special subscriber recognition efforts throughout the year, including a sneak preview of the upcoming season, complimentary artisan chocolates at specific performances and subscriber-only events. During the 2010-11 season, we introduced a concierge program for all new subscribers. Each new subscriber was assigned a personal concierge on staff, who was expected to make themselves available to answer questions, field requests or be helpful in any way. Concierges were reactive to inbound inquiries, but were also expected to be proactive throughout the year, offering new subscribers recommendations on local restaurants, parking, interesting tidbits about upcoming productions, and the like. By concentrating on customer service and retention, we were able to increase our overall subscription renewal rate by 13% over three fiscal years.

Eliminated Advertising, but Increased Direct Mail and Telemarketing. Prior to 2008, 25% of our subscription budget was allocated to advertising. After exhaustive efforts, we could not trace a single subscription purchase back to our advertising campaigns. Therefore, we cut all subscription advertising, and refocused those resources on direct mail and telemarketing. In doing so, we completely revamped our direct mail and telemarketing campaigns. In terms of direct mail, we would previously print hundreds of thousands of season brochures, and then mail them out in a few rounds of massive mailings. Our brochures were 28 to 32 pages in length, and functioned more as a branding tool than a sales piece. Today, we send out 30+ direct mail pieces during each subscription campaign that specifically tailor the offer to the target. We have eliminated our subscription brochure, cut our design costs by 60%, and have directed all of our resources to testing message and offer. For more information on our new approach to direct mail, please read “The Future of the Season Brochure.” While retooling direct mail, we also invested heavily in telemarketing. If executed properly, many patrons actually view telemarketing as a service, as it allows them the opportunity to discuss the plays with a seasoned caller and to ask any questions they may have. As the economy worsened, we found that many potential subscribers needed personal interaction with a friendly and knowledgeable sales agent in order to make a commitment.

Delayed the Introduction of Smaller Packages and Concentrated on Upgrade Strategies. In 2009, we started to experiment with delaying the on-sale date of partial season packages in order to focus our efforts on upgrading subscribers to the full season. There was a fear at the time that our partial subscribers would become frustrated, and leave the company all together, but I was confident that our programming was strong enough that a delay would encourage subscribers to upgrade. The value proposition was clear — the only way to guarantee the absolute best seats in the house for our most popular productions was to purchase a full season subscription. By focusing on full season subscriptions and postponing the introduction of partial subscriptions, we were able to increase the percentage of full season subscribers by 14% from FY09 to FY12. Expanding upon previous successes, in 2011 we launched a completely separate upgrade campaign alongside our renewal and acquisition campaigns. In addition to crafting and executing strategies that focus on renewals and acquisitions, we now also focus on upgrading subscribers throughout the year. These strategies have proven to be quite effective, and as of publication, we have upgraded more than 1,800 subscribers from smaller packages to larger packages in the current fiscal year.

Relentless Dedication to Monitoring ROI. In FY12, we will spend almost 20% less on subscription expenses than we did in FY08 despite the fact that the number of new subscribers has increased by 166% during the same time. I’ve always been taught that acquisition campaigns are expensive; that you have to “spend money to make money.” In most cases, I agree, however if you aggressively monitor ROI on each campaign, in many cases, you will find efficiencies that will allow you to actually decrease your expenses in the middle of an aggressive acquisition cycle. Many marketers think that given limited staff resources, tracking ROI is too time consuming, however a relentless dedication to monitoring ROI will reveal where you should invest in the future, and more importantly, where you should cut.

In addition to the above, it should also be said that the most important ingredient to any subscription campaign is programming. A subscription campaign is both a referendum on the previous season and an indicator on the amount of excitement in the marketplace for the upcoming season. In my time at Arena Stage, I have been extraordinarily lucky that our artistic team has consistently produced and presented exceptionally high quality work, without which, the aforementioned tactics would have only resulted in minor successes at best.