Monday, December 3, 2012

Monday Musings: The Price of a Free Membership


Monday musings are my way of sharing brief, off-the-cuff thoughts about something I have read recently, with the hope that it will generate discussion and response. With that in mind, what do you think of this?:

I’ve been following with interest the news that the Dallas Museum of Art abolishing admission for the permanent exhibits and offering free memberships to all. I hear with increasing frequency from colleagues in cultural nonprofits that:
·         People don’t want to make long-term commitments such as season-passes or memberships anymore, they want their experiences a la carte
·         So many cultural and entertainment options now-a-days are free, non-profit cultural offerings need to be free in order to compete (though actually, Phil and I haven’t see unequivocal evidence that free admission increasing attendance)
·         People want real and meaningful engagement with organizations—they don’t want to be anonymous, interchangeable customers

Making memberships free in response to these drivers of change seems like a reasonable experiment. But how does the math work out? Some fiscal conservatives argue that museums should increase admission fees—if museums really offer something people want, the argument goes, people should be willing to pay the real cost of supporting museums rather than being forced by government to provide direct or indirect subsidies. Problem is, that would involve raising admission a lot. The median cost per visitor to museums in 2009 was $31.40—and the median non-member adult admission fee is only $7.

According the Alliance’s last financial survey (2009), over 90% of museums collect membership fees (59% have general adult admission fees). Earned income is typically about 28% of a museum’s support, and membership fees are the single largest source—bringing in a median of about 5.6% of operating income.

Seems to me that with membership, the tradeoff could be giving up cash income for other media of exchange that are, potentially, even more valuable. The two most likely currencies are:

·         Commitment (of time and attention). If museum fans switch their status from “members” to “in a relationship” it makes it easier to create repeat, small engagements that lead in the end to many small transactions—stopping by to see an exhibit at lunch, coming to an evening reception, using the museum as a place to meet up with friends (who, of course, are also members, or soon to be ones). This in turn can increase three forms of income:
o   Individual contributions (which constitute a median of 7% of operating income.) More people who know and love you translates to more people feeling warm and generous at the end of the fiscal year-particularly if they appreciate the value of what they got for “free.”
o   Increased attendance can be the first step towards creating and measuring greater impact, and greater impact can help make the case to third party funders that the museum is deserving of support. (Support from private or community foundations, corporate foundations and corporations typically bring in almost 9% of earned income)
·         Each interaction gives the museum the opportunity to increase other forms of earned income: most immediately from the museum store and food services (~ 7% of gross income overall, the net varies wildly by museum), and potentially long term from people, newly aware of what a great location it is, go on to rent the facility for a wedding, bar mitzvah etc.

·         Data. One reason people expect great stuff to be free is the proliferation of “free” web services that facilitate social interactions and sharing of content. How much personal data have you handed over to Facebook, Google, Instagram, Flickr, and their kin? Of course in the long run, successful web services do make money from their users—by savvy use of this data. People share crazy amounts of data about themselves with these services, which, in turn, milk it for all it is worth. Museums aren’t going to collect the volume of data that a global social networking site does, but given the blue ribbon credentials and spending habits of their core audience, I wonder if the data they do collect would be valuable to the right buyer. More subtly, I’ll be interested to see which museum first develops the savvy to mine and use this data themselves. A data base of what visitors “like” (in the web sense), how they interact with the museum online, who they share content with via social media—cross indexed against public demographic databases or personal profiles, could lead to immensely sophisticated mass personalization and audience cultivation.  

Contrary to the statement in the Dallas News article I cite in the opening paragraph, the DMA is not the first museum to institute free admissions and free memberships. Thursday we will hear from the director of one museum that has been trying this experiment for almost a year—and I’d love to hear from you if you know of others.

3 comments:

Fiacre said...

This immediately reminded me of a Wired article from 2008 (http://www.wired.com/techbiz/it/magazine/16-03/ff_free), which I think is still relevant today. I believe the trick, as you point out, is to know how FREE fits into your organization's overall business plan.

Sarah Cortell Vandersypen said...

For more information on the origins of admission charges and four case studies of museums that went free, see my Master's thesis:

http://etd.ohiolink.edu/view.cgi?acc_num=osu1307220379

An article tracing the origins of museum admission charges will be published in the Journal of Arts Management. Law and Society soon.

adriannerussell said...

Earning revenue from data mining is something I expect museums to do full-force in the coming years. It's already fairly common for museums to sell or trade visitor data (particularly membership info) to other nonprofits. Philosophically, I agree with the trend toward free admission/membership, but that money has to be made up somewhere.