museummarketing.info

In the beginning of 2008 the Tropenmuseum participated in a coupon action with ETOS one of the biggest drugstore companies in the Netherlands. For every 15 euro’s spend at ETOS you would get a coupon. With this coupon the second ticket at several theme parks (and a museum) would be free of charge. In three weeks there were 450.000 coupons distributed to customers of ETOS. Eventually several hundred spend there coupon at the Tropenmuseum.

Almost every week I am called by a company, or a PR company who is representing that company, if want to participate in a coupon action. Most of the time a company is searching for a nice offering for their customers. No money is exchanged between us and the company who offer the coupons. It is a so called barter deal. The benefit for us is extra exposure to that specific customer base. I turn down a lot of requests to participate. I have made some criteria to consider when asked to participate in coupon action:

1. Brand strength of the company handing out the Coupons. Can this brand lift your own brand up or bring your brand down? Participating in a coupon action with a mom and pop store is probably not a good idea.
2. Products/services the company offers. Heineken is a strong brand, but would we do coupons targeted at children if they would ask us?
3. Reach of the coupon action. What is the size of the audience for this coupon action.
4. Targetgroup. Is the target group extending beyond your normal customer base?
5. Other companies who are joining in. If the coupon is valid for several other museums, theme parks or any other leisure activity are they on the same brand/value level as you.
6. Can our staff handle anymore actions. All those coupons have to be checked at the cashier. To many actions drives them wild.
7. Action conditions. Is it a small discount (20%) or a huge one (second ticket for free)

When you choose to participate I have also made a practical checklist to use when the coupons are designed. These items on this checklist are not always needed but choose wisely when you don’t put them on the coupon.

1. Logo of your museum
2. Picture of the museum/exhibition/event?
3. Address
4. Opening times
5. Barcode/Action code
6. End date of the action
7. Action conditions

A final tip: Always approve the final design of the coupon.

This is part 3 about the optimum entrance fee. This post elaborates on my previous posts about the optimum entrance fee. A lot of you probably know the basics of Price elasticity. And even if you don’t know anything about it you experience your own price elasticity a lot of times.

A perfect everyday example is the rising worldwide gas prices. A few days ago I bought a (big) Volvo. I went to the petrol station to fill up my car. When the car was filled up I went to cashier. I was in a shock when I heard the amount I had to pay. It was 74 euro’s (108 us dollars) for about 47 liters (12 gallons) of gasoline. Next time when I take the car I will think twice about it. Those high gas prices make me reconsider using my car. This approximately how basic price elasticity (of demand) works.

‘A certain percentage change in the price of a product/service changes a certain percentage of the demand for that product/service.’

The elasticity depends of course on the offered product. I am reconsidering buying gas for my car but would I ever reconsider buying drinking water…even if the price gets sky high? Probably not, water is a basic need and without I will die. How does this work with Museums? According to this article by Frey and Meier a raise in admittance fee doesn’t effect the admittance very much. Actually research suggests that a raise of 10% only suppresses demand with 2% (the elasticity is 0,2). The demand for museums is inelastic. The opposite of inelastic demand is elastic demand. The demand for a good is relatively elastic when the quantity demanded does change much with the price change. An example could be a luxurious product like a Shirt with a small crocodile on it. When they raise their prices with 10%, demand could for example drop with 15%. The elasticity of this product is 1,5. This means:

- Inelastic demand; Elasticity has a value between 0 and 1.
- Elastic demand; Elasticity has a value between 1 and infinity.

How would this work out for a museum. A museum in Amsterdam has an entrance fee of 8 euro’s (for this case there are no special prices or discounts). They have 100.000 visitors a year. Management of the museum is short on cash. The president of the museum wants build a new exhibition hall and needs extra money to finance it. The president gives the marketeer director the assignment to set the entrance fee at their optimum revenue level. His exact words were “Show me the money!”. The marketing director of this museum knows about inelasticity of 0,2 of museum admittance prices. He takes out his excel spreadsheet and comes up with the table and chart underneath. To get the highest revenue the museum should set it’s price at 24 euro’s. Attendance will drop by 40.000 to 60.000 a year.

Is it that simple? Just raise your prices until you get the highest revenue. Actually it is not that simple. Price elasticity is determined by several factors.

Frey and Meier wrote in their paper that: ‘Zoos, science museums and natural history museums show the largest price sensitivity (compared to art museums), probably due to stronger competition from other leisure pursuits.’ What thy are saying is that price elasticity depends on substitutes. A museum can set his price as high as it wants. But museum visitors will compare the prices with other leisure activities like going to the cinema or going to an amusement park. If a museum sets a relative higher price than those activities, visitors attendance will decline progressively. And it also works the other way around. A low admittance fee will also raise attendance progressively.

Time is a factor that influences price elasticity. People remember old prices better when the prices are just raised. So raising prices too much will make visitors stay away because of the big difference between the old price and the new price.

Another factor is income: someone with a low income will respond more drastically when a price changes then someone with a high income. Most of the museum visitors have high incomes so a price change will not influence their demand very much. To help low incomes attending a museum most museums differentiate their prices between high and low income (f.e. student passes).

And finally, permanent or temporary price change: a one-day sale will result in a different response than a permanent price decrease of the same magnitude.

I want to end with some concluding remarks. Price elasticity is an important factor in setting the right price. If a museum management is very keen on raising revenues they should raise their entrance fees every year a bit. The demand for museums is very inelastic and most of the museum consumers have high incomes. But while setting the price they should consider substitutes and offer a good solution to low incomes.

Other Sources:
- wikipedia price elasticity of demand
- about.com price elasticity of demand
- Net MBA business knowledge center

In my previous post I have mentioned eight factors to consider when setting an admission price. I just want to explore the first factor that is the factor ‘art matters’. What does ‘art matters’ mean? I will present a few cases to show why ‘art matters’ in setting your entrance fee and I will show some nice homemade charts.

The first case I present is the exhibition called ‘King Tut‘. I have visited this exhibition in Chicago. I have visited Egypt two times and you could say I really love that ancient stuff, and my wife loves it even more. So when we were on a holiday trip in Chicago we stumbled upon the Tut exhibition and immediately we wanted to go. The image of the sarcophagus was all over the place. We already imagined seeing the golden case where the young king was laid to rest in. The exhibition was in the Field museum. While moving to cashiers desk we saw the ticket price (I don’t know the admission fee anymore but I can recall that it was huge, I looked up the fee for the Dallas exhibition and it is $37 dollars and $7 dollars for the audio tour). We started to discuss if it would be worth the fee. My wife said this would be a once in a life time experience…and when you are on a holiday those extra dollars doesn’t really matter anymore. So we bought the tickets and we were assigned to the 11.30am group. The excitement was building up. We were anxiously waiting in front of the exhibition door to be let in. The doors went open we went into a dark room where a story was told (the contents of the story did not make any impression). And then we were let loose. My wife and I said to each other that we would skip all the other artefacts and would head on to the big golden sarcophagus first. So we rushed by moving from room to room in a very fast pace. And then we were at the end of exhibition….. and wondered where that big golden case was, the masterpiece. Where was King Tut?

Well we actually missed it. The golden case we were looking for was a golden statuette of about 20cm’s (8inches). It was so small that we just looked over it. They even made a separate room for that small golden statuette but we had something completely different on our minds. You can imagine we really thought we were ripped of big time. Our expectation was not met at all. What is the point I try to make here? The point is that if the exhibition would have met our expectations we thought it was ok to pay the $37 dollars per person. We really love Egyptian artefacts so much, that we would pay that amount to see the big celebrity king Tut.

Another example is the (in)famous ‘Bodies, the exhibition’. This one I did not visit but not because of any ethical reasons. I just thought it was to expensive. I think it was about 20 euro’s when the exhibition was in Amsterdam. While on average visiting a museum in Amsterdam costs about 8 euro’s so there is a premium of 150%.

The last example I want to share is the exhibition ‘rembrandt caravaggio’ in the van Gogh Museum in Amsterdam. The normal entrance fee to the van Gogh is 10 euro’s you had to pay 10 euro’s extra to visit the exhibition. Also a premium of 100% on the normal entrance fee. But you can ask, where those exhibitions a success? I know ‘rembrandt caravaggio’ was and seeing the queues in Chicago I presume King Tut is also a success. For Bodies the exhibition I don’t know if it was a success. It got lots of publicity so maybe it was too.

Was this information all new too you. Maybe not, maybe yes, but wat is probably new are the charts I made here below. You see here attendance in 2007 plotted against the entrance fee for an adult in 2008 for most of the museums in Amsterdam. What you see is that the higher the attendance the higher the admission is. That is a really strange phenomenon. In normal economics you would expect that the higher the price the lower the attendance. But what it actually shows is that the better your offering is ‘art matters’ the higher you can set your price.

Chart explanation: I have made two charts, one with only the small museums and one with all the museums. I made the chart with only the small museums because they are more comparable. There are only a few big museums in Amsterdam and as you can see in the second chart they change the perspective a bit. The green line is the correlation. I can state there is a medium correlation between attendance and admission price.

In the Netherlands and Amsterdam we have two collective museum cards. The first is the so called ‘museumkaart’ or museumcard. This card gives you free entrance, for a year, to about 400 museums in the netherlands after you paid a subscription fee of about 35 euros. This card is handed out by the museumvereniging (The Netherlands Museums Association). It is bought by people who live in the Netherlands. The other card the Iamsterdam card gives you about 1/2/3 days entrance to public transport and museums in amsterdam for 33/43/53 euros. This card is handed out by the tourist board of Amsterdam. This card is mainly bought by tourists.

The advantages for the user of these cards are clear. You pay a fee and you get access for a certain amount of time. There are no hidden costs and off course you minimize risk. If you think the Rijksmuseum sucks you hop out and move to the van Gogh museum. It sounds really good but on the revenue side of things i am not sure if it is all that good.

To participate in these two cards the museum has to sell their admission at a discount to the card distributors. The museums get paid (at the discounted rate) by the card distributors every time the cards pass the cashier. Selling your admission with a discount will cost revenue. But because of the risk free nature of the cards attendance will grow. So will the rise in attendance offset the the losses by selling at a discount? I think in certain cases it will but in some cases it will not. My hypothesis is that Tourist cards will give you more revenue but collaborative cards you sell to locals will cost you revenue.

Let me explain: local people who buy such a card are far better informed about what a museum has to offer then tourists. In the research I have done at the Tropenmuseum when the visitors were askes how they got the idea to visit an exhibition of the Tropenmuseum, about 40% said the heard it from friends and 35% said the read an article in a newspaper. And a lot of them are returning visitors so they know the museum by past experiences. These sources of information minimize the risk of visiting a museum and being disappointed about it. So when a local pays admission, he/she has less chance to be disillusioned. This being said a local would be more willing to pay full admission because he knows more or less what to expect.

The main sources of information of tourists are travel guides, internet, and the guide that comes with the museum pass. These are less reliable sources of information then friends, local newspapers and past experiences. The risk of getting into an unknown local museum is higher. A card like the Iamsterdamcard offsets that risk.

So if the Amsterdam museums would love to have more revenues on admissions. They should collaborative stop accepting the museumcard ‘museumkaart’ and keep accepting the touristcard ‘Iamsterdam card’.

This post is about setting the optimum price for your Museum. And by optimum I mean what factors a Museum should consider to get the most revenues out of their entrance fees/admissions.

1. Contents/Quality of the exhibitions. Actually what you have on display really matters. The better the content the higher you can set your entrance fee.

2. Price elasticity. What would happen if you increase your entrance fee? Your attendance would probably drop, but the extra revenues of setting a higher price will offset your drop in attendance.

3. The duration of a visit to the museum. The longer you can keep your visitors (voluntarily) in your museum the higher you can set your price.

4. Pricing of competition and substitutes.

5. Communication efforts. The more you advertise, the more free publicity you get, the more people would like to visit your museum.

6. Other costs of visiting your museum. For example if your museum is in the middle of nowhere it will cost people time and extra gaz to go to your place.

7. Scarcity. This exhibition is a once in a life time event!!!

8. Economic developments. For example in times of recession people have less to spend. In times of high inflation you can easily raise your entrance fee in line with that inflation.

I will elaborate on all of the points mentioned above in posts to come. In the meanwhile you can read one my main sources for this post. An excellent paper on ‘the economics of museums’ Bruno S. Frey and Stephan Meier.