United Arts of Central Florida
A Strategy for Growth
By Jeffrey D. Prutsman
January 27, 1998
A Strategy for Growth
By Jeffrey D. Prutsman
January 27, 1998
An overview of arts and culture fundraising in America
A few thoughts about arts and culture attendance
A new direction
What business are we in?
What business should we be in?
Positioning United Arts
A 10-Point Plan to Grow United Arts
About the author
This report assembles and presents background data, observations and ideas that may prove useful in discussions about the future direction of United Arts of Central Florida. We also offer one possible strategy for growth, a specific plan of action to move United Arts into the future.
The current situation facing United Arts, its trustees and principal member organizations can be summarized by the following three observations:
The flatness in year-to-year United Arts fundraising is particularly stunning when one takes into account recent growth in both population and median household income for the Orlando Metropolitan Statistical Area (MSA). The Orlando MSA gained over 155,000 new residents between 1990 and 1995, an increase of 12.7%.
It is probably unreasonable to expect new residents to start supporting local arts and culture immediately upon arrival. On the other hand, the Orlando MSA’s median household income has enjoyed significant increases too, about 18% between 1989 and 1996. The region’s median household income is projected to increase an additional 12% between 1996 and 2001. Clearly, the existing population base has enjoyed a steadily increasing capacity to give during recent years. (Source: Claritas, S&MM Market Statistics annual).
Corporate philanthropy is more problematic. Pure corporate philanthropy tends to be concentrated in headquarters hometowns, and Orlando is home to only one national headquarters of a major corporation: Darden Restaurants. By “pure” philanthropy, we mean corporate giving without any quid pro quo expectation of value to be received in return by the corporation, other than the long-term indirect gains associated with improvements accruing to the community-at-large.
The Orlando MSA’s corporate headquarters challenge aside, attempts to significantly increase local corporate giving along pure philanthropy lines will run counter to current trends. The unmistakable trend in corporate involvement with nonprofit organizations is a shift away from widely dispersed community philanthropy and toward strategic philanthropy and cause-related marketing. Both terms mean essentially the same thing: directing funds toward relationships more closely aligned with corporate and brand identities, target consumer demographics, and marketing and sales objectives.
Poor attendance is a double whammy. In addition to the obvious negative effect of less earned income, reduced attendance hurts fundraising because virtually all of an arts and culture organization’s individual giving comes from the ranks of members and subscribers. As we shall repeat again and again in this report, attendance precedes and drives individual giving for arts and culture organizations.
While the year-to-year trend in United Arts fundraising has been more or less flat, raising $5 million annually is still a significant achievement. We may intuitively sense unfulfilled potential, but how do we know that United Arts and its principal member organizations could be raising more?
What, in fact, are the national benchmarks for fundraising success, as a function of market area population and household income? What should a highly successful United Arts annual campaign look like?
$7 million? $10 million? $15 million?
The legendary investor Warren Buffet has said, “Sometimes it’s not how hard you row the boat; it’s how fast the stream is moving.” It makes no sense to plan elaborate new fundraising initiatives if the current results already stack up favorably against national norms. Accordingly, it would seem that the first logical step in assessing United Arts’ fundraising potential would be to dig up a few facts.
According to Giving USA 1997, published by the American Association of Fundraising Counsel, American individuals, foundations and corporations donated $150 billion to charitable organizations last year. Arts and cultural organizations received 7.2% of this total, or $10.92 billion.
Corporations donated $8.5 billion to charitable organizations last year, allocating roughly 10% of this total to arts and culture. Corporate giving is highly cyclical, following swings in the general economy, but tends to hover around 1% of pretax income. About 60% of measured corporate giving is in cash; the balance is product inventory and other in-kind services.
The trend toward cause-related marketing and strategic philanthropy has produced a long-term decline in the “bundling” of corporate donations to federated campaigns like United Way and United Arts, from more than 20% of all donations in 1978 to less than 13% in 1987.
While the media write stories about increased private giving in response to cutbacks in federal spending, the truth is that private giving has historically ranged within one tenth of a percentage point of two% of Gross Domestic Product. Annual fluctuations are primarily influenced by changes in personal income and the stock market.
About 2% of all households donate to arts and cultural organizations, on a national average basis, and donations by individuals to non-religious causes average about 1.1% of the combined total household income of such donor households. Giving tends to increase, as a percentage of household income, with individual household wealth.
Individuals who volunteer their time to nonprofit organizations are almost four times as likely as non-volunteers to make charitable contributions, and the average charitable contributions of volunteers are almost twice those of non-volunteers.
We can use national averages to estimate Central Florida’s arts and culture fundraising potential. When we speak of Central Florida in this report, we are referring to the Orlando Metropolitan Statistical Area (MSA) which includes four counties: Orange, Seminole, Lake and Osceola.
At the outset, let us dispel a popular myth. Most of the arguments about Orlando’s relative weakness as a market for arts and culture are simply not supported by the demographic facts. The Orlando MSA market’s median age, age distribution, and percentage of college-educated residents all match corresponding national measures so closely as to be remarkable. The gap in median household income narrows every year, and its significance is reduced by Central Florida’s comparatively low cost of living.
Donnelley Marketing and R. L. Polk Company maintain an active database of every known household in the United States; at January 1, 1997, this data file indicated 548,100 households within the Orlando MSA.
The average household income of cultural and arts event attenders is about 1.28 times that of the general population (Source: SRDS Lifestyle Analyst). Orlando MSA estimated average household disposable income at January 1, 1997 was $42,845, so:
$42,845 × 1.28 = $54,842 expected 1997 average household disposable income for Orlando cultural and arts event attenders.
To estimate the potential for annual giving to arts and culture organizations by individuals within the Orlando MSA:
We first multiply 548,100 households × 2% arts and culture donor households = 10,962 expected arts and culture donor households.
10,962 × $54,842 cultural and arts event attender average household income × 1.1% = $6.61 million.
It is important to remember that the $6.61 million figure above represents an expected ceiling potential, i.e., the combined total amount that Orlando MSA arts and culture organizations would have raised from individuals last year if their fundraising campaigns managed to equal national averages for individual giving as a percentage of household income.
One reason the Orlando MSA might not be able to attain U.S. arts and culture fundraising averages is, oddly enough, Orlando’s high population growth rate. Almost everyone here is from someplace else, and because many of Orlando’s affluent residents are relatively recent arrivals, they have not developed long-term personal relationships with and commitments to Central Florida arts and culture organizations. A 1996 survey of a Festival of Orchestras concert audience, for example, indicated that the average attender had lived in Central Florida for over 20 years. This suggests that new arrivals are not embracing local arts and culture in large numbers.
The ceiling potential for corporate giving within the Orlando MSA is impossible to estimate, but it is possible to establish a benchmark. If we assume that the trend toward cause-related marketing will continue, then it is reasonable to assume that corporations will allocate their philanthropic dollars roughly in accordance with geographic consumer spending patterns.
The Orlando MSA represents about 0.5% of U.S. effective buying income. Corporations gave about $850 million to arts and culture nationally last year.
$850 million × 0.5% = $4.25 million.
The cash potential would be $4.25 million × 60% = $2.55 million.
The above figure, like the individual giving figure, is probably high. Even taking into account the trend toward cause-related marketing, it is likely that corporations will continue to allocate money on a disproportionate basis to headquarters cities and the top 10 major metro markets. But even within these contexts, doubling the level of current United Arts corporate cash philanthropy would seem like a reasonable goal.
It might be possible to drive corporate funding of Central Florida arts and culture to new levels if local arts and culture organizations substantially improve their ability to seek out and establish corporate partnerships that conform more to the sponsorship model. Sponsorship offers the potential to attract money out of marketing and promotion budgets. Measured corporate spending on sponsorship of the arts in North America is projected to hit $413 million during 1998 (Source: IEG Sponsorship Report, December 22, 1997).
In summary then, absent significant changes in tax policy or the economy, a Central Florida arts and culture community firing on all cylinders would have a ceiling fundraising potential of about $6.61 million + $2.55 million = $9.16 million, plus funds raised from government and public education sources. It is probably reasonable to assume that various government and school board entities will continue to contribute a combined total of at least $2.2 million annually to United Arts, for a revised total arts and culture fundraising potential of around $11 million.
Naturally, United Arts and its principal member organizations will not capture 100% of Central Florida’s arts and culture giving in any case because other organizations in the marketplace are making appeals as well. WMFE is probably the most significant of these. Yet it would seem, even if we trim the above estimate by 25 percent, that United Arts could still reasonably aim for an $8.5 million campaign, and this is based upon 1997 Central Florida population and household income levels!
In an $8.5 million campaign with $2.2 million in government and school board giving, and $2.5 million in corporate giving, the goal for individual giving would be $3.8 million.
A $3.8 million individual giving goal is at least double the current level of individual giving, perhaps more. And if we accept historical evidence that individual giving across the population-at-large is a relatively unchanging percentage of household income, then the only realistic way to hit the higher goal is to substantially increase the number of donors.
Which presents an interesting problem.
United Arts is not United Way.
The decision to give to an arts and culture organization carries far less perceived urgency for the general population than giving to help people in need. Or even giving to one’s college or university alma mater, for that matter. As a general rule, individual donors won’t give to an arts and culture organization unless they feel a direct personal connection, which helps to explain why most individual giving to arts and culture organizations comes from the ranks of subscribers and members.
In other words, individual giving is a byproduct of subscriber audiences and other direct participants (in the case of the performing arts) and members and other direct participants (in the case of the art museum and the science center). Attempting to attract donations for arts and culture from the general population simply will not work.
A federated fundraising campaign for arts and culture begins with a fundamental structural flaw: There is no direct personal connection between donors and the federated campaign.
Personal relationships exist with individual arts and culture organizations. Workplace giving efforts are wonderful for creating community awareness, and this program probably produces a nice positive cash flow (although we’d be willing to bet that a majority of workplace giving contributions are attributable to arts and culture attenders, staffs, and other participants who simply use the workplace giving program as the channel for contributions they would have made anyway).
The kinds of gains we’re talking about will not be achieved through expanded workplace giving. Nor will such gains be achieved by sending thousands of direct mail pieces to “demographically suitable” households. Certainly there will be response to, and funds raised by, such mailings. The mailings may even attract an anomalous very large donation or two. But we would be very surprised if such mailings even cover their costs, because the principal factor in successful direct response is behavior and not demographic profile.
It follows that the only way to substantially increase individual giving to arts and culture organizations is to substantially increase the numbers of current arts and culture members, audiences and other direct participants.
Attendance precedes involvement. And involvement precedes donation.
High attendance is essential to fundraising, because the vast majority of individuals must be regular attenders (e.g., members or season subscribers) before they will become donors. And increases in paid attendance increase earned income and reduce pressure on contributed income. These ideas are not rocket science. On the other hand …
There is no delicate way to say this: Many of the principal organizations have lousy paid attendance, averaging 40-50% of seat inventory. Of the few organizations with relatively high unit ticket sales, the sales are more often than not being achieved through ticket prices so low that the resulting earned income is only 30-35% of total budget.
The marketplace is not the problem. Nor, in most cases, is the product.
The problem, put simply, is marketing. Insufficient marketing expenditure and ineffective use of what marketing expenditure there is. Marketing is about communicating information to consumers. It takes money to get into consumers’ heads and it takes money to stay there. Free media coverage is certainly very nice, but free media coverage usually doesn’t sell tickets in large numbers (and it is also highly unpredictable). An average product with a big marketing budget will go farther than a great product with little or no marketing budget. Every time.
The Festival of Orchestras concert series, for example, gets relatively poor media coverage for a variety of reasons, but invests a healthy 15% of budget in marketing. The results are that season subscriptions and paid attendance have increased every year during the last three seasons, even though there have been effective price increases each year. The Festival of Orchestras has higher paid attendance on a per performance basis than Broadway Orlando; in excess of 90%, and is among the most expensive performing arts tickets in town.
As we will show later in this report, an increasing returns relationship exists, up to a point for paid admission arts and culture organizations, between the level of marketing investment and net income (surplus). And most local arts and culture organizations are seriously under-invested in marketing.
While we’re on the subject of attendance, we should say a cautionary word or two about market research in general, and the Spring 1994 “Report to the Study Commission on Symphonic Music” in particular. This study, produced by the Canadian firm of Genovese Vanderhoof & Associates, was designed to explore the demand for symphonic music within the Orlando MSA and to provide proposals for filling the void left by the shutdown of the old Florida Symphony Orchestra (FSO).
The report essentially concluded that the Central Florida community would not support any kind of symphonic music with paid attendance, but that the community should fund some mix of classical music anyway. The report’s tone is well conveyed by the following two excerpts:
A number of orchestras have performed at the Bob Carr Centre for the Performing Arts since the April 1993 closure of the FSO. Their dismal attendance figures raise serious questions as to the market’s interest level. Even allowing for poor advertising, little media coverage, and other factors, the sales results are alarming. (Page 25)
The historically poor sales of Masterworks concerts by the FSO and the lackluster response to recent excursions in the marketplace by such orchestras as the Minnesota Orchestra or the Tampa-based Florida Orchestra would seem evidence enough of the community’s apathy to classical music. (Page 28)
Anyone who suffers preconceived notions about Central Florida’s ability to support the classical performing arts, based upon this report, should know this: About 19 months after the report was published, OCCA, Inc. presented the Moscow Philharmonic — not exactly a household name, and not nearly as well known as the Minnesota Orchestra — in the first-ever concert of the Festival of Orchestras series. About 400 people were turned away from the box office of this sold-out performance, and over the last three years, this series has averaged over 90% paid attendance.
Not exactly what the report predicted.
But of course, predicting the success of future plans and programs is full of traps. Until faced with actually having to make the decision to attend an exhibition or to buy a ticket to a performance, consumers are making advance assumptions about a perfectly defined world. Those judgments most often change over time and are affected by price, available competition, and the economy.
Statistics don’t lie, but they don’t understand consumers either. Research is really about history, not about the future. The Genovese Vanderhoof Report provided interesting history, but many of its basic assumptions were flawed, perhaps the greatest of which was a dramatic discounting of the importance of good marketing and sufficient marketing expenditure.
Central Florida will support arts and culture.
Insanity has been defined as repeating the same behavior and expecting a different result. Assuming that the most desirable course of action for United Arts is to stay in business and pursue a course of substantial new growth, then the possible courses of action are fairly limited:
The work harder approach, absent fundamental change in the way of doing things or the nature of the business, is a non-starter. People, presumably, are already working as hard as they can and, if they are not, a momentary burst of energy and enthusiasm is likely to dissolve back into the previous “comfort zone” after the call to try harder ages a bit.
Increasing current trustee commitments could at least offset the effects of inflation, and there are encouraging indications in this area. On the other hand, recent trends in trustee attrition are cause for concern.
Spending more on staffing, direct mail, etc. will make a difference; but absent changes in the fundamental nature of what United Arts is and does, this is probably a diminishing returns strategy at best.
Changing perceptions is one of the hardest and most expensive propositions in marketing. Any public relations expert will tell you that it is extremely difficult, when not completely impossible, to change people’s minds about the status quo.
What United Arts really needs is a paradigm shift-a fundamental change in the organization’s identity and core purpose. And paradigm shifts don’t happen simply by injecting new enthusiasm or trying to change perceptions about the status quo. For United Arts to achieve dramatically different results, it must completely redefine its business to consumers and other stakeholders.
For starters, United Arts must reposition itself in the minds of consumers and stakeholders as something other than a fundraising entity.
The first step is to ask a simple question: What business are we in?
Or perhaps more accurately, what business does the community think we are in? Does an average Central Florida resident know instantly what United Arts does? Do they see the organization’s business as fundraising?
Or perhaps, do many in the population just vaguely assume, based upon the organization’s name, that United Arts is some sort of government lobbying coalition for various arts groups?
Are most people in Central Florida even aware of United Arts?
We believe that United Arts does not own a clearly defined position in the minds of consumers. To illustrate what we mean: Most people probably couldn’t list three Central Florida organizations that receive United Way funding, but they know instantly that United Way means “helping people in need.” United Way is not in the fundraising business; United Way is in the “helping people in need” business. United Arts enjoys no such brand clarity.
Quite frankly, it is even possible that when the average Central Florida resident hears “United Arts,” he or she thinks “United Way.”
Good for them.
Not so good for United Arts.
United Arts needs to define what its real business is before taking any further steps. We would submit that while fundraising is what United Arts does, fundraising is not the business that United Arts is in … or should be in. In other words, fundraising is not the end-product that United Arts provides to the community.
If not fundraising, then what?
The business of arts and culture organizations is the stewardship and transmission of culture. Arts and culture organizations drive education, economic growth and development, and maintain benchmark standards by which to measure the quality of contemporary creative expression.
In a single phrase, these organizations are in the quality of life business.
We believe United Arts’ primary goal should be to redefine the business of nonprofit arts organizations in the eyes of the community.
If United Arts and the organizations it serves are to truly engineer a paradigm shift in fundraising, then influential individuals, corporate citizens and community leaders must become passionate about — and come to truly believe in — the indispensable nature of great arts and culture. Local arts and culture organizations must come to be viewed as vital growth and development drivers in the Central Florida community. Annual fundraising campaigns must be replaced by much closer ties between the business community and the arts, ties that are based more on reciprocal interests than on unilateral requests for cash.
United Arts needs to be in the improving quality of life business.
The current United Arts mission statement speaks about enhancing “the quality of cultural and educational experiences …” This is too limiting.
United Arts must be positioned in the community’s perception as vital to Central Florida’s quality of life. Not interested — vital. Not the quality of cultural and educational experiences — the quality of life.
The case can be made.
Substantial research has demonstrated that early childhood exposure to the arts increases ability in core academic subjects, that vibrant community arts and culture have a multiplier effect on economic activity, and that companies relocating high-value jobs seek out communities with a critical mass of educational and cultural resources.
But current efforts are not making these points with impact. The dry text with tables and pie charts in the nice white United Arts printed brochure that almost nobody really reads doesn’t count. Think more along the lines of the rough-cut black & white TV ads against drunk driving and drug abuse and you’ll get a good idea of what we mean by impact.
United Arts needs to become the voice of Central Florida arts and culture. It needs to spend more time educating the community about the absolutely indispensable value of arts and culture, and less time asking for money.
If, for example, United Arts communicates with consumers ten times, three or fewer of the total messages should have anything to do with asking for money. While the reason for this approach should be obvious, here’s why:
Again, successful fundraising is only a byproduct of prior relationships characterized by high involvement and real value.
This does not mean that United Arts should stop its fundraising activities. Quite the contrary. We mean only to reinforce the point that asking before educating and involving seems like a tremendously flawed approach.
A clear brand identity must be created for the organization that says United Arts means “improving quality of life.” Then that identity must be pounded into the public consciousness over the course of at least a year through an extensive media campaign. We’re talking here about an order of magnitude increase over anything United Arts has previously done. Yes, it might be expensive. Anything worthwhile usually is. But the cost of this campaign should be viewed as a long-term investment in Central Florida’s arts and culture … and economic development. It should be possible to persuade the major local media to help out with a subsidy/discount, if not to provide much of the airtime/space as a public service. The Orlando Sentinel’s cultural advertising rate is a big help, and out of three major local network television channels, it should be possible to persuade one to get on board and help out. Also, Time Warner Cable has a cultural discount program very similar to the Sentinel’s program.
Any viable enterprise, commercial or nonprofit, needs to create value. This means a focus on numerator activities: those activities designed to generate revenue rather than cut costs. Very few successful organizations have ever saved their way to prosperity. A new United Arts should focus on programs designed to sell more tickets to principal member performances, events and exhibitions; increase average ticket prices; improve community perceptions about the absolute necessity of great arts and culture; and help principal organization boards hone their governance and fundraising skills. Each of these activities is a prerequisite to improved fundraising. All of these activities will require investment.
On the other hand, United Arts should zealously practice the principal of subsidiarity. In other words, it should only undertake those activities on behalf of arts and culture organizations that such organizations are unable to efficiently undertake on their own.
No one should suffer the illusion that marketing and fundraising activities undertaken by United Arts will allow principal member organizations to cut their staffs in these areas. This would be shortsighted, because each donor’s personal connection exists with a specific arts group and not with “arts and culture” in general. Also, United Arts cannot and should not get into the business of executing the minutiae of marketing and development campaigns for each and every organization.
Frankly, United Arts and its principals are all significantly under-invested in audience development and fundraising. More staff and more money are needed in these areas; not less. Using the occasion as an excuse to cut costs would be shortsighted, defeatist, and probably accelerate a negative trend.
A good analogy is the introduction of personal computers into the workplace. During the last decade, businesses purchased thousands of personal computers in part based on an assumption that fewer staff would be required. Usually the opposite occurred, with additional staff being brought on board to handle training, network administration, and programming functions occasioned by the new technology. Eventually, though, the technology produced productivity gains that far outweighed the increased investment in equipment and people.
In the remaining pages, we describe a 10-point plan for a new United Arts. Measurable objectives, detailed staffing recommendations, budgets and so on, are beyond the scope of this summary report; however, the major goals of the plan are listed below:
The new identity message needs to focus on arts and culture’s central place in building Central Florida’s future. An example (created, we must stress, on the spur of the moment and only as an example of general tone and direction) is something along the lines of, “A foundation of Central Florida’s Future.”
Once the new brand identity is crafted, United Arts should launch a media awareness campaign in The Orlando Sentinel and on television. The ads should have a consistent “look-and-feel,” be produced in black & white for visual impact, and pound home the positioning message at the end of the ad. The United Arts logo might appear at the corner of the black & white TV ads during the last few seconds, in color for striking contrast. A series of at least three different story lines should be developed, all with the objective of showing that there is more to arts and culture than creative expression. The following story line demonstrates one possible message:
A mother watches her four to six year-old child playing with a computer, a puzzle, or some other intellectual exercise. As the child plays, the mother tells the audience about an arts education program that her child has participated in, and she marvels at how the child’s reading and math performance improved following exposure to the program. The mother pauses, and the camera pans from the child directly into her eyes. She wonders aloud about what amazing future achievements her child might be capable of if her exposure to the arts continues through the remainder of elementary school.
Another storyline might deal with business executives relishing their decision to relocate a new manufacturing facility to Central Florida, mentioning their pride at the number of new jobs created, and talking about how the region’s vibrant arts and culture assets were one of the “tipping points” in their decision.
It is important that advertising messages be upbeat and stress positive aspects of arts and culture, and stay away from the potential for doom and gloom of failed fundraising efforts. Negatives are not effective, as the following excerpt from Fundraising: hands-on tactics for nonprofit groups, by L. Peter Edles, explains:
… by far the greatest portion of present organizational fundraising campaigns operate on a wholly different motivational level. Campaigns to fund an environmental program, a religious, cultural, or artistic center … are examples of philanthropic efforts to improve an already decent quality of life …
… People want to be part of a winning organization; they are drawn to success. Tell volunteers and potential donors that your organization is a pitiful case, about to fall apart, and they will stay around just long enough to say how sorry they are … and good-bye. Another group down the block is doing just fine and needs their support.
One final observation on the subject of marketing communications and achieving awareness. Brochures replete with statistics are great, and formal impact studies are nice to have, but they are at best incidental tools. Such materials and research won’t, by themselves, change anybody’s mind. Or even get read, in most cases.
People are persuaded by stories that stir their emotions. And this is just as true for highly technical, big dollar business decisions as it is for a person’s decision to write a $25 contribution check for their favorite arts and culture organization. The statistics in the brochure, the formal impact study report … the only true value of these materials is to serve as rational support evidence for business executives who decide to invest in the arts and culture, after they have made the decision with their heart. (According to Giving USA, in fact, one of the principal predictors of corporate giving is the amount of time that a corporation’s philanthropy decision-makers spend in the company of other business executives who believe in philanthropy.)
We must move people with vivid stories and images of a better future.
Marketing is an investment, not a discretionary expense to be used as the balancing account when trimming the annual budget. The following table clearly demonstrates the power of the marketing budget. The only variables in the table are “Marketing Investment Per Seat,” and an assumption that more powerful marketing supports ticket price increases and drives increased attendance.
|Marketing Leverage Example||Scenario 1||Scenario 2||Scenario 3|
|Average revenue per ticket||$28.00||$28.00||$32.00|
|Theater seat capacity||2,355||2,355||2,355|
|Number of performances||12||12||12|
|Total season seat inventory||28,260||28,260||28,260|
|Marketing investment per seat||$6.00||$7.50||$10.00|
|Average seats sold per performance||1,200||1,327||2,000|
|Theater % paid||51||56||85|
|Revenue dollars and percent|
|Premium seats and other||151,275||10.2||151,275||9.9||151,275||8.2|
|Guild (fundraising events)||60,000||4.0||60,000||3.9||60,000||3.2|
|Expense dollars and percent|
|Artist fees and production costs||1,044,569||70.3||$1,044,569||68.3||$1,044,569||56.4|
|Marketing and promotion||169,560||11.4||211,950||13.9||282,600||15.3|
It is worth noting that the budgets above very much reflect a range of Orlando real-world examples with which we are familiar; the examples are not fantasy. And too, it should be said that just spending more is not enough. Obviously, the more successful column in the table presumes effective, smart marketing, which leads to our next recommendation.
But these staffs could use help on a fairly regular basis in direct marketing dynamics, product positioning strategy, direct mail design from a sales — as opposed to an aesthetic — standpoint, axioms of consumer behavior, forecasting and media planning, and so on.
Accordingly, a central part of this recommendation is that United Arts create a staff sponsorship development director position. This person would focus on creating, packaging and selling new sponsorship opportunities. Also, a staff sponsorship manager / coordinator position would be created to administer and execute sponsorship programs for principals, and to provide the capability to offer corporate sponsors “turn-key” sponsorship opportunities. Sponsorship is the fastest growing form of marketing, representing $6.8 billion of expenditure in North America last year, and it represents a huge opportunity for United Arts if properly pursued.
Someone still needs to ask for the gifts.
Why? Because all the fundraising direct mail in the world won’t bring in more than 10–20% of the total potential contributions in any campaign.
While averages are useful in estimating total giving potential, it is axiomatic that 10–20% of the contributors give 80–90% of the total money raised in the typical private fundraising campaign. This is precisely why the cultivation of major donors is crucial to the success of any campaign.
The most effective mechanism for generating individual gifts across all socioeconomic levels is being asked to give, especially by someone the donor knows and trusts.
“Silver bullet” fantasies about suave and highly persuasive staff development directors to the contrary notwithstanding, big-dollar fundraising for arts and culture organizations is the job of an organization’s directors.
Wealthy philanthropists are statistical exceptions to the inescapable reality that peer pressure is the central force at work in most arts and culture giving.
Stated reasons for giving are not reliable. There is an old saying in sales that a person will usually give two reasons for not buying something: the one that sounds good … and the real one. And so it seems with charitable giving.
When questioned about their reasons for giving, donors usually mention the recipient organization’s good works and the good feelings associated with making the gift. But research conducted by Harvard University sociologist Francie Ostrower suggests that the most powerful reason for giving among the very affluent is reinforcement of social status. Peer pressure conformance, in almost plain English (American Demographics, June 1996).
So, after their cash contribution, the single most valuable service the trustees can provide to principal organizations is to network among their friends and to canvas their top managements for dynamic individuals who have the time, energy and motivation to serve as active directors on arts and culture boards.
It is not a sin to prefer the Orlando Magic over Mahler, or to prefer hunting and fishing to opera. On the other hand, every chief executive officer of every United Arts corporate trustee knows somebody within his or her organization who is dynamic, talented, and interested in arts and culture. And that person, or those people, need to be pointed in the direction of the nearest arts and culture organization board.
After recruiting and fleshing out those boards that need their membership supplemented, United Arts should invest in a regular program of continuing education in the areas of board governance and fundraising. The idea here would be to bring in a nationally recognized consultant in board governance and fundraising for what would be, in essence, an annual/semi-annual, etc. seminar and retreat. It is not likely that more than one or two principal organizations would ever make this sort of expenditure on their own, and United Arts can achieve cost savings on a per principal basis by bringing all the principal boards together at the same time for the training. This approach would also provide a great chance for sharing ideas.
This (trying to do everything on a shoestring, with volunteers, through used donated equipment, etc.,) sounds great in theory but has severe disadvantages in practice that can best be summed up as you get what you pay for. It’s hard to wage a first-rate battle with second-rate materials. Used equipment breaks down more often than new equipment. Donated office space is frequently in a location where no one wants to be, not just for aesthetic reasons, but for the practical reason that it’s hard to do business there. Pro bono services such as legal counsel, accounting, design, and advertising can be incredibly valuable but not if paying customers are always being put ahead of your needs …
If you were about to start a new business, let’s say a small innovative software company … would you recruit volunteers instead of the most skilled and talented people available? Would you pay low salaries instead of compensation that could create an atmosphere of teamwork among the employees, who will feel invested in the venture for the long term? … Would you forgo marketing and advertising and instead hope the public became aware of your work on its own? This is … a mentality that permeates much of the nonprofit community and has created a self-defeating atmosphere right from the start.
An organization is only as good as the people who run it. Whether it’s the Walt Disney Company or Chrysler, City Year or the Children’s Defense Fund, successful organizations require committed, stable, and secure leadership. Competitive salaries are only one necessary ingredient …
These are not perspectives heard often in the nonprofit world. Most nonprofits find it safer to be seen and not heard. Whether it is fear of retribution from cautious foundations or public opprobrium, too few nonprofits are willing to challenge the conventional wisdom about salaries and expenditures … the nonprofit community itself must take responsibility for educating the contributing public. Unless we assume the burden of bringing a more sophisticated perspective to bear, then the nonprofit community will remain handcuffed to nineteenth-century notions that restrict their ability to accomplish anything as worthwhile as they otherwise could.
A for-profit company budgets a level of expenditure sufficient to drive the future growth it plans to achieve. Simply basing the budget on last year’s expenditures and “hoping for the best” would probably not be considered a sound growth strategy. Why should nonprofits be any different?
It would be statistically improbable for United Arts to achieve results even comparable to the national averages for fundraising when the organization’s investment in such activity significantly trails the national averages. And frankly, one would expect that the 100 largest charitable organizations, for example, would likely enjoy substantial administrative and operating economies of scale when compared to United Arts, suggesting that it might not be unreasonable for United Arts to require a higher percentage of budget to achieve comparable results.
Although detailed budgets are beyond the scope of this report; it is not too difficult to come up with a broad methodology for establishing a level of required expenditure. If the national average administrative and fundraising costs for a cross-section of charitable organizations with similar order of magnitude budgets total, for example, 15% of annual campaign total, then a reasonable person might budget 15% of the United Arts campaign goal.
If, for example, the goal is $8 million, then United Arts would budget $1.2 million for administrative, marketing and fundraising costs. Now, obviously, the $8 million goal is a near-term stretch, but it would not be unreasonable to budget for $7 million. This would, under our example, result in an administrative, marketing and fundraising budget of $1.05 million.
Every recommendation made in this report, including United Arts’ existing overhead and fundraising costs, could easily be covered within the confines of a $1.05 million annual budget.
Over 88% of all available dollars raised by United Arts last year will go directly to the funded organizations … This compares to the national average of 78% for the 100 largest charitable organizations in the United States. Administrative and fundraising costs in the most recent fiscal year were held to less than nine% and write-offs for uncollected pledges were a little over one percent. Both of these figures are well below the national averages …
While it may at once seem contrary to common sense, we respectfully submit that an organization with administrative and fundraising costs and write-offs for uncollected pledges well below the national averages is not necessarily a good thing. An uncollected pledge rate that is well below national averages could mean that overall fundraising efforts are lacking in aggressiveness; that the campaign is picking the “low-hanging fruit” but not closing enough of the people on the fence.
A common direct sales statistic illustrates our point. One of the most closely tracked statistics in direct sales is the rescission rate, the percentage of customers who cancel their contract during the legally allowed time period to do so after the sale. Too high a rescission rate usually means too much high-pressure selling, but too low a rate usually means the company is just taking orders from prospects who pretty much planned to buy the product anyway, and not selling enough of the tougher prospects who actually require some persuasion.
As for administrative and fundraising costs, we have similar questions. Why is United Arts so far below the national averages? Is it great management or under-investment in crucial activities?
Again, Bill Shore from Revolution of the Heart, this time addressing the commonly held myth that the best nonprofits are those with the lowest administrative expenses and the highest percentage of expenses going directly to program support:
I would argue that the best nonprofits are those that are successful in accomplishing their mission. Impact and outcome should be the measuring sticks by which nonprofits are judged. An organization can have administrative expenses lower than all the other organizations in its field, but if it’s not accomplishing much, then what good is it?
I’m often asked by donors whether a portion of their contribution will be used to cover administrative costs. I dutifully explain … but what I want to say is: “You better hope so. Otherwise your check will just sit in a drawer and there won’t be anyone to take it to the bank and deposit it. If you call to ask about it, there won’t be anyone to answer the phone, either!”
Administrative functions are crucial to running an organization in the most professional manner possible. Dollars that go toward paying postage, salaries, or staff benefits don’t give a contributor the same warm feeling of satisfaction and accomplishment that buying a child a meal or a toy or building a classroom do. But costs such as these may be what enable an organization to operate, grow, and achieve its goals.
Look at it this way: Have you ever decided not to buy a car because you thought too much of its sticker price would go toward paying executive salaries in Detroit or toward the cost of running the dealership? The truth is, you don’t know what it costs to run the dealership or what it should cost. The judgment you are best qualified to make is whether the dealer’s product meets your needs.
Obviously nonprofits should be as frugal and efficient as possible, but the issue should not be what percentage of funds go to fundraising or administrative overhead costs. The issue should be whether the organization is fulfilling its mission as efficiently and effectively as possible, and whether administrative expenditures further that mission or not.
We believe United Arts can take Central Florida arts and culture to new levels of community awareness, paid attendance at principal organization performances and events, and fundraising success. As with many of life’s endeavors, it will take sound attention to fundamentals and serious commitment by the various stakeholders in the process.
The Orlando metro market will pass two million residents in a few short years. At that time, it will resemble in size the city of Atlanta as we know it today.
A thriving United Arts would be a shining centerpiece of that future.
Jeff Prutsman conducted extensive research on performing arts market demand between 1995 to 2000, as part of Signal Strategy Group’s ArtStrategy performing arts marketing practice. ArtStrategy directed all marketing for two Central Florida performing arts organizations during this time, the Festival of Orchestras and the Bach Festival of Winter Park. This work included marketing the most successful live masterworks event in Central Florida history: 5,500 paid attendance for two Festival of Orchestras performances of Beethoven’s Ninth Symphony by the Sydney Symphony Orchestra under Maestro Edo de Waart, featuring a combined choir of 300 voices from the UCF University Chorus and Stetson University Choral Union. During the ArtStrategy marketing tenure, the Festival of Orchestras maintained by far the highest percentage of available seat inventory sold (in excess of 90%) of any performing arts group using Orlando’s Bob Carr Performing Arts Centre. ArtStrategy also completed special projects for United Arts of Central Florida, the Orlando Philharmonic Orchestra, Orlando Opera, and the former Central Florida Civic Theatre. Mr. Prutsman is a former magazine publisher (Orlando® and Sunshine Artist™ magazines) and holds a BSBA degree from the University of Florida’s Warrington College of Business.
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©1998 Jeffrey D. Prutsman. All rights reserved.