This article was written in March 2020, and reflects the information available at the time.
Affiliation can be an essential tool in overcoming the threat from COVID-19
“Can’t we just skip ahead to the time when this is all fixed?”
This sentiment, expressed recently by a theatre Executive Director about the interruption caused to her business by COVID-19, is perhaps as widespread as the Pandemic itself.
For now, cultural organisations are, rightly and by necessity, focused on the short-term. Action is required, in haste, with imperfect information in the face of a substantial negative tilting of the balance sheet and many unknowns. Some will be able to find opportunities to engage with their communities in new ways – for many, it is initially a fight to survive.
In the UK and Europe at the time of writing, the Coronavirus Pandemic is beginning its exponential growth phase – this is also the period of greatest uncertainty, as well as the greatest consumer alarm and caution.
We cannot know how long this Pandemic will last in the affected countries, or whether the current shutdown of cultural organisations will be short or long lasting – so it is right to prepare for both eventualities.
Widely shared modelling from Imperial College London suggests it could be prudent to forecast that many venues will be closed for the whole of the first quarter of 2020/21. As of 16th March 2020, Deutsche Bank is forecasting a recession in Europe in Q2, followed by a substantial uptick as restrictions on socialising are lifted – after the bust, there may yet be a boom.
The lost quarter
Organisations should be at pains to resist taking big decisions with lasting impacts at this time – though this is of course easier said than done. If early indications are correct then we may be looking at a lost quarter, perhaps two. In which case, the time for ‘skipping ahead’ may come sooner than expected.
In the coming days we will share advice for the next phase – preparing to reboot your organisation as you begin the challenge of generating earned income again. For now, it is worth quickly recapping the best advice for handling the immediate emergency. We add further detail, suggestions and context gleaned from the Baker Richards team, as well as our global client network.
Here are 7 key things to think about right now:
Many organisations are inviting customers to donate the face value of their ticket to the organisation, or to a dedicated fund, rather than request a refund. Some are reporting success with ‘pay it forward’ messaging – donors may be more confident to give if it is understood that when you reopen your doors, someone will be able to make use of the donated ticket value. Consider also offering a partial donation/partial refund option. Ticketing providers have generally adapted their systems or issued guidance to make a switch to donation easier.
Charitable organisations in the UK should ensure they follow up to request a Gift Aid declaration from all eligible donors. This will allow your organisation to claim back an additional 25p in the pound for each eligible donation and can be back-dated four years – so if a customer has a donation history, be sure to ask for a retrospective declaration. This is also a good time to review the last four years of customer donations to see if you can obtain retrospective declarations from other customers – but be alert to GDPR, and the need to first gather fundraising consent.
If you are planning to encourage small donations of less than £30 through cash or contactless card donations (e.g. through collecting tins in community locations) – be mindful of the tax year and act fast! In each tax year each organisation / building can claim up to £8,000 in Gift Aid for these small donations, without needing written declarations. Make the most of your allowance before it resets on 6th April 2020.
We will have more to say on this very soon.
For now, try to resist the urge to mail your whole database with appeals for help, potentially scooping up cold contacts who have no active relationship with you – you may provoke unsubscribes from contacts who could be useful to you in the coming weeks, if properly warmed-up first. Targeted messaging, based on effective segmentation, has rarely been more important.
There has been an outpouring of support and affection for visitor attractions, arts, culture and heritage organisations, which has been heart-warming. Some people, however, stand ready to support your organisation only so long as they are rewarded when you return to good times. Encourage these customers to buy gift vouchers (and make sure you set an expiry date).
You may also want to consider making a “refund to voucher” your default refund approach – customers may be unnerved by the idea of their ticket value being held in credit on your system but could be more comfortable receiving an electronic or physical voucher.
Customers are also more likely to spend a voucher, bringing them back to your venue when you reopen, generating valuable secondary spend.
A primary objective of organisations at this time should be to retain and grow the number of people affiliated to your cause – members, supporters, champions, even volunteers. Along with unaffiliated high frequency/volume/spending customers, these will be the people you turn to first when you’re ready to reopen the doors.
Customers who donate the value of a ticket are accepting a loss – and as consumers we hate to lose out, so the donation is a significant gesture. We recommend that organisations consider rewarding these donors by enrolling them in a membership scheme. This may be your existing scheme, or you could create (for example) a six-month membership covering your next on-sale – when you will undoubtedly be keen to encourage advance booking. Legitimate Interest, with the option to opt out, may be valid as the GDPR basis for processing your customer’s data in this way, but check your unique circumstances. If in doubt, seek your donor’s consent to be enrolled.
Rewarding what may have been an exceptional, one-off act of philanthropy with a membership that includes a lesser level of priority booking (e.g. paid members have 14 days, complimentary members seven days) will create goodwill, potentially increase frequency and overall spend, and encourage more people to buy tickets earlier – one of your main objectives when you reopen. This also gives your customers something to look forward to when you are back up and running!
Where donors have a clearly identifiable philanthropic motive (e.g. regular donors, friends, supporters and to some extent lapsed supporters) this is also the moment to aim high – consider high value, multi-year supporter packages of three, five, or ten-years. If benefits are constructed carefully, Gift Aid may apply to these larger amounts. Beware creating lifetime supporter levels, these often cost many times more in benefits than the value of the initial donation, particularly when adjusted for inflation over a period of decades.
Supporters who are also active attenders are more likely to spend more when they return to your venue or site, and to attend in larger groups – their customer lifetime value extends far beyond that of the initial support donation itself.
In these extraordinary times, when emotions are running high, retain and grow your affiliate base.
Clear, concise messaging about why you’re asking for support is essential. If you’re in significant trouble, you should say so – consider personal updates which factually convey what is at danger of being lost. Who will your audience resonate with most when receiving this message? Your Chief Executive, or your regular panto star?
You may need to articulate some sense of your margins. Customers may see a large, successful organisation, and assume substantial wealth – particularly if they are used to being charged premium food & beverage prices or have seen VIP benefits advertised to high-spending customers. Without going into the details of numbers it is worth emphasising, where this is the case, that your margins do not leave you with large surpluses/profits each year.
Preserve and channel your team’s energies by home-working well. Our partners at JCA Arts Marketing in the US have good advice on this.
There is, of course, a great deal of uncertainty. The idea of just one lost quarter may be optimistic. But if it is not, then cultural organisations will very soon need to pivot to medium- and long-term planning, preparing to reboot.
Where possible, assign a leader, empowered to work across the organisation, to break away from short-term firefighting and lead on medium- / long-term preparation. Our next update will be aimed firmly at them.