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When Maxwell Anderson[1] took over as director of the Dallas Museum of Art (DMA) two years ago, he told the board he wanted to offer free membership to anyone willing to share some personal data. Anderson’s idea echoes what companies like Google and Facebook have long understood: Learning as much as you can about your customers’ behavior may be more valuable than the price of admission. At the DMA, admissions and entry-level memberships combined would have covered about 7 percent, or $1.7 million, of this year’s $25.8 million budget. Anderson is betting that, by getting more people in the door and measuring their engagement, he can use the information to persuade major donors, foundations, and the city—whose dollars make up the bulk of the budget—to increase their giving. Since introducing the program in January 2013, the museum has registered more than 50,000 DMA Friends, as free members are known. It continues to add more than 1,000 Friends per week. Before free memberships were introduced, the museum had 18,000 paid members (see Figure 1).  Figure 1: Dallas Museum of Art Free Member Growth Reinventing your value creation processesThis is a marvelous example of how one organization contemplated their value creation process to identify where and how new sources of data could power new monetization opportunities. But how does an organization undertake this sort of an exercise in a more methodical process? Can we provide a framework for understanding how our organization creates value (a.k.a. makes money)? And what role Big Data (new sources of customer data combined with advanced analytics) can provide in uncovering new monetization opportunities? Let’s start the process by first understanding how an organization makes money, or in this case, what their sources of revenue are. Sources of Revenue Financial AnalysisOne of the first places to examine in order to understand the DMA’s sources of revenue is the museum’s financial statement (see Figure 2).  Figure 2: Dallas Museum of Art Statement of Activities Let’s download the Statement of Activities for the Dallas Museum of Art data into a spreadsheet to get a better feel for the distribution of the sources of revenue (see Figure 3)[2].  Figure 3: Sources of Revenue Another way to visualize the sources of revenue distribution is to create a pie chart on the DMA sources of revenue (see Figure 4).  Figure 4: Source of Revenue Analysis Both the spreadsheet and the pie chart (yeah, doing some Big Data analytics here!!) say that same thing. While memberships are an important source of revenue for DMA, they only represent 7% of the DMA’s current revenue. Even doubling the paid membership would only put membership as a percentage of revenue at 13% of revenue. And doubling the memberships may come at a very high cost, as the marginal cost of acquiring a new paid member approaches—and may even be greater than—the realized revenue from the extra paid membership. So doubling memberships and related revenue may be a very onerous and expensive option. Monetizing Member/Visitor InsightThe real revenue opportunity is identifying how the DMA might make use of the additional member and visitor insights as leverage to 1) increase the financial contributions of the existing sources of revenue, and 2) uncover new monetization opportunities or sources of revenue. To do this, we will follow the following three-step process:
Helping business constituents realize their “desired benefits”Let’s work through those questions on a business constituent-by-business constituent basis to see what additional member insight we could provide to each business constituent to help them further monetize their DMA relationship. During this process, we may uncover new business constituents—perhaps direct advertisers that we can monetize. For example, Chipotle might be a potential advertiser, if there were an exhibit on sustainable agriculture; or Nike, if there were a wing with displays on the workings of the human body.
* Advertisers are a potentially new source of revenue for the DMA To summarize the insight into member information that we would need to tease out of the member and visitor usage and visitation data, business constituents would want to know:
With a better understanding of the insights that the business constituents seek about the DMA members, the DMA may uncover be opportunities to 1) solicit the existing business constituents to increase their financial support and 2) approach new business constituents, like advertisers, to financially support the DMA.  Figure 5: Potential Revenue Increases by Business Constituents In the spreadsheet analysis seen in Figure 5, we can see that a 10% increase in other sources of revenue. (Note: I am ignoring Net Assets Released, because I don’t understand that source of revenue well enough to make an estimate), covers any lost paid membership revenue. And a 25% increase—not unreasonable give a greater than 200% increase in DMA members—would yield 15% more revenue than our current baseline. SummaryThe new DMA program has so far delivered about 2 million records that show how visitors use the museum. Anderson says the data he’s gathering helps him pitch deep-pocketed donors that the museum depends on. When he can show that members are joining from low-income areas, it tells supporters that their gifts aren’t just subsidizing wealthy visitors. That’s helped the DMA secure more than $5 million in new giving since the change, including a $4 million anonymous donation supporting free admission. More visitors also yield greater revenue from ancillary sources such as parking and gift shop purchases. Anderson maps memberships by zip code to identify neighborhoods with few members and then considers how to reach residents of those “art deserts,” as he calls them. “If everybody coming is old, rich, and white, pretty clearly we’re failing as an institution,” he says.
[1] “Dallas Museum of Art Trades Memberships for Data” By John Tozzi, February 20, 2014 http://mobile.businessweek.com/articles/2014-02-20/dallas-museum-of-art-trades-memberships-for-data [2] Net assets released from restrictions, which is the largest source of revenue for the DMA is defined as “the transfer of funds from restricted net assets to unrestricted net assets due to the satisfaction of donor-imposed stipulations with respect to timing or purpose of the contribution.” |
