Many social enterprises with cultural missions (museums, galleries, recreational facilities, or ongoing or travelling events) struggle with how to set admission prices, and many revert to a “jar at the door” asking for donations.
Spoiler alert: charge admission.
I firmly recommend to any social enterprise that they set prices (including admission fees) based upon a sound understanding of their cost structure, and how much they need to charge their guests they expect to visit their location to attempt to cover these costs. This recommendation is borne out of experience and logic for any business. For cultural social enterprises, they may not cover all of their costs, but charging an admission fee—over an admission-by-donation strategy—has many benefits described below:
Admission fees are professional
In 1st century BC, Publilius Syrus wrote: “Something is only worth what someone is willing to pay for it”. This is perhaps a bit simplistic, as the truth is that a sustainable price represents the point where both the customer and the business both are getting a good deal (or at least neither is getting a raw deal). Charging visitors for admission simply states to your customer that you have spent money to create an experience for them, and they need to spend money to enjoy the experience. All agree that good experiences cost money. Now there is nothing left to do other than haggle over price.
Free, however, suggest that the museum doesn’t pay for, or doesn’t care about, or perhaps doesn’t even know the costs of their service. The assumption by the consumer, paradoxically, is that the experience is likely not going to be very good. In the bizarre world of consumer expectations, free stuff is low quality and useless, and expensive stuff is better quality or valuable. (just think of drinking water or wrapping paper) Charging admission says that you are professional and that your business value proposition is important and valuable.
Admission fees do not decrease attendance
If you lose 5% of your customers due to the application of an admission fee, that would be a shame, but studies show that admission prices don’t actually decrease attendance. Some even argue that museums and cultural attractions actually get more customers by charging a “professional” amount (see above). A study in 2015 of 98000 adults in the US actually concluded that “in most instances, audiences indicate greater intentions to visit organizations that charge more than $20 for an adult admission than those that are free.”
The decision to visit a museum, gallery or event is affected by many factors and price plays a smaller role than most believe. Family history, geographic proximity (especially for travelers), hobbies and interests, marketing and promotions, available time, or availability of alternatives all play a pivotal role in attendance numbers for cultural social enterprises. After all, if you travel to Paris, do you really care what the price of admission is to the Louvre? You are already committed: once you’ve paid for the flight, hotel, meals, and your time…the admission could be 50 Euros before you would even blink.
Admission fees will generate more total revenue than donations
If 100 people come to your attraction and you charge them $10 to get in, you’ll earn $1000 in gross revenue. If 100 people come and are asked to make a suggested donation, you’ll be lucky to get $500 in revenue. It varies by event, attraction, demographics, region, and product, of course, but in every study I’ve read where a “suggested donation amount” is posted, the actual donation is 25-50 percent of the posted amount, even when the posted amount is significantly less than what the market would bear. This is lost revenue and lost opportunity for your cultural business.
There are tricks to try to increase donation amounts. Some have tried offering a choice of recommended amounts (and the results show that most people choose the median recommendation or less). Some have considered a sign saying that other patrons have historically given a certain amount (and this helps to bump up the average donation slightly).
One particularly creative example is from the The Contemporary Arts Museum of Houston (CAMH), which doesn’t charge admission and prefers to accept donations. They put out a donation box old-school style with a sign on it that reads: “Average cost per visit $22. Your admission charge $0. Suggested donation $5” This approach increased their average donation slightly, because it listed a factual cost (calculated from the previous year’s financials) as a benchmark allowing visitors to confer value upon the experience they are about to have. This is a clever approach, but still an approach that generated less revenue than a straight $10 admission fee.
Your gift shop benefits
Most cultural social enterprises have an opportunity for a secondary spend. What this means is that your visitors to the main attraction will (of course) be encouraged to visit the gift shop, the ice-cream stand, the café, or the special exhibit. It turns out that visitors who don’t pay for admission are also far less likely to spend money in other parts of your establishment. A good example comes from Cedar Rapids, which offers free admission for about two months a year to their Museum of Art. Their attendance during those promotions (contrary to most data) does increase, but as noted by the business owner “the average donation in the donation box remains in the range of 25-35 cents per person and the average amount spent by those who enter the gift shop plummets from about $13 to about $3.”
You can track and plan marketing and promotions
If your customers have to pay to get in, you can get more information from them that can help document your marketing success or guide your future promotions efforts. Where do they live? How many people are in their party? Did they question the price? Did they request a family rate? Did they use VISA, MC or AMEX? How did they hear about you? Did they use a coupon or a promotion through their hotel?
The act of collecting a fee allows for an interaction (either automatically by the point of sale software, or through conversation). Every time a business can interact with a client, it is an opportunity for improving customer service, retention, and renewal and another way to inform future marketing efforts. A donation box is normally anonymous (to protect the dignity of the donor), and thus represents a lost opportunity for business development.
Increased social outcomes
Although my data on length of visit of paying vs non-paying customers is largely apocryphal, visitors who have paid to get in to your exhibit are likely to “savour the experience” just a bit more, in order to get their money’s worth. In an art gallery this is often the experience for special exhibits; visitors will pay to see the Monet exhibit, for example, and even if their fee allows them free entrance to the regular collection, many will either forego the gallery’s resident collection, or they will rush through these works of art after hours of peering at the “valuable” art in the special exhibit.
Most cultural social enterprises want people to learn, enjoy, and engage in the mission of the business. Knowing that your customers will read every plaque, pause at every display, and ruminate on how this affects them is certainly a goal equal to or more valuable than the mere volume of visitors.
Admission fees force good business practices
It is true that if you charge a fee, your customers will expect more from your business. Many museums and cultural exhibits are struggling to maintain visitation levels in a world of virtual reality, internet museums, and so many fantastic blogs and websites devoted to capturing and curating history and culture. It is important for all cultural businesses to strive to find new ways to capture the attention of new audiences. Not only will admission fees generate revenue to help run the business, it will also force your board, staff, volunteers and content curators to work diligently to create excellent experiences for customers. There is little incentive to update, change, review, digitize or improve your collection or experience if the customer is not demanding it.
You can still be accessible
In my experience, the key rationale made to solicit voluntary contributions is to allow everyone to enjoy the museum, installation or activity. “Maximize accessibility” is the mantra. After all, if the mission of the business is to promote culture, then it may seem logical to not create any financial barrier to entry. For fully funded organizations, I accept that “admission by donation” will be fine, as the business costs will be covered by grants or sponsorships. However, the fully funded cultural social enterprise is a unicorn; people claim they exist, but I’ve never seen one.
It is possible to offer bursaries, school programming, or discounted days for those who are unable to pay. There are many creative examples of dignified programs and promotions that can help those for whom a small admission fee still is a concern.
Fees are guaranteed. Donations are fickle.
The other argument I often hear is that donations do not have a ceiling; that is to say, a donation request might yield a $1000 contribution, and surely that possibility makes an “entrance by donation” strategy worth considering. When faced with this assertion, I normally ask how many large gifts has the business ever received in this manner, and were they able to properly receipt, track and cultivate that donor? More often than not, there is no evidence that such a gift had ever been received, nor is it truly likely to be expected through that mechanism.
The truth is that even if there were to be a “huge gift” in the donation jar, perhaps once in a year, by fluke (every fundraiser knows that “people give to people,” after all), it is likely that the lost opportunity for all those who chose not to donate would exceed the value of the larger one-off gift.
To conclude, it is overwhelmingly clear to me that charging a fee is the right approach for all cultural social enterprises.
The downside risks (fear of decreased attendance or restrictions for those in poverty) are easily managed with creative pricing approaches if it is even necessary, while the benefits of an admission fee are significant. Under set admission fees, revenue is more stable, predictable and lucrative, and the organization is more professional and effective. Fees don’t need to be exorbitant, but they should at least reflect the costs of the business that have not been covered by donations, endowments, or sponsorships.
Regardless of the size of your business, charging an admission will help your social enterprise remain in business, impress and engage your customers, and most effectively promote your cultural or social mission.
The marketplace of social deficits
Most social enterprises start because an individual or an organization sees a problem in society—a social deficit—and they want to find a sustainable way to improve that deficit.
Just as inventions historically have helped to address perceived personal needs—from the radio to the steam iron—so too are innovations required to address social deficits, and if those innovations can be commercialized, then they are fodder for a strong social enterprise.
In the last few years, I’ve met an increasing number of people—both seasoned and young—who want to pursue social enterprise as a meaningful career path. However, many haven’t necessarily taken into account the marketplace of social deficits. In the last decade or more, there are some clear, growing areas of need in our society for which a social enterprise might be the right tool.
Below is my quick list of the challenges facing our society; this list describes a fertile field for social enterprise development to start.
Ageing populations will create needs for new financial tools, intergenerational wealth transfer, housing, urban design, mobility and new methods of countering isolation in a world of technology, fading social structures (like the church) and greater longevity.
A diversified global citizenry requires new approaches to schooling, language and cultural training, housing and ways to address conflict.
New health care needs for chronic illnesses and afflictions, including diabetes, arthritis, depression, obesity. Even some of those diseases which were considered acute (and typically life threatening) such as cancer and heart disease are increasingly being considered chronic, as survivors may require ongoing supports to live well.
Our energy needs are extraordinary. With a technologically advancing society, all our lives are affected by available electricity and locomotion. Our shelter, our food, our lifestyle, and even our money are all perilously threatened if we loose power, or if energy costs spurred by limited supply and increasing demand become unaffordable.
Water and other environmental challenges are also looming concerns of the next generation. Clean water is an ecosystem requirement and a threatened resource as the population grows, and as our continued polluting contaminates the limited freshwater reserves on the planet.
Increases in gambling, poor diets and inactivity, violence (gang, domestic, and other abuse), and the (mis)use of both illegal and prescription drugs are requiring us to reconsider the way the society must address social behavioral problems.
Crime appears to be on the increase, although statistics prove otherwise. Of course, we need not be complacent, as preventing crime is worth our vigilence at the local, national, international, and even the metaphysical space of the internet. Identity theft, concerns of privacy and even fears of falling victim to fraud pervade our news, and thus our response to the world around us.
The nature of work is changing and this creates many social challenges. Increased wealth is not translating in to increased welfare. Communal workplaces, telecommuting, and decreases in manufacturing and skilled labour are affecting our communities and exacerbating wealth gaps.
It also appears that the next generation is losing purpose, faith and hope in the structures of past generations (marriage, work, universities, religious institutions, government, etc).
Poverty and income inequality is also a global challenge. Our interdependent world means that poverty across the world will directly affect us all. Wars, famine, refugees, human rights abuses, and criminal activity are all reinforced by poverty, if not initiated by the curse of income inequality and injustice.
This list of social deficits should not drive us to despair. Statistically, global improvements to health, transportation, work, and international relations have enjoyed incredible gains over the last decades (“Factfullness” by Hans Rosling, will help reaffirm your faith in humanity).
Nevertheless, the traditional solutions to social deficits that have got us this far have often been direct interventions through the development of a new product or new service (or law!) by governments, non-profits, or private sector actors motivated by profits. However, the current multifaceted, systemic challenges are in need of more systemic solutions by engaging different sectors, different actors, new ideas, revised expectations, and new organizational structures.
Social enterprise is a tool—when done well—that can house systemic solutions that embody democratic (or collective) ownership, the focus of business thinking, the scale of the public sector and the compassion of the non profit and charitable world. By taking the best of all thinking, social enterprise is a vehicle to tackle both the new and intractable social deficits in our society.