Growth Strategies

[Tom Spencer]

Ashley, 

 

Thanks for the great post on Growth Strategies.  I will kick off the efforts to provide a recommendation to the question. 

 

Our client is the Museum of Fine Arts in Boston. They want to develop a growth strategy for the next five years. What would you advise them to look at, and what are your recommendations for growth?

 

Firstly, I would ask about the customer. I would be interested to identify customer segments: age groups, gender and socio-economic status, etc. I would then want to compare the current year's numbers to prior years to see whether there is any trend in the data.  What do our customers want from us?  How much are they willing to pay?

 

Secondly, I would look at our product/offering.  What do we provide our customers? Are we the low cost provider or do we distinguish ourselves from the competition in some way?  Can we identify relevant complimentary goods or substitute goods?  For example, as Ashley noted in her post "baseball games" and "musical performances" are substitutes for the museum. All three are forms of entertainment.  A complimentary good might be public transportation.  If the government has decided to increase the price of public transport, then this could have reduced the number of people willing and able to visit the museum. 

 

Thirdly, I would look at the museum itself. What are its core capabilities? E.g. hanging exhibitions. How does it reach its customers? E.g. newspaper, radio, social media.  What is the museum's cost structure? Fixed vs variable costs. What is the museum's financial situation? Lots of existing debt may prevent the museum from making large new investments. 

 

Fourth, I would look at the competition. How many other museums are there in Boston? How are they performing compared with our customer? What strategy do the competition appear to be following, i.e. target customers, product offerings, pricing, marketing strategy. Is the competition doing anything clever which our client could emulate?

 

While it is impossible to say what the museum should do given that this is a hypothetical with limited information, one alternative course of action, in addition to the one Ashley mentioned, would be to expand the product offering.  Ashley suggests attracting new audiences, but the museum could also try to sell more to each existing customer.  Additional products might include: audio guides, coffee, conference events held in the evenings, etc. 

 

I am interested to hear thoughts from other people ... 

[Eric Yau]

I would ask about industry and competition first.

 

If industry is growing or shrinking then this gives information about external environment which informs talk about customers/products/company. 

 

Just my opinion. What people think?

[Ben Engler]

In addition to all of the relevant market data mentioned by Tom, I think it is important to identify the key offering of the museum. In a general term, this would include the actual art exhibitions, but it could also be framed differently as a "Boston tourist attraction" or a "field trip destination" rather than just a museum. Thinking about how to frame the museum's core offerings in a new way can help us to identify new markets while maintaining many of our other structural elements. For example, if the museum position's itself as a must-see tourist attraction in Boston, by having high ratings on Trip Advisor, having pamphlets and discounts at local hotels, etc; it can capture much more of the population that is visiting Boston for a short time. This would not necessarily require them to change their exhibits, or prices, but rather just fine-tune its marketing strategy. Identifying alternative "frameworks" like this can be a way to capture more market share in untraditional ways. 

[Emily]

Ashley, interesting read on growth strategy in regards to the Museum of Fine Arts.

 

As mentioned in the post, people are spending their money on baseball games and concerts instead of museum passes. Part of the reason for this is because people feel loyal to teams or to bands, and are willing to spend a premium on these tickets.

 

The Museum of Fine Arts needs to increase its loyal customer base, in addition to the short-time visitor base that Ben mentioned. One way to do this is to decrease the initial ticket price, perhaps even by half if financially feasible. As it stands, people are only going to spend $25 -- the cost of admission -- on a museum ticket if they are going for a significant chunk of their day. If reduced by enough, Bostonians will feel that they can stop by the museum for a few hours and browse if they are in the area, or have only the morning free. Making art into something casual that people can enjoy will increase the loyalty that Bostonians feel towards the museum.

 

Additionally, I think the Museum could stand to strengthen its membership program. Right now, the program is very differentiated based on how much you pay, and at the lowest level, barely seems worth the cost. If they add more events, both academic and fun, people will be incentivized to join. They could also add other perks, like a members-only lounge or access to other museums throughout Boston. This perks should be given in even the most basic membership program. 

 

If these two policies are implemented, the Museum will see an increase in casually loyal customers -- Bostonians who go more often, if for less time, and intensely loyal customers, i.e., members. Members will talk up the museum and make even more people go in a way that no social media campaign is capable of doing. 

[Tom Spencer]

The recommendations so far can only be described as excellent.  I will try to summarise where we are up to.

 

My suggestion was that the museum could perhaps develop new products so that it could increase its share of wallet from existing customers.  Additional products might include audio guides, coffee, and conferences. 

 

Ben had the excellent suggestion of reframing how we think about the museum's core offering (i.e. exhibitions) in order to target new markets. In particular, the museum could frame itself as a "tourist attraction" or a "field trip destination".  These are new markets that the museum could target by changing its marketing strategy. 

 

Emily's excellent recommendation might be categorized as a market penetration strategy; increasing sales to existing and new customers by a combination of price cuts and loyalty programs. 

 

I think all three of these recommendations are relevant.  

 

To ensure that we don't overlook any of these options, perhaps the framework that we should keep in mind when dealing with growth strategies is the Product/Market Expansion Matrix. 

 

I am interested to hear any further thoughts that people might have...

[Chen Cao]

Thank you for the case. In general, I agree with Tom's recommendation which I then structure in another way as following.

 

1. There are normally two solutions for "Growth Strategy".

    

    · We would firstly call up the marketing department to gather the historical sales data and prioritize efforts correspondingly.

    · Should demand is insufficient, undoubtedly, as Tom mentioned, Product/Market Expansion Matrix is a good tool to analyze for organic growth route;

    · In terms of inorganic growth route, this may involve M&A activities such as acquiring relevant themed museums or boutique arts galleries/workshops, or being acquired by other more successful museums to achieve synergies for cost reduction or client base cross-sell;

    · But when supply is constrained, we then would suggest to look deeper into operational side both at finance and organisation level;

    · The framework is not strictly MECE, for example, as M&A activities may have impact on the internal operations and thus help to generate internal growth as well. But because that we have prioritize at the first beginning whichever approach to put more efforts on, we basically avoid being exhausted in crunching numbers. In real practice, we do look at both solutions.

 

2. "Location, Location and Location!"

    · Tom raises up a niche economic question: visitors vs transportation fees. Thanks Tom, interesting!

    · I personally think that the correlation may be insignificant, depending on the regression results we actually run. The reasons why I say so are: 1) visitors of museums attend mostly with intended purposes, and those who will otherwise end up not attending exhibitions due to increased transportation fees tend not do so anyway no matter what. In another word, the price elasticity is close to zero minus ; 2) it depends whichever transportation means targeted visitors choose from. Museums are essentially walk-in buildings which are normally city centre or SOHO-based, and there is normally very limited parking lot for museums nearby; 

    · That's just becoming complicated and even more complicated to look at this specific niche area at early stage!

    · A golden principle in retailing sector is "location, location, and location!", and I do think this applies to the museum case as well. Together with pricing structure (i.e., charged or not), promotion and theme content, location is more a factor than transportation fees to the contribution of visitor numbers.

 

3. Go Digital

   Of course, museums are choosing physically located as close to the mass audience as possible. On a digital era, this could mean anywhere online.

   · not only to display the museums online with 3D effect but to develop new streams of revenue with creative thinking,

   · In a real case we did previously for a London-based gallery, we advised them to post the digital pics of the un-allocated assets, literally the arts pieces and to rent out (not for a worldwide tournament this time but short-term or one-off basis) to relevant institutions or private borrowers who are interested. A already-existed website akin to Art Buffet could help us to do this. The rest for the client is to structure warranty contracts, negotiate for better terms and arrange logistics.

 

These are some of my thoughts. Any comment welcomed!