museum franchising

Museum Franchising February 17, 2010

Barcelona

Program MSc in Marketing Management 2009/2010 Research Project Master ThesisStudent Irene de Pedro LlorenteDirector/Advisor José María Álvarez de Lara Morel, CEIC Director

index

1. Executive Summary2. Goals of the master thesis3. Methodology4. Main learnings5. Further steps

It is worth doing a master thesis on museum franchising because…

• The trend is becoming increasingly relevant but lacks of specific (scientific) studies

• As a helpful strategy for museums to build successful and/or sustainable businesses, as well as strong brands in a moment especially crucial for the sector

It contributes to museums with a guide & with reflections

• A guide of reference on museum franchising as a competitive advantage for museums: why, when & how, with recommendations & examples

• A series of reflections on the urgency of the introduction of managerial theories & practices in museums as a key for innovation, competitiveness & performance

Self-benefits of the conducted research

• Contribution to improve my knowledge of the museum sector, especially regarding the marketing & management disciplines

• Opportunity to develop a “consultancy project” in the museum field, which is the professional path I would like to follow in my career

Executive Summary

index


The 3 big goals of the master thesis

1. Understand the reasoning behind the museum franchising trend

2. Understand the process and define a model for museum franchising

3. Analyze the suitability of the strategy in the Spanish museum sector

Analyze and define why, when and how is it recommendable to initiate a museum franchising strategy

index


Literature Review

3 Case Studies

1 Model (Theoretical Framework)

Best Practices

Research topic

selection

Input Research & Analysis Output

Methodology

Methodology: Input

Research Topic Selection > Literature Review Research + 3 Case Studies Analysis = A theoretical Framework + Best Practices

Worth from a cultural perspective: + social impact + exploitation of museum assets

Research questions

? Is museum franchising worth, both from a business and a cultural perspective?? Might it become a key competitive advantage in the long-term?

? Might it be a suitable model in the Spanish museum network? Main hypotheisis

Franchising might become a key competitive advantage for museums in the long-term Might be a suitable model in the Spanish museum network

Secondary hypothesis

Worth from a business perspective: + branding+ economic performance

Literature Review

3 Case Studies


Best Practices

Research topic

selection


Methodology

Methodology. Research & Analysis: Literature Review


Perspective of the study form 3 academic disciplines…

Management Marketing Arts Management


Main references are:

• Sandell, R. & Janes, R. R. (2007) Museum Management and Marketing

• Harvard Business Review & Harvard Marketing, Harvard Business School

• Kotler, N. G., Kotler, P. & Kotler, W. I. (2008) Museum Marketing and Strategy

• International Journal of Arts Managemet, HEC Montreal

…that are present in the main bibliography


More than 70 bibliographic regerences in the form of:• Articles• Corporate papers• Reports• studies• Statistics• Etc.


Structured in 5 groups of knowledge towards one objective

The Museum Sector

Museum Management

Museum Marketing

Museum Franchising

The Spanish Museum Sector




Trends & Opportunities Challenges

Franchising as a harmeless way for cultural organizations to expand Use of (leisure) time has changed

Franchising as a source for income generation New museum function: entertainment vs. education

Museums as tourism attractions Increasing competition in the leisure arena

Relation between culture & consumption Need to introduce performance measurement

Architectural sensationalism (crisis!) Balance between business success & public service function

Branding to stand over competitors and gain long-term sustainability

High costs of museum franchising: economic investment, organizational culture, maintenance

Implement experience branding to increase attendance

This is a good moment in Spain (crisis!)

Main ideas from the literatue review

Literature Review

3 Case Studies


Best Practices

Research topic

selection


Methodology

Methodology. Research & Analysis: 3 Cases Studies


3 case studies

Guggenheim Louvre CaixaForum

+10 projectsSince 1990s (1976)

INTERNATIONAL

+2 projectsSince 2003

INTERNATIONAL


SPAIN



The Guggenheim as a referent

Guggenheim Louvre CaixaForum

+10 projectsSince 1990s (1976)

INTERNATIONAL


INTERNATIONAL


SPAIN



The Guggenheim Bilbao Museum: a referent

The Bilbao Effect Culture + Bottom-line business techniques + Political support

OPPORTUNITY

Basque government:• Position he Basque region

internationally• Urban renewal project• Huge investment

SRGF:• Add exhibition space• Add financing sources

PROCESS

• 3 months negotiation• Frank Ghery• 6 years from negotiation to

opening

RESULTS

1 year after opening:• +1M visitors• 73% operating costs

covered• Reversed declining

economic activity• Basque region as a popular

tourist destination



The Guggenheim Bilbao Museum: the deal

OPENING: October 1997

NEGTIATIONS: October-December 1991

BASQUE GOVERNMENT S.R.G.F.

FINANCING $326M• 100% construction &

operational costs ($256M)• Donation to develop a

Basque collection ($50M)• Franchise fee: 2 tax-free

donations ($10M each)

OPERATIONS & MANAGEMENT

BUILDING & FACILITIES SET-UP DIRECTION

STAFFPROFITS:

tickets & gift shop

BRANDPART OF COLLECTION

TEMPORARY & ITINERANT EXHIBITIONS

“ADVISORY CAPACITY ONLY”

Literature Review

3 Case Studies


Best Practices

Research topic

selection


Methodology

Methodology. Output: A Theoretical Framework of Museum Franchising


Literature Review

1 model for Musem Franchising

Case Studies Triangular Analysis

WHY? HOW?WHEN?



Advantages & Disadvantages of Museum Franchising

Advantages Disadvantages

Economic effectiveness

• Reach economies of scale

• Reduce maintenance & storage costs

• Increase earned income

• New sources of income & financing

• Better results thanks to major flexibility

• Increased market share

• Better image, reputation & trust

• Impact of increased tourism flows

• Major benefits, in general, for the museum and its environment

• High economic investment required

• High maintenance costs

• Loads of visitors are required

• Numerous employees required

• Difficulty to measure and demonstrate results

Social effectiveness

Better fulfillment of public service function:

• Better use of museum’s resources

• Reach larger audiencesWHY?

4 elements are key in a museum franchising strategy…



TRADEMARK

the museum brand name

PRODUCT

part of the collection, assets & products

KNOW HOW

staff

ASSISTANCE

pre-opening , acquisitions,

partnerships,

etc.

1 2 3 4

HOW?

…and, although some limitations must be considered,…



DIMENSIONS of the museum:

Large museums

Power of the museum BRAND:

Strong brand image & notoriety

WHEN?

…the strategy can easily be implemented it in 5 steps



1The right

place

2The right

franchisee

3Negotiating

financing

4The

agreement

5Inauguration & follow-up

• Measure demand levels & typologies and adapt with marketing

• Find urban renovation areas and estimate urgency

Non classic guidelines. Go for public entities + help of local consulting firm

4 sources: • Government

funding• Earned income• Private or donor

giving • Investment

income

Carefully regard: • duration of

contract• shared assets

(especially: coporate image)

• distribution of rights

• obligations & revenues

• royalty & license fees

• relationship regulation

Opening with blockbuster exhibition of permanent collection

HOW?



Public franchisee vs private franchisee

Public franchisee Private franchisee

Advantages Long-term sustainability Easier & faster negotiation

Disadvantages Complex & time-consuming negotiation Risk of earlier break down

How to sell to the franhisee?

Communicate all potential benefits :

• anchors for development areas• establishes new channels for economic

development• generates direct & indirect jobs &

income for residents• contributes to improve the quality of life

of the community• positions the city as a cultural referent• positions the city as a tourist destination

(impact on tourism industries, taxes, etc.)

Communicate quick, concrete & measurable results• Stress quick wins

HOW?

Literature Review

3 Case Studies


Best Practices

Research topic

selection


Methodology

Methodology. Output: Best Practices identified


4 GENERAL

10 MUSUEM MANAGEMENT 5 MUSEUM MARKETING

8 BRANDING

13 EXPERIENCE BRANDING

40 Best Practices identified

GENERAL RECOMMENDATIONSTo help museums anticipate and adapt to consumers needs and preferences and they can attract and maintain them, it is recommendable that those museums: • Position themselves as institutions that provide society with meaning by paying special attention to

the following areas: service quality differentiation and positioning, personnel differentiation and technological differentiation.218

• Expand and diversify audiences to reach broader community support and use it as a source of revenues and a justification for funding

• Develop a performance management and development system (based both in collective and individual work)

• Promote collective leadership (a group of people is at the top of the organization, they share responsibilities and clear accountabilities to develop strategies together and reach decisions by consensus). However, it is worth noting that it is useful to select one single leader among all (primus inter pares).



GENERAL RECOMMENDATIONS

MUSEUM MANAGEMENT• Self-organization, flexible position descriptions, democratic & non-hierarchical committees with rotating

chairs in order to avoid a common risk: narrow mind/view and to promote creativity • Multidisciplinary, multi-functional and cross-departmental teams to cross fertilizing the rich storehouse of

knowledge, skills and experience inherent in museums. To develop programs, exhibitions, enhance general level of creativity, innovation and problem solving

• Avoid business tribalism • Leadership to cope with organizational change • Second curve thinking to avoid decline. Requires: question, scenario planning, be skeptical, curious and

inventive, ask front-line staff • Self-reference as a foundation for change. A clear sense of identity -values, traditions, aspirations,

competencies and culture- that guide the operations (self-reference) helps in sensible change in turbulent environment

• CSR consciousness: museums‟ functions are beyond entertainment and education. Therefore, they must adopt a new sense of accountability and seek long-term sustainability

• Especially in the case of public museums, governing authorities must get better at defining strategic futures for their museums & ensure that their boards are representative of the community diversity and aspirations

• Adopt some performance measurement tool to keep public trust and better justify the need of the museum of further financing

• Never lay-off the organization’s knowledge-owners.



MUSEUM MANAGEMENT

MUSEUM MARKETING• Develop branding on these three key issues: reputation (brand image), recognition (brand

awareness/notoriety) and trust of visitors and supporters. • Success: offer unique and distinctive value to consumers and capture their attention, commitment, and

purchasing behavior.• Transform exchanges as transactions (Single-time exchange) into relationships (long-lasting relationships =

profit & stability) • Ideally: Holistic marketing: 4 elements: INTEGRATED MKG (5ps mkg plan), RELATIONSHIP MKG (building

mutually satisfying long-term relationships among stakeholders; 3 forces: consumers, society, competitive pressures), INTERNAL MKG (consumer-orient the whole organization) and SOCIALLY RESPONSIBLE/CAUSE MKG (the org embodies a commitment to the community & the society as a whole)

• An internal market orientation and inter-functional coordination applied to museums have both a direct and a moderating effect on effectiveness



MUSEUM MARKETING

• Branding should be applied extensively in the following areas of the museum activity: • Use exhibitions to communicate brand identity, mission, vision,… • Use museum boards to further communicate the brand message and the brand promise as they normally

have high visibility and credibility • Use the education department as a guard of one of the museums‟ core function: education. Use the

store(s) as a space for extending this function • Staff (volunteers) are the most relevant touch point: keep them motivated. • Fund raising activities are a good place to brand the museum as well. • Membership actions and/or activities should also be related to branding as the most important source for

brand building, reinforcement and loyalty.

• The expansion/renovation project: • Must be in line with the institution‟s renewal marketing strategies • Can take 8 years approximately • Spaces must be: dynamic. audacious, multi-functional and capable to integrate peripheral activities,

natural light is important, welcoming, accessible and of varying sizes to welcome venues. also facilities for revenue, relaxation and enjoyment: coffee-shops, casual family restaurants and fine-dining rest, … they further enhance the museum experience.



BRANDING

EXPERIENCE BRANDING: ICON BUILDINGS

• Make the building a must-see • The design must transmit the museum brand identity • Involve the state and local tourism groups early and often. • Integrate the architect’s thoughts so that he/she articulates the museums image/identity and

mission creatively • Exhibit maps and miniatures of the new building and new location in the other museums and send

preview brochures to members and donors (mailing list). This way, the new branch will be related to the mother brand creating an umbrella brand architecture. Consequently, brand visibility and brand image will increase potentially in a few time.

• Make the new space part of the community by inviting locals to opine on the appearance, types of activities there, etc. and invite the local orchestra to perform in the lobby, or the city council to meet there.

• Anniversaries: celebrate every commemoration you can • Street signage: “a large surface to display the museum name and logo”



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Main learnings on museums & museum networks

Museums potentiality

Museums can be magnets of economic development & urban renewal1

Networks can help a museum to fulfill its objectives and reach social impact in a cost-effective manner2

Networks can help a museum to multiply social and economic effectiveness3

Networks can help a museum to strengthen the museum brand name, its brand image and brand equity4

Main learnings: Why to implement a museum franchising strategy?

5 learnings about the trend

Alive & relevant worlwide: growth strategy chosen by leading institutions (national & international levels). Impact in the market, society and local economies.1

Improves museum productivity. Better results in social and economic dimensions 2

Profitable strategy in the long-term. Contributes to sustainability3

Confirms a change in attitude in the museum sector, more market-oriented4

Contributes to change the perception and relatonship of museums with stakeholders5

Main learnings: when & how to implement it?

5 determinant factors to develop a museum franchising project:

Create strong museum brands and effective marketing (and management) programs1

Tourist location: settle the new museum branch in places with tourism potential2

Spectacular architecture: raise iconic buildings that work as an attraction themselves3

Be open-minded and collaborative regarding franchisees4

Respond to the leisure nature of the demand with a competitive offer, the proper management attitude, and the correct communication strategies5

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Further steps

Improving the master thesis & going further

Ways to improve

Measure & balance of variables. Criteria: weight in the process (time & resources) & impact on results (ROI, brand image, revenues, etc.)

Fine-tuning, simplification & overall consistency

Next steps

Put in practice the strategy, track the evolution & measure results

Elaborate a definitive model for museum franchising

Develop a museum franchising project for a Spanish museum (Prado museum)

&

Further research in the area of museum branding

Museum Franchising February 17, 2010

Barcelona

Program MSc in Marketing Management 2009/2010 Research Project Master ThesisStudent Irene de Pedro LlorenteDirector/Advisor José María Álvarez de Lara Morel, CEIC Director

museum franchising

Business

case studiesanalysis

museum marketing

museum management

museum field

museum franchising3

spanish museum sectoranalyze

goals of themasterthesis3

harvard business school