Market development skills resource for performing artists and companies


What is market development?


Market Development – A business definition
The expansion of the total market for a product or company by (1) entering new market segments of the market, (2) converting non-users into users and/or (3) increasing usage per user.

Market Development – in a performing arts context

A company or artist’s pro-active and targeted investment of scarce resources (time and money) to strategically plan to develop skills, knowledge and capacity to match products (artistic work) to local and international buyers in an culturally, artistically and financially sustainable way.

Outcomes of market development

  • Touring
  • Cultural exchange
  • Residencies
  • Collaborations
  • Income including fees and/or box office, royalties etc
  • Ownership of relationships and networks
  • Market knowledge
  • Enhanced profile and reputation
  • Critical review and peer recognition
  • Cost recovery from initial investment
  • Artist employment
  • A market development plan


Who is accountable for market development?

Who has primary accountability?

  • The primary accountability in most small to medium companies would normally sit with the general manager or executive producer. Larger companies may have a dedicated market development role.

What roles have a secondary accountability?

“Everyone on tour has a role in building relationship capital”

  • Most successful companies in this area demonstrate a commitment and clearly defined secondary accountability for the artistic director and all tour participants including artists and production crew.


What is a market?

A market is an actual or temporary place where forces of demand and supply operate and where buyers (presenters/ producers/ promoters) and sellers (artistic companies and artists) interact (directly or through intermediaries e.g. agents) to trade goods and services (artistic work, product or skills), for money or barter.

The word market or market segment is used in a range of contexts. These contexts differ according to criteria including:

  • Geographical markets – e.g. the US or UK markets
  • Presenters’ shared aesthetic
  • Type of presenter - festivals or performing arts centres
  • Genre – dance, physical theatre, theatre etc

What are market mechanisms?
Markets include mechanisms or means for (1) determining price of the traded item, (2) communicating the price information, (3) facilitating deals and transactions and (4) effecting distribution.

The market for a particular item is made up of existing and potential customers who need or want it and have the ability and willingness to pay or barter for it.

Examples of temporary markets

  • Australian Performing Arts Market (APAM) (Brisbane, Australia)
  • APACA Conference and Performing Arts Exchange (PAX) (Australia)
  • CINARS (Montreal, Canada)
  • Performing Arts Market in Seoul (PAMS) (Seoul, South Korea)
  • TPAM in Yokohama (Yokohama, Japan)
  • Association of Performing Arts Presenters (APAP) (New York, USA)
  • Western Arts Alliance (WAA) (West Coast, North America)
  • International Performing Arts for Youth (IPAY) Showcase (North America)

Examples of other temporary gatherings
The following are not strictly markets but are gatherings of artistic professionals from around the world

  • International Society for the Performing Arts (ISPA) Congress (New York each January and a different city outside the USA each year)
  • IETM – International Network for Contemporary Performing Arts (Europe)
  • Canadian Arts Presenters Association Conference (CAPACOA)

Market Development Objectives

Example objectives might include:
  • Improving the financial robustness of the artist or company by building diversified and sustainable revenue streams through touring, residencies and collaborations
  • Developing a successful national and international brand
  • Raising the profile and status of the artist or company with peers in the defined priority markets
  • Encouraging further artistic development through contact with national and international peers, exchange of ideas or skills development and new opportunities for collaboration
  • Actively extending the life of productions by targeting national and international presenters in priority markets
  • Making money without compromising artistic vision.

Setting key objectives - why?

In setting your market development goals / objectives, reflect on the following questions:

  • What measurable outputs and outcomes do you want from market development?
  • Why are we touring or why do we want to tour?
  • How does touring, collaboration, residencies, cultural exchange and so on assist in fulfilling the company’s mission (why it exists, core purpose or raison d'être) and vision (what it aspires to be renowned for)?
  • What would happen if you didn’t undertake market development?
  • What is the opportunity cost if you don’t tour?
  • How do we want to tour and for how long?

Some things successful companies do include:

  • Clearly identified priority markets nationally and internationally
  • Explicit criteria for saying yes and no to touring opportunities
  • Cleary defined and measurable objectives for undertaking market development and touring
  • A documented market development strategy which relates directly to the artists or companies business strategy
  • A measurable market development goal included as part of the business strategy with clear accountability
  • Profitable touring – at a minimum direct touring and market development costs covered
  • A pricing strategy which reflects the differing characteristics of different markets and the status of you and/or your work within it.

Key Skills

  • Knowledge of your work and where it fits in the presenting ecology (e.g. it is small venue focused etc)
  • Knowledge of what is being presented where and what that means to your work or product
  • Skills in network development (attending formal activities such as arts markets through to conversations with peers)
  • Confidence in describing your business and asking for money
  • Knowing when to say no and when and how to say yes
  • Knowing that your business infrastructure can support the delivery of the tours you commit to and the broader market development plan.

 

Developing a market development strategy



Market development business model 

  

 

Key Components of a market development strategy

  • Company’s mission, vision and values
  • Context
      • Key characteristics of products/ works
      • Competitor analysis
      • Environmental scan
  • Market development business model
      • Defined priority markets (three to six) and market segments
      • Criteria for selecting priority markets
      • Distribution model by priority market
      • Product pricing strategy by priority markets
      • Key criteria for saying yes and no to a touring opportunity
      • Projected three year touring plan by product / work
  • Measurable market development goals and accountability
  • Measurable key initiatives / strategies and accountability
  • Market development and touring resources
  • Key risks to the implementation of the plan
  • Three year market development budget.

In developing any market development strategy you need to answer a number of strategic questions:

  • Why tour, collaborate, undertake cultural exchange?
  • What products/works fits which markets?
  • How will I build the reputation of my product and distribute it?
  • Which criteria will I use to say yes or no to an opportunity?
  • How will I value/price my product/work/show?
  • How much time away from home base can the company/artist sustain?

Example - Company vision statement

The company’s vision statement answers the question:
What does the organisation aspire to be renowned for as a result of all activities including its market development activities?”
For XYZ Theatre to be recognised as a leader in the creation of interactive works for children and presented regularly in identified priority markets
If you need a specific market development vision it needs to reinforce your company’s vision statement. It must relate to the overall mission and vision for the organisation as stated in the company’s business plan.

 

Key steps to complete competitor analysis

  1. Confirm which market or market segment the analysis is being undertaken for i.e. Australian capital city performing arts centres, regional venues, or an international market, for example, South Korea, UK, USA, Germany.
  2. The analysis should be done market by market as your competitive advantage will vary in each market based on a range of factors. If your company has a repertoire of different styles of work for different demographics then be clear which product you are doing the analysis for example large scale outdoor work, small interactive work
  3. Identify a number or potential competitors – these can be identified by talking to experienced market development practitioners who know the market you are potentially targeting, for example other companies, agents, producers or by your own desk-based research and knowledge
  4. Identify the key characteristics that presenters in a priority market value about the work they present i.e. tourability, bump in days required, price, target demographic, familiarity with their audience, reputation of the company and so on, ideally a maximum of five to six characteristics
  5. Subjectively rate your company against each of your competitors in the given market. Be as objective as possible and test your findings with an independent person with knowledge of that market
  6. Identify where your company or style of work has a competitive market and what that competitive advantage actually is. In other words, why would a presenter pay to program your work?
  7. Identify where you’d like your curve to be or where it needs to be to have success in a market.


Example - Competitor analysis

Value proposition curve vis-à-vis competitors

*Reproduced with the kind permission of Simon Abrahams


Example - Market development key goal

The vision is achieved through the delivery of a range of goals including potentially a market development goal and related key initiatives or strategies.
Goals need to be measurable to see if they have been achieved.  Set somewhere between one to five goals.
Example Market Development Goal
To generate $X0,000 after covering all direct market development and touring costs.


Example - Market development key initiatives

Initiatives need to be measurable (what, when and who) to know when they have been achieved. Usually two to four major initiatives per goal:


Priority

Initiative

Measures
(Performance Indicator)

Timetable

Primary Account

High

Develop, review, approve annual market development plan and  budget

Plan and budget signed off by board

Nov 2013

Executive Producer

High

Establish a part time international market development role by 2013

Role established with agreed financial and touring targets

Jan 2013

Executive Producer

High

Secure investment to underwrite plan

$25,000 p.a. of new funding / investment from our cash reserve

Nov 2013

Board

 
Example - Implementation risks

Note these relate specifically to the risks to implement the market development plan.

Key Risks

Probability of occurring

Impact if it occurred

Mitigating stagey

Environmental/ External

US performing arts market slow to recover

High

High

Ensure other priority markets and developed particularly in Asia

Prices in some priority markets remain low

High

High

Consider touring lower cost products or casting locally

Volatility with $AUD

High

High

Hedge currencies

Financial

Non-payment of performance fees by presenter

Medium

High

Ensure contracts have at least part payment upfront

Demand

Demand for our traditional theatre product very high in market B

High

High

Invest in developing a traditional work every two years

Demand for our interactive work in market B declines

Medium

High

Don’t invest in this market

Management

Not finding suitable agent / producer in priority market

Medium

High

Use market intelligence to shortlist potential agents

International agents do not meet agreed targets set in place

Medium

Medium

Ensure sunset clause so contract can end after a year at any time

Loss of Executive Producer

Medium

High

Ensure sufficient handover and up-to-date database

Our key advocate in a given venue/festival leaves

High

High

Ensure they introduce you to their replacement


Example - Three year market development budget

When creating a market development budget it is important to consider both the investment in developing markets, and the income generated from these activities, for example, touring, showcasing, and trips to markets.

Year

2010

2011

2012

2013

2014

$,000

Actual

Actual

Budget

Forecast

Forecast

Market Development

Total Income

5

37

23

19

23

Total Direct Expense

31

50

61

60

94

Profit/Loss

-26

-14

-38

-41

-71

Touring

Total Income

115

219

271

292

414

Total Direct Expense

117

173

220

233

280

Profit/Loss

-2

46

51

59

134

Residency Exchange

Total Income

0

0

0

0

0

Total Direct Expense

0

0

0

0

0

Profit/Loss

0

0

0

0

0

Total Income

120

256

294

311

Total Expenses

148

223

281

293

Net Profit

-28

33

13

18

63

Net MD margin

-23%

13%

4%

6%

15%


Matching product to priority markets



Priority and non-priority markets

A priority market – one that the artist or company and/or agent will actively invest time and resources in developing regular and profitable market development opportunities.
These should be limited in number.
Non-priority market - one that the artist or company or artist will react to opportunistically rather than actively invest resources and time in developing.
The company may decide to undertake a tour in a non-priority market if pre-defined criteria are met.

Priority markets - matching product to markets

  • Product fit – is there demand by presenters for my work or my type of work in a given market? Do my competitors present work in these markets?
  • Price fit - if yes at what price does the demand exist? Is this price enough to build financially, culturally and artistically sustainable tours?

 

Related questions include:

  • What are the presenters in those markets looking for?
  • Can presenters in that market pay the fees needed?
  • What other Australian or international work, similar in aesthetic, size and scale is presented in that market?
  • Are there any language barriers to my work?
  • Do I have any relationships in that market?

Example priority market - children’s text theatre

A priority market is one where:

  • There is latent demand or evidence of demand for your product
  • Their economy is fiscally strong
  • The Australian dollar is relatively weak
  • The work is distinctly different and extraordinary
  • A culture that is children-centric and has a demonstrated emphasis on the value and role of children in the society
  • English-speaking or a strong desire to learn English
  • Established touring circuits and ease of touring
  • Demonstrated propensity to pay the fees at the level you set
  • Existing trade and/or foreign affairs relationships with Australia
  • Demonstrated propensity to present Australian work
  • Demonstrated ability to present a competitor’s work (national or international)
  • Existing relationships with you or other Australian companies
  • Alignment with business practices in Australia
  • Large middle class with the ability to pay for tickets
  • Reasonable proximity to Australia


Example - Product characteristics analysis

A product analysis is a key step in matching a work to a potential market. 

Product Characteristic

Product A

Product B

Product C

Type of buyer

Venue or theatre festival

Festivals with outdoor programming

Venue or theatre festival

Type of venue

Proscenium arch

Outdoor

In theatre open space

Venue flexibility

Low

Low

High

Audience size

100 - 400

Up to 1200

Up to 100

Ticketed

Yes

Generally tree entry

Yes

English comprehension

High

Low

Medium

Use of puppetry

High

Low

Medium

Interactivity

Low

High

High

Narration based

Yes

No

Yes

Length

45 minutes

3 hours

45 minutes

Max daily shows

3

2

3

Remount required

Yes

No

Yes

Relative Price

Medium

Medium

Low


Example - Priority market analysis

A high-level assessment of potential priority markets.

Criteria

US

CAN

UK

KOR

CHN

HK

TW

Demand for our product or style of product

M

H

M

H

M

M

M

Relative (internationally) fees paid

L

M

M

H

M

H

H

Subsidy required to offset touring costs

Y

Y

Y

N

Y

N

N

Logistical ease of touring intra and inter the market

M

H

H

H

L

H

H

Strong existing market relationships

N

Y

Y

Y

N

Y

N

English speaking audience

Y

Y

Y

N

N

N

N

Interest in English language theatre

-

-

-

Y

Y

Y

Y

Open to more risky theatrical experiences

L

H

H

M

L

Y

M

Australia Council focus

M

M

N

H

N

L

N

DFAT focus

N

N

N

Y

Y

N

N

YN = Yes, N = No, H = High, M = Medium, L = Low, N/A = not available


Researching a market

It pays to conduct thorough research to shortlist potential priority markets. The final step is to visit a market to showcase. Some key steps include:

  • Define draft criteria to assess a potential market
  • Identify and speak to industry peers who understand the potential market (other companies, producers, agents, artist managers etc)
  • Find a mentor with a good working knowledge of the potential market

Speak with the International Projects section of the Australia Council, Austrade and the Department of Foreign Affairs and Trade.


Distribution models


Different distribution models

A company’s distribution model is defined as the approach used for developing touring opportunities in priority export markets.
The choice of model should be a conscious decision and reflect the company’s resource capacity, risk appetite and capacity to invest in the development of a priority market.
Approaches used by companies include:

  • Direct to market- the company or artists develops and owns relationships directly with presenters, producers and promoters in each market
  • Agency or artist manager- the most common model where a locally based agent, generally working on a commission basis, is engaged to act on the company’s behalf to develop tours with local presenters. The agents own the relationships and the market knowledge
  • Producer- less common but often highly effective where a company deals directly with a producer in a market or cluster of markets
  • Hybrid model – a combination of the models above.

Direct to market - key advantages

  • Key relationships are owned by the artist or company and the company can control who and how often key presenters are approached
  • The company brings the ownership of a critical business process and market knowledge internally into the organisation
  • Significantly increases the ability to appoint the appropriate agent at a future point in time
  • Opportunity cost of agency fees can be invested directly in market development costs
  • Can use the support of other agencies e.g. Austrade and DFAT to supplement your resources and sales force in targeting and developing market knowledge.

Direct to market - key disadvantages

  • The time and cost taken in developing an understanding of and key relationships in the market
  • Need to be present regularly and visibly in the market
  • Company needs to invest more time and resources up-front in market development
  • The number of priority markets that can be effectively developed is limited by the capacity of the organisation to invest in market development.

Agency lead - key advantages

  • Agent’s own existing relationships and market, tax and visa knowledge
  • They are sometimes based within or closer to the market
  • Companies can contract different aspects of the market development and touring logistics (i.e. visas, tax etc)
  • The lead time to get an initial tour may be shorter
  • Can result in longer tours
  • Can result in better fees
  • Can increase your reputation if the agent is well known, respected etc.

Agency lead - key disadvantages

  • An agent’s objectives may not align with yours – ask them what they are
  • Companies often outsource this critical process and the associated market knowledge entirely
  • Very few artists ask agents to have performance targets and sunset clauses built into their contracts
  • Their fee structure doesn’t often reflect the downside risk companies are taking
  • Agents often have too many artists and companies on their books to provide targeted focus
  • They often claim to service more markets than is reasonably possible.

Producer lead - advantages and disadvantages

Advantages

  • They often have their own money at risk in a project
  • They often have a vested (profit and reputation) interest in ensuring performances are sold out

Disadvantages

  • There are often only a few in each geographical market.

 

Key tips for building your reputation in a priority market

  • Identify the key programming segments and which time of the year they occur / program i.e. when is the festival season, when do theatres program
  • Research and identify the key programming influencers / flagship programmers in each segment
  • Confirm your key points of difference in that market (it should not be just about price)
  • Target these programmers and begin to build a personal relationship – don’t rely on agents etc. to do this
  • Visit the market regularly (at least once a year) and meet with key influencers
  • Secure a first season and invite other key influencers in the market to this season
  • Get respected presenters to advocate for you.

 

Why this tour?




Key criteria for saying yes to a market opportunity

If at a minimum it:
  • Is an opportunity in an agreed priority market
  • Does not put people at risk of injury or death
  • Does not compromise the company’s overarching mission, vision, company or cultural values or brand
  • Covers all direct touring costs and makes a contribution to market development overheads / fixed costs
  • Assists the company to achieve a goal or initiative set out in the market development plan
  • Does not divert scarce resources away from implementing higher priority goals / initiatives in the market development strategy
  • Can be resourced without affecting other key programming and business commitments in the business plan

Key criteria for saying yes to a non-priority market opportunity
If at a minimum it:

  • Does not compromise the company’s overarching mission, vision, company or cultural values or put people at risk of injury or death
  • Covers all direct touring costs and makes a contribution to market development overheads and organisation income
  • Fills the gap in an existing tour and improve the profitability of that tour
  • Does not compromise priority markets including diverting scarce resources away from implementing the market development strategy
  • Can be resourced without affecting other key programming and business commitments as set out in the business plan

Key criteria for saying no to a market opportunity
If it:

  • Compromises the company’s overarching mission, vision, values and / or brand
  • Puts people at risk of injury or death
  • Compromises priority markets including diverting scarce resources away from implementing the market development strategy
  • Does not cover direct touring costs
  • Cannot be resourced without affecting other key programming and business commitments
  • Does not fill a gap in an existing tour


Pricing your work in a market


There are a number of methods for pricing a product in a market

  • Direct Cost Pricing – all the direct costs to deliver the product to the buyer
  • Cost Plus Pricing – all the direct costs to deliver the product to the buyer plus an arbitrary margin on top
  • Full Absorption Pricing – all the direct costs and proportion of overhead costs e.g. market development, remount, product development
  • Value Based Pricing – what price will the market bear?
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