Problem Statement: How can the Coleman Art Museum increase total revenues and “reverse the deteriorating financial condition of CAM” given the limited availability of special exhibitions, a declining number of scheduled events, and rising costs?
Analysis of Alternatives:
Membership Restructuring: A key part of the Coleman Art Museum’s success is the membership program it offers. Mercer calls the relationship between the museum and the members “symbiotic” because the member volunteers save the museum from huge operational expenses. In turn, the members enjoy being a part of the museum culture and the benefits they obtain from their payment. However, the membership program has been lacking on revenues lately and needs to be restructured. It is also very complicated by offering six sections of personal membership and four categories of corporate membership. That is 10 different options that members can choose from and can be simplified. The alternative that needs to be implemented includes 4 tiers of personal membership while leaving the corporate membership options as is. Some of the incentives offered to each category will be slightly modified as well as the membership price for each category.
Additional Per-Head Revenue: The Coleman Art Museum can implement a $2.00 admission fee for nonmembers to help them obtain a positive net income. A survey concluded that 50% of nonmember visitors would be willing to pay an admission fee. With this the museum could see additional revenue of $681,642 in 2005 with an increase of 10% in attendance. Also calculated in Appendix 3 is the additional revenue seen with a decrease of 10% in attendance, with this CAM would see $487,879 in revenue. Because 70% of $50 members do not renew after the first year it is vital to create a system that consistently brings in revenue for the museum and focuses on retaining members year after year.
Business Development Opportunities: The Coleman Art Museum has many business development opportunities to assess. Donations in various tiers for individuals, businesses, and other potential non-profit partners as well as other relationship-based strategies including art rental/loan partnerships among museums, proceeds events, corporate partnership events, or even partnerships with local artists offer potential revenue streams. The purpose of all of these events will be to increase the influx of positive cash flows to the museum; hopefully, these opportunities will be a key cog in revamping the profitability of the CAM. The main driver for any plan(s) is cost coverage and profit margin creation in each transaction. Is the cost to provide a service or experience exceed by the benefit? How much risk is