Business culture

While the range of activities has widened, retail and catering still dominate – at least in terms of turnover.

The success of commercial ventures depends on the degree to which organisational processes give room for entrepreneurial thinking and the priority this is given at senior management, board and funding level. This is manifest in the ability to bring in staff with commercial sector experience, the position and authority of managers responsible for commercial activities, and the status of income generation in the annual planning and budgeting process, as well as the level of internal monitoring, control and information sharing between senior management teams and operational staff.

Evidence suggests that the net financial benefit derived from commercial activities, defined as net contribution to museum central budgets, is limited and only in a few cases exceeds 5-10 per cent of a museum’s core operating budgets.

Attendance levels and admission income are driven by visitor service levels. The provision of catering and retail services can be critical of this and can justify low levels of financial return.

The overall integrity and effective stewardship of the brand is critical. Ultimately, the distinctiveness of the museum’s core product (that is, the collections and buildings, the programme of activity) drives the income-generating and commercial opportunities. Protecting and building on that distinctiveness (in marketing terms, the point of difference or the unique selling point) is therefore central to any long-term commercial strategy.

In practical terms, this applies equally to the product range on sale in the museum shop, the range of titles in the publications programme, the type of product developed under licence, the character of the café and pricing of refreshments, and the types of events for which the museum hires out its premises.

Many museums have drifted into revenue raising activities or been driven by a sense that it is “the thing to do”. What may seem an interesting idea can turn into an expensive activity which may not generate the anticipated income. Commercial activities expose the museum to market forces and the risks that come with it.

The museums and galleries sector is a mixed economy, possibly affected more directly (than purely commercial creative industries) by the Government’s policy agenda in relation to broadening access and social inclusion. In such a context, museums can find themselves caught between the Government’s policies to increase attendances, and the drive towards maximising opportunities for increasing income. In some cases, this may well make it difficult for museums to operate their income generating operations according to market-led principles.

The importance of Government policy on museum’s ability to develop successful income-generating operations must not therefore be underestimated.

The need for museums, galleries and other cultural centres to operate as businesses is well recognised, as is the huge profit potential of associated retail and catering ventures. Sleek, professional operations that complement the existing brand can do very well, and museums and galleries that don’t exploit those brand values to the full will be quickly exposed and fall dramatically short of their potential. After all, a trashy gift shop not only devalues the integrity of the institution to which it is attached, but it also sends out negative messages to the world about how we view the guardians of the UK’s historical and cultural heritage.

So what’s the secret of a museum or gallery’s successful outlet? At the heart of it is an awareness of the importance of sending out the right “message” when developing interior, product and graphic designs. If these fail, it becomes difficult to compete successfully with retailers and other leisure groups for the public’s precious time and money. Money, of course, is inextricably linked to the increasing “surf’s up” mentality. On-site outlets not only generate extra funds to plough back into gallery maintenance and exciting exhibitions, but are necessary to benefit from Lottery hand-outs, which are available only if supported by private funding.

Another extra source of revenue can come from high entrance fees, although the Government is introducing a maximum £1 museum entry fee for the 12 major museums it funds from September 2001. This will apply to all adults between the ages of 16 and 60 – children and the over 60’s already enjoy free entry.

The British Museum is one institution that retains a free entry scheme. Extra revenue is generated by the museum’s on-site retail outlets, cafés, and two stand-alone shops, each one targeting a different audience. “From the research carried out, it’s essential for a museum outlet to feel like an extension of its exhibitions,” says Kate Channing, head of retail at the British Museum. Andrew Bone, creative director at Four IV, which worked on the National Portrait Gallery graphics, agrees. “Public perception is often clinched in the commercial facilities, services and products provided,” he says.

A careful and sensitive balance needs to be achieved to both exploit brand values and maintain reputation. “We consider it essential to convey a message of integrity over profitability,” says The Lowry’s chief executive, Stephen Hetherington.

“We view high quality, bespoke interiors and branding to carry the identity forward as an essential part of the commercial expansion process, so we’ve used leading architecture, interior, retail, catering and graphic design specialists to help us develop our commercial side without undermining the Museum’s reputation,” says Channing. “Such partnerships, if managed effectively, not only increase awareness of gallery collections and exhibitions, but also raise the profile of the gallery both culturally and commercially.”

Extracts from Creative Industry: Generating Income for Museums and Galleries, published by the Museums & Galleries Commission, now known as the Council for Museums, Archives & Libraries