Data Shows Non-Dues Revenue Key to Association Sustainability
By Hank Berkowitz
If you think you’ve been spending more time on non-dues revenue programs than you have in the past, you’re not alone. As last month’s Association Adviser enews reader poll discovered, nearly half (45.8 percent) of respondents told us that non-dues revenue is an “increasingly important” component of their 2012 budgets. Nearly one-third of respondents (30 percent) said non-dues revenue will have the same importance it did in 2011, and only one in four (24.2 percent) predicted non-dues revenue would be less important next year.
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“Everyone agrees that associations’ dependency on non-dues income is high,” said Beth Brooks, president & CEO of the Texas Society of Association Executives (TSAE). While this is not a new priority, many groups have found they need to be more mindful and strategic about non-dues income.”
According to Ken Cousineau, executive director of the Canadian Golf Superintendents Association (CGSA), non-dues revenue (NDR) accounts for nearly 70 percent of his organization’s revenue—up from 55 percent in 2005—and is becoming the mantra for professional, non-mandatory organizations. Cousineau expects NDR to account for even more of CGSA’s revenue in the next two to three years.
The move toward NDR has been the trend for at least the past decade and is not necessarily because of the recession, according to Chris Monek, Senior Executive Director of Business Development, Programs & Industry Relations for the Associated General Contractors of America (AGC). “The key to a successful NDR program is how it contributes to member value. For instance, I put together a lot of affinity relationships with partners such as GM, Ford, BP and Enterprise. We negotiate deep discounts for our members and that directly helps our recruiting and retention efforts. What’s more, we share the royalty payments we receive from our partners with our 95 chapters.” It may look like NDR, but it really is what supports the member value inherent in their dues, Monek added.
As a percentage of your 2012 budget, what is your expectation for non-dues revenue?
Source: Association Adviser enews and Naylor, LLC 2011 | N=120
Our reader poll mirrors the findings we detected in our 2011 Association Communication Benchmarking Report this spring. In that report, more than 40 percent of the 700 responding associations told us their member communication vehicles were required to operate as a profit center (generate non-dues revenue), and only 19 percent said they could run their member communication vehicles as cost centers.
That report also told us that more than half (55.6 percent) of associations now ask advertisers and sponsors specifically if they’re getting their money’s worth, and nearly two-thirds (62.3 percent) told us the feedback they get from advertisers and sponsors is directly incorporated into their pricing considerations.
How has the role of NDR changed at your organization?
“I would say NDR now accounts for 50 to 75 percent of total revenue overall,” according to Ramona Jones, Vice Chair of IBAT Services for the Independent Bankers Association of Texas. “At successful associations, member-dues represents less than half of total revenue. Ten to 15 years ago, dues represented 50 to 75 percent of total revenue. So the ratio has just about flipped.”
The 16,500-member Building Owners & Managers Association (BOMA) is still pretty dues-oriented, according to President Henry Chamberlain, but he expects NDR to account for between 50 and 60 percent of BOMA’s revenue over the next 10 years. “The big wild card is what the membership model will look like for most associations. Will members keep signing on for the whole package or will they want various membership benefits on an a la carte basis?” he asked.
Don’t miss our Corner Office profile with Henry Chamberlain in today’s issue.
Areas for NDR growth
For the New York City-based Direct Marketing Association (DMA), its online career center has been very successful, but it wasn’t until it was outsourced to a specialized vendor that it began to gain traction with members, noted Ken Ebeling, DMA’s senior vice president of membership. “We’re now providing a much better user career experience for our members and that comes back to support the dues equation.”
In addition to education programs, CGSA’s Cousineau said the other area of opportunity is advertising, “provided that you can be flexible and adjust to meet the ‘flavor of the day’ with respect to the management companies that are managing the larger corporate contracts.” According to BOMA’s Henry Chamberlain, his organization is also seeing strong demand for advertising in its directory, magazine, webinars and conferences. BOMA is also seeing good results from its onsite education programs and sales of its best practices books, he added.
AGC’s Monek agreed that webinars and other continuing education programs have been very successful. In a tight job market, he said members really want to enhance their professional development. At the same time, their bosses want to keep travel costs down and keep time out of the office to a minimum. Webinars are a great solution. “We charge for many of our webinars, but we often get them sponsored and that allows us to make the webinars available free of charge, or at a reduced cost for our members.”
IBAT’s Jones agreed that educational programs that don’t require travel and that can meet the multiple needs of the staff “are on the upswing.” Webinars and live clusters, in which small groups of members with similar requirements for training can join together for 2- to 3-hour after-work programs have been very popular, she added.
According to TSAE’s Beth Brooks, most associations depend on meetings and trade shows for a lot of their non-dues income.
“I have also seen growth in online everything: education (all types), as well as online publications and ad sales,” she said. “For associations that have a credentialing program, I have seen a big upturn in their participation. Also, the growth of job banks has been significant, and for some associations, sponsorships have grown as suppliers see the association as a great centralized way to reach their audience.”
Common NDR mistakes made by associations
“One error that has remained constant for most of my association career is not considering the support that is required at the staff level to sustain a new program for the long term,” related CGSA’s Cousineau. “The second most common mistake is not recognizing when a program has passed its ‘best before’ date.”
TSAE’s Brooks observed that associations often rush to add programs and services that they think members will buy. “They don’t do any research, but they expend a lot of staff time developing and marketing, and then members don’t participate,” she said. She advises associations to be deliberate about what to offer, perhaps even doing trial tests. When working with affiliate program, due diligence in vetting the company or service is key.
AGC’s Monek cautioned that NDR is the future, but you can’t get so swept up in selling that you lose sight of the educational program. “It’s incumbent on us to offer the right content—government compliance, for example—with the right credentials.”
IBAT’s Jones said that when exploring broad partnerships and affinity programs, it is imperative for your board to engage professional advisers (legal, accounting and intellectual property consultants) who are familiar with associations versus for-profits. Also, you must invest in staff with energy, relationship building outreach, curiosity and marketing savvy.”
Conclusion
While most associations have a few visionary people on staff, everyone on your team has to learn to become more entrepreneurial, urged AGC’s Monek. DMA’s Ebeling said that it’s not just about looking for new streams of revenue; it’s about learning how to operate in a last-minute, just-in-time environment.
“We used to know three or four months out how a conference was shaping up,” he said. Now, even three or four weeks out, we still don’t have a handle on how many attendees and exhibitors are coming. People are still spending money; they’re just waiting till the last minute to commit. Forecasting has become a real challenge. I don’t see that changing anytime soon.”
While no one knows exactly what the ideal association model will look like in the future, it’s clear from our experts that you’ve got to keep asking yourself—again and again—how you’re delivering real value to members and how you can provide an experience that they can’t get elsewhere in the real (or online) world.
Hank Berkowitz is the moderator-in-chief of Association Adviser enews.
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