Non-Dues Revenue Key to Association Survival?
By Hank Berkowitz
As associations wrestle with unprecedented demographic, technological, economic and competitive pressures, the membership model as we know it may never be the same. Boomers are retiring. Generation Y needs to be firmly convinced—not simply invited—to join, and there isn’t much wiggle room to raise dues every year in a tough economy. In response, associations are increasingly turning to non-dues revenue to balance their budgets, but many of the experts we spoke with agreed that the association learning curve remains pretty high.
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Our latest reader poll indicates that conferences and live events are the largest single source of non-dues revenue, by at least a 2-to-1 margin over continuing education, corporate partnerships, charitable donations and, of course, advertising and sponsorships. Read Did You Know? for full reader poll results in today’s issue.
However, while trade shows bring in money, data from the last 10 years shows the amount has decreased due to a variety of technological, political and economic factors. Exhibitions are now a risk business, according to Douglas L. Ducate, CEM, CMP, president and CEO of the Center for Exhibition Industry Research. “Associations should review the health of their exhibitions immediately as part of their overall risk management responsibility,” he told us.
What to do?
According to our experts, associations are taking a two-pronged approach: First, they’re finding new sources of NDR, and, second, they’re trying to get more bang out of the NDR programs they already have in place. So, can associations embrace the NDR challenge without turning into what my colleague Kelly Donovan calls “pseudo-NASCAR billboards?” See Kelly’s article in today’s issue.
NDR increasingly important
“NDR will become more important than ever for associations,” according to Naylor Publisher Kathleen Gardner, “as they’re learning to do more with less and struggling to retain members, build ROI and increase attendance and exhibit space.”
Fellow Naylor Publisher Tom Schell agreed. “Too many younger members will not feel like engagement is important, so dues revenue will be smaller.”
According to Gary Hamilton, president of Winnipeg-based Western Retail Lumber Association (WRLA), “NDR will be a more important part of our budget. Like a lot of associations, we’re constantly asking what more value can we add to the membership?”
Member-centric model changing
Naylor President and CEO Alex DeBarr warned that the challenge of staying relevant to members and their industries is going to keep getting more complicated for associations. “They need all the revenue they can get and the biggest membership base with the largest buying power they can get in order to maximize their revenue opportunities.”
Meanwhile, Tim McNichols, NaylorNet publisher and director of business development, said associations need to expand their idea of what a “member” really is. “You also need to understand that not everyone in your marketplace can or will become a member—even though most will need your products and services at some time,” he said.
As DeBarr noted, “It’s a circular challenge—they need to maximize the quantity and quality of their membership to capture the most dues and non-dues revenue.”
Biggest growth areas for non-dues revenue
Schell suggested associations look no further than their screens and tablets for new revenue streams. “The future is simple,” he said. “Online advertising.”
WRLA’s Hamilton believes video is the future, but it must be done well and it can’t be intrusive. “We’re having success selling advertising around the video player, but we’re not going to allow advertising within the video.”
See today’s Association Spotlight column for more of Gary Hamilton’s insights about member communication.
According to DeBarr, associations don’t need to reinvent the wheel to unlock the key to NDR. They also should try to maximize their traditional media offerings, such as print and events. “It takes a clear understanding of the membership, what they need and want, as well as what the advertisers/sponsors/exhibitors want.” Finally, you need to deliver it through a single well-coordinated approach to media, sponsorships and events, he said.
So why do so many organizations struggle with the NDR equation?
Charles Popper, Naylor’s vice president of association relations, said that while sponsorship programs are growing, many associations don’t understand that sponsors want a customized approach before they shell out big bucks. “They don’t want to be boxed into a pre-determined ‘gold, silver and bronze package,'” he said. “Sometimes a blank sheet of paper (not your rate card or media kit) is the best thing to use.” Popper also recommended bringing case studies of successful programs you’ve done with other sponsors.
Marcus Underwood, Naylor’s vice president of online media, said advertising and sponsorships can provide an association’s members with trusted partners and save them lots of time when vetting potential vendors. ” Advertising and sponsorship should be seen as a member benefit, not as a nuisance. Using industry-standard ad sizes and placements will enhance the effectiveness of advertising and sponsorships for both association and member.”
Naylor Publisher Jill Andreu cautions that there have to be some limits. Content that is underwritten by suppliers can seem less authoritative, particularly in cases of full-blown advertorials, she added. “I come from an editorial background. But, the more I become immersed in publishing, the more I’ve been focusing on consumer magazines and advertising placement,” she said. “Advertorials appear in many magazines, including incredibly reputable news magazines. A fine ethical line still exists, and advertisers [and associations] need to be educated so they respect it.”
According to McNichols, associations need to capitalize on their credibility and longevity and make sure members understand that advertising and sponsorship is what makes it possible for the organization to offer its programs, products and networking opportunities at such affordable rates. For-profit media companies can’t claim this, he explained.
Conclusion
The balance between membership dues and “outsider” revenue will always be a contentious issue in the association world. But, thanks to an aging membership base, a tough economy, new sources of competition and a new generation of young professionals who have extensive professional networks right out of school and who don’t use the word “join” the way previous generations do, NDR is a larger part of most associations’ operating budgets.
DeBarr noted that we often we see boards and other influencers pushing agendas or old solutions or assumptions on an already overloaded executive staff. “The better approach is to ask membership and sponsors what they need and want—then try to deliver it.”
Popper said he’s amazed at how few associations actually talk to their advertisers and sponsors—only about 1 percent, according to our latest communication benchmarking study of more than 400 association leader. “Rule No. 1: Ask the very people who are buying from you what you could be doing better,” he said.
Tell us what you think.
Next month we’ll look at the biggest mistakes associations make when it comes to leveraging NDR, as well as success stories about organizations that are finding the right balance between dues and non-dues revenue initiatives that keep the bottom line healthy while not offending members and constituents.
Hank Berkowitz is the moderator-in-chief of Association Adviser enews.
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