Copyright American Society of Association Executives Aug 2005| [Headnote] |
| Plant a deliberate process to evaluate programs and partners. |
YOUR BOARD MEMBERS want you to show them the money. Whether it's discounts on long-distance learning or insurance programs, funds generated from nondues-revenue programs are critical to the fiscal health of most associations. But which programs are the right ones for your association?
In the nondues-revenue arena, haste definitely can make waste. Making a sound investment for your association requires careful planning from start to finish. Consultants and your colleagues share their strategies for building a nondues-revenue portfolio that delivers return on investment and member satisfaction.
Negotiating the nondues necessity
Many associations have responded to economic pressures affecting the industries and professions they represent by focusing more heavily on generating nondues revenue. "Nondues revenue allows associations to have more diversified revenue streams," says Jodie H. Slaughter, president of McKinley Marketing, Inc., Chevy Chase, Maryland, and incoming board chair for ASAE Services, Inc. Among other association-marketing assignments, Slaughter's company develops strategic partnerships between associations and corporations and advises associations on their programs. Establishing these partnerships has become even more important in recent years. "Associations never want to raise dues, and for trade associations, mergers and acquisitions decrease the number of members who pay dues," Slaughter says. "Similarly, professional associations are hit particularly hard by a bad economy if most of their members are responsible for paying their own dues."
| [Photograph] |
| Jodie H. Slaughter |
| Nancy Frede |
In our current economy, consumers-including your members-have multiple choices about where they purchase services and products and from whom. They may no longer equate association membership with getting the best deal. "Associations need to be competitive, especially with the Internet making it easy for everyone to identify the best prices and features for all kinds of products and services," says Laurie Ford, president of Critical Path Consultants, Columbus, Ohio. Ford's consultancy focuses on helping associations understand how to create more mission-relevant nondues revenue.
The bottom line, says Nancy Frede, owner and president of MarketSense, a Wethersfield, Connecticut-based company specializing in the development of nonduesrevenue strategies for associations, is that "memberships are fewer, and reasons for joining have changed. Associations need other ways to generate money." To generate these much-needed funds, associations are challenged "to identify specific member needs," says Kathy Kiernan, vice president of business development for the ASAE-sponsored program Affiliate Power Purchasers International Savings Solutions, Salisbury, Maryland, "and then establish themselves as the place members turn to first to get those needs met."
| [Photograph] |
| Kathy Kiernan |
Managing to avoid mistakes
While the necessity of associations generating nondues revenue is evident, the best approaches to take in evaluating, marketing, and administering nondues-revenue programs are less transparent. "Programs don't run themselves," says Slaughter. "They require careful consideration on the front end and care and nurturing on the back end."
Slaughter and her colleagues share these strategies for building the best portfolio of programs for your association.
Do your homework. Is your association tuned in to members? "Find out what keeps your members up at night and then develop unique ways to deliver services that address that need," says Slaughter. "Associations don't always know what their members need to be successful," says Ford. "Member surveys are a great tool, but you have to ask the right questions: What's your biggest problem, and how can we help?" (See sidebar, "Just Bill Me.")
In addition to conducting surveys, Kathy Kiernan of APPI recommends "test driving" your programs before introducing them to the entire membership. "It's a good idea to introduce a pilot or trial program to a representative sample of members, who may later become great ambassadors for the program when it is launched to the entire membership," says Kiernan. She acknowledges that "this may not be necessary for all associations, because they've already done research or have committees set up to evaluate member benefits."
Review what you have to offer. "When I work with organizations, the first thing I ask the CEO to do is make a list of every single nondues-revenue offering that is currently available to members and other customers," says Ford. This exercise helps you see the big picture before you begin introducing new programs. Instead, the best strategy for your association might be combining several existing offerings to create packages.
Treat your programs like businesses. Often associations do not engage in the business planning required to launch and administer successful programs. "Associations don't necessarily understand how to develop this kind of business plan," says Frede. "For one thing, they rarely use forecasting because they don't collect good data about their members-or if they have data, they don't have the capability to use it effectively."
Employing staff who specialize in this area can help associations overcome these difficulties. "It's important to have staff who understand the business of negotiating contracts and managing relationships," says Dixie Arthur, president of ASAE Services, Inc. Slaughter observes that the responsibility for these programs is often delegated to someone junior on an association's staff, which indicates that senior staff may not always recognize the importance of this job nor the impact that right staff can make on this key area.
In terms of overall approach, Slaughter offers this advice: "I don't think associations should behave like businesses, but they need to treat certain initiatives as businesses. If they would think of [generating] nondues revenue as part of their core operations, their programs would be more successful."
Count your money. Everyone in your association, especially your board, needs to understand the gross and net return on nondues-revenue programs. Evaluate how much it costs to produce the product or service. Consider the cost of staff time as well, and make this information visible to your board. "Making these determinations can be difficult," says Ford, "but a ballpark figure is better than nothing." Ultimately, you'll use this information to provide regular updates on how your programs are affecting the allocation of staff time and other resources.
Be patient and don't go for the quick fix. Developing profitable programs is a complex process that doesn't always unfold as quickly as you may have anticipated. "In our experience, it takes about three years to generate a full revenue stream from a program," says Arthur. "Many associations tend to look at short-term revenue needs instead of exploring the big picture of nondues revenue," says Ford.
While you don't want to keep a program that's floundering in place, you also want to avoid discontinuing a program before it's really run its course. "Smart business people know that not everything works. In fact, it's rare to have a winner the first time out of the gate," says Slaughter. "The key is to be open to experimenting and trying a lot of different things in a measured way. You learn how to make things work as you go along, and in the process, develop a diversified portfolio of offerings."
Put the appropriate policies in place. Has staff been trained to communicate about your programs? Do you have a problem-resolution strategy as well as a customer-service policy? "Responsibilities for program marketing and implementation should be candidly discussed and agreed upon before contracts are signed," says Slaughter. "It must be clear who plays what role in any given situation." Established policies provide a mechanism for clear and consistent communication about your programs, which contributes to good relationships with your business partners and high levels of member participation.
Consolidate deal-making authority. "You have to be able to walk away from any deal," says Arthur. "Sometimes you can't compromise on your terms." As such, deal-making must be centralized in your association so that only a select few have the authority to enter into agreements on behalf of the organization. This centralization results in the consistent evaluation and administration of both existing and potential programs.
Perfecting your partnerships
Once your internal strategy and policies are in place, you need to establish guidelines for selecting and working with business partners. "One of the key factors in selecting a partner is trust," says Ford. "Who will your members trust? What kind of reputation does the vendor have with members?" Slaughter agrees, "You've got to know what's in the hearts and minds of your rank-and-file members. Corporations might have staff charged with building relationships with associations, but that doesn't mean their particular offering is right for your group."
After you've conducted your reality check, here are some additional key steps to take in identifying potential partners for your association.
1. Be active in the process, not reactive. "Don't rely solely on the program proposals that come in over the transom. Conduct a scan of the market," says Slaughter. "Determine who the players are in the marketplace and find out more about them." Once you've completed your scan, you may be ready to begin developing a request for proposals.
2. Concentrate on developing long-term relationships. Ideally, you want to work with a partner who demonstrates commitment to your organization and understands the decision-making process of associations.
3. Investigate the company's financial Strength. "You can find out a great deal about a potential partner's finances by visiting the company's Web site and downloading its annual report," says Arthur. She also suggests using resources such as Dun and Bradstreet and Standard and Poor's to evaluate the fiscal stability of an industry partner.
4. Determine if the company can serve your market. If your association is national in scope, you want to ask about the partner's ability to offer products or services regionally and nationally. Additional concerns include the level of staffing available for your program and the amount of money the partner is willing to invest in marketing it.
5. Find out what kinds of progress reports you will receive. "You need to ask potential partners how you will find out what's happening with your program," says APPI's Kiernan. "Request samples of the reports that you will receive and make sure they are easy to read and understand." Even more important, says Kiernan, is whether the reports contain the information that you want to track, such as number of phone calls or number of members who contact the partner. APPI provides its association clients with quarterly financial and marketing reports and then follows up with them to address any questions.
6. Have a plan for the year and stick to it. Maintain a master list of the programs that you've determined would be of interest to your members. Use this as your guide when approached by potential partners. If their program didn't make the list, that particular offering may not currently be a priority for your association. According to Frede, the question you always need to ask is simple: "Does the membership want it?"
7. Ask for relevant references. Does the potential partner have association experience? "We hear from so many companies that want to get into the association market," says Arthur, "when what we're looking for is partners with experience in the market."
However, bear in mind that as carefully as you may be evaluating potential partners, similar scrutiny of your association is taking place on their end. "Associations have to remember that nondues-revenue programs are two-way business deals," says Arthur. "You have to have something to sell to attract and keep good partners."
Once you've done due diligence in selecting a partner, you need to give careful attention to building a good working relationship. One of the keys is giving your partners access to the information and people they need to successfully market your program.
"Often, association executives don't see the need for marketing," says Ford. "You have to market your programs because you cannot rely solely on member loyalty. This also means you'll want to allow your partners to communicate with your members."
For example, "an association's unwillingness to provide membercontact information hinders a program provider's ability to engage in proactive marketing," says Kiernan. Often, associations will say that they'll take care of the marketing, and then they don't. "Most associations don't have the time, energy, or program knowledge to market programs appropriately," adds Kiernan.
Another concern is reluctance to focus on specific segments of membership (e.g., size, revenue, region, or number of employees) when marketing the program. "Some associations are hesitant about targeting specific segments of their memberships," says Kiernan. "They want the program to be for all members, but their partners recognize the need to be very focused in presenting the message of their programs so they reach the right members."
In addition to segmentation, endorsements from active members help open the door to building successful programs. One of the best groups to approach for endorsements is your board. Board members have to not only approve programs but must understand them and commit to their success. "Give us access to the board," says Kiernan. "APPI goes before boards during the approval process to make sure our program is understood, and we provide ongoing support to our clients in presenting information to their boards about the progress of their programs." Your association and your partners want the same result: a successful program.
Realizing return on investment
Any discussion about working with partners to develop member programs inevitably turns to dollars and cents. Are associations making any money? Yes. No. Perhaps. It really depends on how their nondues-revenue initiatives are designed.
"Yes, people are making money," says Ford. "To realize return on their investments, associations need two key ingredients:
1) the ability to offer direct services that members need (or will use) to be successful, and
2) the flexibility to make internal organizational changes so their staffs are focused on providing value for member success."
Commitment to programs being offered is also critical to financial success. "Programs don't sell themselves," says Kiernan. "The association has to get behind the program, or its partner is just another company with a marketing list."
However, sometimes it's not all about the money. "Association CEOs will tell us that it's more important to them to show their members value by providing a source of advice or information than it is to generate actual dollars," Kiernan.
"Some programs operate at a loss," says Frede. "And that's acceptable as long as the association has identified which programs in its portfolio are designed to make money and which ones are being offered to serve a member need and build value." She also observes that while certain types of programs that involve securities or insurance generate significant revenue, they may require specialized staff support, adding to labor costs.
"Often, associations don't track the soft dollars associated with their programs," says Slaughter. Arthur agrees and suggests that it's important to set benchmarks for both revenue and expenses. "If your association is not seeing a double-digit percentage of return after a reasonable period of time, it may be time to sunset that particular program," says Arthur.
Catching the competition
The competition for member dollars continues to get stiffer, making it critical for associations to clearly communicate the value of their offerings to members. "Associations are just like for-profit businesses in that they have their own stakeholders to whom they must demonstrate value," says Kiernan. "People have so many choices," she says. "Associations have to show members what they're bringing to the table."
One important attribute associations bring to the table is their ability to negotiate with their partners to offer members above-average products and services (See sidebar, "Better Than Off the Street.") "Associations will remain competitive if they leverage their unique assets and differentiate themselves in the marketplace," says Slaughter. "For example, the American Physical Therapy Association offers its members disability insurance that covers the loss of use of thumbs. Where else can their members get a policy like that?"
However, Slaughter notes that associations often "can't respond to the market as quickly" as their for-profit competitors, which will make it difficult for them to remain competitive. "The marketplace is so much bigger than associations realize. They need to focus more on marketing and competition," observes Ford, who adds that "many associations haven't really discovered their markets."
"To remain competitive, associations need to develop win-win relationships with their partners and, more important, be willing to listen to member feedback about their programs, even if it's negative," observes Frede, who says it's hard to admit that a program didn't work, but there is no benefit in continuing to offer a product or service that members don't support.
Monitoring your association's marketplace and maintaining flexibility are crucial to staying alive in a competitive market, but often organizations don't have the internal resources to do this. "Associations remaining competitive will require that they work with partners who will not only keep up with the marketplace but stay ahead of it," says Arthur.
Despite continuing challenges, Ford remains optimistic about the future of associations in the marketplace. "Associations have the high ground, the inside track," she says. "They have member expertise at their fingertips. If they use it to leverage their marketing, they can beat the competition."
| [Sidebar] |
| Better Than Off the Street |
| "We have concentrated on offering members benefits that are better and visibly more attractive than what they can get by themselves off the street," says Jay L. Rothberg, vice president, office of the CEO, and manager of insurance programs for the American Institute of Certified Public Accountants, New York City. |
| AICPA introduced its first insurance program in 1947. Today its three most successful programs are life, long-term disability, and professional-liability insurance. Sixty-five percent of AICPA members participate in the life insurance program, and close to 50 percent of public accounting firms in the United States utilize the professional-liability insurance offered by the institute. |
| [Photograph] |
| Jay L. Rothberg |
| [Sidebar] |
| Rothberg cites several attractive features of the AICPA plans-notably, the annual refund of premiums based on the plans' experience for the life and long-term disability plans and the risk management/early-intervention programs of the professional-liability insurance plan. |
| In his 17 years at AICPA, Rothberg has helped grow the institute's insurance programs from 5 in 1987 to 13 today. "Our programs have been so successful because we had a good product to begin with, and we keep working to make it even better," he says. |
| AICPA conducts an electronic member survey every two years and focus groups on an ongoing basis. Among other areas, members are asked to evaluate AICPA's insurance products. "Associations often make the mistake of putting revenue before benefit," says Rothberg. "It's very important to conduct research in the beginning to find out what members value because it's almost impossible to kill a program once it gets under way." |
| In addition, the organization has two standing committees specifically charged with monitoring the current insurance programs and providing ongoing feedback about them. Rothberg believes AICPA members really value the oversight of the committees, which are responsible for overseeing the plans' design, marketing, experience, rates, and overall operations. When AICPA conducts a due-diligence study or considers a new program, the committees also help design the request for proposal, evaluate the responses, and make a recommendation to the board of directors. |
| This formal "due diligence" process has certainly contributed to the overall success of AICPA's insurance programs according to Rothberg, who believes that "one of the biggest mistakes an association can make is starting a program without doing sufficient research." Relying solely on "anecdotal member feedback or the emotion of a few members who think you can offer something that you can't" is not the way to go. |
| For example, Rothberg does not foresee AICPA adding whole life or health insurance to its offering in the near future because the former is not attractive to his members, and the association cannot offer a plan that "beats the street" in the latter case. Rothberg sums up AlCPA's approach to launching nondues-revenue programs: "If you can't be better than the marketplace, you shouldn't be in the business." |
| [Sidebar] |
| Just Bill Me |
| "What could we offer that members couldn't get elsewhere?" Four yeas ago, this question took priority during planning discussions as the Ohio State Medical Association, Hilliard, tried to determine why its membership was declining. "We had to think about what kind of value OSMA could offer to members," says Mark C. Jarvis, managing director of OSMAdvantage, the association's business arm. "We had to ask ourselves if the membership model was still relevant and how we could help our members in a more meaningful way." |
| In the past OSMA focused primarily on advocacy, which Jarvis describes as "the view from 10,000 feet." With the introduction of business services, "We have become much more intimate with physician practices, and we know more much more about how our members run their businesses." OSMA's new focus is on member needs and how well the association can respond to them. |
| [Photograph] |
| Mark C. Jarvis |
| [Sidebar] |
| OSMA conducted an extensive, paper-based member survey in 2004 and continues to solicit member feedback through quarterly quick surveys accessible on the association's Web site. "We continue to conduct research and collect feedback," says Jarvis. "The first services we launched addressed the highest need areas." |
| Not surprisingly one of those areas was revenue-cycle management. To address this need, OSMA selected its first corporate partner, Athenahealth, Waltham, Massachusetts. "It was an ASP model-unlike any other system, Athenahealth could constantly update its system as insurers changed their payment rules," says Jarvis. One of the challenges OSMA faced in the beginning of the relationship was learning how to step outside the usual association mind-set and work with a for-profit business. (For more on OSMA's partnership with Athenahealth, see "Quality Equation" in the August 2004 issue of ASSOCIATION MANAGEMENT.) |
| In addition, while tackling reimbursement seemed like the logical first step, Jarvis acknowledges that this choice forced the association to ramp up quickly into its new role: "Practically overnight, we had to learn two new languages-one to comprehend medical billing at the office level and the other to communicate physician expectations in a language a vendor could understand." |
| Now that the association's first nondues-revenue program is up and running along with eight others, Jarvis and his team are prepared to field the calls they receive daily from vendors who want to partner with OSMA. "We now have a system for vetting opportunities," says Jarvis. "We maintain a list of potential services ranked by level of importance as well as an estimated timeline." When Jarvis talks with vendors his key question is always, "If we add OSMA to this product or service, what can we offer that members cannot get elsewhere?" |
| OSMA's board of directors signs off on each new partnership. "The board's level of involvement in approving new programs depends upon the level of risk the partnership involves," notes Jarvis. "If the opportunity is high-risk, representatives from the company make a formal presentation to the board." For lower-risk opportunities, Jarvis sends a two-page analysis of the program to the entire board via e-mail soliciting feedback. However, the officers of the board are authorized to make the final decision. |
| According to Jarvis, relevancy and value are the most important factors in evaluating any potential nondues-revenue program, and the value must apply to the membership as well as association operations. He says, "You have to be able to look your members in the eye and say this is the best service or product available anywhere." |
| [Author Affiliation] |
| Apryl Motley is senior editor of ASSOCIATION MANAGEMENT. E-mail: amotley@ asaenet.org. |