Monday, April 7, 2014

The Fee-for-Service Model Migration

By Steven M. Worth

Twenty to thirty years ago the majority of associations derived up to 80 percent of theirrevenues from membership dues (from ASAE sources). However, this scenario began to change inthe past two decades. Younger people ceased joining organizations with the same enthusiasm astheir parents, and when they did join, it grew harder to keep them. As a result, many membership organizations began to experience a graying of their membership base.

Associations have responded in part by seeking out revenue streams beyond membership and havebeen forced to do some self-reflection on the value of membership itself. For many associations,nondues revenue coming from nonmembers will grow increasingly important in the future.

Associations that recognized changes in the nation's socio-economic structure-such as the factthat most people change jobs several times in their career-were quick to develop and promotethose products and services the market was demanding. Certification and accreditation programsthat help enhance employability and guarantee quality, for example, are now in demand. Also ofpremium value are the education and training programs that support them. Many of theassociations that have done the best financially over the past twenty years have transformedthemselves into centers of professional learning or places where industry and professionalstandards are defined.

Following are some trends in today's association landscape, each of which bears heavily onmembership and revenue.

Networking means something different nowadays. Potential members are more than ever 
looking to associations as opportunities for networking. While networking has always been a drawfor associations, it now often is valued as a job search tool first and foremost, whereas for priorgenerations networking simply meant meeting and forming bonds with people with similar valuesand interests. ASAE's Career Headquarters is a good example of a career network service thatincreasing numbers of associations are offering.

Associations have become more specialized. The International Institute for Real Estate Finance 
is a spin-off of the Mortgage Bankers Association of America; the National Coalition for Quality Diagnostic Imaging Services was created to represent a niche group: the manufacturers and users of magnetic resonance imaging.

Revenue flows have changed. As much as 80 percent of a successful association's revenues now 
come from the sale of products and services. The Institute of Internal Auditors gets only 25percent of its revenue come from dues.

Associations have had to learn to cultivate, promote, and protect their name brands in the same way as for-profit corporations. The American Association of Snowboard Instructors was created as a brand within the Professional Ski Instructors of America for the simple reason that snowboarders have historically considered themselves a separate breed from skiers. Associations,in fact, have even had to compete increasingly with for-profit corporations entering fields that have been usually the reserve of nonprofit organizations. Organizations that have failed to adapt to this new environment have either become "clubs" of like-minded friends who meet for social purposes, or they have ceased to exist altogether. Following are some tips to can help your organization succeed in this new climate.

Consider membership a gateway-not an end unto itself. Membership in AARP-the largest membership organization-costs $12.50 a year in dues. Their principal interest is to provide valuedproducts and services to their target market. In effect the American Association of RetiredPersons, Washington, D.C., charges only enough in membership dues to maintain members onmailing lists. The real revenues-and the fulfillment of the organization's mission-come from thekind and quality of products and services the organization delivers.

Revisit your strategy. Review your strategic positioning in the market and your organization's relevance annually. In a survey of Washington, DC-based associations conducted 10 years ago,Plexus Consulting Group, Washington, D.C., found that most associations were doing a top tobottom strategic analysis of their operations every four to five years. A 1999 survey found thatmore than half of the associations had begun doing this strategic planning annually.

Create value for your name brand. As membership loyalty declines people make their buying choices based on what they know and hear about name brands. This means that successfulassociations are much more attuned to the need for building and maintaining brand awareness-inmuch the same way as the for-profit world operates. The CPA of The American Institute ofCertified Public Accountants is a good example of a certification "product" that has developedremarkable brand recognition in this country and around the world.

Define your target audience and know their needs and concerns. Many associations make more sales to people and organizations that are not members than those who are-even when there is afinancial advantage to being a member. For example, the Project Management Institute, NewtownSquare, Pennsylvania, one of the nation's fastest growing associations in terms of revenue, derivesas much of its product and service revenue from nonmembers as from members.

With membership loyalty largely being a thing of the past, associations must develop cutting-edgeproducts and services that can compete in increasingly crowded markets. Levels of both nonduesrevenue and sales to nonmembers can serve as an indication of your association's future relevance.

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