The Power of Non-Dues Revenue
I recently attended a large seminar about non-dues revenue (NDR) strategies for association leaders. The presenters did a deep dive into the “balanced portfolio” approach and explored how advertising, sponsorships, live events, webinars, online education, affinity programs, custom research and more can prevent dues increases and hedge against a big revenue hit if your annual convention has an off year.
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“We try to keep our revenue stream evenly divided so we aren’t too reliant on one specific area,” noted Liz Richards, executive vice president of the Material Handling Equipment Distributors Association (MHEDA).”Our revenue stream comes from an even mix of dues, convention/trade show, education and other non-dues revenue, including publications, investments and discount programs (i.e. affinity programs). You don’t want to keep all your eggs in one basket, and our strategic planning process helps us to analyze and make changes as needed.”
Based on a show of hands, most in the packed seminar that I alluded to above said dues accounted for at least half of their organizations’ total revenue, but other sources were contributing more and more each year. In fact, a small cadre of attendees said that dues made up only 10 percent of their annual revenues. Results of a recent Association Adviser reader poll seem to concur. More than half (56 percent) of respondents to our unscientific online poll believed NDR accounted for between 25 and 50 percent of their organizations’ total revenue pie, and another one in three respondents (31 percent) said NDR accounted for more than half of their overall revenue pie.
But, are we approaching NDR the right way? Unlike MHEDA, many associations don’t have a strategic revenue plan, or if they do, they’re not following it. This is based on our benchmarking research and interactions with more than 450 associations that Naylor works with.
NDR gone too far?
Now don’t get me wrong. I spent many years on the NDR side of a large national financial association and lived quite well during my tenure there. We were clearly the No. 1 player in our niche and made a killing on advertising, sponsorships and affinity deals—at least on a P&L basis. But we didn’t make a lot of friends with state and local chapters whose lunch they felt we were eating. We also irked many departments within our own organization who resented how many membership eyeballs we were tying up with our ad-supported newsletters, sponsored webcasts, sponsored e-blasts and videos. If they’d seen our bonus and commission checks, they probably would have stormed our cubicles.
Unfortunately, the more successful your NDR programs become, the more likely you are to rely on them. We called it “bean-counter crack.” Each year, regardless of economic conditions, our revenue targets were set 20 to 30 percent higher. This created a vicious cycle that was not sustainable for the long term—more and more advertising inventory with too few sponsors to fill it.
“One of the biggest mistakes associations make is asking for too much too often,” according to Gabriel Eckert, executive director of the Building Owners and Managers Association of Georgia (BOMA). “You’ve really got to look at the quality and quantity of what we ask for from our vendors.” Make sure sponsors get the value and ROI that they need, he added.
Ask the people who pay your bills how you’re doing
As information overload and communication clutter continues to plague associations, Charles Popper, Naylor’s vice president of association relations, said it’s ironic that membership organizations continue to send out more print, online and social media—not less—without asking members what they really want. That’s not a strategy, he lamented. “That’s throwing things out there and hoping they stick,” he said.
Naylor’s annual Association Communications Benchmarking Survey revealed that only 11 percent of associations are asking readers/members what they really want and only 1 percent is asking advertisers—the people who pay the bills. “There’s so much information out there,” Popper said. “You have to know your audience. You need to know if you’re providing what’s expected of you—both the readers and the advertisers.”
According to BOMA’s Eckert, who derives about 45 percent of his annual revenue from NDR sources, you should always be looking for new ways to present your valuable offerings to members—events, education and sponsorship. “The best associations are those that look at different forms of communications with members and new ways to raise revenue around those forms.” Eckert also recommended focusing on member value, not on the dollar amount of the sponsorships. “Ask for little bits of revenue along the way,” rather than a large, all-encompassing package, he advised.
NDR programs must not only make sense on the balance sheet, but they need to fit in with your organization’s mission and core competencies. ASAE President John Graham told us recently, even if you can make a killing selling cars to your members, if that’s not part of your mission, members and other stakeholders will bail on you. You might also find yourself with some nasty tax headaches if you start tapping the UBIT (unrelated business income tax) cash machine too often.
How to proceed down the right NDR path
Reader surveys, advertiser surveys and post-show follow-up surveys are a start. But you also have to pick up the phone to get verbatim feedback from your stakeholders and, if possible, meet with them face to face throughout the year—not just during your annual conference. Also make sure you mine all the feedback that your member service folks work so hard to collect. As Workforce Development Group President Randi Busse told us, a complaint is a gift, not a problem; it’s a great opportunity to get customer feedback.
Camille Stern, vice president and group show director for Naylor CMG, observed that too many associations are afraid to ask the right questions. She also lamented that only a small number of associations are willing to follow up with those who give negative feedback. So get the right information, before you proceed with a new offering.
Next, look at the numbers. As our annual benchmarking study reveals year after year, members (and association leaders) still place a higher value on live events (typically 4.3 on a scale of 5) than they do on any other member communication channel. And this month’s Did You Know column shows that more than half (52 percent) of respondents to our unscientific reader poll said conferences and events remain the SINGLE greatest source of NDR for their organizations. But, that’s not necessarily where many feel rapid NDR growth is going to come from.
When asked which type of NDR they’d most likely to increase this year, advertising, sponsorship, mobile apps, webinars and virtual events were cited just as frequently, if not more so, than traditional live events, continuing education and affinity deals (see chart below).
It’s not a matter of either/or
One of the hottest debates in recent years has been about the impact that webinars, virtual events and even mobile apps are having on association live events. Are they helping or hurting? I can assure you that was a sensitive issue at my association until we finally convinced the conference folks to think of a web event as a great (revenue generating) way to test a new conference concept before you take the risk of rolling it out as a full-blown live event. Grudgingly, they agreed and it became a win-win for both sides. That’s an example of what Stephen Lieber, president of the Healthcare Information Management Association (HIMSS), would call “calculated risk-taking.” That’s where you test product extensions with small upfront costs and rapid results.
David DuBois, CEO of the International Association of Exhibitions and Events (IAEE), said webinars and virtual events are a great way for non-members to sample the great programs, content and speakers you have at your live events before they’re ready to commit to attending. Hybrid events (virtual attendance of live event) are also wonderful. “They’re a multi-faceted approach to showcasing your association’s benefits and value,” he said. If you give customers enough store samples of your candy, they’ll eventually buy the whole bar, he added with a chuckle.
Associations should be very aggressive about marketing live events via mobile devices. “If you do not have an app for your live events available weeks in advance of your show, then you are missing out on opportunities for growing education, economic development and exchange of ideas,” DuBois said. Live events may happen for three days. How do you make them last for 365 days, asked DuBois? “Make sure your content has a long shelf-life after presenting it,” he said. “Make sure it’s captured on your website and accessible via your search capabilities.”
Conclusion
So, does that mean NDR will overtake membership dues as boomers start retiring and Generation Non-Join moves into prime career years? No. If nothing else, well-executed NDR programs enhance the member value proposition and create more ways to attract new members to your organization. And don’t forget, members will spend a lot more with you than non-members, according to Lieber.
As Charles Popper advised, ask the people who pay your bills what they really want and expect from you. “If you’re not delivering on what’s expected of you, there’s going to be a gap and it’s only going to get worse,” he said. “You can’t operate in a silo.”
