The bottom line is the bottom line: an Association needs revenue to provide value to its members, serve its industry, and fulfil its mission. The solution is a fully developed commercial strategy.
Article by Jeroen van Liempd, Director Engagement, Associations & Communities at MCI Benelux.
Revenue generation is a commercial activity — like it or not. It is also essential for the health and welfare of any Association; simply put, an organization cannot exist without revenue. However, because they are “not-for-profit” and “mission-driven,” many Associations find this a difficult reality to confront and fail to develop a clear revenue strategy. Indeed, in the Association space, we often hear about the debate between mission versus margin. But there should be no such contradiction. In order to achieve their mission and continually deliver value and relevance to all stakeholders, Associations must generate both revenues and profit (margin) and reinvest that profit into value and innovation.
Where do revenues come from? That depends on the scope and nature of an Association, but there are some common sources. Membership is an obvious one – for some trade Associations that have no trade show or exhibition and that are primarily focused on advocacy, this can be as high as 80 to 90 percent of revenues. But for many Associations, membership represents approximately one-third of revenues, while activities such as trade shows, congresses, conferences, events, and meetings generate another third, and products and programs such as certifications, trainings, guidelines, publications, and standards represent the final third.
Still, few Associations have a clearly defined commercial strategy or structure to generate revenues that fully integrates these existing sources while also prioritizing the identification of new sources.
Many Associations focus some degree of commercial sales efforts around selling to sponsors, but this is not sufficient. Your Association must develop not just a revenue strategy but a revenue mindset.
Commercial strategy
Fundamental to the success of a commercial strategy is understanding that your Association is selling to two distinct target audiences or customer groups, each requiring a different and customized approach. On the one hand, there is the core target profession or industry group of individuals or companies to whom your Association is dedicated, for whom your Association exists — the core user target customer. On the other hand, there is the affiliated ecosystem of vendors, suppliers, and partners — the affiliated target customer. Success lies in the confluence of the two.
Core user group
Here Associations can learn from the corporate world, where revenues are generated from both sales and strategic account management. Sales are typically focused on generating new business, while account management is focused on the organic growth of existing customers. For Associations this means also understanding the principles of audience segmentation. You must develop specific strategies to address B2C (business to customer) — that is, the Association toward the individual; B2B (business to business) — that is, the Association toward companies, institutions, and organizations, sometimes referred to in the Association space as “enterprise” sales; and B2G (business to government) — that is, the Association toward government entities, state-owned enterprises, etc.
Associations that are structured as individual membership organizations, targeting individuals who practice a particular profession, often believe they are only in the business of B2C and overlook the importance of cultivating relationships and revenue growth at an enterprise level — what the corporate world refers to as strategic account management. But a successful Association engages with enterprises to generate large-scale value for the company, organisation, or institution and in return generate large-scale revenue for the Association.
The key to this revenue-generating strategy is the concept of account management. If your Association predefines the package as enterprise membership, you tend to focus on one sale only — that is, the initial sale of the membership. But strategic account management centers on an active, ongoing conversation about value, return, engagement, and alignment between an enterprise and your Association. Effective account management is designed to stimulate the growth of existing customer relationships and should be a win-win for the two parties.
Whether engaging in enterprise sales or targeting individuals through proactive marketing and lead generation, your Association must develop a deliberate strategy to generate revenues from its core user target audience. This strategy must include measurable goals and financial targets, be evaluated regularly, and, if necessary, adjusted to ensure the implementation is delivering the desired outcomes.
Affiliated ecosystem
In general, Associations have more experience with selling to the affiliated target customer group. They understand the importance of generating so-called “non-dues” revenues from sponsorships, advertising, exhibition sales, and in some cases long-term partnerships. But many do not pursue this group through a developed and clear strategy, but rather take a tactical, short-term, and somewhat transactional approach that is driven from the baseline of having a product or program that needs to be “paid” for — such as an event that depends on generating sponsorship revenues or a digital publication or website that must generate advertising revenues. The Association’s needs come first; the affiliate target partner’s needs are secondary.
Given that affiliate target partners today are very often savvy marketers who have multiple channels and options from which to choose when designing and spending marketing budgets, your Association must place higher importance on understanding their needs. Nurturing long-term relationships with potential partners, sponsors, advertisers, and exhibitors is as important as nurturing and growing core user enterprise relationships. Too often Associations develop products and sell them in a linear and siloed manner, engaging with sponsors on a transactional basis around a single product or program. With in-person conferences, meetings, congresses, and trade shows cancelled or transformed into digital experiences, your industry partners will look to you for alternative but equally impactful ways to engage with your community. Or, at least, they should.
Product lifecycle and design
As part of your Association’s overarching commercial revenue-generation strategy, it is critical to consider the products, programs, and services that form the backbone of what you are “selling.” Even with a sophisticated plan and the best sales professionals, if your portfolio doesn’t respond to the needs of your members, customers, and partners, it won’t generate the revenues you aspire to. Just as corporate brands do, your Association should regularly conduct product assessments and analyses that look at the lifecycle of individual products, from being new and useful to eventually being retired.
It is important to understand not just where your products are in their lifecycle but also which ones drive top-line revenues (sales) and generate the most net profit. You shouldn’t maintain legacy products if they are no longer profitable.
Additional guiding principles
Analysing revenue-generating products using a product lifecycle model encourages your Association to think critically about the products that generate revenue.
Products that generate little revenue but require significant time and resources should be closely evaluated and potentially sunset. This will free up staff time and resources to focus on innovation and growth.
For many Associations, their signature event lives in the mature phase — which puts them at a revenue risk without that product. It’s critical to introduce new products that can move through the lifecycle and generate revenue.
Whether your Association is targeting revenues from core users or from your affiliated ecosystem, you must have a comprehensive strategy and engage skilled, dedicated, and accountable professionals to implement it. In this way, you can work with each member, customer, or partner to determine the best product fit and the appropriate investment level and manage performance expectations — all the while nurturing a relationship that elevates your Association community.
Revenue generation is an art!
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