Article by Adjunct Associate Professor Deanna Varga
In our White Paper – The Future of Associations: diversifying portfolios and increasing revenue – launched in July 2021, we asked the hard questions of Associations such as what do your members need now? Where is our revenue going to come from? And how do we insulate ourselves from the next disruption?
Since then, Associations have battled new challenges: workforce shortages, IT transformations, cancelled conferences and finding new ways to connect. The landscape has shifted; it is a good time to pause and reflect on the big trends in Association revenue today.
1. Where will revenue come from in the future?
From discussions with Association leaders, I know that numerous boards and executives are continuing to ask where their revenue will come from, and many more are driving revenue strategies into their organisational plans with two- and three-year horizons.
It is good to see Associations actively addressing their revenue models in their strategic plans, and it is important that this work is prioritised over the busy BAU of Association management, as the competition for the membership dollar and their attention will only get more fierce.
2. Replacing one revenue gap with another
Some Associations have done very well to pivot their big income stream from their conference to their education offerings. Whilst this represents a significant piece of work for many and has kept organisations afloat during this time, it also comes with risk.
Education is undoubtedly a big revenue earner and I fully endorse this as a long-term sustainable revenue stream. However, replacing one big chunk of revenue with another, is not mitigating the risk of reliance on one key product; the key to risk mitigation is spreading the load.
3. The two ends of the bell curve
Whilst successful Associations are engaging members at their peak professional age, an ongoing challenge for many is targeting the youth market and the ageing population.
This goes right to the heart of the conversation of membership value. The work is to keep your offering relevant for younger people (and the price right), as well as keeping the experienced members engaged (and paying) without them benefiting from the full range of services.
4. Conversations Associations should be having now
The way an Association will work through commercialisation and revenue diversification issues will depend on the structure of the team, strength of the board, current program and product mix, history, culture, purpose and financial reserves. However, I encourage all Associations to find the people and time to have the following important conversations.
Whose job is commercialisation and revenue diversification? Often it sits with the CEO or even the CFO, however, being clear on who needs to ensure these issues are on their agenda, and who has the resources and time to deliver, is key to moving ahead. This is a capability building and skills issue, as much as a revenue structure one. In some larger Associations we are seeing the emergence of a Head of Commercial – a role responsible for the commercial objectives of the organisation, which reflects a change that evolved out of the corporate arena a few years ago.
What is paying for whom? Even in Associations with diverse portfolios it is common for some revenue streams to be ‘carrying’ others. Is your education stream funding the membership? Is your advertising funding your webinar series? There are many ways to view revenue and how it is spent, however, it is wise to understand how it balances out and what the true cost of a revenue stream is.
Is our reliance on membership fees a risk? Many Associations continue to rely heavily on membership revenue as their core revenue stream; if your membership revenue represents more than 65% of total revenue, it can be a major risk to your sustainability if you don’t also have additional streams that are profitable and ‘low risk’ or ‘non-volatile’.
Are we searching for new audiences? Does your Association have access to the data that is needed to keep members, and find new ones? And if you have the data – does your Association recognise how ‘rich’ that data is, its true commercial value?
Are our pricing models right? Are you giving away too much for free or undervaluing your offerings by including it all in the one membership tier? For example, if non-members or subscribers can get access to your content for free or a very low fee, do they have incentive to become a member (if that is the goal)?
5. Hold your nerve with new products
If you’ve done your due diligence, then trust your new products you take to market. They likely won’t all work, however, give it time and invest properly. It is not easy to take new product to market, and building audiences takes time. This is where your Risk Appetite Statement holds its own. Refer back to your Risk Appetite document, and if your organisation doesn’t have one, this is another good reason to invest in one in order to ascertain the level of risk (financial, resourcing, time) your organisation is willing to take.
6. Today is the rainy day.
We are hearing boards are nervous and reluctant to spend money reserves, and so are instead cutting costs and value from the offering, rather than investing in staff and products. We are living through the ‘rainy day’ now. It is time to invest if you can and prepare your organisation for the next stage of its development.
For more insights into the future of associations contact Deanna via email@example.com