Tag Archives: revenue models

Event Report – Member Value Management 28-04-11

With

Justin Reeves – General Manager Supporter Services, Collingwood Football Club
Kelly O’Shanassy – CEO, Environment Victoria
Sarah Adams – Marketing Manager, Artshub

Moderator

Brendan Lewis – Chairman, The Churchill Club

Who were the panellists and what were they doing?

Justin Reeves is the General Manager Supporter Services, Collingwood Football Club.  It is the largest football club (all codes) by membership in Australia history, with 70,000 members.  They also believe they engage around 400,000 through their website and other facilities and believe about 1.2M Australian’s would respond “they barrack for Collingwood” if asked.  At this size the club is no longer just a  social club .  It doesn’t allow player access any more, has replaced volunteers with professionals at every level.  It is looking the club and league to understand how it can grow.

Kelly O’Shanassy is the  CEO of Environment Victoria  a state based not-for-proft group that advocates for a better environment.  It was formed 40 years ago, by 18 different environment groups that came together.  In 1994 it opened itself up to individual memberships.  It now has around 20,000 members who keep their membership for 3-5 years.

Sarah Adams – who is the Marketing Manager of Artshub an international, for-profit Arts community that is based in Melbourne with around 7,000 members.

The difference about members based businesses

Subscriber is just a  revenue model for customers, regularly used by membership organisations, and  normally called “membership fees”.  Simply having subscribers doesn’t make you a membership based organisation.
Members have a sense of team,  they dress up or show their allegiance and have a sense of shared purpose or passion and ownership.  Membership organisations allow their members to become involved.  This is why Foxtel, although it has hundreds of thousands of subscribers, wouldn’t be considered a membership based organisation.

Interestingly the Arts industry has a very high level of unemployment.  One of the reasons that Artshub is successful is that it allows its members to be engaged in their industry, even when they are unemployed.

Most members feel a very strong sense of ownership, however this generally doesn’t translate to a desire for a governance role.  This is why there is traditionally almost no one at Annual General Meetings.

Successful Membership based organisations:

  • Provide members a clear understanding of their entitlements, even in times of change due to exponential growth.
  • Have lots of ways their members can become engaged ( the ultimate engagement where members get to choose what they can do, but this is difficult, if not impossible to achieve).
  • Have lots of different offerings, dependent on members desires and provide value at each offering along the membership path.

Professional Membership today is no longer about a community or social club, that provides access access to talent and is run by volunteers.  Its an Organisations that employs professionals to become great at what it does and constant seeks insights from members on how to provide value.

Revenue Sources

Member based businesses generate revenues in many ways,  however membership fees are usually only a minor part.
Collingwood – Membership Revenue is only round 25%, but that’s still up from 13% where it was 4 years ago,
Environment Victoria – Membership Revenue is only around 1%, whereas donations make up around 13%.
Artshub – Membership Revenue is only a tiny percentage most, revenues are from advertising sales and services.

There are plenty of ways you can derive revenue in member based organisations:

  • Donations.
  • Grants – to support your group.
  • Membership Fees – Lot of packages, to meet lots of different types of member needs.
  • Event or activity fees.
  • Services such as training & accreditation.
  • Branded Product  – T-shirts, Caps etc.
  • Support Products – Soft drinks etc.
  • Sponsorships.
  • Advertising.
  • Alliances – Football clubs also get fees from the venue and the AFL.

You can also achieve cost saving s through volunteers doing work.

Its not ok to sell membership lists though, as privacy laws may prevent it, its generally immoral and when it has occurred in the past, it didn’t have a happy ending as it upsets members.  It is okay to sell advertising space, in your newsletters though.

Sponsorships are becoming harder to achieve, which is why more energy is being put into membership by the football clubs.

Dynamic pricing (each person gets a different price) for games is becoming popular in the USA.  They AFL is currently doing a study into this locally, however the Clubs and the AFL don’t own the stadiums, so its primary a venue revenue issue.

Can you pick up members with free or cheap offerings and then up-sell them?  Not really.  There are no entry level products and membership path, just different value offerings for different  demographics and desires amongst members and potential members.  Free services, such as Twitter feeds are in many ways more of a marketing offering than a membership offering.  However for every organisation it is different.  Environment Victoria sees its free knowledge sharing as its entry level product.

Designing Membership Packages

There is no membership path that starts with a free or introductory offer in a true membership based organisations.  There are just lots of different ways members want to engage.  Clever organisations design lots of membership packages so members can engage in the way that best suits them.

Regular professional research leading to insight around current and future member demands is what sets Collingwood apart from other clubs.  They know all the ways members want to engage, and design a package for everyone.  Collingwood does not make decisions around membership by gut feel.  Value has to be there for all offerings.

Remember that offerings can be very organisation specific.  E.g. a membership offering by Collingwood, wouldn’t necessarily work for other clubs –   In fact other clubs have looked at the Collingwood offerings, and rather than do their own research, they made emotional decisions, introduced packages and failed.

Environment Victoria can’t afford market research, but knows from profiling that’s its members are skewed to the richest and poorest in society.  Therefore, it pushes donations (tax deductible of course) as a way to achieve outcomes as an offering to its affluent members and volunteering to the less affluent members.

Even when an organisation has explosive growth, members should be able to access a variety of different offerings, and clearly understand their entitlements,  therefore design cannot be random and you need to know your limits.  E.g. the Legends offering is capped at 9,000 members – not to make it exclusive, but that’s all the club can cater for.  Arbitrary exclusivity for marketing purposes doesn’t go down well with members.

Offering a free knowledge or education product is a great offering for all organisations to have as it provides value to those that currently want a light level of engagement, and it tests where interests may lie.

The key though is to make it easy for people to get engaged.  Getup has done this and now boasts 400,000 members.

Artshub (7,000 members) has:

  1. Free Mini Membership
  2. Professional Membership
  3. Company Membership

Environment Victoria (20,000 members) has:

  1. Affiliate Groups
  2. Individual Membership
  3. Donors
  4. Free Newsletter
  5. Volunteers

Collingwood Football Club (70,000 members) has:

  1. Club 5 membership
  2. ANZAC Day Membership
  3. Legends Membership
  4. Captains Membership
  5. Social Club Membership
  6. Season Ticket Membership
  7. 3 Game General Admission
  8. 3 Game Reserved Seat
  9. Country, Interstate and International Membership
  10. Thommo’s Team 13 Membership
  11. Reserved Seating
  12. AFL and MCC Member Upgrades
  13. Magpie Nest
  14. Community Bay Membership
  15. Player Sponsorship

New Member Acquisition

Many traditional organisations are slowly dying, e.g.

  • Catholic Church
  • Political Parties.
  • Unions

The problem was asserted as they haven’t determined how to continue to provide value to a changing demographic or potential members and adapted.  This is the key to attracting membership both now and in the future.

Youth are always seen as exiting as and valuable as they provide a future to organisations.  Other State Environment groups, are generally only available to environment groups, mostly full of old people.  This is seen as dangerous.

Differentiating and focussing is also important.  For instance the Age Online is a competitor to Artshub, however its not focussed just on the art scene, has too much tabloid journalism, to many adds and appears to be shouting at you all the time.

But at the end of the day, getting members is all about asking people to join, its the only thing that works, however you must do this in sophisticated ways.

You should also have a very clear of the average lifespan of membership and the average value, so that you can look at the true ROI of your membership campaigns.  Always design your campaigns to be measurable and asses their performance.  The Football industry has traditionally is terrible at measurement of activities, and feels it is only now catching up.

Member get Member campaigns are always useful as your members will always know others who are passionate about the same topic, but they must be carefully constructed not to alienate members.

The radio station Triple R has successfully used guilt to turn listeners into subscribers.  Which is play on the amount of social capital you can derive from being a member.

Alliances

Most member based organisations need to form alliances to grow and have influence, but this can be very difficult.  Consider:
Supporters won’t change clubs but the AFL is now effectively a competitor as well as a clubs biggest partner.  There are now 47,000 AFL members.
Its difficult to run an organisation of highly passionate supports.  Lots of agendas and very loud people.  If you want to take a leadership role, be prepared to take flack.

So how do you form effective alliances?  It appears that the answer generally is to form short term partnerships, to address specific campaigns or agendas   e.g. Vic Farmers Federation and Environment Victoria come together to address a water issue.  In this case an unusual partnership between normally arch enemies, gives credibility to agendas.

Social Media

Social Media is a fantastic tool for growing and retaining membership, especially for resource constrained organisations.    It provides an easy and accessible  membership offering for those that are only comfortable with a very light level of engagement and in many cases it provides the initial engagement with an organisation.

Most organisations now announce new editorial content on Twitter and have Facebook fan pages.  Facebook is also heavily used for running competitions and announcing give aways.

Social Media is a great driver of new visits to an organisations website.   Environment Victoria’s visit increased by 8,000 unique visitors a month when they added social media as a communications channel.

Footy generally has been a late starter with Social Media, which means its a great opportunity for the sport.

– end of report –

Revenue Models and Memberships

I quit the Naval & Military Club when they decided that members should have a minimum spend at the Club each quarter, or simply be billed it anyway. This completely brainless revenue raising scheme accelerated the downfall of the Club, which went into liquidation in 2009.

Since that time though I had been thinking about how membership based organisations worked. I felt that they were somehow different from normal business in how they offered value, but a business partner of mine, ex McKinsey said “Members are just customers by another name”. “Not true” I thought, but I didn’t get a chance to really explore the concept until last week when the Churchill Club ran a panel session entitled “Member Value Management”.

The panel consisted of representatives of; a sporting club with 70,00 members, a not-for-profit environment group with 20,000 members and a for profit arts organisation with 7,000 members. Note: this is the number of fee paying members, not “facebook friends”.

For me the biggest takeway from the evening was that is all to easy to confuse the Revenue Model of “Fee Paying Member” with the way your organisation engages with its customers. Members are passionate and/or involved, regardless of what revenue model you use.

  • Consider the cable TV company Foxtel. It has a huge subscriber base that pays monthly fees, but would never call their customers a membership base. Their customers aren’t passionate about the Foxtel brand, nor do they want to engage with other subscribers. Foxtel is not a membership based organisation, but it charges membership fees.
  • Consider Holden Racing Team. It has a huge supporter base, most of whom act like customers, purchasing branded products and hospitality packages. This is a membership based organisation, but doesn’t charge membership fees.

So why do I pass this on? I realised that if your customers aren’t engaging with you and passionate about what you, they are just customers regardless of the label you use. It saddens me to say that this is probably the case with the Churchill Club, as our members just aren’t overly passionate about the club, nor want to get involved in putting on events. On the bright side though its the next opportunity for us that I want to address.

In regards to Naval & Military Club – they had passionate & engaged members, in fact 4,000 of them in the 1960’s. But unfortunately, the Club failed to change with the times and continue to provide value and preferred ways to engage. By the time the club closed in 2009. they had turned their 4,000 members into 1,100 customers, who weren’t passionate or engaged, and didn’t want to wear a major cost increase.

Time & Materials V’s Fixed Price billing

Just before Xmas I had one of my coffee/mentoring sessions with a vibrant young Victorian entrepreneur and an interesting question came up around how she should invoice her services. Although not an expert in the area of pricing models (I generally recommend Jon Manning of Sans Prix for some hard core consulting), I have owned and run a number of businesses that billed in a variety of ways and therefore had a general framework for thinking about it that I thought worth sharing.

So her question was “should I invoice for Time & Materials or Fixed Price?

Truthfully the question isn’t either/or as your entire package can have a combination of the two – eg a fixed call out fee, then Time & Materials (T&M). You can also add tweaks such as capped T&M or fixed fee covering a certain number of interactions – eg “includes up to 3 re-design sessions”. But each component of your product or service can usually be broken down into one or the other.   So lets look at Time & Materials

Time & Materials

Professional Service’s firms love T&M billing and are very good at it. Lawyers & Accountants traditionally have always billed that way to generate large incomes, however I have noticed lots of fixed price services starting to creep in.

The Pros of T&M are:

  • It massively reduces your risk on the job, as you get paid for all the the work you do regardless of whether you run into problems or not.
  • It allows you to be more dynamic and instantly respond to a client’s changing needs or priorities as you are not dependent on specific outcomes for your profitablity.
  • There is no need to trap and manage clients variations for billing purposes as it all gets picked up – although you still need to manage your clients expectations if the job drags out.
  • It reduces the effort required in pre-sale design, research & planning forecasting or writing quotations – all of which may be unbillable or just not desirable for the time pressed or lazy.

The Cons are:

  • Although your risk is reduced on the project, your client’s risk is increased. This means that they may review every invoice critically and demand a lot of meetings.
  • Clients may demand verbose invoicing, wanting to know exactly what you have done, then argue about which components should be billable – eg. “Why should I pay for your learning”. It also means you have a lot of recording to do – think Lawyers recording their time in 6 minute increments.
  • Its not a particularly scalable model as there is a ceiling for the amount of hours you can bill per week. Unless of course you can bill out large teams and its easy to put on / lay off resources.
  • Its lack of scalability generally makes it unattractive to investors
  • Your pricing is easily compared to competitors & near competitors, which puts a lot of downwards pressure on your pricing. Everyone loves to complain about hourly rates
  • In tiny organisations, it may mean you can’t take holidays because if you don’t work, you don’t eat.
  • Your motivation to complete the job quickly and efficiently is massively reduced, which is a regular source of client conflict.

So where is it suitable?

  • If your offering is highly malleable and therefore individualised for each customer, T&M provides the simplest way to construct an proposal.
  • Its suits areas where the people cost is the major component of the job as that is where your profit risk is.
  • It suits projects where there is considerable danger of the job dragging out because of unknown factors such as technical risk.
  • It suits projects where there is likely to be a lot of, or regular of scope creep.
  • It suits young organisations attempting to understand their market place before creating products.
  • It suits young organisations that need to pad out their revenue from a product with consulting, or even just contracting themselves out.

So what are some top tips when using Time & Materials Billing?

  • As part of negotiations, get the clock turned on as early as you can. Don’t allow the client to turn “pre-sale” negotiations into unpaid early design work.
  • Invoice early and often. There is nothing wrong with invoicing on a weekly basis for longer jobs, because clients argue less about small invoices and it has the added bonus of reducing your credit risk.
  • Trade high prices for longer hours being billed. Clients are almost always more price sensitive than time sensitive.
  • Avoid spending the majority of the project working at the client site. Harsh clients will audit your every movement and its difficult to perform multiple tasks for multiple clients at the same time
  • Have pre-set pieces of text you can use in your invoices so you can turn a phrase like “tweaked server” into a paragraph about checking logs for errors, applied patches, optimised configuration etc.
  • Where possible and keeping an eye on quality, substitute cheap resources to do the work at the higher rate – use graduates, or even outsource the work to overseas individuals or groups through solutions such as Odesk or Elance.

Next post I will have a look at billing fixed price.

That’s my Product!

Last week I mentioned I had difficulty figuring out what the Churchill club was doing after our initial concept didn’t work.

This caused me to have my first insight. If I am going to have 30 people turn up, why not accept the fact, and engineer the events so the Club makes a bit of money with thirty people. Much more fun than losing money and being really, really stressed that we didn’t get 100.

So now we are running some really interesting topics. We do it out of our board room (which admittedly is pretty nice) and don’t have lots of fancy AV support. In fact “No Powerpoint” is part of our pitch. Sure we only get 30 people but we make a slight profit, have fun and the audience really enjoys the intimate environment where they are guaranteed of being able to ask a speaker a question.

People still on occasion say to me “I can’t believe your not getting a bigger crowd”. My response is to smile quietly.

The second insight was that questions I personally wanted answered, were valid to the community of technology entrepreneurs we have in Australia. Sure they may not have as much gravitas as addressing Australia’s bio-risk over the next 50 years, but they still pull in an audience that’s passionately interested. “How to go global on a shoestring”, “how to raise equity without diluting your capital to much”, “how to build brand”, “accessing cheap technology via web 2.0”.

I call them programmes for players, not cheer squad.

My final insight though, was what my product was. Amongst all my other events, I started to run these monthly panels on questions that interested me as a technology entrepreneur. After a couple of months I decided to do some analysis on the performance of these club events, and noticed a strange thing. Sure we are still pulling sub 50 crowds, but three performance indicators were going up.
1. The number of people attending events
2. The number of repeat visitors at events
3. The number of people deciding to become members of the club.

That was when I had my final insight. My product wasn’t an event; it was a series of events. Specifically, the monthly entrepreneurship panel. With this insight I suddenly realized that I could:
A. Plan ahead, even a year ahead.
B. Be more efficient in my marketing as I understood whom my customer base actually was.
C. Tweak the events to improve the value proposition to the audience.
D. Start to get sponsors interested.

Finally, I realized that I could continue running a seemingly random collection of events on other topics with other formats, but what I was actually doing was conducting customer research for another product (ie another series of events, to layer on top).

The result – much, much, much less stress and firm foundation for building the Club.

What’s my Product?

A while ago I wrote about Tactical Marketing Management .  But I have recently had another insight about the Strategic Marketing of the Churchill Club .  In fact, I just realized what my product actually was.  Sounds dumb, but its true.

When I first set up the Churchill Club, it was going to mirror the activities of the original Churchill Club  in San Francisco.  However I quickly discovered that most globally influential technology executives don’t live in Australia, the Venture Capital Community here is fairly risk averse and our technology entrepreneurs are to busy to talk.

So for the last two years or so, the Churchill Club has been running a wide variety of programs to determine what kind of content and format could actually work.  We ran public events at hotels, at morning noon and night. We ran private dinners at restaurants and out of our offices.  We covered IT, Nanotechnology, Sport, Entrepreneurship, Innovation Policy, Venture Capital, Governance and Town Planning.  We had guests of honour, key note speakers and panels.  Day long programs and two hour events.

The problem was almost every time we ran an event; we were marketing to a new audience, as our topics were so diverse.  Additionally, we could never really plan ahead as we didn’t know whom we had available to speak, or what our topic was going to be.

Of course I got lot of advice.  Advice that I should just focus on venture capital / technology / innovation / leadership.  Advice that I should get high profile speakers / panels.  Advice that I should run more / less events.  Advice that I should market to real entrepreneurs / armchair entrepreneurs / public servants / CEO’s.

Terrific.  Lots of advice, most contradictory.  And sometimes when I ran suggested events, they were successful, sometimes, spectacularly unsuccessful.  The advice giver normally expressed surprise that people didn’t flock to their suggested event in droves.  I of course had to put my hand in my pocket, which made me more and more risk averse.

Mostly I struggled to get more than 50 to turn up.  Sometimes we made money, sometimes we lost.  The Churchill Club may be a not for profit, but that doesn’t mean we can make losses.

The story is probably not unfamiliar to you.  Change the names and products and you have a regular startup story.

Next Week – My three insights