The following is a guest post from Rob Pitzer, founder and president of Pitzer Research & Analysis. Rob has 15 years experience in membership- and subscription-based organizations and is making his first foray into the association blogging community with a response to a recent series of blog posts from Jeff De Cagna.
I read Jeff De Cagna's three-part series, "Five reasons membership is killing association business models" (here, here, and here), with great interest. As always, Jeff is provocative, and thinking about the issues he raised forced me to drill down and examine some basic assumptions. Before I address his arguments, let's look at those assumptions:
In virtually every association, the membership has a strong say in the direction of the organization, and it exists primarily to serve the personal or professional needs of the membership. These are essentially the defining criteria of a membership organization.
Somewhat confusingly, virtually all associations also have membership programs, through which members are acquired, serviced, satisfied, and renewed. The expenses associated with those programs must be offset by the revenue they produce, or they might be subsidized by other activities within the organization.
Importantly, having a membership program does not make you a membership organization! In fact, at its core, an association's membership program is not fundamentally different than a magazine subscription, a Friends of the Arts program, or membership at a golf club—they all rely on acquiring, servicing, satisfying, and renewing the member within the constraining economics of the parent organization. Where they differ is in the motivation of the member, the goals of the organization, marketing messages, and the benefits they provide.
Turning to Jeff's specific arguments (summarized here for space):
1. Membership-centric business models organize all value around the membership relationship. NEW DESIGN APPROACH: 21st century association business models must focus on creating radical new value instead of on membership.
2. Membership-centric business models tend to focus on association outputs instead of stakeholder outcomes. NEW DESIGN APPROACH: In designing 21st century business models, association leaders must pay much closer attention to the kind of people their current and future stakeholders wish to become, and the things they wish to achieve in their lives.
These are valid concerns and are related to the difference between offerings and benefits. Over time, association outputs take on lives of their own and their original intent—satisfying the needs of members and providing value to attract new members—becomes obscured. It is critical to periodically review offerings to judge effectiveness and conduct research with current and prospective members to learn how needs are shifting.
However, there is nothing inherent in either membership organizations or membership programs to prevent this review and research from happening. In fact, to the degree that an association is unable to offer enough value to convince people to join, that association will most likely cease to exist.
3. Membership-centric business models often depend on cross-subsidies that create unintended consequences. NEW DESIGN APPROACH: The priority for associations, then, is to design business models that can generate meaningful revenue streams based on the creation of new value with transformative potential for their future stakeholders.
5. Membership-centric business models require a significant investment of human effort for an insufficient return. NEW DESIGN APPROACH: Â The work of business model innovation offers associations an opportunity to reconsider the narrow focus on membership in favor of more open and inclusive approaches to new value creation.
These two items are related. In many associations, donor or industry support does in fact subsidize the membership program rather than the organization itself, and there are associations where the time and money spent on the membership program is not justified by the return. However, these are driven either by a failure to understand the economics of the association's membership program or by policy decisions to operate the membership program at a loss to serve some greater purpose. Unfortunately, in my experience, it's too often the former, with stakeholders focusing on the number of members rather than the financial results of the program over time.
Thus, it's critical that organizations understand how acquisition and servicing expenses interact with membership and other revenue, renewal rates, and the breakeven period so they can determine whether membership is net positive or negative financially. An association can decide in advance what level of return or required subsidy it expects from membership, but doing so does not require killing off or deemphasizing membership.
There's also nothing to prevent associations from offering no- or low-cost memberships and adopting a more inclusive, less formal view of membership in the event they are able to create the radical value Jeff suggests. After all, many associations currently subsidize the membership program as a policy decision.
4. Membership-centric business models ask members to make the most important decisions about new value creation. NEW DESIGN APPROACH: associations need a rapid learning approach to strategy-making, such as crowdsourcing.
Jeff accurately identifies a real problem in associations: Too often strategic decision-making is handled by an unrepresentative slice of the membership. But there's nothing about membership that prevents greater inclusiveness. Rather, crowdsourcing with both members and nonmembers is a great way to engage all stakeholders and can lead to strengthened relationships with both groups.
In summary, while I couldn't agree more with Jeff's diagnosis of some key problems in the association world, I disagree with his prescription thatÂ membership is fundamentally flawed and needs to be re-imagined. It just needs to be done correctly.