Insights

Hopes and Fears for Association Business Models post COVID

Published on 17 September 2020

Let’s pause obsessing over the future of online vs hybrid vs in-person events for a moment and consider the whole picture of an association’s business model. With so much uncertainty around, I want to look at where we can find hope in established models and principles, and where we should be fearful of damaging disruption that may still come. When reflecting on this I took a step back from association specifics and found this HBR article with a helpful summary of fundamental business model forms and examples.

Looking at the list from an association perspective, a combination of bundling, crowdsourcing, freemium, reverse-razor blade, and subscription models all look familiar (even if we don’t typically refer to them that way).

Membership as a subscription is an easy parallel to draw but associations have long been aware of its limitations. When even a company of Netflix’s scale and brand recognition struggles to be truly profitable and sustainable on its subscription model, associations shouldn’t feel alone with that challenge.

The association’s ability to mix a number of business models brings opportunity through diversity, rather than relying on a single subscription product with a few variations (think Netflix or Spotify) and needing massive scale to be viable.

However, diversity also reduces clarity. This can be an issue for volunteer Boards with limited time to dig deep into the workings and performance of the model. Additionally, a (perceived) lack of transparency on how an association funds its activities can erode the trust of members and prospects.

Who doesn’t like easy money?

The current crisis is putting pressure on association business models – especially those relying on event profit subsidising other costly yet highly appreciated activities. Indeed, it has become an accepted part of the non-profit model to reinvest those profits for the good of the industry or profession. However, that has led us to a point where there is often no connection between the revenues, costs, and the perceived value or importance of association activities. So, what happens next? What happens if the thing that makes the money that pays for the other really good stuff goes away…?

During the recent ASAE virtual event, Duncan Wardle (Disney’s former head of innovation) delivered a keynote on innovation and creativity.

He highlighted the well-known story of Blockbuster and how their lucrative late fees on DVD rentals hooked them on a model that was detached from the value of the service their customer was really buying. Another parallel could be the exclusivity and margins of physical media (CDs) in the music industry which resisted the shift to digital – in both cases, reliable access to “easy money” created huge resistance to change. In other words, it is natural that associations, just like other businesses, have readily accepted that consistent earnings from events subsidise year-round activities.

Events are still the answer… yes, but

Personally, I still have hope for large, in-person events to return and be better than ever – they are a multifaceted (bundled) product, not just content (which we are now sure can be delivered well online), also vibrant networking full of easy introductions, chance encounters and non-verbal communications), plus the experience of being in a specifically selected space or location, and enjoying the atmosphere, food and culture.

Technology improvement coupled with organisers’ ability to use it and attendees’ familiarity and acceptance of it has seen virtual events rapidly multiply, with the good ones developing into genuinely engaging content and networking platforms. This means we can keep essential gatherings that are not possible in-person until the COVID situation improves, and enjoy the positive side effect that we can also reach new audiences online, all year round (but at what cost? More on that later).

The downside of course is that we miss the 3D, multi-sensory experience that in-person, onsite events provide. Connecting and learning from home is convenient and infinitely better than not meeting at all, but most of us will do this from the same work from home or office environment with our ever present “connected distractions” and standard office technology which limits the immersion.

Again, technology innovators will be seizing this opportunity but the day when things like VR headsets are as ubiquitous in every home or office as laptops, tablets or smartphones is years away. Compare these forecast sales for VR headsets with the volume of laptops already in circulation – most event organisers need reach to maximise audiences and commercial viability so they must design for the most readily accessible technology, even if it limits what the end product could be.

Regardless of the limitations of virtual events, the good news for attendees is they have given a long overdue kick in the behind to tired and uninspired event formats. However, whilst organisers are hard at work on new designs to ensure the effort and costs of attending an in-person event is worthwhile, the big question is when can they restart and when will they be the same – especially international gatherings?

From IATA’s late July forecast, “Global passenger traffic will not return to pre-COVID-19 levels until 2024, a year later than previously projected.”

2024! And yes, they are talking about all those business travellers who used to jet around the planet for association events.

Questions of profit and purpose for the digital association

So, if we need to get digital fast, where is the hope for ill-prepared (and not usually agile) association business models? One advantage associations have today is that they can draw from the harsh lessons already learned from the music and media industries who initially resisted change to their money making models and then saw massive chunks of their revenue from physical products swept away in the digital wave, never to return.

However, in the immediate panic as the COVID crisis hit, many associations rushed online and over-served members and non-members alike with tons of free online content and events. All this was done with the right intentions, but if we continue anchoring the expectation that online ​= free, we must be aware of the consequences.

Imagine what would happen if associations went through what the newspaper world went through during its shift to digital.

He highlighted the well-known story of Blockbuster and how their lucrative late fees on DVD rentals hooked them on a model that was detached from the value of the service their customer was really buying. Another parallel could be the exclusivity and margins of physical media (CDs) in the music industry which resisted the shift to digital – in both cases, reliable access to “easy money” created huge resistance to change. In other words, it is natural that associations, just like other businesses, have readily accepted that consistent earnings from events subsidise year-round activities.

He highlighted the well-known story of Blockbuster and how their lucrative late fees on DVD rentals hooked them on a model that was detached from the value of the service their customer was really buying.

Even setting aside the scary financial picture – can you really run a credible content driven association business model that is reliant on advertising or sponsor revenues?

A huge advantage over music and media companies that should bring Associations hope is that our content creators are primarily member experts volunteering to share their knowledge and experience for the benefit of their community. Imagine the difference it would make for a media company if it didn’t pay its journalists, or for Netflix’s profitability if its actors showed up for free. Yes, production staff and platforms are needed to bring association services to market but this represents a fraction of the potential cost if associations were a “normal” content driven business.

Coming back to Duncan Wardle at ASAE, one of his key predictions was an impending shift to a purpose driven rather than a profit driven economy.

So, will this shift bring hope that the motivation will grow ever stronger for experts to give their content exclusively to associations instead of for-profit sources, and for members to pay to support association communities? Or, should we rather fear that this creates an existential risk to associations as more empathetic, social businesses take over? The line between for and non-profit may blur until it is no longer relevant… History shows that crisis and disruption will bring new competition and the “content and community” of associations are not immune to that.

Hope for associations may rely on the unique nature of their elected volunteer leadership, with accountability and transparency – if so, this will need to be built into the business model and positioning, not reside as a footnote on the “about” page .

Back to basics: time is money

One thing that 2020 makes abundantly clear is that the ratio of “volume of content out there” vs “time available to consume it” is only going one way and fast. Associations can surely provide value worth paying for (in time saved) with careful content curation focused on relevance, credibility, and reliable quality. Again, we need to be aware the business world is full of examples of “better” products that lost out to those with better marketing or a winning celebrity endorsement.

On balance, I remain hopeful that many associations will come through this with a better and more resilient business model. But agility, transparency and a dedication to quality will be essential.

So, with 2021 fast approaching, what are your hopes and fears for association business models?

 

Contact the author

Author

Colm Clarke

Partner, Consultancy

colm-05

Stay connected to our last case studies, news & insights

    Exempla collects your personal data to process your request and respond to you in compliance with GDPR.
    For more information, check our Privacy Statement.

    Learn how our team of senior experts can help you

    redefine or improve your association business model for a long term success

    More case studies

    News & Insights