The way ahead is uncertain, and boards can be slow to respond, but some CEOs are embracing customers, not just members

With associations large and small struggling to attract and retain members and with nondues revenue under pressure, many are asking with increasing urgency: Is the traditional business model dead?

For Peter O’Neil, executive director of the $15 million-revenue American Industrial Hygiene Association, the model is evolving.

“The membership model is dead. Long live the membership model,” O’Neil says. “I don’t think it’s truly dead, but the model is changing.”

“People may be affiliating with our organization rather than joining it,” he told CEO Update. “Some may just be our customers.”

Mark French, president of speakers bureau and meetings company Leading Authorities, said professionals today don’t join organizations for the same reasons their predecessors did—such as for socializing and civic involvement—and aren’t willing to devote the same amount of time to association activities. Now, it’s all about return on investment.

“If the membership model depends on, ‘I’m going to become a member to support the industry or support the greater good,’ it’s dead,” said French, a former senior vice president at the American Trucking Associations.

“If the membership model is, ‘As a result of being a member, I derive a value I can’t get somewhere else or can get it more efficiently through an association,’ then it’s not dead,” he said. (Leading Authorities has many association clients, and French is the publisher of CEO Update.)

Cafeteria plan

ASAE CEO John Graham also points to social media and the volume of information on the Internet as threats to the value of membership.

The traditional model is a one-size-fits-all approach, in which dues, services and information are the same for all members, with the association creating and controlling the information, said Graham. Typically, dues were the association’s primary revenue source.

But society and technology have evolved to a point where association members and potential members are demanding “mass customization,” Graham said.

“Technology enables the user to create their own experience with the association. That is a fundamental change in the business model and mindset and pricing,” he said.

“Members can pick and choose services, like a cafeteria plan,” he said, getting only the information and services they want, when they want them and in the format they want.

Graham said the membership issue affects trade associations and professional societies in different ways.

“The membership model for trades is a fairly solid model,” he said, since industry groups are typically more focused on government advocacy than on education and standard setting. The main problem for industry groups occurs when companies try to pare down the number of separate association memberships.

French added that trade associations are struggling with industry consolidation—reducing the pool of potential members—and technological change that leaves some companies obsolete.

‘Information is a commodity’

AIHA’s O’Neil said that in the face of the social media threat, associations can emphasize their role as guarantors of credibility and providers of knowledge, and use social media to promote it.

“One of the values associations can bring is turning information into outright knowledge,” he said. “Information is a commodity, knowledge is a skill.

“It’s easy to join a social network and hear what people think, but has what’s been posted been vetted?” O’Neil said.

Sixty percent of AIHA’s book sales are to nonmembers. Buying products and services from the association, rather than joining, is a growing trend, he said.

Still, AIHA, an individual membership professional society based in Falls Church, Va., is struggling to win consensus on changing its model, said O’Neil, who joined the group 12 years ago and has been executive director since January 2009.

“AIHA has taken a very holistic and wholesale look at our membership structure and customer base … but the board has elected not to make changes.

“I think it’s fast evolving and we will ultimately have to do something different,” he said.

Because of aging membership and changes in the industry, AIHA’s membership has been declining about 1 percent a year for “a long time,” he said, though the group has managed to keep revenue steady in the last three years. “Flat is the new up,” O’Neil said.

“We’re not going to have a choice in the next few years. We have discussed our membership model five times in two-and-a-half years and our board still has not been comfortable making those changes.”
One change AIHA has considered is allowing full membership without a bachelor’s degree, to appeal to technicians.

‘They don’t know what to do’

O’Neil’s group is not alone. Declining membership is a pervasive problem—as is the resistance of boards to change.

“We see a lot of associations that know they’re in trouble but they don’t know what to do,” said Mary Byers, an association leadership consultant and co-author of “Race for Relevance: 5 Radical Changes for Associations.”

“And because they don’t know what to do, they don’t do anything. Most volunteer leaders are more comfortable tinkering with the association model and not as comfortable radically redefining it.’’

“I definitely think [the association business model is] threatened,” said Byers. “I see that with my clients daily and part of the concern is that nondues revenue is declining, membership is declining, and when those two things are happening simultaneously, we really have to ask if the model is sustainable.”

Byers said one client, whom she declined to name, failed to adapt and had to halve its staff, eliminate its annual trade show and sell its building (becoming a tenant rather than an owner) to keep itself afloat.

Still, Byers’ message isn’t all doom and gloom.

“Associations willing to carefully and methodically and courageously look at their current operations and be objective about how sustainable they really are have the opportunity to thrive and not just survive,” she said.

Change at ASAE

One group that has changed its membership model in the last 18 months is ASAE. As the association of association executives, some see it as a bellwether in the association world.

ASAE still offers individual memberships, but also allows groups to purchase memberships in bulk, with pricing dependent on staff size.

The price of an individual membership has become a little higher, Graham said. But the CEO can have full membership while staffers become electronic members, who still get member pricing for meetings and conferences and other activities, and access to the website.

ASAE also offers lower-priced memberships to those under 30 years of age.

Finally, ASAE has borrowed an idea from professional sports: through the group’s Circle Club, members can purchase “season tickets” to ASAE educational programs, or can buy a single ticket, a block of tickets or a package giving access to 10 or 20 events.

“We’re looking at this through a whole different set of lenses now,” he said. “We hope to get broader engagement by enabling people to access us more easily.”

‘Members are our customers’

Another professional association changing its business model—and being run more like a business—is the $8 million-revenue Financial Executives International. CEO Marie Hollein was a managing director for global audit, tax and advisory firm KPMG before taking the top job at FEI in January 2009. FEI, of Morristown, N.J., is her first nonprofit group.

“I feel like our members are our customers,” Hollein told CEO Update in a recent interview. “They should be. You need to really focus on what their needs are, and how to retain your members. It’s the same as retaining customers. I mean, that’s our business. You can’t be just an elitist group anymore because there is competition out there.

“At the same time, we don’t want to lose that cachet and the credibility we do have with the standard-setters and regulators, because it means a whole lot to both them and to FEI.”