Wednesday, May 9, 2012

5 Questions to ask about FREE: A new association revenue model?

What consumers (who are also members of associations) are experiencing influences their expectations from their associations.

In the last four or five years, I’ve seen members and potential members “push back” on membership dues and conference registration fees.

And, since reading
FREE: the Future of a Radical New Price by Chris Anderson (@chr1sa),  I’ve had a better sense of the push back on dues/fees. Depite the information and push back from members/prospects, I've heard association CEOs and volunteer leaders say there is no way they could afford to offer free memberships. I’ve listened as most of those leaders – especially membership directors – balk at the idea of giving content and other “member benefits” free to non-members.

I’m still curious. If other organizations can make money offering content (and other benefits) free, why not associations?

What, exactly is Freemium?A. Giving lots of people content/services FREE ... and ...
B. Charging fees for preMIUM services/content.

By the way, making money by giving content away free is not new. It’s been a standard for the publishing businesses for more than 50 years.

Here are four examples of groups/organizations that use the freemium model:

1. Controlled circulation magazines
  • While many magazines and newspapers charge a subscription fee (associations call this dues) to get their content, a host of other publications gave it away free to those who provided demographic information. Thus, they could quickly give them large circulation numbers which allowed them to charge higher advertising rates. Here again, they made money by giving content away free.
  • Back in the 1980s, I supervised the conversing of Soybean Digest magazine from an 17,000 member-only house organ of the American Soybean Association into a 250,000 controlled circulation magazine. We guaranteed ASA members a free copy of the magazine. The other 200,000+ readers were recruited/added based on demographics. 
  • The results: rather than costing ASA $185,000 to produce, Soybean Digest grew to generate more than $3 million in gross revenue. And, rather than reducing ASA membership (as several staff worried), the new magazine helped ASA membership increase to 32,000.
  • Marketing Profs offers curated content related to marketing. Most is free; those who pay $279 a year received “premium” content. 
  • By offering most of its service free, MarketingProfs has grown to more than 400,000 and a multi-million dollar budget.
  • Here’s their response to a common question: “But you charge money for some content. Why should I pony up cash when there are other sites I can read, for free?” You don’t have to. In fact, most of our information is available completely free of charge. But we hope you do become a paid member – in fact, we think $279 (our annual membership fee) is a darn good deal given the quality, breadth and depth of our content, not to mention the results that our faithful readers tell us they reap in their own businesses when they apply what they’ve learned from MarketingProfs. (When we are having a bad day, it feels good to read their testimonials here.) Very simply, we charge for some content because it costs us to produce it. We could skimp on quality and not charge for it, but that’s not our style. Believe us, producing content that’s good enough to pay for is not an easy thing. At least, it’s not easy on the Web, where the idea persists that everything should be free, and charging for content is often an unpopular choice. Luckily, lots of people agree with us: Our paid members come from Microsoft, IBM, GE, Cisco, 3com, Amazon, Adobe, and many more large and small businesses.
3. Bloggers
  • Back in November, I listened to a panel of “mommy bloggers.” When asked if (and how) they made money, one quickly responded: “Yes, in a thousand little ways.” Ads. Sponsorships. Click through fees. Product sales. Sounds a lot like Seth Godin’s question “Can you break your offering into smaller bites?”
  • Brian Clark spoke at the 2011 Content Marketing World Conference (CMW11). He shared that his more than 170,000 subscribers pay no fees (dues) yet his blogging company grosses more than $6 million a year.
4. The Grateful Dead
  • At the same CMW11, David Meerman Scott shared his take on the marketing success of the Grateful Dead. 
  • At a time when nearly all musical groups prohibited recording or photos at concerts, the Grateful Dead not only encouraged recordings but provided tools to help fans record their concerts. 
  • By giving their tunes away free, they become the most successful touring band of its time. They made tons of money on concerts and other sales by giving their music (their content) away free.
What is your association doing about your current revenue models?

The five key questions to be asking:
  1. What is the size of your potential market? How many people in the profession or industry that your association represents?
  2. What is the size of your potential advertisers/sponsors? How many companies with sizeable budgets would like access to your profession or industry?
  3. What/who are your competitors? Does a publication or other organization already reach your profession or industry? Or, is this a niche you can fill?
  4. What would it take for your association to gather, curate and distribute content from/about your profession or industry?
  5. If you move toward the freemium model, what content/benefits would you put in the premium box and how much would you need to charge to cover the cost of the programs and benefits that member dues now cover?
Associations can learn from others. We could offer free stuff to everyone in our profession or industry to build our audience and then "make money" when they buy products, services or upgrade to premium membership.

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