As published on January 8, 2010 in:

To build sustainability through 2010 and beyond, Massachusett’s nonprofits are increasingly interested in finding sources of earned revenue—income from business transactions—in addition to their traditional sources of gifts, grants, and subsidies.

Typically, nonprofits have a clear vision of their mission and an incredible passion to deliver, but they have difficulty seeing how to translate that mission and passion into earned revenue.

Arts and culture organizations often have the easiest time identifying earned income opportunities, such as admissions fees, membership dues, building rentals, food services, gift store sales, and outreach programs. But all types of nonprofits can uncover new revenue streams. And by earning revenue through activities related to their mission, organizations are less likely to be subject to Unrelated Business Income Taxes (UBIT).

If you were a revenue detective, scanning through the nooks and crannies of your organization for a new source of mission-driven revenue, how would you start? It’s easy to miss ideas just screaming to be developed at organizations of all sizes. To find them, look for the intersection of your organization’s assets, your passion, and the market’s needs.

Start by noting your organization’s assets—the kind that don’t show up in a bank statement. Your assets could be defined as physical structures, staff skills/knowledge, content, or programs that were great for just a few purposes but never expanded.

For example, when a private girls school’s Olympic-sized pool and athletic facility was used for less than four hours a day, many suggested opening it for rentals or as a general health club. Although that would not fit with the school’s mission, a high-end wellness center for women could be a powerful option. By providing access to trainers, peer groups, classes, and activities focused on women’s wellness, the school could expand on its mission to support the personal development of girls.

Where do your assets and passions intersect? For example, in the process of creating new revenue streams, Boston’s Museum of Science looked at its passion for science learning, its years of accumulating collections of science activities, and the expertise of outreach department staff. The museum partnered with publishers, including the Nature Company and Running Press, to produce a number of products, including The Inventors Workshop Discovery Kit, which is still being sold 20 years later.

Now look for a community need or market niche that complements your assets and passions.

For example, services that are targeted toward an underserved population would be a marketing success if repackaged for those who could pay for them. The resulting income would provide funds for what you really want to do. This was the case for a Midwestern museum that operated a local summer camp. One of its camp sites in a wealthy suburb generated enough net revenue to fund a one-week program for the underserved. The museum embarked on a plan to establish camps in affluent and middle-income cities and towns. Within two years, and because of the broad success that attracted media attention, the museum was able to establish sponsored camps for the underserved. The camps now operate in 48 states, serve more than 55,000 children annually, and contribute substantial revenue to support the museum’s core mission.

Now that you know what you’re looking for, where do you look?

• Board members’ contact lists. — look here for strategic partners to help unleash your assets as products, programs, or services. For example, when a nationally known nonprofit computer trivia competition was moving to the Internet, a board member introduced the organization to the president of an online advertising giant that allowed nonprofit participants to globally recognize their donors, thereby providing their supporters significantly more value.
• Programs and services that you offered years ago that are ripe to be remodeled. — Back in the 1980s, there was a snail-mail international science pen-pal program that connected 2,500 working scientists from corporations, universities, and labs with 25,000 elementary schoolchildren. Today, that program could be refreshed and deployed effectively using social media technologies and multi-media online sharing platforms, which would eliminate two of the programs’ most costly line items—postage and materials.

Don’t just look—listen, too. Say “yes,” rather than the typical “no,” to those who ask your organization to do things you don’t already do. These could be new areas of revenue development. For example, one impressive national organization inspires underserved young children and their families to become active readers. To remain focused on programmatic goals, this organization has been saying “no” when individuals ask to buy their carefully selected packages of high-quality books. Instead, the organization could sell them in any number of ways to people who have the means to purchase the books. This would fund the organization’s mission-critical work while aligning well with the mission itself.

If your potential new revenue stream is not obviously related to mission and therefore potentially subject to UBIT, you and your accountant may decide that the added income is so valuable to your core that you’re willing to pay the taxes. Consult with an account when exploring any options with tax implications.

Economic times like these are great opportunities to start new ventures. These new problems need innovative solutions that nonprofits can deliver by unleashing their passion, drive, and creativity to deliver quality and results. By putting on the hat of a revenue detective, you will begin detecting the unseen opportunities and assets of your organization and exploring their potential for mission-driven revenue.

Dr. Stephen Brand, president and chief imagination officer of the New Enterprise Factory, works with nonprofits to uncover and unleash new revenue streams. Contact him at sbrand@enterprisefactory.com.

At the Boston Fundraising Summit, Stephen did a panel on Cause Related Marketing (CRM), following an excellent introduction to CRM and an interesting application from the Quilting Museum.

One of the cautions he offered was the potential backlash over “pinkification,” the ubiquitous application of pink during October to link a product or company to breast cancer fundraising, research, or “awareness raising,” which carries no contribution.

Given that October is Breast Cancer Awareness month and the Susan G. Komen Foundation has worked hard to get their pink ribbon on dozens if not hundreds of products,  it was not surprising that the Boston Globe published “Sick of Pink” in the Globe Magazine.  It includes poignant perspectives of breast cancer survivors who’d rather not be reminded of their battle constantly, and of protesters who rightly identify profit as a big part of corporate motivation to engage in pink cause related marketing. Joe Waters, who blogs on cause marketing through Selfish Giving, thought the article was like ”Looking for bad when <you are> surrounded by good.”

Cause related marketing is about business first with “doing good” coming in second.  Cause marketing is “Joint funding and promotional strategy in which a firm’s sales are linked (and a percentage of the sales revenue is donated) to a charity or other public cause. However, unlike philanthropy, money spent in cause related marketing is considered an expense and is expected to show a return.” (Source: Businessdictionary.com)

Like any initiative you consider, do so with your eyes open to the ways relationships can affect your organization in either direction.  Entrepreneurial non-profits explore the landscape and engage with appropriate partners around relevant products.  And in many situations, being more entrepreneurial allows you to reach more people, raise more money, have more impact but at the risk of businesses who partner to stand on the shoulders of an important cause with less than philanthropic motivations.  It is a choice that is sometimes worth taking.

What’s been your experience with cause related marketing?

Photo Credit: http://www.stardoll.com/

How easy is it to do business with your organization?  How hard do people have to work to find out about your programs or services or pay for what you offer?  Here is my experience trying to buy tickets for the circus today.  Nonprofits can learn a few things from these challenges.

After two years of promising my sister (and brother)-in-law’s triplets (who are now 6) to take them to the circus, I heard Ringling Bros. was coming to town this week, so I decided it was time.  But for some reason, the circus really didn’t want me to be there.  Here is my ticket purchasing journey.

It started a few days ago when my wife, who I the CEO of Girl Scouts in our region, forwarded me an email stating that this Friday is “scout night” at the circus – which included $4 discounts on each ticket.  Luckily, two of the triplets were Girl Scouts (actually Daisies).  I called the number in the email and the woman who answered, informed me that the discount was for groups of more than 8.  Unfortunately, we didn’t make the cut off, but she offered to forward me to the arena ticket office.  I decided to call later since I was about to enter a meeting.

Later that day, I decided to purchase our tickets online and forgo the personal touch of being on hold for 20 minutes. There were dozens of companies trying to sell me tickets to this event but I was trying to go to the arena site so I didn’t have to pay the hefty Ticketmaster or other broker fees.  I actually couldn’t find the arena’s site.  I finally gave up and went to Ticketmaster.  The prices ranged from $15 – $85.  It was not clear what the different price ranges offered, so I proceeded to almost buy tickets in each of the categories so I could determine where each price level would land us.  Although the process was a bit laborious, I finally determined that the $22 seats were perfect.  Close enough to see things and not too close enough to scare the kids or me. . .

Lucky, they had $4 a seat discounts if you used an American Express card.  This was the same price we would have gotten if we had a large Girl Scout troop.  I was thrilled.  The problem was that when ordering the tickets in the American Express discount category, you needed to put in some type of secret code to get the preferred price.  This code was nowhere to be found.  The following conversation occurred when I called the arena or was it Ticketmaster?  I don’t really know.

Customer Service Rep (CRS):  (after waiting for 10 minutes for someone to pick up) Good evening, how can I help you? (in a heavy hard to understand accent)

Me:  I’m looking to purchase tickets for the circus using my American Express card discount, but I don’t know what the secret code is to allow the purchase.

CSR:  Where would you like to go to the circus?

Me:  Worcester, Mass.

CSR:  What state is that in?

Me:  Mass

CSR:  Is that a state?

I wonder which third world country this cubicle sitting operator is answering my call from. . .or maybe she couldn’t understand my New York accent.

Me:  Massachusetts.

CSR:  Oh. OK.

Me:  The website suggests that anyone with an American Express card can get $4 off the price of each ticket.

CSR:  Well sir, the only way to get that discount is to use a special discount code.

Me:  Well, I don’t know the code, but I do have an American Express card. Where can I get the code?

CSR:  From the web site, sir.

Me:  I can’t find it on the web site.  That’s why I’m calling you.  Can you help me?

CSR:  Sorry I can’t help you.  Anything else?

Me:  Well, what other discounts might there be?

CSR:  I’m sure we are distributing coupons at various retail establishments in the area, but I don’t know where.

Me: Big Y? Target?  McDonalds? Barnes and Noble? Brueggers?

CSR:  I don’t know. Do you have an entertainment booklet?

Me:  No.  What about AAA?

CSR:  Yes.  We take AAA.

Me:  Great.  Here is my AAA number.

CSR.  Sorry sir, you have to bring your AAA card to our box office. We don’t take the numbers on the phone.

Me:  Can you put a hold on the tickets and I’ll show you my card when I pick them up on Friday?

CSR:  No sir, we have to see your AAA card in person when you purchase the tickets.

Me:  Well, I work in Boston and live in Springfield, which will make it impossible to come to the arena in Worcester during your box office hours which end at 5:30PM.

CSR:  Sorry sir that is our policy.  You can just purchase your tickets on Friday.

Me:  OK.  Do you think there will still be good seats on Friday?

CSR:  I’m not sure.  You never know. Anything else sir?

Me:  Sure, but I don’t think you can help me.

Maybe I should have responded in my usual way by asking, “can you please forward me to a supervisor who has the authority to help someone out who is ready to buy tickets?”  For some reason, I decided to move on.

Before I gave up, I decided to explore the American Express site to see what codes they might have to open the secret circus tent payment door.    I searched using the term “circus” and found a Russian Circus and the Shriner’s circus, but no Barnum and Bailey.  Then I typed in Barnum, I found ways to buy tickets for the circus in Orlando, Toledo and Miami. . . but no Worcester, MA (yes MA is a state).   I was going to call American Express or Ticketmaster, but decided to stop looking and just pay the full price, which was the recommendation from my very pragmatic wife.

I then went to the Ticketmaster website to buy the non-discounted tickets and pay the hefty Ticketmaster surcharges.  But before I was going to give up on the discounts, I went to the American Express double secret code coupon box and as a joke starting typing in words — clown, elephant, cotton candy, lions, tigers and bears Oh My . . . but no luck. One more try and I typed in,  “AMEX”. . .and like a magic bottle holding an elusive Genie after you say abracadabra. . .  the web site accepted the code and I was home free. . . I was exhausted but have the bar coded tickets in hand that “should” allow me to enter the big top this Friday.  I can’t wait.  I just love the circus.  Oh yeah, this was about the kids.

I can’t wait to see what happens when we try to buy cotton candy. . .  I’m prepared with my AAA card, American Express card, social security card, driver’s license, college diploma and anything else they might throw my way.

Is it hard to do business with you?  Do all of your employees know when the marketing department has promised to customers?  Do your web people know?  How many people just don’t come to your programs because your web site is too confusing or the person who answers the phone doesn’t know how to help them?

Ask your friends or family members to try to become a member of your organization or sign up for a program to see what the experience is like.

Please share any related experiences you have had below.  I’m sure they’ll be amusing and insightful.

Blue Shirt Nation

Two members of the marketing team at Best Buy were looking to gain more insight into the customer experience in their stores nationally.  I heard these guys speak when I attended the Business Innovation Factory event in Providence, RI last year. They realized that those with the greatest knowledge of their customer base were their employees.  They created the Blue Shirt Nation, a research site dedicated to “connecting employees to share knowledge, best practices, frustrations, aspirations and a few jokes”.  They were able to start getting some understandings of their customer’s perspective that allowed them a better sense of what was going on in their stores.  Steve Bendt and Gary Koelling, creators of the site, also found this as a deeper tool for engaging and motivating employees.

“When we set it up two years ago, we weren’t turning on a social network,” explains Koelling. “We were turning on a research tool. Boy, did we have it wrong.”

“We found out real fast that employees didn’t want to play that game,” continues Bendt. “Instead, they gave us new rules and told us what they wanted on the site and at the company. We shut up pretty quickly and realized we needed to just listen.”

Best Buy attrition rate is about 60% annually, however, the 20,000 employees involved in Blue Shirt National only left the organization at levels of 8-12%. How can you make understanding your clientele not just an exercise for highly paid research companies, but something in the DNA of your employees?  Frontline employees are the experts in the day to day care and feeding of your constituents.  Why not give them the responsibility to collect information, share ideas and create solutions that work?

It’s gotten even more interesting for the company when they now allow members of the team to start proposing new ventures and initiatives as a result of the data they have collected.  This is something that the founders of Blue Shirt Nation or the executives at Best Buy never expected.

What ideas do you have or have you used to better understand your clientele or better engage your employees as they look to help your organization move into the future?

Keep an eye out for my future blog posting on Lead User Design (LUD).

Connecting with your customers/clientele in new ways

National Inventors Hall of Fame

During the opening months, when I was the President of the National Inventors Hall of Fame in Akron, OH, I wanted to get as much information as I could about the visitor experience and how we could continually tweak our environment, policies and programs to better engage our guests and create as much word of mouth as possible.  We had phones placed around the building so that guests could, at any time, leave a message for our team with a compliment, complaint or just an idea to make the Hall of Fame a better place.  We got great feedback and reviewed these ideas each week.  I also spent much of my time roaming around the building observing guest interactions with our exhibits and team.  One day as I was looking up our 5 story atrium at the glass elevator, I had an idea.  I picked up one of the purple aprons which was standard garb for our frontline and volunteered to staff the elevator.  I realized that this would be a great place to overhear guest responses to the look of the building, exhibit elements and the overall experience.  I could ask any reasonable question I wanted to that could be answered in just 5 floors. The amount and richness of the data I collected proved to be invaluable as we worked every day to evaluate our successes and challenges and made the experience as compelling as possible.  I was amused by one of the students who asked me as we traveled through the floors if I had been on the news being interviewed the previous night. I said I was.  And he replied, “I just love a place that puts the elevator operator on TV”.

Where could you stand or what role in your organization could you temporarily play to get insights that you could not get by sitting in your office or in management meetings?

In my next blog posting, I’ll explore how Best Buy gets closer to their customers?

American Express used to tell the world, “Membership has its privileges.”  Does yours? Do the benefits you offer members provide value to them, or only to your organization?

Members of your non-profit, whether individuals, corporations, or organizations, commit their resources to you because they support you.  They want you to be successful.  They want their contributions to generate success, for you and for them.

When you provide them with benefits that provide them with resources, access, expertise, services or products that are valuable to their organization, they will feel privileged to be members.

Providing privileges may be easier than you realized. Who, for example, gets to sit with your board members, introduce the panelists at your events, welcome the guests to a networking session, or be profiled in the members area of your web site?  Which members are invited to recommend speakers?  And then asked them to make the call to invite them to speak?  Those opportunities to engage with executives your members want to know better and want to hear from can have very high perceived value.

Which members are invited to provide note pads with their logo and yours; at your annual or monthly meetings?  Which members are identified as having expertise to share through your directory or at one of your events?  Which companies are invited to host meetings or events in their conference rooms at the beginning or end of their day?

Your organization has many opportunities to provide your members with privileges. Ask them what’s on their wish list of membership benefits.

Last question:  What are some exemplary benefits of organizational memberships you know of, or would recommend an organization offer?

Where might they be?  Some are right in front of our faces but we don’t see them because we are too close. . . others are buried in the minds of our most creative employees waiting to be exposed to the light of day. . . others are in our comment cards from customers or clients, but no one in your organization analyzes them to uncover new revenue opportunities.

Ask your employees the following question. . . “What program, employees, equipment, buildings, or other element of our organization would you take with you if you had a million dollar package to leave and start your own company?  What would your business be about?  Who would your customers be? What convinces you that this is the business to explore?”

What would you do if the board offered you the same deal?

Once you have imagined this for a bit . . . come back to reality and explore how you might really get this idea off the ground with the resources or partnerships you do have or could find? Be a pragmatic visionary leveraging your best assets in new mission driven business ventures.

Feel free to share with our blog readers what new ventures you could imagine that build on your existing strengths that you would love to get off the ground. You might get some encouraging and helpful feedback.