Identifying Additional Revenue Opportunities in Tough Times

These are tough times for many nonprofit organizations.  Almost all are struggling to increase revenue in an environment where people and businesses are anxious about the future and therefore reluctant to spend or donate. 

There is an old adage, "Until the pain of not changing is greater than the pain of change, no change will occur." This is often truer in the nonprofit sector than in the for-profit sector. Now that nonprofits are feeling the strain of the economic environment, there is an opportunity to bring about positive changes they may have been previously reluctant to undertake.

When faced with a financial crunch there are a number of options available to nonprofits:

• Live off your reserves or endowment until the economy turns (assuming you have a sufficient amount, and that they are not externally restricted)
• Make your normal operations as efficient as possible
• Cut program and/or staff
• Offer current products to new and related markets
• Create new products and services for your existing markets and possibly other markets.

In this article we will consider the last two options: expanding markets and widening the pool of available goods and services that are offered.

Like for-profits, nonprofits have markets they serve.  This is clearly the case for membership based organizations such as trade associations and professional societies like the Aluminum Association and the American Bar Association, but also includes service clubs like Rotary and Kiwanis.

There are many non-membership nonprofits that also offer goods and services to specific markets. Charitable, human services, and similar philanthropies also set boundaries on their markets for services they deliver and populations that they serve.  One need only look at what some might refer to as the disease and body part associations like American Diabetes Association and the American Lung Association, or at such well know charities as So Others Might Eat, or your local food bank.

Organizations with large membership or markets need to be sensitive to the existence of market segments: sub-groups with needs that are different from or in addition to the needs of the larger, more general market.  AARP, for example, has to think differently for at least three market segments:

1. Retired persons age 50 and older
2. Non-retired persons age 50 and older
3. Vendors which have products of use to individuals age 50 and older.

Where a for-profit would look for all available markets, AARP has self-selected to not enter the under 50 years old market.

Generally speaking, it is easier for most nonprofits to expand the product offerings to the existing membership or constituency base than it is to try to expand into a new target market.  Associations as well as eleemosynary organizations are intensely political institutions. Participation, particularly in the leadership, involves a serious commitment and identification with the field.  Redefining "who we are" is a very profound change.  Perhaps that is why there are so many nearly identical organizations and why historically we have seen more new spin-off associations than mergers.

Yet, the possibility of adding market segments does occur. For instance, some medical specialty societies also serve the needs of non-physician medical professionals (nurses, technologists, etc.) while most do not. Similarly, the shift from print to electronic publishing has enabled many American associations to increase their product offerings to non-US markets.  More traditional nonprofits have also demonstrated a capacity to adjust to profound changes in the market.  The March of Dimes responded to the conquering of polio by refocusing its effort to pregnancy and baby health. 

For each market or market segment, current or prospective, the organization needs to answer some crucial questions that parallel the classic Five Ps of Marketing.

1. People: Who are you trying to market to and what are their self-perceived needs?  Not what the leadership may think the market needs, but what the market is asking for.   The need may not be articulated as a specific product or program;  rather it may be communicated as a concern or a problem that needs to be resolved.  One good way to solicit this information would be to inquire of individuals in a market or market segment, "What wakes you up at 3 AM in a cold sweat?"
2. Product: What product will meet their needs? Are there other products that address the needs and how will ours provide more value?  There is absolutely no reason to add "another" product that is no better than what is already on offer.
3. Price: Will the price reflect the full direct and indirect costs of production and promotion?  If the product is very highly valued by the marketplace, will the price test the upper limits of that value?  Alternatively, even in this time of financial need, if the product is absolutely core to the organizations's mission, can we moderate the price but still not lose money on it?  What is necessary is good data on the direct and indirect costs of production and promotion?
4. Promotion: How will you communicate the benefits of the product to the potential buyers? 
5. Place: Can we get the product to market on a timely basis, and how will we distribute it? 

It has been a long time since the nonprofit community has been as stressed as it is now.  Now is the time for you to help those in your market who are waking up at 3 in the morning in a cold sweat.  They will remremember you for it.