Five Business Models
A Strong Business Model is the Bedrock of Success
Summary
“Strategy is what you do, not what you say.”
Roger Martin
Business models are vital for any organization. They are structured pathways that create laser focus on our community (and the value we develop for them) while ensuring financial viability and revenue diversification.
Business models are focused, active documents that are only effective when widely owned and deeply aligned. They are animals of investment and buy-in.
This article frames the business model as a lever for focused success. In doing so, I cover five different models, providing an association example as well as pros and cons. This list is not comprehensive nor will each of the models work for all associations. The examples work in concert with the Business Model Canvas.
The Product Community is a product development learning community designed specifically for associations.
Framing
“Business models can unleash the full potential of creative thinking, challenge the status quo, and help define innovative offerings.”
Bastian Widenmayer
As I reviewed in my article “How to Design a Winning Business Model”, designing, adopting, and sustaining a sound business model is vital to staying ahead of the pack and remaining relevant as the world evolves and your members desire new value.
A business model provides a holistic picture of how an association creates and captures value. It does this by defining the who (membership community), the what (offerings of value to connect members to the association), the how (how the offerings are delivered and how they offer distinct, connective value), and the value of an association (what makes the business model financially viable).
All associations have multiple business models, but we’re less good at documenting them for focused action and outcomes. It is our job to design, develop, integrate, execute, align, and keep our business models up-to-date. This way, we can ensure our main focus remains our main focus: designing indispensable value for a community hungry for connection and value.
In the next section, I cover the following five business models: the add-on, customer loyalty, digitization, all-you-you-can-eat (or flat rate), and the leverage customer data business model.
The Business Models
“Like seeing the doctor for an annual exam, regularly assessing a business model is an important activity that allows an organization to evaluate the health of its market position and adapt accordingly.”
Alexander Osterwalder
I use the book The Business Model Navigator: The Strategies Behind The Most Successful Companies by Oliver Gassman, Karolin Frankenberger, and Michaela Choudury as inspiration for this article. They cover sixty business models with origins, examples, and suggestions for implementation. Although their focus is corporate, the concepts are generally applicable to associations.
MODEL #1 –The Add-On Business Model.
The 'add-on' business model involves providing a core product or service at a base price and offering additional features, services, or options for customization at an extra cost. This strategy allows members to tailor their experience or enhance the value they receive.
Let's look at the annual conference as the core offering. Here's how we could implement the 'add-on' business model:
Basic Conference Package: The base registration fee to attend the conference, which covers access to breakout sessions, keynote speeches, and networking. This is the core offering.
Add-On Options:
Workshop Intensives: Members can opt to pay an additional fee for specialized workshop intensives or masterclasses on topics related to the conference theme.
VIP Networking Event: For an extra charge, members can gain access to an exclusive networking event with industry leaders, keynote speakers, and other VIP attendees.
Premium Materials or Resources: Offering premium resources such as an exclusive conference workbook, access to speaker presentation slides, or additional online resources for a supplementary fee.
Extended Access to Recordings: Providing the option to purchase access to recordings for those unable to attend all sessions or wanting to revisit the content later.
Customized Packages: We could also offer bundled packages where attendees can choose multiple add-ons at a discounted rate compared to purchasing each separately.
PROS – The add-on business model allows us to offer a more tailored experience plus the opportunity to increase revenue by offering value-added services or experiences beyond the core offering.
CONS – The add-on business model might add an unneeded layer of complexity to your offerings, which might confuse members or add friction to the buying process. The add-on business model might also be tricky to navigate in your association management system (which may need to be configured or integrated with other systems).
MODEL #2 – The Customer Loyalty Business Model.
The customer loyalty business model focuses around fostering enduring relationships with members by prioritizing trust, personalized experiences, and consistent value delivery.
In this model, we aim to cultivate strong, long-term connections with members by offering value that encourage ongoing engagement and connection. Here's how it works within a membership framework:
Trust and Value Creation: We focus on delivering consistently high value through offerings such as educational resources, industry insights, networking opportunities, and exclusive events. This builds trust by demonstrating the association's commitment to anticipating its members' needs.
Personalized Engagement: As members have unique needs, we might adopt a more personalized approach or tailored content, workshops, or networking opportunities based on the member interests or industry focus. We could also create specialized tracks or resources for different sectors.
Rewards and Benefits for Loyalty: Members who demonstrate long-term commitment and engagement could be rewarded. This might include:
Tiered Membership Levels: Offering membership tiers with escalating benefits based on the level of engagement. Higher-tier members could receive priority access to events, mentorship programs, or dedicated support.
Recognition and Awards: Acknowledging and celebrating members who have made significant contributions to the association or the industry. This could involve awards ceremonies or public recognition.
Continuous Communication and Feedback: Engaging members in ongoing conversations and seeking their feedback to improve services and offerings. Providing avenues for members to voice their opinions and actively incorporating their suggestions helps in strengthening the relationship.
Here how it might work for a healthcare association. Basic membership provides access to general resources and events, while premium tiers offer personalized mentorship programs with renowned practitioners, exclusive access to cutting-edge research, and invitations to closed-door roundtable discussions with industry leaders.
PROS – The 'customer loyalty' model encourages members to stay connected for reasons beyond standard benefits: trust, recognition, and sense of belonging. It's about creating a community where members feel valued, understood, and supported, fostering loyalty that extends beyond mere transactional engagement.
CONS – Customer loyalty could give an impression of favoritism or reinforce political channels (as opposed to developing a customer loyalty model based solely on community health or meaningful impact).
MODEL #3 – The Digitization Business Model.
The digitization business model involves converting traditional products or services into digital forms to enhance accessibility, reliability, flexibility, and efficiency. Let's take an association that offers in-person learning programs and transform it into an online platform. To make this shift, they could:
Content Conversion: Transform existing course materials, presentations, and resources into digital formats like e-books, videos, or interactive modules.
Online Platform Development: Adopt a user-friendly online learning platform. This would allow users to enroll, access course materials, submit assignments, and interact with instructors and peers.
Interactive Learning Experience: Incorporate multimedia elements such as videos, quizzes, forums, and live webinars to simulate the in-person learning experience. This maintains engagement and interaction among participants.
Virtual Collaboration: Introduce tools for virtual collaboration, enabling group projects, discussions, and networking among participants regardless of location.
Personalized Learning: Implement adaptive learning technologies that cater to individual learning styles, pace, and tailored content and recommendations.
Assessment and Certification: Develop mechanisms for online assessments to evaluate participant progress. Upon successful completion, issue digital certificates or badges to acknowledge achievement.
For instance, an education association could take a week-long in-person workshop on marketing strategies and convert it into an online program. They could create video lectures, interactive modules on various marketing tactics, discussion forums for participants to exchange ideas, live webinars with industry experts, and assessments to gauge comprehension.
PROS – A digitalization business model could expand reach while also offering a more flexible, interactive, and accessible learning experience to a wider audience.
CONS – A digitalization business model requires an investment in technology, talent, data, volunteer management, and content creation. This might not be an easy lift for associations with older technology. Some associations might not see a return on investment for a while.
MODEL #4 – The Flat-Rate or All-You-Can-Eat Business Model.
The flat-rate business model is a business model underscored by a pricing strategy where members pay a fixed price for unlimited access to an association’s resources, products, and services for a specific duration. This model is popular in entertainment, hospitality, software, and membership organizations. Let's look at how it works in an association focused on professional networking:
Membership:
Annual Membership Fee: Members pay a fixed annual fee.
Access to Content: Members gain unlimited access to exclusive content such as webinars, industry reports, white papers, and online courses related to their profession or field of interest.
Event Participation: They can attend all association-hosted events throughout the year, including conferences, workshops, seminars, and networking mixers, without any additional charges.
Service Utilization: Members can also access specialized services like mentorship programs, resume reviews, or career counseling.
For instance, let's say the membership fee is $500 per year:
Member A pays the $500 annual fee and gains access to all the association's content, events, and services for the entire year. They can attend as many events, access as much content, and utilize as many services as they want without any extra charges.
The flat rate model encourages more frequent utilization of our resources and services, fostering greater engagement among members and providing predictable revenue.
PROS – It's a win-win situation: members enjoy the convenience and value of unlimited access while the association can forecast revenue more accurately and potentially attract more members due to the perceived value of the all-inclusive membership. Members will also shed the perception that they are being ‘nickeled and dimed’.
CONS – A single cost, flat rate business model might be a tough sell to a traditional board. Also, demand for resources might outpace our capacity to deliver and it might also be tough to predict the all-in price (or cost for delivering such a model), which could cause a short-term hit to revenue or satisfaction. The largest con for more mature associations is that they simply may not be able to make the numbers work (the all-in price looks too high for members or is too low to sustain a healthy budget.
MODEL #5 – The Leverage Customer Data Business Model.
The leverage customer data business model revolves around collecting data, analyzing it, and potentially monetizing it. Associations can leverage member data across various offerings in order to conduct research, determine patterns, or sell anonymized and aggregated data to third parties.
Consider a healthcare association, which collects data which could include information about patient demographics, treatment methods, success rates, and healthcare trends. By aggregating, anonymizing, and perhaps selling this data, the association could provide the following value:
Research and Analysis: Analyze data to identify patterns and trends within the healthcare industry. For instance, they might discover correlations between certain treatments and patient outcomes, or they might identify regional variations in healthcare practices. This information could be used to improve industry standards, develop best practices, or contribute to academic research.
Product Development: Insights derived from member data could help in creating new products or services tailored to the needs of healthcare providers. For instance, if the data suggests a growing demand for a specific type of medical technology, the association might partner with manufacturers to develop and promote these products.
Monetization: Anonymized and aggregated data, stripped of any personally identifiable information, could be sold to third-party organizations. Pharmaceutical companies, research institutions, or healthcare analytics firms might be interested in purchasing this data for market research, trend analysis, or to enhance their own services and products. The association can generate revenue by licensing access to this valuable dataset.
PROS – The leverage customer data holds great promise for associations looking for an additional revenue source of revenue. It would, however, take an investment in technology, capability, capacity, and a new mindset.
CONS – Good data is hard to come by in associations. This business model's success hinges on our ability to collect quality data, analyze it effectively, and derive actionable insights while respecting the privacy and confidentiality of its members. It's crucial to emphasize the importance of maintaining data privacy and adhering to ethical standards when handling member data. Strict measures need to be in place to ensure that individual identities remain protected and that data usage complies with privacy regulations.
Purpose + Financial Acumen
“The only way to create a new business model is to stop doing what your competitors are doing.”
Oliver Gassmann
The association of the future is purpose-driven.
In order to achieve our purposes, we need to be strategically-focused, fiscally-shrewd, value-creation machines. These traits are mindsets as much as they are investments. Instead of being at odds with purpose, they embolden it.
The association of the future is community-driven, in which revenue and membership become outcomes of a well-run, in-tune, anticipatory organization.
These well-run organizations are simultaneously people-focused and problem-focused. In doing so, we build thriving communities who desire both connection and indispensable value. And we can do none of this without developing, honing, and executing on a well-designed business model.
Product-led growth fuels connection. Join the product community and flip your destiny.
About the Author
James Young is founder and chief learning officer of the product community®. Jim is an engaging trainer and leading thinker in the worlds of associations, learning communities, and product development. Prior to starting the product community®, Jim served as Chief Learning Officer at both the American College of Chest Physicians and the Society of College and University Planning.
Please contact me for a conversation: james@productcommunity.us.
Your workshops have been illuminating - great content!