New Recurring Revenue
A Guide to Productized Services for Associations
Summary
All associations desire a healthy balance sheet. The most strategically-prepared are in-tune with member needs, understand the pulse of what’s coming, and invest steadily in value creation.
Despite our cautiousness about using the word, we are in the product business. We convene communities, tackle hard-to-solve problems, and provide value for those hungry for connection, networking, or professional development. These products are our offerings, services, or programming. Properly implemented, they become drivers for deep and long-lasting connection.
Recurring revenue is not about nickeling and diming members, raising prices solely to fill budget gaps, or throwing new spaghetti on the wall and hoping that new revenue will emerge. Recurring revenue is about superior value creation in the service of healthy culture and lifelong connection.
Productization offers the best of both worlds: an investment in value creation that keeps members serially connected and coming back for more. The outcome? An indispensable association with healthy membership numbers and strong, diversified revenue.
I lead the product community, which is a product development learning community designed specifically for associations.
The Need for Recurring Revenue
“The most successful organizations are no longer the ones that offer the best deals. They’re the ones that champion the most original ideas and do things other organizations can’t or won’t do.”
William C. Taylor
Annual Recurring Revenue (ARR) is a metric that measures the amount of predictable, recurring revenue that an association can expect to receive on an annual basis. It is calculated by taking the total value of all active subscriptions, memberships, or recurring contracts and projecting that amount over a 12-month period.
ARR provides a baseline of financial stability; properly implemented and managed, it is the foundation for grounding an association in predictable revenue that is expected to continue in the future.
The best example for associations of recurring revenue is membership. Most associations are membership-based, which is a value-based exchange of monies from member to association. Depending on the association, membership can be anywhere from 15% to 30% of total annual revenue. If you consider annual events (which can sometime be up to 50% of annual revenue), most association revenue comes from two sources. In a future article, I will address the risks of undiversified annual revenue.
ARR is important for associations for several reasons:
Predictable revenue streams – By offering memberships, subscriptions, or recurring services, associations can generate a predictable and stable revenue. This predictability allows for better financial planning, budgeting, and resource allocation.
Valuation and growth – ARR is used by stakeholders to evaluate the growth potential and value of an association. A growing ARR can indicate a sustainable business model, making the association more attractive for new members or partnerships.
Member retention – Recurring revenue models encourage customer retention, as members or subscribers are more likely to continue their relationship with the association over an extended period. This can lead to higher customer lifetime value and reduced acquisition costs.
Scalability – By offering productized services, associations can scale their recurring revenue streams with relatively low incremental costs. This can lead to improved profitability and operational efficiency as the business grows.
Financial stability – A strong ARR provides associations with a stable financial foundation, which can be particularly important during economic downturns or periods of uncertainty. This stability can help associations maintain their operations, services, and support for their members.
ARR can be generated through membership dues, subscription-based access to resources or publications, online courses or certifications, and recurring consulting or advisory services (more on this below). By increasing ARR, associations can build a more sustainable and predictable revenue model, enabling them to better serve their members and invest in long-term growth and innovation.
What are Productized Services?
“People can copy your products and services, but seldom can they build the powerful connections with customers that emerge from the well-designed experiences that you deliver.”
Joseph A. Michelli
Productized services is a business model where value is packaged and sold as standardized, ready-to-use offerings. These services have predefined scope, pricing, and delivery models. Instead of custom, one-off projects, productized services are designed to be repeatable, scalable, and easily consumable by members.
Productized services can be easier to market, sell, and scale. The goal is to provide efficiency, clarity, and value to members while streamlining delivery and providing recurring revenue for associations.
With the right market niche, consistent investments, and a membership hungry for connection, productized services could be a boon for associations looking to innovate, grow, and/or achieve durable relevance. As you might expect, there are pros and cons.
Pros of productized services
Recurring revenue – Productized services can generate recurring revenue through subscriptions, licenses, or ongoing service contracts, providing a more predictable and stable income source.
Scalability – Once developed, productized services can be replicated and delivered to multiple customers with minimal incremental costs, allowing for greater scalability and growth potential.
Efficiency – By standardizing and streamlining service delivery, associations can improve operational efficiency, reduce costs, and better allocate resources.
Accessibility – Productized services can be accessed and consumed by members or customers remotely, expanding the association's reach and potential customer base.
Branding – Successful productized services can enhance the association's reputation, visibility, and credibility within the industry or profession.
Diversification – Offering productized services can help associations diversify their revenue streams and reduce reliance on traditional funding sources, such as membership dues or event registrations.
Cons of productized services
Development costs – Creating high-quality, standardized services or products can require significant upfront investment in terms of time, resources, and expertise.
Commoditization – By standardizing services, associations may risk commoditizing their offerings, making it harder to differentiate and command premium prices.
Cannibalization – Productized services may compete with or cannibalize existing revenue streams, such as consulting or advisory services offered by the association.
Perception – Some members or stakeholders may perceive productized services as a departure from the association's traditional role or mission, potentially leading to resistance or criticism.
Maintenance – Productized services may require ongoing maintenance, updates, and support, which can be resource-intensive and challenging to manage over time.
Competition – Associations may face increased competition from commercial providers offering similar productized services, potentially eroding their market share or pricing power.
To mitigate these cons, associations need to carefully evaluate their capabilities, resources, and market demand before embarking on productized service initiatives. They should also ensure that these offerings align with their mission, values, and the needs of their members or target audience.
Example Productized Services
“By having every team focused on the product, you create a culture that is built around enduring customer value.”
Wes Bush
In addition to membership, here are some ways associations could consider productizing their services:
Courses and training – Associations can develop and offer online courses, certifications, or training programs related to their industry or profession. These can be self-paced or instructor-led, and can cover a wide range of topics relevant to members.
Consulting – Associations can package their expertise into predefined consulting offerings, such as industry benchmarking studies, best practice audits, or strategic planning services. These can be offered at fixed prices and with clearly defined deliverables.
Software – If the association has developed proprietary software that is valuable to their members, they could consider productizing and selling access to it, either through subscriptions or one-time licenses.
Tools and resources – Associations can create and sell toolkits or resource libraries that members can use. These could include legal document templates, marketing materials, or industry-specific templates and guides.
Research and reports – Associations often conduct extensive research and data collection within their industries. They could package and sell access to these research reports, industry benchmarks, or trend analyses.
The key to successful productization is to identify services or resources that are valuable to members, package them in a standardized and scalable way, and market them effectively to the target audience. Associations can leverage their industry expertise, member networks, and trusted reputation to differentiate their productized offerings from those of commercial providers.
Investing in Value Creation
“You can’t just slap a monthly fee on a product and start shipping; you have to change your entire way of thinking. You need a mindset that treats your customers like partners in an ongoing, mutually beneficial relationship.”
Tien Tzuo
The indispensable association is grounded in strong community and deep relationships. People don’t want more stuff, but they do want the right value at the right time to help solve problems while working meaningfully toward achieving a bold vision. Three mantras drive a product community approach to strategic innovation:
Investing in value creation to create deep and serial connection.
Building thriving community to cement and extend this connection.
Positioning revenue as an outcome of community, not a transactional goal.
I lead the product community; we are a learning community because we believe great relationships help us create the value our members want. Remember, 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 theproduct 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