Beating the Dues Blues

Meetings & Conventions Beating the Dues Blues April 1999 Current Issue
April 1999

Beating the Dues Blues

Declining membership puts pressure on planners to boost convention revenue

By Maria Lenhart

What happens to a trade association when corporate mergers shrink its membership base? For these groups, which are heavily dependent on dues and other financial support from large corporate members, it can be a matter of life or death.

Consider the case of the American Automobile Manufacturers Association, which was dealt a body blow last year when Chrysler Corp. merged with Daimler-Benz. With its operations transferred to Germany, Chrysler no longer was eligible to participate in the U.S.-based AAMA. As a result, the remaining members, Ford Motor Co. and General Motors Corp., folded the association in December.

Although most trade associations are not so reliant on a small membership base of corporate giants, the proliferation of company mergers and acquisitions among their membership is a growing challenge for many.

“Trade associations have been dealing with this for a long time, but it’s really intensified during the past few years,” says Paul Meyer, vice president of executive management for the American Society of Association Executives in Washington, D.C. “Mergers and acquisitions are having a serious impact on dues income for some associations. If a key member drops out, it means a huge loss of revenue.”

Duane Ekedahl, president of Smith, Bucklin & Associates Inc., a Washington, D.C.-based company that provides management services for more than 200 associations, agrees. “These are difficult times for trade associations,” he says. “One of our clients is now facing a 25 percent drop in dues revenue because of all the mergers and acquisitions in its field: venture capital.”

Paying their dues?
Although most trade associations require their member corporations to pay dues based on their annual sales volume, a merger between two members still can represent a considerable drop in dues income.

“When two members of a trade association merge, there’s usually a loss of revenue involved, even though, in theory, the merged company should pay the same amount as the two smaller companies,” says Meyer. “But what usually happens is that the combined amount of the dues paid by each company is not recaptured after the merger.”

Although professional associations, which are composed of individuals rather than companies, are less vulnerable to business trends than trade groups, Meyer says even these associations are feeling the effects of mergers. “Both professional and trade associations can be affected by changes in their industries,” he says. “For example, when companies downsize and people are not rehired in the field, there can be fewer members for professional associations to draw on.”

Bill Drohan, president of the Drohan Management Group in Reston, Va., a company that manages 14 professional groups, adds, “There’s a limit to what professional associations can get out of dues because there is a limit to what their members will pay. Dues rarely comprise more than 25 percent of revenue for an association, so they know they need other income.”

For associations that are affected by mergers and acquisitions, the solution is often to take a lesson from their corporate members: Do whatever is necessary to improve the bottom line. Savvy trade associations are beating the decline in dues revenues by merging with other associations, outsourcing all or part of their operations and generating additional revenue from non-dues sources, particularly meetings.

According to Meyer, the ability to glean more profits from meetings may be the most effective weapon some groups have against dues loss. “Meetings, conventions and trade shows are taking on much more significance for many trade associations as the fear of losing members through mergers grows,” he says.

Yet, in some cases, the same forces putting pressure on meetings are drawing potential dollars away from the conventions. In many industries, mergers have meant a shrinking exhibitor pool.

“We’re finding that the number of available exhibitors we can get is dwindling,” says Tina Kautter, vice president of Kautter Management Group, an association management company based in Altamonte Springs, Fla. “Where we might have had five drug companies to call on, it’s down to two because the companies have merged. So we get two booths instead of five. That cuts down on revenue for the show.”

To overcome these challenges and fill gaps in revenue, planners need to be creative.

Show business
The National Association of Broadcasters, a New York City-based trade association comprising 6,300 radio and television stations, is no stranger to consolidation, particularly after a 1996 federal law lifted restrictions on the maximum number of radio stations that can be acquired by a single owner.

But regardless of any impact mergers and acquisitions have on NAB membership dues, the financial health of the organization will not be in jeopardy, according to Dennis Wharton, the association’s senior vice president of communications. That is because the revenue the association gets from dues pales in comparison with the profits yielded by the group’s annual trade show in Las Vegas.

Although Wharton declines to specify the amount of money generated by the trade show, he says the NAB “makes millions off it each year, and it enables us to provide the services we do for our members. It’s essential for the health of our organization.”

Despite the fact that the NAB has long had an annual trade show, only in recent years has the show taken on such significance for the association.

The show attracted about 50,000 attendees six years ago; this year’s show, dubbed NAB99 and scheduled for April 17 to 22 in Las Vegas, is expected to draw more than 100,000 people. It will feature more than 1,400 exhibitors and 150 breakout sessions, and it will consume every inch of the mammoth Las Vegas Convention Center.

According to Wharton, such growth is a result of a carefully planned strategy to make the show appeal to as broad an audience as possible.

“What we’ve done is widen our scope to include all aspects of the communications industry at our show, not just radio and TV,” Wharton says. “Not only broadcasters attend our show. We get people from multimedia, computer graphics, engineers, satellite producers, Hollywood types, you name it. We’ve also worked to boost international attendance, which now comprises 20 percent of attendance.”

The strategy has attracted new people from related fields, and the broadcasters themselves find the show more relevant, according to Wharton. “For instance, we saw that our industry is fast expanding into digital technology and that broadcasters want to be up on this,” he says. “By providing a venue for all these facets, broadcasters get much more out of the show.”

To build attendance, Wharton says the association, which plans and markets the show in-house, promotes it heavily both in the broadcasting industry and beyond. “We’ve expanded our promotion by advertising in publications in fields other than broadcasting. At the same time, we’ve managed to convince broadcasters that they need to attend the show, that this is their opportunity to network.”

A show-stopping agenda helps, too. This year’s conference will feature an eclectic mix of appearances: executives of companies such as Sony Corp. and WebTV; congressmen and senators involved in key communications issues, and the cast of the All in the Family television series, which is being inducted into the NAB Hall of Fame.

Those without the resources and show-business links of NAB have found other measures to increase the profitability of their shows.

One method, according to Joanne Cole, president of Professional Management Group in Belle Meade, N.J., is to keep events short and sweet. “We’re cutting down on the days of shows and concentrating the exhibit hours during the days of the convention,” says Cole, whose company provides management services for 11 associations.

“It concentrates attendance at the show and appeals to exhibitors because they don’t have to pay for extra hotel nights and aren’t just standing around all day.”

Banking on meetings
Considering its industry was rocked by recent high-profile mergers between banking giants, it may not be surprising that the American Bankers Association is another trade organization relying more heavily on non-dues revenue these days.

“Our largest members have merged, and it has affected our dues revenue,” says Jeffrey Owen, executive director of the ABA’s Banking Organization Group in Washington, D.C. “However, we realized some time ago that we can’t rely on membership dues and that we need to diversify our revenue streams.”

While dues have declined, profits from new insurance and educational products that the ABA offers to its members have soared.

So has attendance at meetings, such as at the annual conference for small and midsize community banks, where attendance has grown from 400 to 1,500 during the past decade.

According to Owen, the ABA has adopted a strategy of offering more meetings that are specific rather than general in nature. Some meetings are geared for different types of banks, while others have a focus, such as technology.

“About the only general meeting we do these days is the annual convention,” he says.

Also helping with attendance are efforts to get members involved with meetings content.

For instance, while planning the annual conference for community banks, Owen and other staff members hold two-day brainstorming sessions with members of the ABA’s Community Bankers Council.

“We make sure that the content at each meeting is directed by the people who will be attending it,” he says. “If it’s going to work, it has to be banker-driven.”

Drohan of the Drohan Management Group agrees that strong, focused content is the key to attracting a crowd. “All the surveys tell us that members want a meeting that is worth their while, not a vacation,” he says. “The content is what they want. It has to be relevant to their business needs.”

Joining forces
For some associations, the favored strategy for staying healthy has been to merge with a related group.

According to information supplied by the American Society of Association Executives, at least seven high-profile association mergers have occurred during the past two years, in fields ranging from software publishing to telecommunications to medical law. “This trend is very much related to the trend in the business world for companies to merge,” says ASAE’s Meyer. “Associations are following the lead of their corporate members.”

Along with boosting revenue, these mergers often enable the organization to broaden its appeal to members and tap into new resources that enliven the content of meetings and trade shows.

Such is the hope of the Direct Marketing Association, which acquired the Association of Interactive Media last November. The union brings together the 86-year-old DMA, an organization of 4,100 companies involved in database marketing, and the 15-year-old AIM, an organization of 250 Internet marketing firms.

According to DMA president H. Robert Wientzen, the acquisition is “a snapshot of what’s going on in the business world today. Many mainstream, stable and traditional businesses are merging with younger, entrepreneurial start-ups on the verge of success.”

AIM president Andy Sernovitz adds that the “acquisition is about sharing intellectual capital. Direct marketers have the marketing know-how, and the new-media architects have the technological know-how.”

Under the terms of the agreement between the two organizations, Washington D.C.-based AIM will maintain its own staff and headquarters but will be a subsidiary of New York City-based DMA. Members of each organization can join the other at a discount.

Among the areas that are expected to be most affected by the acquisition are meetings, which DMA executives say will become more attractive to the many members eager to learn more about online marketing and commerce.

“This gives us new experts in the field to draw on, people with more entrée into the high-tech world,” says DMA spokeswoman Vesna Huzovic. “AIM will help us expand our educational tracks and shape the agenda.” She adds that this already was demonstrated at the recent DMA Net.Marketing conference, which featured presentations by Sernovitz and others from AIM.

Chris Gallagher, vice president of conferences for DMA, expects additional benefits from the acquisition. “We know it will help expand meetings content, but it may also enable us to put our conferences over the Internet and do virtual trade shows. We also now have a much wider base” at which to direct marketing efforts, he says.

Even before hooking up with AIM, DMA was finding ways to make meetings more profitable and more relevant to members, Gallagher says. “One way we’ve been doing this is to offer more technology training seminars,” he says. “It’s not just newcomers to the field who want them, but there’s a lot of demand from people who’ve been in the business for 20 years and want to keep up on the new technology.”

DMA is hardly alone among trade associations that are finding a ready market for training seminars, says ASAE’s Meyer, who cites corporate cost-cutting as the primary reason. “As companies downsize, they’re doing less in-house training and they’re looking for more outside organizations to manage this for them,” he notes. “This is one business trend that may help, rather than harm, trade associations.”

Your loss, AMCs’ GAIN
While corporate mergers and acquisitions are causing problems for some trade associations, they have been nothing but a benefit for association management companies. With an increasing number of associations, both trade and professional, looking for ways to trim costs and lessen reliance on membership dues, one solution has been to hand all or part of their operations over to AMCs.

Tina Kautter
“A leading cause of the growth of our client base has been the mergers and acquisitions going on in corporate America,” says Duane Ekedahl, president of Smith, Bucklin & Associates Inc., an AMC based in Washington, D.C., that provides full or partial management services for more than 200 associations. “With the loss of dues revenue, associations are cutting down on full-time staff and looking more to outsourcing.”

One indicator that these are boom times for AMCs is the fact that the number of such firms listed in the database of the American Society of Association Executives has grown from 1,000 to 1,200 in the past year. “For many associations, outside management companies both save money and enhance the services they can provide to members,” says Paul Meyer, ASAE’s vice president of executive management.

How much money can associations save by turning to AMCs? While declining to specify a percentage amount, Ralph Marlatt, vice president and general manager of the Olson Management Group in Raleigh, N.C., says the biggest savings are in not having to pay office rent, salaries and benefits. “Instead, the association pays a management fee that is certainly less than what salaries and benefits would be.”

AMCs also promote their ability to save money on meetings, emphasizing their clout with suppliers exceeds that of individual associations. “Because of our volume of business, we can leverage rates with hotels and convention centers better than our clients could alone,” says Marlatt, adding that further savings come from the fact that Olson Management Group owns its own travel agency and shares commissions with clients.

Also fueling the demand for AMC services is the fact that many associations are faced with a declining pool of volunteers. “People just don’t have time these days to serve on committees, staff an exhibit hall or help plan a convention on a volunteer basis,” says Joanne Cole, president of Professional Management Group in Belle Meade, N.J. “Associations are delighted to hear that there are companies that will do this for them.”

Not everything is rosy for AMCs, however. Along with more business from associations has also come more competition among an ever-growing number of AMCs. Tina Kautter, vice president of Kautter Management Group in Altamonte Springs, Fla., attributes the boom in start-up AMCs to the trend among associations to merge with one another or outsource. “Because of this, a number of association executives have been thrown out of work,” she says. “One way for them to use their experience is to become a consultant or start an AMC.”

Some AMC executives note that competition also is increasing because of the growing number of meeting-management and site-selection firms. Bill Drohan, president of Drohan Management Group in Reston, Va., says survival depends on developing a niche. “Clients not only want to see your track record, but they want to know that you have an understanding of their industry.”

For meeting planners, the trend toward outsourcing means more job opportunities with AMCs and less with associations. “Companies like ours offer a real growing job market for meeting planners,” says Marlatt. “I’d suggest that anyone looking for a job get a list of the AMC membership from ASAE.”

M.L.