civic entrepreneurship: revenue generating strategies government and nonprofit organizations
DESCRIPTION
Presentation given by James H. Johnson, Jr. at the 2009 Health Equity Conference.TRANSCRIPT
September 2009
Civic Entrepreneurship:
Revenue Generating
Strategies Government and
Nonprofit Organization
James H. Johnson, Jr.William Rand Kenan, Jr. Distinguished Professor of Management
Kenan-Flagler Business SchoolDirector, Urban Investment Strategies Center
Frank Hawkins Kenan Institute of Private EnterpriseUniversity of North Carolina at Chapel Hill
1
September 2009
Overview
Civic entrepreneurship approaches to
sustainability
Drivers of change
Keys to thriving and prospering in the future
2
September 2009
Social vs. Civic Entrepreneurship
Revenue Generation Options
Partner Motivations
Steps to Creating a Strategic Alliance or
Commercial Business Venture
Critical Success Factors
Potential Pitfalls
Entrepreneurial Approaches
to Sustainability
3
September 2009
Social Entrepreneurship
A set of behaviors whereby an individual acts as a change
agent in the social sector by:
adopting a mission to create and sustain social value;
recognizing and relentlessly pursuing new opportunities to serve that mission;
engaging in a process of continuous innovation, adaptation, and learning;
acting boldly without being limited to resources currently in hand; and
exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.
J. Gregory Dees, Kauffman Center for Entrepreneurial Leadership
4
September 2009
Civic Entrepreneurship
Non-Profits: creating social ventures to meet society’s pressing needs and the financial needs of their organizations.
For-Profits: acting in a socially responsible manner while continuing to operate in the best interests of shareholders.
Government: operating efficiently while creating policies that encourage others to act responsibly.
5
September 2009
Cycle of Fundraising and Distribution
Rise in Venture Philanthropy and
Social Entrepreneurship
Scarcity of Federal Resources
Civic Entrepreneurship
Driving Forces
6
September 2009
Civic Entrepreneurship
Mission
To transform the culture of non-profit and
government organizations from a social
welfare-oriented to a business-oriented
model of operation, enabling them to
become creators rather than mere
redistributors of wealth.
7
September 2009
Typology of Revenue-
Generating Options
Cause-related Marketing Alliances
Affinity Programs
Exclusive Agreements
Selling of Space
Incentive Programs
Sponsored Programs/Activities
Commercial Ventures Launched by Nonprofits
8
September 2009
Traditional Cause-
Related Marketing
Alliances
Corporation agrees to donate a specified
amount of cash, food, or equipment in
direct proportion to sales revenue-- often
up to a set amount-- in support of a
specific cause.
9
September 2009
Traditional Cause-
Related Marketing
Alliances (cont.d) Research confirms that companies
supporting social causes in this way
typically garner greater market share as
more and more people who believe in
the cause begin to purchase their
products or services.
10
September 2009
Traditional Cause-Related
Marketing Alliances (cont.d)
Thus, such initiatives enhance, rather
than diminish, the company’s bottom
line, while contributing to the resolution
of pressing societal problems.
11
September 2009
Traditional Cause-Related
Marketing Alliances:
Examples
American Express and Share Our Strength “Charge Against Hunger” Campaign
Visa and “Reading Is Fundamental” Program
J.C. Penny’s “Can Do” After School Program
Revelation Corporation of America (www.revelationamerica.com)
12
September 2009
Web-Based Cause-Related
Marketing Alliances:
Charity Malls and
Cause-Focused E-Commerce Companies
befree.com
benz.com
charitableway.com
charitymall.com
charityville.com
giveforchange.com
givesomethingback.com
greatergood.com
igive.com
iwon.com
mycause.com
noosh.com
schoolpop.com
shopforchange.com
4anything.com
thehungersite.org
13
SchoolPop.com
September 2009 14
September 2009
Cause-Related Marketing
Alliances: Public Health
Examples
Company Promotion Contributions($) Benefits
American
Express
Charge For The
Cure
Up to $500,000 Komen
Foundation
Avon Kiss Goodbye to
Breast Cancer
N/A Avon
Foundation*
BMW BMW Ultimate
Drive
Up to $1,000,000 Komen
Foundation
Eureka
(Electroux)
Clean For The
Cure
Up to $250,000 Komen
Foundation
* - Donations to various breast cancer organizations and research institutions
15
September 2009
Cause-Related Marketing
Alliances: Public Health
Examples (cont.d)
Company Promotion Contributions($) Benefits
Yoplait
(General Mills)
Save Lids to
Save Lives
Up to $750,000 Komen
Foundation
Creative
Memories
Consultants
Triumph
Album
$526,532 Alzheimer’s
Association
Dreyer’s &
Edy’s
Pink Ribbon Up to $250,000 City of Hope
16
September 2009
Affinity Programs
A variant of cause-related marketing
alliances. In exchange for the
opportunity to provide products or
services to association members at a
reduced cost, corporations agree to
donate a specified percentage of profits
to a charitable cause.
17
September 2009
Affinity Programs (cont.d)
Target two types of associations
Trade -
representing businesses
Professional -
representing individuals
18
September 2009
Associations
“Associations are an underserved market
niche that is open to any business willing to
understand their unique needs…the
association marketplace is one of the finest
niche-marketing opportunities to be found.”
Daniel Bicker, Camelot Travel Services, Englewood, CO.
19
September 2009
Key Facts About
Associations in the U.S.
Over 100,000 associations exist in the U.S.
More than 80% of associations have 1 to 20 employees and have annual budgets under $1 million.
Small businesses are represented at the national level by more than 25 associations.
Most Americans belong to at least one association; over 40% belong to 4 or more.
20
September 2009
Key Facts About
Affinity Programs
Used to market products for more than 20 years.
Rely on the good name of the association to market
products or services.
Allow members to gain improved access or pricing
on products/services, and enable business partners
generate increased sales.
Help to attract and retain members while decreasing
association dependence on membership dues.
21
September 2009
Key Facts About Affinity
Programs (cont.d)
Co-branded Credit Cards are the most popular example of Affinity Programs
Cards appeal to consumers with specific interests or desires
Examples include the following…
22
September 2009
MBNA International
MBNA also has cards
with:
NHL
Gateway
LL Bean
NFL
NASCAR
Universities
23
Broadcasting Companies, Magazines
Retail, Financial Institutions
Internet Companies
Travel and Entertainment Companies
First USA Visa: Companies
September 2009 24
Animal and Environmental Organizations
Colleges/Universities
Military
Professional Associations
Special Interest Groups
Sports Organizations
Fraternities and Sororities
Symphonies
First USA Visa: Organizations
September 2009 25
Bank of America N.A.
September 2009 26
September 2009
Examples of Associations
Involved in Affinity
Programs
NAME MEMBERSHIP
National Association of Realtors 720,000
Assoc. of the Bar of the City of NY 20,000
Greater Washington Society of Assoc.
Executives
3,400
American Academy of Periodontology 7,000
Aircraft Owners and Pilots Association 341,000
U.S. Chambers of Commerce 215,000
27
September 2009
Cities Involved in Affinity
Programs
Shaker Heights, OH
Boston, MA
South Orange, NJ
San Francisco, CA
Plano, TX
Charlotte, NC
28
September 2009
Affinity Programs:
Opportunities for
Development
Group Purchasing Program
Financial Services
Insurance
Information and Education
Marketing and Advertising
29
September 2009
Advantages of Affinity
Programs
Portability
Satisfied Customers
Royalties
30
September 2009
Nonprofit
Organizations with
Affinity Portals
AFL-CIO
National Federation of Republican Women
National Association for Underwater Instructors
31
September 2009
Exclusive Agreements:
Definition
Local governments and other public sector
organizations grant private sector companies
exclusive rights to provide a particular product
or service to their clientele in exchange for
signing bonuses, a percentage of profits, and
other perks.
32
September 2009
Exclusive Agreements:
Organizations
Cities
Public Schools
Public School Districts
Other Non-profit Organizations (e.g., zoos)
33
September 2009
* Contracts typically range from 5 to 15 years.
Exclusive Agreements:
Examples
“Pouring Rights” Contracts
ENTITY COMPANY VALUE *
San Diego, CA Pepsi $6.7 m
Huntington Beach, CA Coke $6 m
Madison (WI) Metro School
District
Coke $1.5 m
Colorado Springs (CO)
School District
Coke $8.0 m
Denver Public School
District
Pepsi $1.5 m
34
September 2009
* Contracts typically range from 5 to 15 years.
ENTITY COMPANY VALUE*
Town of Amherst (NY)
Recreation Center
Pepsi $550,000
Crete-Monee District 201-U
(Chicago Schools)
American
Bottling
Company
$2.7 m
Keller School District (TX) Coke $4.2 m
Wilson County Schools
(NC)
Coke $4.4 m
Exclusive Agreements:
Examples
“Pouring Rights” Contracts (cont.d)
35
September 2009
* Contracts typically range from 5 to 15 years.
Exclusive Agreements:
Examples
“Pouring Rights” Contracts (cont.d)
ENTITY COMPANY VALUE*
Bozeman School District
(Montana)
Pepsi $120,000
Louisville (KY) Zoological
Garden
Coke $550,000
Hurst-Euless-Bedford
Independent School District
(TX)
Pepsi $1.95 m
36
September 2009
Selling of Space
Billboards
Telephone Kiosks
Trashcans
Buses/Vans/Taxi-Cabs
Airports
ATMs
Computer Screen Savers
Cafeteria Menus
Book Covers
School Rooftops
Fruit
Scoreboards, Fences, etc.
37
September 2009
Incentive Programs
Provide Equipment or Cash
Sharon Luggage “The Pack that Gives Back” Program
Apples for Learning
Promote Learning
Pizza Hut “Book It” Program
General Mills “Box Tops for Education”
38
September 2009
Sponsored
Programs/Activities
Corporations prepare materials that are designed to enhance the quality of entrepreneurial education in public schools.
Merrill Lynch’s “Money Matters inthe Millennium”
BIC’s “Quality Comes in Writing”Program
39
September 2009
Corporate Ventures
Launched By Nonprofits
Social business enterprises are specifically setup to generate revenue.
ProductsHabitat for Humanity - Tee Shirts, Gifts
ServicesNature Conservancy - Educational Tours
StorefrontsThe World Wildlife Fund Canada
Online ShopsAmerican Civil Liberties UnionNational Rifle AssociationSave the Children
40
September 2009
Partner Motivations
Non-Profit/GovernmentIncrease Revenue
Access to Resources
Enhance Capacity to Offer Services
CorporationSolve Business Problems
Build Customer Loyalty
Enhance Public Relations
Access to New Markets
41
September 2009
Steps in Creating a
Strategic Alliance
Research the company’s history of donations and future plans for charitable contributions - understand their motivations
Present your added value – “What do you bring to the table?”
Build on what works; eliminate what doesn’t - rely on the existing expertise of both organizations
Begin with the end in mind - outcome focus
Communicate and follow up
42
September 2009
Steps in Creating a Social
Purpose Enterprise
Get Buy In - Internally and Externally
Create A Task Force
Brainstorm Ideas
Conduct Feasibility Studies
Develop Business Plan
43
September 2009
Critical Success
Factors
Clarity of Purpose
Dedication of Partners
Customer/Community Focus
Congruency of Mission and Goals
Planning
Communication
Expertise
44
September 2009
Potential Pitfalls
Community Perspective Generation of revenue is perceived as moving
away from mission --- any or all stakeholders
Human and Capital Resources Limitations of what is available to launch venture
Legal Implications Make sure revenue doesn’t “inure” to benefit of
an individual or outside interest. Business launched has to be directly related to
mission of nonprofit.
45
September 2009
Path to Independence
Obtain
Business
Skills
Modify
Internal
Operations
Form
Strategic
Alliances
Leverage
Dollars
Spent
Achieve
Mission
of NP
Transformation of a Nonprofit/Government Entity
46
September 2009
The Civic Entrepreneur
Effect
Business
Acumen
Dependence
on External
Funds
Financial
Stabilty
Profitability
Probability
of Success
47
September 2009
Implications For
Financial Health
Change is the only constant
Business intelligence gathering is paramount
Speed
Agility
Flexibility
48
September 2009
Implications for
Managers and Leaders
Competitive drive
Voracious consumer of competitive intelligence
Tenacity
Persistence
Entrepreneurial spirit
Soft skills
Hard work
49