Goodbye, Dues: The Transition From Paid Membership to Free
By: Erin M. Fuller, CAE
These days, the media industry is trying just about every model for payment imaginable, from micropayments to free samples to subscription services, and our members at the Alliance for Women in Media are in the thick of it. If anyone has a membership that understands the need to change to remain sustainable and increase our relevance, it is the AWM community. At least, this is what I told myself and our board of directors as we radically changed our business model.
Beginning later this year, AWM will adopt a "freemium" membership structure, in which a majority of members will pay zero dues. We believe this new model will better fit our rapidly changing profession and our target audience of influential, tech-savvy media professionals. The organization announced a name change from American Women in Radio and Television at the beginning of 2010, and I became president in July 2010, after the former CEO left at the end of eight successful years. The timing was perfect for AWM to take a fresh look at its business model.
Nonetheless, the transition from a paid membership model to a free one has been no easy task. Here's how we came to the decision and then started the process of adapting our governance and operations to a new form.
The Right Time for Change
AWM has never relied on membership as a primary source of income. In fact, membership dues have usually made up only 20 percent of the association's revenue and less than 10 percent of the combined revenues for the association and its 501(c)(3) foundation. Rather, over the past decade, AWM has grown its annual corporate partnerships and event sponsorships to fund a significant portion of the overall operating budget. This strong corporate support, coupled with ticket and table sales for AWM's popular annual gala, allowed us to actively consider alternate membership models.
Meanwhile, AWM has historically allocated approximately 35 percent of its staff resources and around 20 percent of direct expenses toward member and chapter services. This was at a time when AWM's lack of investment in technology was increasingly apparent, serving a profession that is used to the best in terms of technology, design, and delivery. The circulation for our print magazine remained flat, even as web visitors grew exponentially. We were in demand to comment on complex issues, but we didn't have the capacity for true thought leadership on important advocacy and industry issues. In short, the time was right for change.
Our business-planning committee spent three months in an intense planning process, and then it worked to engage the board of directors on refining the plan for another three months. Just as we had earlier changed our name to more accurately reflect and include the variety of electronic media and professionals we serve, we realized throughout the process that our membership structure needed to evolve as well. As we read Free: The Future of a Radical Price, by Chris Anderson, and related articles, blog posts, and case studies, we came to think that the traditional model—one that requires annual dues to access information, connect with colleagues, participate in advocacy, and so on—wasn't the right fit for our industry. That model also was incongruent in terms of how people—especially our tech-savvy audience—connect, engage, and commit. So, we researched and debated a number of new models, and today we are proud of the radically inclusive AWM that we've created:
New membership structure. We eliminated almost all membership dues moving forward, creating a new "Community Member" category in our bylaws. Community Members receive all AWM communications, have access to all areas of the website, and can engage with other media professionals virtually or in person at national events. Anyone with a professional interest in women in media is eligible to join as a Community Member. We ask only for some basic info in return: name, company, title, zip code, and email. Meanwhile, we retained our "Active Member" category, which carries a dues rate of $75, reduced from our previous general membership fee of $110. Active Members can vote for officers and for governance changes, serve on AWM's national board, and receive additional perks, such as first option to purchase individual tickets to our annual awards gala as they come available. We estimate that up to 20 percent of our previous paid membership will pay to join as Active Members, while the rest will remain with AWM at no cost as Community Members.
Freedom for chapters. When we eliminated dues, we eliminated the financial tie between our national organization and our components. AWM will no longer provide membership reports or dues rebates (impossible to do, with no dues!) to our former chapters, but, in return, their reporting load will get much lighter, and they can charge the market rate in their local area for membership. We will still offer some support to our student chapters, as their leadership turns over so regularly.
Weekly newsletter. We launched FastForward, a new weekly e-newsletter, and sent it to our entire database—numbering three times our paid membership—as a way of introducing the new membership offer. From that initial message, we signed up 75 percent of recipients, and we continue to grow our database of Community Members through new subscriptions to this free service.
So, How Much Does "Free" Cost, Exactly?
The new business plan was enthusiastically and unanimously approved by AWM's board of directors in November 2010. Next came the heavy lifting in terms of governance, budgeting, and operations.
Governance. First, I met with our attorney, Jeff Glassie, at the Pillsbury law firm. I have known Jeff for years, and I knew he would welcome the challenge of how to get our governance documents to conform with our snazzy new model. I thought our challenges would lie mostly in changing the definitions of membership, but Jeff had to bring in New York state statutes (where we are incorporated as an association), District of Columbia statutes (for the foundation side), IRS requirements for tax exemption, and a host of other considerations, including reviewing the definition of a quorum for a membership vote to comply with the New York statutes. We worked on bylaw revisions, some of which could be approved by the board after a 60-day notice period to our membership and some of which needed to go to our full membership for ratification. So, we added conference calls with our local leadership, articles explaining the changes, and a voting process to our list of to dos. (See sidebar titled "The Legality of Free" below for more on the legal ramifications of AWM's new membership structure.)
Budget. Amy Lotz, CAE, AWM executive vice president, and I also had to draft a 2011 budget during this time period, reflecting all of the elements of the new business plan. With membership dues gone and a business plan that mandated new issues-driven symposia and increased content creation, we were knee deep in projections, educated guesses, and as many calls to shore up our 2011 corporate support as possible. We replaced much of the lost membership dues revenue via the new symposia series and found significant expense savings on membership items that would no longer be needed (cards, awards, certificates, and so on). In an ideal world, we would have had more time between plan approval, the budget year, and execution, but associations are rarely ideal (and rarely boring as a result).
Operations. Finally, we had to work with our operations guru, Michele Jerome, CAE, on how and when to make key changes to our database system. Michele had just led us through a switch from an antiquated Access-based system to netFORUM by Avectra, and now we needed to change our membership structure all over again. AWM is professionally managed by Coulter Nonprofit Management, and we are lucky to have access to a variety of operational models, reports, and advice merely by walking down our hallways. Michele's experience in migrating seven associations into new systems in 2010 helped us expedite the implementation of our new model, although I am sure she would echo my "ideal world" sentiments above. (See sidebar titled "Making Free Work" below for more on adapting AWM's association management system to its new membership structure.)
Once all these ducks were in a row came the true test: selling these changes to our local leadership and membership. This meant FAQ documents, talking points for staff and leadership, and conference calls with various constituent groups. We wanted to be as transparent as possible while still meeting deadlines for our governance and operational processes. The membership model went out for membership vote in January 2011, with approval received in early February, making the new model both official and a reality.
Next Steps for the Freemium Model
Will "freemium" work for AWM? Only time will tell, but already we feel an impact from our changed model. We have reallocated our member and chapter services staff toward the care and feeding of our new website and new content creation, elements that will allow us to take quick and decisive leadership on a host of issues. We are in the planning and implementation stages of three new single-issue symposia in 2011 in new local markets around the country. We launched our magazine in a new digital format in late 2010, and we plan to create more special reports tied into our symposia moving forward, rather than a quarterly, general publication. I believe we have been able to do so much "new" so quickly because we have freed up our resources and structure to focus on key big-picture issues.
Will it work for your association? I don't know, but I do know this is not a one-size-fits-all solution for associations. AWM is at an advantage in that our varied corporate and foundation support allowed us to move away from membership-dues revenue without a definite replacement stream. Most importantly, this organization has a creative, smart board of directors who are willing to enthusiastically embrace new concepts and a road to speedy execution. We are conservatively projecting a slight year-end surplus for AWM in 2011, and the response to all of the elements of our new model has been extremely positive thus far.
We believe AWM is tearing down barriers—physical, financial, or technological—that prevent anyone with an interest in women in media from participating in events and campaigns, learning about key issues and trends, or engaging with their peers within our association. We believe this change makes us as open and inclusive as possible, and we look forward to welcoming new members to our community.
Erin M. Fuller, CAE, is president of the Alliance for Women in Media and group president, strategy and innovation, at The Coulter Companies in McLean, Virginia. Her favorite free things include cheese samples from Whole Foods and the complete works of Jane Austen for her Kindle. Twitter: @allwomeninmedia; Email: firstname.lastname@example.org
Sidebar: The Legality of Free
By Jeff Glassie
Dues. There is no legal requirement for a nonprofit Section 501(c)(6) membership association to charge dues to members, but IRS rules require such an association to have the purpose of promoting a "common business interest," with activities dedicated to improving conditions in one or more lines of business, versus performing particular services for individuals. However, not charging dues and obtaining revenues mainly from sales and services could be problematic for an association that wants to "go free," if viewed as simply providing business or commercial services. Conducting a variety of activities focused generally on improving and enhancing the profession, such as substantial educational programs, conferences, and training, would still likely demonstrate consistency with Section 501(c)(6) requirements.
Governance. It is important to consider carefully how an association's governance will work after changes to membership and dues structures. Members still may have voting rights, even if in a more limited or narrow membership class. Election of officers and directors also will need to be considered but need not be affected simply by removal of dues obligations. It's a good idea to review applicable state law to make sure any new governance structure complies in all respects.
Lobbying. Finally, if the association has a political action committee, the membership definition and relationship will be critical to fundraising. Only bona fide association members can be solicited by an association PAC. A "significant organizational attachment" by members is permissible under Federal Election Commission rules, such as the right to vote, but dues payment is not necessary to meet the FEC's definition of membership.
Jeff Glassie is a partner in the nonprofit organizations group at Pillsbury in Washington, DC. Email: email@example.com
Sidebar: Making Free Work
By Michele Jerome, CAE
The change in model deployed by the Alliance for Women in Media has been a great case study for us in identifying new ways to use resources. From an operational standpoint, AWM addressed a series of questions related to how it could be easily accessible to all while using systems already in place. Below is a sample of those considerations.
How do we use our association management system (AMS) to support the new model? This is probably the question with the largest impact. AWM's new website must link into the AMS in a user-friendly manner that allows easy access. In the end, we are able to use the new visitor registration feature as a way to get new customers into the community.
What is the key information to collect from community members? AWM has taken the fundamental approach that anyone is welcome to engage in its community. But to do so, what information should be required? It all depended on how the data would be used. We determined that member data would be used to track geographic engagement (critical for advocacy efforts and determining metro areas in which to host future events) and company affiliation, so AWM asks for name, company, title, x code, and email when members enroll.
The challenge here is to motivate Community Members to then engage at a higher level and complete their full profile, register for an in-person symposium, attend a virtual seminar, or sign up for the new e-newsletter. Luckily, AWM had much of that basic information about all existing members in its previous database.
How do we transition current members to the new model? This required a transition timeline that includes milestones such as when to stop offering the old model, when to remove all pending dues renewals from the system, when to communicate with current members about their "renewal," and when to implement new communications. AWM decided to offer all communications (including its weekly newsletter and the digital Special Report on Diversity) for free immediately. However, we rolled out the new financial model over three months, reducing dues to $75, then eliminating membership renewals for national members, and finally transitioning remaining billing to local affiliates.
Have we dotted our is and crossed our ts? As with any change, it was important to review its impact on the baseline operations of the organization. In terms of its fiscal management, how should the new model be reflected in everything from the chart of accounts to the monthly financial statements? What are the new metrics? What should the new dashboards contain? These are all important questions we have yet to answer.
Michele Jerome, CAE, is vice president, enterprise operations, at The Coulter Companies in McLean, Virginia. Email: firstname.lastname@example.org
Online Extra: Timeline for Transition to New Membership Structure
The Alliance for Women in Media pursued a fast-paced schedule for transitioning to a new membership model and rolling it out to members. Below is the checklist of steps and tasks AWM followed during the process:
- Present business plan to national board of directors for vote.
- Hold calls with executive committee regarding bylaws revision.
- Create 2011 budget based on business plan.
- Begin bylaws revision.
- Present revised bylaws to board at meeting.
- Create transition committee.
- Begin work to launch website with content, blog, and so on.
- With transition team, develop and present comprehensive roll-out strategy.
- Draft key message points for use by leaders and in AWM communications related to membership changes.
- Draft key message points for use by leaders and in AWM communications related to chapter changes.
- Alert AWM chapter leaders via special conference call.
- Beta test portions of website.
- Send bylaws to outside lawyer for final review for no significant changes.
- Create benefits and structure for two membership levels: Community Members and Active Members.
- Incorporate article in FastForward newsletter about the bylaw changes that were approved by board (run four consecutive weeks).
- Hold AWM chapter leaders' special conference call (focus on new affiliate relationship).
- Notify past AWM chairs in advance of notifying membership.
- New AWM website goes live.
- Work with database department on changes for database and web integration.
- Distribute bylaws update to members for vote by proxy (in conjunction with board nominations slate).
- Hold follow-up calls with affiliate leaders as necessary.
- Draft press release announcing new structure.
- Host roundtable for chapter leaders.
- Announce results during the Annual Business Meeting.
- Publically recognize past chapter leaders at affiliate Leadership Training and Symposium on Women's Media Ownership.
- Honor BELL Award winners.
- Honor AWM Achievement Award winner.
- Membership invoicing changes to national rate only of $75 for Active Members.
- Letter announcing dues changes.
- Create affiliate toolkit.
- Create affiliate bylaws template.
- Create affiliate dues template.
- Issue press release: AWM Restructures.
- Structural changes go into effect after March event.
- Launch first "campaign."
Q3 & Q4 2011
- Host conference calls with affiliate leaders.
- Create affiliate pricing structure (levels).
Eric Duchinsky , CAE , March 15, 2011
Some axioms still must hold weight.
"You get what you pay for."
"No free lunch."
"If it is too good to be true, it probably is."
Hopefully, this works for them, because there is no going back without significant retooling.
It seems the real difference is no difference at all. Community member is a registered user accessing a limited amount of free content. Active member is just a paid membership with extra benefits.
So in the end, is this a new model or the same model wrapped in new paper?
Organizations with significantly higher dues support will have a more difficult time restructuring.
Lastly, the world of the internet may be all about the FREE. How much value do users have about free information? The rest of the consumers' experiences are still based on dollars.
David Patt , CAE , March 12, 2011
What appears to be a shrewd marketing strategy for this particular group should not be instantly embraced as representing the future for all associations.
The strategy may work here because this is an advocacy organization. It is not the primary professional affiliation for most of its members. Its primary goal is merely to bring people into the tent.
A smaller portion of the group's revenue has been derived from membership fees than is normally the case, so revenue replacement may be less critical. And dues are still assessed for those who want to vote for leaders and receive other benefits. It's not a totally free deal.
The association assumes that creating a package of free services will boost membership numbers and ultimately induce non-payers to pay for other products - meetings, seminars, governance rights, etc. I hope it works.