There's more to launching an endorsement and licensing program than designing an seal and corralling some product reviewers: Your association's reputation is threatened when you sign off on a bad product. Experts share their insights on what makes a good program work.
Your word may be your bond, but an association's official endorsement also carries a lot of weight—and it can be a major marketing coup. A 2000 study published in the Journal of Consumer Marketing found that association endorsements positively influence consumers' purchasing intentions.
Your association may be able to leverage its influence and generate additional revenue by creating an endorsement program. But a successful program involves more than designing an attractive seal and gathering some product reviewers; there are potential pitfalls in terms of administration and liability. Some organizations, such as AARP, make millions of dollars annually from endorsement deals—as much as $400 million in 2006, according to BusinessWeek. But the organization has been publicly criticized for some of its endorsements, as well. If your association is considering an endorsement program, take a close look not only at what you're approving, but how you're doing it and why.
Association endorsement programs come in three main forms:
- True endorsement. An association evaluates a product or service and provides a "seal of approval" for use by the vendor.
- Nontraditional models. The association is actively involved in the creation and marketing of a product or service.
- Licensing deals. An association enters into a sponsorship agreement with a vendor that permits the use of the association's logo but does not include an evaluation process by the association.
One of the most established and well-known association endorsement programs is the Seal of Acceptance [read its guidelines here] granted by the American Dental Association (ADA). The seal program was created in 1930, says Clifford Whall, DDS, who has administered the program since 1981.
"Many dental products were making dubious claims in the late 1920s," he says. "As a service to all ADA members, some of our member dentists evaluated these products and published their data." Until 1995, there was no fee for a product to be evaluated for the ADA seal; all expenses were covered by member dues.
As the evaluation program grew in size and stature, ADA member dentists developed guidelines for many product types and outlined the necessary clinical studies required to ensure safety and effectiveness of consumer products. The seal is sought after: Whall estimates 15 to 20 products are submitted for evaluation each year, and more than 300 have earned the seal. The submission fee is $14,500, and after approval an annual fee of $3,000 is required to maintain the use of the seal. Why do companies pay so much? "It is a rigorous, objective, scientific, third-party evaluation with great credibility," he says.
When submitting a product for evaluation, the applying company must provide clinical studies that demonstrate the safety and effectiveness of the product. These studies undergo rigorous review by a team of expert consultants; products with successful reviews are then forwarded to ADA's council of 17 academic research dentists. About one quarter of applications are denied the first time, Whall says.
Despite the hefty evaluation fee, the program is "not a money maker," according to Whall; fees only cover the administrative and overhead costs of maintaining the program. ADA offers no exclusive endorsements in any product category and does not limit the number of applications a manufacturer can make or the number of products that can carry the seal.
Whall emphasizes that the Seal of Acceptance is not an endorsement but rather an official ADA statement saying that the product has been shown to be safe and effective; therefore, ADA has no product liability. "Our goal is to provide consumers with information that they can use; the seal ensures truth in advertising," he says.
Paths to Approval
The American Chiropractic Association (ACA) has been endorsing products and services for more than 10 years. Examples include a La-Z-Boy anti-back-pain recliner, North Face backpacks, and certain brands of mattresses. Vendors apply for the ACA endorsement by submitting studies and evidence of accountability, a process that carries a flat fee. Once approved, ACA negotiates an endorsement contract with the manufacturer; fees and terms vary depending on whether the contract is exclusive or nonexclusive. Both types of endorsements have their pros and cons, says Cheryl Rothbart, vice president of membership and business development. "An exclusive endorsement can restrict your potential market, while a nonexclusive contract can be hard to restrict," she says. ACA's endorsement contracts are usually for three years.
The National Council for Community Behavioral Healthcare endorses only one product, and it's one the council helped craft: coverage by the Mental Health Risk Retention Group Insurance Trust, which provides professional liability insurance to mental-health practitioners. The trust grew out of a practical need: Mental-health professionals found it difficult to obtain such coverage two decades ago, according to Linda Rosenberg, the council's president and CEO. The trust is a for-profit entity, but dividends are returned to shareholders. Rosenberg's group receives income for marketing the plan.
Though the American Physical Therapy Association has had an endorsement program for more than 10 years, it currently endorses only six products. APTA initiated its program, which is designed as a revenue stream for the association, after it was approached by companies that sought such an endorsement.[Read APTA's Product Endorsement Program application.]
"Our endorsement gives immediate visibility to a product and provides the manufacturer with a catalyst for a marketing campaign," says Janice Ford, associate director of member services, who has been administering the program for more than seven years. She notes that companies display the APTA seal prominently and that some have used earning the seal as a way to get their products into retail outlets.Due diligence in product claims is crucial to maintaining the credibility of the endorsement, Ford says. "We do not accept every product, even though the revenue is important. The product must meet our guidelines, and manufacturers must provide the research evidence to back up their claims."
Companies seeking an APTA endorsement submit an application along with a $750 fee. The product and clinical studies are reviewed first by physical therapists on staff at APTA, then by a three-member committee of the board of directors. Committee members might ask questions of the vendor; once they are fully satisfied, the application goes to the full board for approval.
Reference checks with actual users of the product are conducted, then contract negotiations begin. The entire process takes six to nine months.
APTA's endorsement deals are usually from one to three years, and companies pay an annual fee based on product type and cost, company size, and other factors. Each contract is negotiated individually. Annual fees range from $2,000 to $40,000. The association is fully indemnified in the terms of the contract. Ford reports that no product liability concerns have arisen during her tenure with the program; currently about 10 applications are in the pipeline.
If you're considering launching an endorsement program, follow four steps to get started:
1. Research. Do basic research on your members' businesses, suggests Dixie L. Arthur, president of ASAE Business Services, Inc., who has been crafting association endorsement deals for more than 20 years. Surveys and focus groups can help you determine whether there are particular products and services that members want and need. Sometimes, however, she says that you "take a leap of faith" and that some offerings are "just a blatant need in the marketplace."
The research is more anecdotal but no less important at the Professional Rodeo Cowboys Association. According to Commissioner Karl Stressman, the association's licensing program is part of a corporate sponsorship agreement that allows manufacturers to brand their products as PRCA "official" items, such as jeans and boots.
"The products that we endorse are those that we and our members use every day," says Stressman, who notes that the "official" designation is limited to one product in each category. Although PRCA has no formal written endorsement policy, the terms of the agreement are spelled out in licensing contracts; manufacturers pay for the privilege of using the PRCA logo. [Read PRCA's sponsorship agreement.]
2. Evaluate. Uniqueness of the endorsement offering is key to making it competitive in the marketplace, Arthur advises. Evaluate whether you are able to offer your members benefits that they would not otherwise receive. "Time savings and cost savings are the two greatest benefits," she says, but she adds that "many associations don't drill far enough down into how they can and will market or sell the product."
ADA's Whall also recommends evaluating your reasons for launching an endorsement program, as well as your association's available resources. In ADA's case, all Seal of Acceptance evaluators are volunteers."Your group must have a real commitment to the idea," he says. He also notes that, if endorsements are purely a profit-making venture, their credibility could be compromised.
The Mental Health Risk Retention Group Insurance Trust endorsed by the National Council for Community Behavioral Healthcare is "a strong product that really met a need within our profession," says Rosenberg. "Because our endorsement is valuable, the trust is very responsive to our member needs and makes necessary changes in coverage."
"Make sure that you have sufficient administrative support for the program," says APTA's Ford. "Initial company research, tracking, and follow-up take time; it is not a part-time job," she adds.
3. Contract. Ensure that the proper contract provisions are in place, says Arthur. Request that vendors generate and retain the pertinent information to allow you to see whether members are buying the product or service. "Build that into the agreement from the beginning, and don't be afraid to ask for details," she says, adding that you should build your own contract instead of using one provided by the vendor.
Rothbart advises that you should keep your members' needs foremost in the process. "All agreements should be made to the benefit of the association and its membership," she says. In addition, she recommends having your legal counsel review any contracts, which should clearly spell out how and on which products the manufacturer can use the association's name, logo, and trademark. She also suggests including a clause that grants the association the right to approve any marketing collateral that contains those items.
APTA's endorsement criteria clearly stipulate that the association has "approval right over all marketing copy to ensure accuracy and consistency with APTA policy and credibility." Ford notes that the association also can and does request changes to product-marketing copy and claims due to findings during the review process.
4. Educate. Though associations should not solicit product endorsements, it is appropriate and necessary to publicize the fact that you do have such a program, says Ford. Craft clear and careful guidelines, post them on your website, and educate members about the nature of the program. "We say these products are ‘good,' not ‘best,'" Ford says.
The ADA website devotes an entire section to the Seal of Acceptance program, which is "frequently held up as exemplary," Whall says. It includes guidelines, a list of products that have earned the seal, and even includes a video tour of the ADA laboratory.
Endorsement programs can provide significant revenue for associations, credibility in the marketplace, and attractive marketing options for manufacturers and service providers. The size, scale, and type of your organization's program will be determined by resources, market potential, and the tax liability your group is willing to undertake. Consult your legal and tax advisers before implementing any new program.
Jennifer J. Salopek is a freelance writer in McLean, Virginia. Email: [email protected]