How the Hydraulic Institute increased sales by repurposing existing content and diversifying delivery systems
When association executives look for new revenue streams, all too often they think in terms of brand-new products or services. While these offerings are exciting to contemplate, they come with higher risks than a variety of other alternatives. So what are some of the less risky ways top executives manage to increase their revenue?
Robert K. Asdal, executive director of the Hydraulic Institute, located in Parsippany, New Jersey, recently shared with me some excellent examples of steadily increasing sales by repurposing existing products and diversifying delivery systems.
Expanding the Product Line
HI was organized in 1917 to develop industry standards for the worldwide pump industry. For much of its 94-year history, it sold hardcopy versions of its standards and guidelines, now totaling more than 2,500 pages in 35 separate documents.
Twelve years ago Bob and his staff capitalized on improvements in intellectual-property-protection technology to allow HI to create PDF versions of its documents, while offering new and more useful derivative products.
Many associations fear that adding alternative delivery systems will cannibalize sales of their existing products. Interestingly, the CD version of the document HI created, priced the same as the hardcopy, found its own niche: CD sales simply added to the hardcopy revenue. Because the CDs cost less to produce, store, and ship, they were even more profitable than the hardcopy versions.
In 2000 HI decided, due to a lack of in-house IT capability, to contract with a for-profit reseller to sell the full set of standards through two new derivative products in addition to the CDs: downloadable PDFs of individual standards and web-based subscriptions. These channels increased total sales and provided a valuable source of recurring royalty income.
Bringing It Back in House
By 2008 Bob realized HI had sufficient in-house capability to produce and offer its own downloadable PDFs of individual standards, using now well-proven encryption technology. PDFs were priced the same as the individual hardcopy of the same standards. With low production costs and no shipping and handling expenses, these PDFs were also particularly profitable. In addition, HI found that the PDFs were attractive to a wider global market because they could be ordered easily and received quickly, without high international shipping costs.
Interestingly, individual PDF standards did not immediately reduce overall sales of the full sets of standards. However, in a couple of years, as the PDF sales grew, CD sales inevitably declined.
In response to the downturn in 2009 and to the end of a restrictive contract with the original reseller, HI decided to seek additional reseller relationships. According to Bob, these new resellers have opened up access to new markets, such as global corporations, that HI previously could not access. "Here again," Bob said, "our overall revenue increased by adding new versions of our existing products and new distribution channels."
Also in 2009, Mary Silver, marketing and membership director for HI, made another important breakthrough. With encryption capability in house, HI could offer its own web-based subscription model, priced by the number of simultaneous users, for various packages of the standards. She worked to define the web subscription and delivery system. HI contracted to have it built, at minimal cost, in India.
This proved to be yet another popular derivative product. According to Mary, subscriptions are continuing to grow nicely. On the other hand, with its tighter focus and easier use, it has inevitably further reduced the sale of CDs.
When Bob arrived at HI, the sale of standards was about $20,000 annually; today the total exceeds $200,000 a year (see chart below). When he arrived, HI owned its niche, and today, if anything, it has an even tighter hold on it. Bob frames his approach well: "Associations must come up with different products and markets over time so that we remain relevant and responsive to changing member and customer needs." That's always sound advice for association executives, especially in challenging times.
Andrew S. Lang, CPA, is with LangCPA Consulting LLC in Potomac, Maryland. Email: [email protected]