Much of the work we do with not-for-profit organizations is focused on revenue sustainability. In many cases we find that their overall approach to revenue generation is generally not very strategic; but rather, more of a “knee-jerk” reaction to a specific problem i.e. ” our membership is down, so let’s put all of our energy into a member blitz”.
While this is not necessarily wrong, if an organization is jumping from one revenue opportunity to another, they never seem to do anything of them as effective as they could and often miss out on new opportunities because they are taking such a “myopic view” towards their operation.
To help you take a more strategic approach towards revenue generation, here are four (4) revenue strategies that should be considered in any revenue portfolio.
Market Penetration – the organization seeks to achieve growth with existing products/programs and services in their current market segments, aiming to increase its market share.
This is the approach that most organizations consider as fundamental to their existence; that is, how do we increase the number of people from our target audience using our services? The problem with relying solely on this approach is that at some point, an organization will achieve a threshold of market share vs. potential market and the cost to increase market share (after this saturation point) becomes exponentially higher.
This approach is viewed as low risk, but the results could also yield mediocre results.
Product Development – the organization develops new products/programs and services targeted to its existing market segments.
Rather than put all of your eggs into the “market share basket”, your strategy should include an analysis of new products or services that your organization could offer to increase value to members as well as share of member / customer wallet.
Your current members are already supportive of what you do, so the question you need to ask is “what can I do to increase the amount of money a current customer spends with us by XX percentage” through the sale of new programs, products or services? A certain percentage increase in customer spending could generate a lot more revenue than by recruiting new members.
This approach is considered low/medium risk, but the results of your efforts could pay off significantly.
Market Development – the organization seeks growth by targeting its existing products/programs and services to new market segments.
This approach is focused on identifying new potential target markets that could benefit from existing and/or slightly “tweaked” products and aggressively pursuing these markets. The question you need to ask is “are there under-serviced markets out there that would benefit from our offerings” and can we reach them efficiently and effectively?
This approach is considered medium/high risk, because of the time it might take to make significant inroads into these markets.
Diversification – the organization grows by diversifying into new businesses by developing new products/programs and services for new markets.
This approach is usually reserved for organizations that have a broader mission i.e. profit-driven companies or are more desperate to do anything to survive because it involves moving completely out of your “comfort zone” into new ventures.
This approach is considered high risk, because of the time it will likely take to develop products and make inroads into these markets.
The Bottom Line – A strategic organization is one that considers all of these potential revenue generating initiatives to determine where opportunities for revenue exist and what percentage of time and effort may be allocated to each revenue activity. For example, you may want to allocate 50% of your time and resources towards member recruitment (increasing market share) and 35% towards developing new offerings for members (share of wallet) and 15% towards researching new markets that could benefit from your products or services.
By adopting a more strategic approach, you can diversify your revenue generating activities and adjust your strategy as opportunities evolve; but the starting point is taking a 360 degree look at your revenue model to determine where the real opportunities exist.