Civic Entrepreneurship:
   Revenue Generating
Strategies Government and
  Nonprofit Organization
                 James H....
Overview
   Civic entrepreneurship approaches to
    sustainability

   Drivers of change

   Keys to thriving and pros...
Entrepreneurial Approaches
      to Sustainability
   Social vs. Civic Entrepreneurship
   Revenue Generation Options
 ...
Social Entrepreneurship
A set of behaviors whereby an individual acts as a change
agent in the social sector by:
 adoptin...
Civic Entrepreneurship
   Non-Profits: creating social ventures to meet
    society’s pressing needs and the financial ne...
Civic Entrepreneurship
         Driving Forces

                  Scarcity of Federal Resources


                 Rise in...
Civic Entrepreneurship
             Mission
   To transform the culture of non-profit and
    government organizations fr...
Typology of Revenue-
     Generating Options
   Cause-related Marketing Alliances
   Affinity Programs
   Exclusive Agr...
Traditional Cause-
         Related Marketing
             Alliances
   Corporation agrees to donate a specified
    amou...
Traditional Cause-
         Related Marketing
           Alliances (cont.d)
   Research confirms that companies
    suppo...
Traditional Cause-Related
    Marketing Alliances (cont.d)
   Thus, such initiatives enhance, rather
    than diminish, t...
Traditional Cause-Related
      Marketing Alliances:
            Examples
   American Express and Share Our Strength “Cha...
Web-Based Cause-Related
         Marketing Alliances:
               Charity Malls and
     Cause-Focused E-Commerce Compa...
SchoolPop.com




September 2009              14
Cause-Related Marketing
     Alliances: Public Health
            Examples
Company              Promotion              Con...
Cause-Related Marketing
       Alliances: Public Health
            Examples (cont.d)
Company            Promotion      Co...
Affinity Programs
   A variant of cause-related marketing
    alliances. In exchange for the
    opportunity to provide p...
Affinity Programs (cont.d)
   Target two types of associations

            Trade -
                representing busines...
Associations
   “Associations are an underserved market
    niche that is open to any business willing to
    understand ...
Key Facts About
    Associations in the U.S.
   Over 100,000 associations exist in the U.S.
   More than 80% of associat...
Key Facts About
           Affinity Programs
   Used to market products for more than 20 years.
   Rely on the good name...
Key Facts About Affinity
       Programs (cont.d)
   Co-branded Credit Cards are the most
    popular example of Affinity...
MBNA International

MBNA also has cards
with:

NHL
Gateway
LL Bean
NFL
NASCAR
Universities



 September 2009       ...
First USA Visa: Companies
Broadcasting Companies, Magazines
Retail, Financial Institutions
Internet Companies
Travel a...
First USA Visa: Organizations

                 Animal and Environmental Organizations
                 Colleges/Univers...
Bank of America N.A.




September 2009         26
Examples of Associations
       Involved in Affinity
           Programs
NAME                                     MEMBERSH...
Cities Involved in Affinity
          Programs
   Shaker Heights, OH
   Boston, MA
   South Orange, NJ
   San Francisc...
Affinity Programs:
          Opportunities for
            Development
   Group Purchasing Program
   Financial Services...
Advantages of Affinity
       Programs
   Portability
   Satisfied Customers
   Royalties




September 2009           ...
Nonprofit
        Organizations with
          Affinity Portals
   AFL-CIO


   National Federation of Republican Women
...
Exclusive Agreements:
       Definition
   Local governments and other public sector
    organizations grant private sect...
Exclusive Agreements:
     Organizations
   Cities

   Public Schools

   Public School Districts

   Other Non-profit...
Exclusive Agreements:
          Examples
  “Pouring Rights” Contracts
ENTITY                               COMPANY        ...
Exclusive Agreements:
           Examples
“Pouring Rights” Contracts (cont.d)
ENTITY                               COMPANY...
Exclusive Agreements:
           Examples
“Pouring Rights” Contracts (cont.d)
ENTITY                               COMPANY...
Selling of Space
   Billboards                Computer Screen Savers

   Telephone Kiosks          Cafeteria Menus

 ...
Incentive Programs

   Provide Equipment or Cash
      Sharon Luggage “The Pack that Gives Back”
       Program
      A...
Sponsored
       Programs/Activities
   Corporations prepare materials that are designed
    to enhance the quality of en...
Corporate Ventures
   Launched By Nonprofits
Social business enterprises are specifically set
up to generate revenue.
    ...
Partner Motivations
Non-Profit/Government
          Increase Revenue
          Access to Resources
          Enhance Ca...
Steps in Creating a
           Strategic Alliance
   Research the company’s history of donations and
    future plans for...
Steps in Creating a Social
   Purpose Enterprise
   Get Buy In - Internally and Externally

   Create A Task Force

   ...
Critical Success
                  Factors
   Clarity of Purpose
   Dedication of Partners
   Customer/Community Focus
...
Potential Pitfalls
   Community Perspective
     Generation of revenue is perceived as moving
        away from mission ...
Path to Independence

Transformation of a Nonprofit/Government Entity

 Obtain          Modify       Form      Leverage   ...
The Civic Entrepreneur
        Effect                                                Probability
                         ...
Implications For
             Financial Health
   Change is the only constant
   Business intelligence gathering is para...
Implications for
 Managers and Leaders
   Competitive drive
   Voracious consumer of competitive intelligence
   Tenaci...
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Civic Entrepreneurship: Revenue Generating Strategies Government and Nonprofit Organizations

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Presentation given by James H. Johnson, Jr. at the 2009 Health Equity Conference.

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Civic Entrepreneurship: Revenue Generating Strategies Government and Nonprofit Organizations

  1. 1. Civic Entrepreneurship: Revenue Generating Strategies Government and Nonprofit Organization James H. Johnson, Jr. William Rand Kenan, Jr. Distinguished Professor of Management Kenan-Flagler Business School Director, Urban Investment Strategies Center Frank Hawkins Kenan Institute of Private Enterprise University of North Carolina at Chapel Hill September 2009 1
  2. 2. Overview  Civic entrepreneurship approaches to sustainability  Drivers of change  Keys to thriving and prospering in the future September 2009 2
  3. 3. Entrepreneurial Approaches to Sustainability  Social vs. Civic Entrepreneurship  Revenue Generation Options  Partner Motivations  Steps to Creating a Strategic Alliance or Commercial Business Venture  Critical Success Factors  Potential Pitfalls September 2009 3
  4. 4. 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 September 2009 4
  5. 5. 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. September 2009 5
  6. 6. Civic Entrepreneurship Driving Forces Scarcity of Federal Resources Rise in Venture Philanthropy and Social Entrepreneurship Cycle of Fundraising and Distribution September 2009 6
  7. 7. 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. September 2009 7
  8. 8. 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 September 2009 8
  9. 9. 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. September 2009 9
  10. 10. 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. September 2009 10
  11. 11. 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. September 2009 11
  12. 12. 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) September 2009 12
  13. 13. Web-Based Cause-Related Marketing Alliances: Charity Malls and Cause-Focused E-Commerce Companies  befree.com  igive.com  benz.com  iwon.com  charitableway.com  mycause.com  charitymall.com  noosh.com  charityville.com  schoolpop.com  giveforchange.com  shopforchange.com  givesomethingback.com  4anything.com  greatergood.com  thehungersite.org September 2009 13
  14. 14. SchoolPop.com September 2009 14
  15. 15. Cause-Related Marketing Alliances: Public Health Examples Company Promotion Contributions($) Benefits American Charge For The Up to $500,000 Komen Express Cure Foundation Avon Kiss Goodbye to N/A Avon Breast Cancer Foundation* BMW BMW Ultimate Up to $1,000,000 Komen Drive Foundation Eureka Clean For The Up to $250,000 Komen (Electroux) Cure Foundation * - Donations to various breast cancer organizations and research institutions September 2009 15
  16. 16. Cause-Related Marketing Alliances: Public Health Examples (cont.d) Company Promotion Contributions($) Benefits Yoplait Save Lids to Up to $750,000 Komen (General Mills) Save Lives Foundation Creative Triumph $526,532 Alzheimer’s Memories Album Association Consultants Dreyer’s & Pink Ribbon Up to $250,000 City of Hope Edy’s September 2009 16
  17. 17. 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. September 2009 17
  18. 18. Affinity Programs (cont.d)  Target two types of associations  Trade - representing businesses  Professional - representing individuals September 2009 18
  19. 19. 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. September 2009 19
  20. 20. 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. September 2009 20
  21. 21. 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. September 2009 21
  22. 22. 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… September 2009 22
  23. 23. MBNA International MBNA also has cards with: NHL Gateway LL Bean NFL NASCAR Universities September 2009 23
  24. 24. First USA Visa: Companies Broadcasting Companies, Magazines Retail, Financial Institutions Internet Companies Travel and Entertainment Companies September 2009 24
  25. 25. First USA Visa: Organizations Animal and Environmental Organizations Colleges/Universities Military Professional Associations Special Interest Groups Sports Organizations Fraternities and Sororities Symphonies September 2009 25
  26. 26. Bank of America N.A. September 2009 26
  27. 27. 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. 3,400 Executives American Academy of Periodontology 7,000 Aircraft Owners and Pilots Association 341,000 U.S. Chambers of Commerce 215,000 September 2009 27
  28. 28. Cities Involved in Affinity Programs  Shaker Heights, OH  Boston, MA  South Orange, NJ  San Francisco, CA  Plano, TX  Charlotte, NC September 2009 28
  29. 29. Affinity Programs: Opportunities for Development  Group Purchasing Program  Financial Services  Insurance  Information and Education  Marketing and Advertising September 2009 29
  30. 30. Advantages of Affinity Programs  Portability  Satisfied Customers  Royalties September 2009 30
  31. 31. Nonprofit Organizations with Affinity Portals  AFL-CIO  National Federation of Republican Women  National Association for Underwater Instructors September 2009 31
  32. 32. 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. September 2009 32
  33. 33. Exclusive Agreements: Organizations  Cities  Public Schools  Public School Districts  Other Non-profit Organizations (e.g., zoos) September 2009 33
  34. 34. 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 Coke $1.5 m District Colorado Springs (CO) Coke $8.0 m School District Denver Public School Pepsi $1.5 m District * Contracts typically range from 5 to 15 years. September 2009 34
  35. 35. Exclusive Agreements: Examples “Pouring Rights” Contracts (cont.d) ENTITY COMPANY VALUE* Town of Amherst (NY) Pepsi $550,000 Recreation Center Crete-Monee District 201-U American $2.7 m (Chicago Schools) Bottling Company Keller School District (TX) Coke $4.2 m Wilson County Schools Coke $4.4 m (NC) * Contracts typically range from 5 to 15 years. September 2009 35
  36. 36. Exclusive Agreements: Examples “Pouring Rights” Contracts (cont.d) ENTITY COMPANY VALUE* Bozeman School District Pepsi $120,000 (Montana) Louisville (KY) Zoological Coke $550,000 Garden Hurst-Euless-Bedford Pepsi $1.95 m Independent School District (TX) * Contracts typically range from 5 to 15 years. September 2009 36
  37. 37. Selling of Space  Billboards  Computer Screen Savers  Telephone Kiosks  Cafeteria Menus  Trashcans  Book Covers  Buses/Vans/Taxi-Cabs  School Rooftops  Airports  Fruit  ATMs  Scoreboards, Fences, etc. September 2009 37
  38. 38. 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” September 2009 38
  39. 39. Sponsored Programs/Activities  Corporations prepare materials that are designed to enhance the quality of entrepreneurial education in public schools.  Merrill Lynch’s “Money Matters in the Millennium”  BIC’s “Quality Comes in Writing” Program September 2009 39
  40. 40. Corporate Ventures Launched By Nonprofits Social business enterprises are specifically set up to generate revenue. Products Habitat for Humanity - Tee Shirts, Gifts Services Nature Conservancy - Educational Tours Storefronts The World Wildlife Fund Canada Online Shops American Civil Liberties Union National Rifle Association Save the Children September 2009 40
  41. 41. Partner Motivations Non-Profit/Government Increase Revenue Access to Resources Enhance Capacity to Offer Services Corporation Solve Business Problems Build Customer Loyalty Enhance Public Relations Access to New Markets September 2009 41
  42. 42. 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 September 2009 42
  43. 43. 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 September 2009 43
  44. 44. Critical Success Factors  Clarity of Purpose  Dedication of Partners  Customer/Community Focus  Congruency of Mission and Goals  Planning  Communication  Expertise September 2009 44
  45. 45. 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. September 2009 45
  46. 46. Path to Independence Transformation of a Nonprofit/Government Entity Obtain Modify Form Leverage Achieve Business Internal Strategic Dollars Mission Skills Operations Alliances Spent of NP September 2009 46
  47. 47. The Civic Entrepreneur Effect Probability of Success Financial Profitability Stabilty Business Acumen Dependence on External Funds September 2009 47
  48. 48. Implications For Financial Health  Change is the only constant  Business intelligence gathering is paramount  Speed  Agility  Flexibility September 2009 48
  49. 49. Implications for Managers and Leaders  Competitive drive  Voracious consumer of competitive intelligence  Tenacity  Persistence  Entrepreneurial spirit  Soft skills  Hard work September 2009 49
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