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Civic Entrepreneurship: Revenue Generating Strategies Government and Nonprofit Organizations
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. Overview
Civic entrepreneurship approaches to
sustainability
Drivers of change
Keys to thriving and prospering in the future
September 2009 2
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. 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. 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. Civic Entrepreneurship
Driving Forces
Scarcity of Federal Resources
Rise in Venture Philanthropy and
Social Entrepreneurship
Cycle of Fundraising and Distribution
September 2009 6
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. 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. 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. 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. 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. 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
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 $250,000 Komen
(Electroux) Cure Foundation
* - Donations to various breast cancer organizations and research institutions
September 2009 15
16. Cause-Related Marketing
Alliances: Public Health
Examples (cont.d)
Company Promotion Contributions($) 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. 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. Affinity Programs (cont.d)
Target two types of associations
Trade -
representing businesses
Professional -
representing individuals
September 2009 18
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. 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. 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. 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. MBNA International
MBNA also has cards
with:
NHL
Gateway
LL Bean
NFL
NASCAR
Universities
September 2009 23
24. First USA Visa: Companies
Broadcasting Companies, Magazines
Retail, Financial Institutions
Internet Companies
Travel and Entertainment Companies
September 2009 24
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
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. Cities Involved in Affinity
Programs
Shaker Heights, OH
Boston, MA
South Orange, NJ
San Francisco, CA
Plano, TX
Charlotte, NC
September 2009 28
29. Affinity Programs:
Opportunities for
Development
Group Purchasing Program
Financial Services
Insurance
Information and Education
Marketing and Advertising
September 2009 29
30. Advantages of Affinity
Programs
Portability
Satisfied Customers
Royalties
September 2009 30
31. Nonprofit
Organizations with
Affinity Portals
AFL-CIO
National Federation of Republican Women
National Association for Underwater Instructors
September 2009 31
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. Exclusive Agreements:
Organizations
Cities
Public Schools
Public School Districts
Other Non-profit Organizations (e.g.,
zoos)
September 2009 33
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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Critical Success
Factors
Clarity of Purpose
Dedication of Partners
Customer/Community Focus
Congruency of Mission and Goals
Planning
Communication
Expertise
September 2009 44
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. 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. The Civic Entrepreneur
Effect Probability
of Success
Financial Profitability
Stabilty
Business
Acumen
Dependence
on External
Funds
September 2009 47
48. Implications For
Financial Health
Change is the only constant
Business intelligence gathering is paramount
Speed
Agility
Flexibility
September 2009 48
49. Implications for
Managers and Leaders
Competitive drive
Voracious consumer of competitive intelligence
Tenacity
Persistence
Entrepreneurial spirit
Soft skills
Hard work
September 2009 49