A Business Model for Chapters

STC has adopted a new, pay-as-you-go business model, about which I’ll write more later. STC needs to run at break-even from year to year (or a little better, so we can invest in the future). This has triggered discussion about chapter business models. Should chapters try to run at break-even? Specifically, what should a chapter charge its members for events? Looking around STC, the answers range from “nothing” to “the cost to offer the event.”

In various discussion groups, several people have advanced the viewpoint that the value of a chapter event is its price; if it’s more expensive, it’s less valuable. It follows that the cheaper the event, the greater its value. I don’t think that’s true. If an event appeals to me, I attend it, and the price isn’t a factor; if it doesn’t, I tend not to go, and I wouldn’t even if it were a bargain, or free. The value of the event is that it’s happening at all. The chapter has organized the event. No chapter, no event.

When I was a chapter president, we held program meetings at a single venue (a hotel function room) and served dinner (because for dinnertime events, members wanted more than cheese and crackers). It cost something over $10 more to feed an attendee than we were charging. That was a money-losing model, and we couldn’t make up the losses with volume; the bigger the turnout, the more my chapter lost. One of the things we changed while I was president was to raise the prices to roughly cover the costs. To my relief, attendance held steady.

There is another, more subtle argument against offering events at a megadiscount (or free). Association research shows that only about 10% of members are active (where “active” is defined as attending at least one local event per year). The other 90% of members simply pay their dues and enjoy the benefits of general membership. Overall, STC is about average in this regard, but to avoid arguments, let’s be generous and say 20%. So one chapter member in five attends an event per year, and four in five don’t come to any event. Under the old passthrough model, chapters got money on a per-capita basis. If a chapter offered free or heavily discounted events, that meant 80% of the chapter members paid money that subsidized the other 20%. That hardly seems fair.

Instead of subsidizing members at events, I’d like to suggest a different set-point:

• If you are a member of the local chapter, you pay slightly below cost
• If you are an STC member, you pay at cost
• If you are not an STC member, you pay above cost

In my opinion, offering chapter events for free or at a significant loss is both an outmoded business model and an outmoded practice. This set-point model breaks even for chapter events; if a chapter offers excellent events that attract non-members, it will make money. (There’s nothing wrong with a non-profit making money, if it doesn’t make too much and if it reinvests revenues in its core mission.) Psychologically, offering the event to non-members at a premium price reinforces its value.

But if a chapter member doesn’t enjoy a discount, what value does chapter membership get? The event itself. And the better the event, the more money the chapter will make. That, I think, is fair!