September 2009

Civic Entrepreneurship:

Revenue Generating

Strategies Government and

Nonprofit Organization

James H. Johnson, Jr.William Rand Kenan, Jr. Distinguished Professor of Management

Kenan-Flagler Business SchoolDirector, Urban Investment Strategies Center

Frank Hawkins Kenan Institute of Private EnterpriseUniversity of North Carolina at Chapel Hill

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September 2009

Overview

Civic entrepreneurship approaches to

sustainability

Drivers of change

Keys to thriving and prospering in the future

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September 2009

Social vs. Civic Entrepreneurship

Revenue Generation Options

Partner Motivations

Steps to Creating a Strategic Alliance or

Commercial Business Venture

Critical Success Factors

Potential Pitfalls

Entrepreneurial Approaches

to Sustainability

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September 2009

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

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September 2009

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.

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September 2009

Cycle of Fundraising and Distribution

Rise in Venture Philanthropy and

Social Entrepreneurship

Scarcity of Federal Resources

Civic Entrepreneurship

Driving Forces

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September 2009

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.

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September 2009

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

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September 2009

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.

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September 2009

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.

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September 2009

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.

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September 2009

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)

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September 2009

Web-Based Cause-Related

Marketing Alliances:

Charity Malls and

Cause-Focused E-Commerce Companies

befree.com

benz.com

charitableway.com

charitymall.com

charityville.com

giveforchange.com

givesomethingback.com

greatergood.com

igive.com

iwon.com

mycause.com

noosh.com

schoolpop.com

shopforchange.com

4anything.com

thehungersite.org

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SchoolPop.com

September 2009 14

September 2009

Cause-Related Marketing

Alliances: Public Health

Examples

Company Promotion Contributions($) Benefits

American

Express

Charge For The

Cure

Up to $500,000 Komen

Foundation

Avon Kiss Goodbye to

Breast Cancer

N/A Avon

Foundation*

BMW BMW Ultimate

Drive

Up to $1,000,000 Komen

Foundation

Eureka

(Electroux)

Clean For The

Cure

Up to $250,000 Komen

Foundation

* - Donations to various breast cancer organizations and research institutions

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September 2009

Cause-Related Marketing

Alliances: Public Health

Examples (cont.d)

Company Promotion Contributions($) Benefits

Yoplait

(General Mills)

Save Lids to

Save Lives

Up to $750,000 Komen

Foundation

Creative

Memories

Consultants

Triumph

Album

$526,532 Alzheimer’s

Association

Dreyer’s &

Edy’s

Pink Ribbon Up to $250,000 City of Hope

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September 2009

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.

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September 2009

Affinity Programs (cont.d)

Target two types of associations

Trade -

representing businesses

Professional -

representing individuals

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September 2009

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.

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September 2009

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.

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September 2009

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.

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September 2009

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…

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September 2009

MBNA International

MBNA also has cards

with:

NHL

Gateway

LL Bean

NFL

NASCAR

Universities

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Broadcasting Companies, Magazines

Retail, Financial Institutions

Internet Companies

Travel and Entertainment Companies

First USA Visa: Companies

September 2009 24

Animal and Environmental Organizations

Colleges/Universities

Military

Professional Associations

Special Interest Groups

Sports Organizations

Fraternities and Sororities

Symphonies

First USA Visa: Organizations

September 2009 25

Bank of America N.A.

September 2009 26

September 2009

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.

Executives

3,400

American Academy of Periodontology 7,000

Aircraft Owners and Pilots Association 341,000

U.S. Chambers of Commerce 215,000

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September 2009

Cities Involved in Affinity

Programs

Shaker Heights, OH

Boston, MA

South Orange, NJ

San Francisco, CA

Plano, TX

Charlotte, NC

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September 2009

Affinity Programs:

Opportunities for

Development

Group Purchasing Program

Financial Services

Insurance

Information and Education

Marketing and Advertising

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September 2009

Advantages of Affinity

Programs

Portability

Satisfied Customers

Royalties

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September 2009

Nonprofit

Organizations with

Affinity Portals

AFL-CIO

National Federation of Republican Women

National Association for Underwater Instructors

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September 2009

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.

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September 2009

Exclusive Agreements:

Organizations

Cities

Public Schools

Public School Districts

Other Non-profit Organizations (e.g., zoos)

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September 2009

* Contracts typically range from 5 to 15 years.

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

District

Coke $1.5 m

Colorado Springs (CO)

School District

Coke $8.0 m

Denver Public School

District

Pepsi $1.5 m

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September 2009

* Contracts typically range from 5 to 15 years.

ENTITY COMPANY VALUE*

Town of Amherst (NY)

Recreation Center

Pepsi $550,000

Crete-Monee District 201-U

(Chicago Schools)

American

Bottling

Company

$2.7 m

Keller School District (TX) Coke $4.2 m

Wilson County Schools

(NC)

Coke $4.4 m

Exclusive Agreements:

Examples

“Pouring Rights” Contracts (cont.d)

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September 2009

* Contracts typically range from 5 to 15 years.

Exclusive Agreements:

Examples

“Pouring Rights” Contracts (cont.d)

ENTITY COMPANY VALUE*

Bozeman School District

(Montana)

Pepsi $120,000

Louisville (KY) Zoological

Garden

Coke $550,000

Hurst-Euless-Bedford

Independent School District

(TX)

Pepsi $1.95 m

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September 2009

Selling of Space

Billboards

Telephone Kiosks

Trashcans

Buses/Vans/Taxi-Cabs

Airports

ATMs

Computer Screen Savers

Cafeteria Menus

Book Covers

School Rooftops

Fruit

Scoreboards, Fences, etc.

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September 2009

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”

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September 2009

Sponsored

Programs/Activities

Corporations prepare materials that are designed to enhance the quality of entrepreneurial education in public schools.

Merrill Lynch’s “Money Matters inthe Millennium”

BIC’s “Quality Comes in Writing”Program

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September 2009

Corporate Ventures

Launched By Nonprofits

Social business enterprises are specifically setup to generate revenue.

ProductsHabitat for Humanity - Tee Shirts, Gifts

ServicesNature Conservancy - Educational Tours

StorefrontsThe World Wildlife Fund Canada

Online ShopsAmerican Civil Liberties UnionNational Rifle AssociationSave the Children

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September 2009

Partner Motivations

Non-Profit/GovernmentIncrease Revenue

Access to Resources

Enhance Capacity to Offer Services

CorporationSolve Business Problems

Build Customer Loyalty

Enhance Public Relations

Access to New Markets

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September 2009

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

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September 2009

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

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September 2009

Critical Success

Factors

Clarity of Purpose

Dedication of Partners

Customer/Community Focus

Congruency of Mission and Goals

Planning

Communication

Expertise

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September 2009

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.

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September 2009

Path to Independence

Obtain

Business

Skills

Modify

Internal

Operations

Form

Strategic

Alliances

Leverage

Dollars

Spent

Achieve

Mission

of NP

Transformation of a Nonprofit/Government Entity

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September 2009

The Civic Entrepreneur

Effect

Business

Acumen

Dependence

on External

Funds

Financial

Stabilty

Profitability

Probability

of Success

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September 2009

Implications For

Financial Health

Change is the only constant

Business intelligence gathering is paramount

Speed

Agility

Flexibility

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September 2009

Implications for

Managers and Leaders

Competitive drive

Voracious consumer of competitive intelligence

Tenacity

Persistence

Entrepreneurial spirit

Soft skills

Hard work

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