Five Key Areas for Revenue Sustainability

By Barbara Heller
In November 21, 2012
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In today’s economy, virtually all agencies look for methods to grow revenues.  While there are significant ways to increase revenues through sponsorships, new facilities that promote revenue growth, or new and popular programs, there are also practices that elicit improvements such as pricing and backstage support (support systems such as finance and technology).  This paper focuses on five key areas of revenue sustainability: an important endeavor during these times of decreasing tax support.

Agencies poised for the future work to reduce their reliance on tax support and move toward increasing non-tax revenues.  According to the NRPA 2009 Operating Ratio report, the national average for the ratio of tax support to non-tax revenues is 69% to 31%.  Agencies having a higher percentage of non-tax revenue than the 31% average can use flexibility to control their use of resources.

For the purposes of this article, these five key areas for revenue sustainability are explored:

  • Pricing
  • Program development
  • Backstage support
  • Marketing
  • Sponsorships

 

1.      Pricing

When asked, most agencies believe they leave revenue on the table by not adopting a more sophisticated approach to pricing.  The typical response to the pricing approach question results in this answer:  “We just call other agencies in our area and base our pricing on what they are charging.”  Unfortunately, the nuances of pricing are much more complicated than warranted by this simple approach.  Some agencies rely on desired cost recovery rates, which is a significant improvement from the simplistic task of comparative pricing.   These agencies establish cost recovery goals, understand the cost of service, and assess prices based on this information.

However, an additional area of attention in the pricing of services includes the nonmonetary effects of pricing on consumer behavior.  According to Ron McCarville of the University of Waterloo, an expert in parks and recreation service pricing, “Pricing is more about perception than working with numbers.” Pricing needs to include nonmonetary attributes and also needs to relate to the marketing of programs.  These include factors such as barriers to participation (time investment, uncertainty, or lack of skills), price sensitivity, and competitive environment, to name a few.  Any attempt to establishing or changing pricing should include a documented process to review these elements.

Value is defined as the perceived benefit divided by the perceived cost.  Potential customers respond to pricing through the perception of the value of the program or service.  Therefore, it is important to give attention to the benefits associated with program participation.  Agencies that understand the monetary and nonmonetary effects of pricing are positioned well to capture increases in revenue.

 

2.      Program Development

 At the heart of a parks and recreation agency is the ability to develop excellent programs.   The ability to sustain and grow revenue is highly dependent upon the offering of programs that have great customer support and satisfaction.  In order to continually offer great revenue-generating programs, align them with customer needs, focus on core programs and elements of excellence, and the measure the results.

Agencies should complete ongoing customer research through needs assessment surveys to evaluate their success in offering what customers desire.   Defining core programs can also assist with program excellence.  Core programs create a sense of focus for staff and include criteria such as:  significant part of the existing program inventory, wide community appeal, been in existence for a long period of time, organizational competency in offering the program, and positive revenue and participation trends.

Some elements of program excellence include establishing standards, evaluating the lifecycle of programs and ensuring a good distribution (introductory, growth, maturation, or decline) of program life.  In addition, measures should exist to identify how programs are performing.  A few suggestions for metrics include:

  • Household participation percentages for programs
  • Trend charting participants and revenues
  • Market penetration for core programs
  • Percent of new programs
  • Customer satisfaction
  • Cost recovery
  • Program success rate

 

3.      Backstage Support

 In order for recreation programs and facility operations to maximize revenue growth, consistent attention must be given to the internal support processes.  These include functions such as marketing, finance, human resources, technology, and park maintenance support.  Seamless service in these areas can significantly maximize revenue sustainability.

First, it’s important for human resources to hire the right people. Next, marketing staff needs to understand the connection between revenue growth and marketing allocation, and the use of technology to reduce barriers in the service delivery process.  The internal service delivery process partially dictates the ability of recreation program staff to offer excellent programs and operate facilities efficiently.  As a result, staff working in these support areas need to develop their processes with their customers in mind.  In this case, their fellow employees are their customer.

 

4.      Marketing

Good agencies recognize the importance of developing a strategic approach to marketing services.  Many times, marketing is a reactive and tactical process based on the desire to help individual recreation program or facility operations staff members.  Having an overall marketing plan that addresses the most significant system needs is necessary to sustain revenues.   Marketing staff should be included as part of the senior leadership team in order to better understand financial results and learn how to leverage resources in support of revenue sustainability.   Marketing should continuously monitor resident awareness of services and evaluate overall marketing effectiveness.

Parks and recreation agencies rely heavily on program guides to promote programs and services.  According to a national database of results from over 500 agencies collected by the survey research firm, Leisure Vision, 50% of households rely on the program guide for their information.  Yet, the publication and distribution of these guides can be cost prohibitive.  In a 2010 survey completed by Active Network, of 480 agencies that participated in the survey, the majority produced a hard copy brochure as follows:

  • 64% – print and online
  • 24% – print only
  • 11% – online only
  • 2% – other (e.g. email, newspapers)

Marketing is currently going through revolutionary changes that have been adopted by a significant number of agencies.  In a 2009 survey completed by Active Network, 64% of agencies used social media to promote services and gain customers.  Seventy four percent of respondents have an interest in using this form of marketing in the future.  The ability to connect with customers and grow relationships is now greatly enhanced.

It is projected that within the next five years, there will be an equal number of users who access the internet through smart phones (I-Phones, Androids, Blackberries etc.) and tablets (I-Pad, Samsung Galaxy, HP Slate etc.)   In order to maximize outreach to its target market, agencies should evaluate a WAP (wireless application protocol) enabled website which can be easily viewed by potential users on smart phones or tablets and also allow them to make online reservations.

 

5.      Sponsorships

Sponsorships are an excellent way to gain additional resources and build strategic partnerships, ensuring your community’s environmental and recreational opportunities for generations to come.  There are a variety of structures that can be employed, ranging from event sponsorships and cause marketing to naming rights. Conducting initial conversations within your agency/property, as well as with current corporate partners is key to shaping a strategic and valuable sponsorship program.

Assets

Assets are the marketing benefits that your organization has determined are available to “sell”. Examples of these are advertisements in brochures, logos/links on your website or festival website or in e-mails, on-site access to the sponsored event/program, ability to conduct sales on property, title an event, exclusivity, etc. The list of assets should be agreed upon in advance of sharing them with prospective sponsors and periodically updated as new assets develop and others are no longer used.

Sponsorship Policy

Creating a sponsorship policy is critical to overall efficiency of your program.  Once a policy is adopted, sellers can comfortably solicit businesses and share with them the details of moving forward into a formal contract without appearing bureaucratic.

Relationship Building

Interview and talk with your sponsors about the results they are getting, or not, from a sponsorship. Ask them if there are other benefits they are looking to have in a sponsorship, or other opportunities they will want to know about in the next 8 to 12 months. You can use this information to determine if your sponsorship packages are meeting the needs of your partners, and they will tell you what they want.

Also, be sure to ask sponsors when they want formal updates from you, like a “Sponsor Report”. Typically these are prepared and presented to sponsors within two months of the conclusion of a program or event. For multi-year partners, quarterly may be required.

Summary

Unlike many other governmental departmental agencies, parks and recreation agencies have an advantage in controlling their destiny as a result of the ability to charge fees for programs and services.  The five key revenue areas outlined above can make a dramatic difference in the amount of operating dollars available for operations and improvements.  It takes an entire organization to be able to sustain revenue growth.  The culture must support the economic engine of the agency:  facility operations and programs.   Support service areas such as marketing need to be connected to service quality and revenue results.

Coupled with effective ways to allocate expenses, revenue enhancements can result in increasing available funding despite the challenging economic times we face.

...is determined to give government a good name - one agency at a time. Her innovative approach to the planning process has delivered results in organizations across the U.S.

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