"Software Sales Propelled by Mission" - Association Management

June 2004 -

Reprinted from Association Management Magazine

by Carl Levesque

The mission of the National Association of Investors Corporation (NAIC), Madison Heights, Michigan, is, in short, to "create a nation of successful investors" by providing investment information and education. And what better way to support that mission than to create and sell software specific to the needs of its 280,000 members--and simultaneously generate millions in revenue?

Low-risk financial arrangements
Many organizations have members who might benefit from some form of tailor-made software, but such customization can be a pricey venture. Not for NAIC. It has partnered with ICLUBcentral Inc., Cambridge, Massachusetts, a company that specializes in developing customized affinity software products, to produce and sell software that helps its members screen, analyze, and compare individual stocks and mutual funds. Because the company owns and upgrades the software, the arrangement costs the organization little. Through a license agreement, NAIC allows the company to use its intellectual property--a system for analyzing the stocks and so forth. In return, the company gets roughly two thirds of the retail price from each software product sold. NAIC, which has an annual operating budget of $13 million, receives the other third.

Depending on the particular product, the software retails for $49-$200, though most are in the $69-$89 range. Buyers pay a one-time fee for the software and an annual $25 fee for access to the organization's data, which can be imported into the software program for analysis. Access to the data and software remains a primary reason to join the organization. NAIC's 2003 share of the program's revenue: $2.9 million.

When the association launched the project in the early 1990s, it spent about $500,000 on the initiative, mostly in staff time devoted to confirming the content and operation of the software programs. The primary maintenance cost for the initiative is one staff person devoted entirely to the program. That person does everything from managing vendor relations to tracking software inventory and assisting with advertising material for NAIC's magazine.

Idea pipeline
Prior to the development of the software, NAIC offered similar educational tools in paper form. But by the early 1990s, an increasing number of members had access to computers, and NAIC jumped at the chance to automate when a software company approached it with the idea. As is often the case with technology, a core group of computer-savvy members took to the software immediately. "It allowed people to avoid the drudgery of filling out the forms by hand," says Robert A. O'Hara, NAIC's vice president of development. Others have continued with the paper product: Even today, about half of NAIC's members still use paper, and the association has chosen not to push the software on them.

No question, though, the software version has evolved into an entirely different product. "You can input the data quite easily," says O'Hara. "In just a couple of keystrokes you can download 10 years of company information right into our forms and charts. Or if you combine our screening products with our database, you can search through thousands of companies in just seconds. It's allowed people to focus on [selecting investments], as opposed to going through the drudgery of penciling in numbers."

Build on good ideas.
Though the software idea came from NAIC's supplier partner, the association has found innovative ways to build on its initial success. For example, when NAIC learned that most of its members invested in mutual funds, it decided to modify its stock-analysis software to give members a means to analyze their mutual-fund investments.

Tap volunteers for market research.
How did NAIC discover the need for the mutual-fund product? By capitalizing on what O'Hara calls "the real strength of our organization": its 2,000 volunteers who work at the local level to deliver workshops and seminars to amateur investors. Because volunteers are on the ground, in close contact with members, they know what members want. NAIC generates a constant flow of new ideas by bringing the software developers together with the volunteer educators so that they can collaborate on new upgrades and innovations. Next, the staff comes into the picture. "If ICLUBcentral or a member thinks they have a good idea, they will approach us about it. If we agree, we encourage ICLUBcentral to go ahead and program it," says O'Hara. One of NAIC's more recent software offerings is Take Stock, a prescreening tool that allows users to punch in a company's ticker symbol to learn whether the company might warrant a closer look.

The concept of selling software to members need not be limited to investment associations. The Community Associations Institute, Alexandria, Virginia, for example, offers accounting software to its members. ICLUBcentral also has created software for the American Society of Composers, Authors, and Publishers, New York City, through which members can register federal copyrights.

O'Hara is certainly pleased with NAIC's software offerings, which, he says, have the added benefit of appealing to a market segment the association has yet to fully tap: younger investors, who are more likely to expect up-to-date technology tools. "If you've got the right application for it, it's certainly a great thing," he says of software packages as nondues revenue generators. "It's good for the feel of the association. You look up-to-date, and as far as keeping members happy--or in our case, trying to make people better investors--that's what it's all about."