InformationWeek

December 8, 1997

For Members Only

Nonprofit associations are using extranets to link members and save money

By Nick Wreden

n mid-September, United Airlines dropped a bombshell by slicing the commission travel agents get for selling its tickets from 10% to 8%. The move was soon echoed by other major airlines. Facing the threat of a 20% drop in revenue, the American Society of Travel Agents (ASTA) turned to an unexpected ally to generate grassroots resistance to the commission cuts: the society's extranet, ASTAnet.

In doing so, the ASTA joins an emerging trend by associations, buying groups, and other nonprofit organizations to use extranets to connect members more effectively, eliminate meetings, and lower the huge mailing and printing costs traditionally required to keep members involved and up to date. Some organizations are even looking at extranets-often cordoned off as "members only" sections on public Web sites-as a source of extra revenue. The money could come from sales of education al and other materials, and from affinity associations wanting to market to members.

About 4% of the more than 138,000 U.S. nonprofit associations have extranets, estimates Bob Kressley, associate director of IT services at the American Society of Association Executives (ASAE), a self-described "association for associations" in Washington. "Small nonprofit organizations generally have limited resources, and extranets can represent a steep learning curve for them," Kressley says. He notes that extranets represent an efficient way for organizations-particularly trade associations-to develop commerce and communications among their members. It's also a good way for them to share important information with their members, he adds.

The nonprofit world is surprisingly large. In fact, according to Kressley, more people work for nonprofit associations than for the federal and state governments. At the same time, seven of every 10 adult Americans belong to at least one association. And one in four belongs to fou r or more associations.

For these groups, extranets can be powerful tools. The ASTA's extranet helped it quickly deploy an arsenal of public relations and other tools to help its 25,000 members worldwide lobby against the airlines' commission cut. These tools included "Swiss cheese" press releases with fill-in-the-blank customization for sending to local media organizations; downloadable ticket stuffers outlining the consumer impact of reduced commissions; copies of national ads suitable for localization; and information on the steps the national organization was taking.

The extranet page, headlined "Commission Crisis" and illustrated with a photo of lightning striking an airplane, also prepared members for potential consumer calls following an upcoming press conference.

All this caught the attention of travel agents across the country. "We immediately saw a 149% increase in usage among members," says Stephanie Kenyon, VP of industry affairs and travel technology for the ASTA in Alexandria, Va . "Members are using the information to fight the commission cut, and we're seeing an increase in membership because of the information we provide."

Real-Time Communications
If common interests represent the soul of an association, then its lifeblood is the constant communications members demand. Like their for-profit cousins, associations realize that intranets and extranets can make possible real-time communications without the printing, postage, and other communications costs that represent a big drain on often tiny budgets. Conversely, extranets make life easier for association members. "We used to get more mail from [trade association] Affiliated Distributors than you could open in a day, but at the same time, we were crying for current information about national accounts," recalls Mike Horner, CEO of Frischkorn Inc., a Richmond, Va., distributor of industrial pipes, valves, and controls. "Now I can log on to its extranet and see all the latest information about where we stand with natio nal accounts and manufacturers without waiting for a mailing or an E-mail."

Frischkorn belongs to Affiliated Distributors, a marketing group in Wayne, Pa., that comprises more than 280 independent distributors of electrical and other industrial products. Not long ago the organization developed A-D Net, an advanced extranet that lets manufacturers and distributors coordinate and track sales activities. A-D Net also provides conferencing among top distributor executives, and it offers members current information on group activities. Everyone within a distributor's organization can use the extranet for specialized forums or program review, with information limited on a need-to-know basis. Distributors can also use A-D Net for communications with their own branch offices.

A-D Net has saved the organization hundreds of thousands of dollars in printing and mailing costs, forms processing, and data entry resulting from such activities as program tracking, estimates Dennis Gordon, MIS director for Affiliated Distributors. Each manufacturer and distributor enters into annual joint marketing agreements that cover sales meetings, joint sales calls, direct-mail campaigns, and other activities. When these "sales stimulator" activities are completed, distributors can receive a cash incentive. "Last year, we processed 30,000 forms in triplicate to verify these activities and make sure distributors got paid," Gordon explains. "Now, the distributor fills out a form online, and it's automatically sent to the manufacturer for verification before coming back to us for summarization." That summarization, adds Gordon, helps both distributors and manufacturers track activities against the original marketing plan.

Dated Data
One of the extranet's biggest benefits, says Gordon, is that the distributors now maintain information the association was formerly responsible for keeping up to date. "If a distributor opened a new branch, we had to record and distribute that information," he says. Now that all that informat ion is maintained by the distributors and manufacturers themselves, the information is more accurate, and the association is freed up from a lot of work, Gordon adds.

Sharing common information among an association can also illuminate trends or issues that individual members would be unlikely to spot. For example, the Air Transport Association (ATA), the Washington trade organization for major U.S. airlines, is developing a database on its extranet to monitor airplane-component reliability and to share maintenance solutions among its members.

If, for example, a member airline is having problems with a radio antenna, it can log on to the extranet to check the database. The search can reveal whether other airlines are having similar problems with the part and whether a fix has been outlined. The database also contains the serial numbers of "rogue" components-parts that appear particularly susceptible to trouble-to alert airlines making aftermarket purchases. "It gives all the airlines better informat ion and helps keep poor-quality parts from being sold to unsuspecting customers," says Dan Brown, the ATA's supervisor for electronic publishing.

Another big benefit to the ATA should be a decrease in the number of meetings. There are about 100 working groups within the ATA, and the four meeting rooms at ATA headquarters are usually booked solid, Brown says. But now each working group has its own exclusive area on the extranet, where the ATA hopes they'll move toward "virtual meetings." If so, that should cut the number of meetings that include not only representatives from U.S. airlines but also European and Asian manufacturers and airlines. "The aerospace industry has become so global that it becomes inconvenient to hold meetings in Washington," says Brown. "If the extranet works as we hope, we expect to eliminate some meetings and make the rest more productive. Airline personnel travel enough as it is."

Some associations are testing extranets as a new approach to generating revenue, both for themse lves and their members. The American Society of Travel Agents, for example, has a directory of travel agents with links to member home pages. Members without home pages can purchase sites from the ASTA.

By the start of next year, the ASTA will begin referring business to members via a "travel request form" on its public home page. Consumers can fill out the form about a desired trip. The ASTA will then filter responses from members wishing to book the trip before forwarding them to the customer, leaving it to the consumer to contact the travel agent. The ASTA is also building a business-to-business section on its extranet, where car-rental companies, tour operators, cruise lines, and other travel-industry operators can provide members with information on services.

Challenges To Creation
But the ASTA and other associations face three major challenges to creating extranets. The first is finding the funds to create and maintain an extranet, which can prove expensive. Even though the ASTA had the help of internal programmers, the group spent about $100,000 developing its site, and it's spending another $10,000 a month for maintenance and related costs. Although the site has attracted members and reduced mailing and printing costs, the ASTA's Kenyon does not anticipate the site's becoming a profit center in the near future, even with revenue from sales to members and others in the travel industry.

A second challenge is the extranet's need for constant care and feeding. To get around this, many associations are outsourcing their extranets to third-party providers. "We began by hosting our site in-house but then outsourced the site to EDS," says Brown of the ATA. "We were here only eight hours a day, but EDS gives us 24-by-7 maintenance, monitoring, and security."

The third challenge: It's not always easy to get members to use the extranet, especially low-tech members who are just now beginning to add E-mail addresses to their business cards. To boost usage, the ASTA is sponsoring contests, both on its public and members-only sites. Affiliated Distributors has provided members with A-D Net training sessions, videos, a help desk, and other assistance.

Despite such obstacles, a number of other associations have ambitious extranet projects planned. VHA Inc., a nationwide network of 1,400 community-owned health-care organizations and their physicians, is one. It plans to use IBM's Global Network to link up with members as well as suppliers and insurers. Two other groups-the Coalition for Healthier Cities and Communities, and America's Promise (a companion organization chaired by Gen. Colin Powell)-intend to use an extranet to link more than 200 organizations involved in community initiatives. They'll work with vendors Fort Point Partners, Netscape Communications, Informix Software, and Hewlett-Packard. While these groups are nonprofit, they all hope to profit from extranets.

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