Revenue management in nonprofits: A case study of an adult education nonprofit organization

Objective: The objective of this paper is to investigate how a nonprofit organization can increase its financial capacity through improvements in its revenue management while remaining committed to its mission. Data based decision-making, such as demand forecasting, serves as a valuable tool for nonprofit organizations to improve their understanding of their users, define a proper portfolio of product/services offered, and thereby manage their financial sustainability. Attention to alignment of services with user needs and organizational mission is likely to result in increased revenue as well as in enhancing an organization’s reputation in the community.

Data and Method: This study provides an example of how a nonprofit organization can utilize data analysis to improve its decision making. Based on the case of the Cambridge Center for Adult Education (CCAE), we study the impact of revenue model drivers, such as prices and program offerings on enrollment, while maintaining commitment to the mission of CCAE. Our panel data consists of 269 English as a second language (ESL) courses with 2,051 students enrolled, 305 language courses with 2,340 students enrolled, and 516 visual arts courses with 3,166 students enrolled over 7 terms. We estimate program demand enrollment as a function of prices, competitor prices of similar courses, schedule, seasonality, and quality of instruction. Our CCAE panel data is well suited for this kind of study. As the same courses can be offered in some semesters but not in others, our data is unbalanced panel data, which lend themselves best to fixed effects or random effects methodology.

Results: Our research shows that data driven decision making enables nonprofit organizations to increase their knowledge of their program users, improve their program offerings, and sharpen their demand forecasts. This paper has important implications for nonprofit management in providing insights based on data analytics and enabling nonprofits to improve their financial capacity and sustainability.