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Wednesday, September 20, 2017

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Phase 3: Configuring and Pricing Membership Categories for Marketplace Success

In Phase 2, current and potential options for membership benefits were prioritized. The final step is to determine the configuration of priority benefits and price that optimize the odds of success in the marketplace.

To accomplish this, Association Laboratory uses a unique and sophisticated analytical technique called discrete choice analysis.

Discrete choice analysis is a technique designed to more closely mirror how people make decisions in real life. It allows you to create a model that simulates future member action. This simulator can be used to run "what if" scenarios to analyze different offers and price points.

The technique helps you identify different configurations or benefits and price tiers for key audiences designed to maximize membership retention and acquisition.

Our research using this technique has identified three price strategy trends:

Feature Rich, Premium Priced Membership

Many associations have opportunities for premium memberships which offer substantial benefits at a much higher price than the association might think possible. For example, a key finding from a study for the Clinical and Laboratory Standards Institute (CLSI) included the following:

"Among large members, more feature-rich configurations have stronger appeal; prefer a higher annual fee to additional charges for desired features and benefits."

Echoes of this finding have been discovered in other Association Laboratory research providing evidence that association members are willing to pay for benefits they value.

Simplified Membership Categories

Association Laboratory's research indicates that a large number of options make it more difficult for members to identify the meaningful differences between membership categories. This may result in their selection of the cheapest membership category, not the one that is best for their needs.

CLSI, based on the simulated market response, restructured and simplified organizational membership from twenty-five options to six options. This change helped members understand the substantive differences between each type of membership so they could quickly identify which one best met their needs.

High Net Income Categories

Finally, many associations assume that in order to improve revenue you must increase membership acquisition or retention. In fact, by increasing net income within a membership category you can generate more revenue from the same number of members and at the same acquisition and retention rate.

Association Laboratory's research discovered that, often, there was no meaningful difference in the marketplace between two different membership categories, but substantive differences in the net income for the association. In the simulator, members were just as willing to select the high net income as the low net income category because the difference in the benefits package was not meaningful to them.

For example, in a study for ASCD, the simulator showed virtually no difference in the take rate between membership packages that included 6 books vs. 9 books, but the cost difference between these categories was substantial.

Summary of Membership Category Development

The membership model for trade and professional associations is alive and well.

Given changes in the environment, though, associations must constantly review the benefits and price of their model to ensure that it keeps pace with changing membership needs.

By determining the needs of members, prioritizing how these needs are addressed through programs and services, and configuring the priority programs/services at the proper price point, associations can develop and sustain successful membership strategy.

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