Trends in Membership Pricing
In virtually every pricing study conducted by Association Laboratory for associations, price is the most important factor in the selection of a membership package.
How do we identify the relationship between price and membership benefits?
Association Laboratory identifies the price/benefit relationship for our clients by creating and testing a sophisticated model of potential membership categories. The model identifies a package of benefits matched with a price. This options present research participants, usually current and potential members, with options that more accurately represent real world choices.
The result is a customized membership market simulator which allows our clients to conduct "what if" analysis to test which member benefits package and price is preferred by different membership audiences so that membership categories can be customized to maximize acquisition and retention.
Other methods commonly used in price research such as benchmarking or Van Westendorp' s Price Sensitivity Meter provide much less sophisticated data and, as a result, far less useful insights into pricing. They cannot accurately identify the real world link between benefits and price for key markets.
The following summarizes three price strategy trends we have identified following a review of several member value proposition and membership category pricing studies.
Feature Rich, Premium Priced Membership
Based on Association Laboratory's research using the membership market simulators, 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."
This same study discovered that, "Few participants favor the most basic membership options."
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.
In a study targeting 67,000 current, former, and prospective members for ASCD, as the financial commitment of membership increased, so did the mean importance of ASCD membership. A willingness to pay a higher membership price correlated to greater membership engagement.
Finally, in a recent study for the National Automatic Merchandising Association (NAMA) discovered that regardless of company size and, consequently, dues payment, most members and prospects preferred a moderate or high level of benefits over a basic, low cost option.
Simplified Membership Categories
In the pursuit of member service, many associations have a history of creating numerous membership categories. The goal is to allow members to select the category that best meets their needs.
Unfortunately, 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 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 the 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.
Further support for this was found in a study for the Society of Manufacturing Engineers (SME); although the number of members went down slightly, raising the price of the standard membership tier just $25 yielded higher revenue than retaining the current annual fee.
Summary and Next Steps
For every year that membership categories are not priced properly, the association loses money. Based on Association Laboratory's research, associations should consider the following when evaluating potential changes in membership categories:
To have Association Laboratory develop a market-based membership simulator for your association or for more information on how to conduct pricing research and configure membership categories contact Dean West at Association Laboratory at 312.466.5702 or via email at email@example.com
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