Deciding how to price your membership can be challenging.
How can you find a price point that’s fair for your members, accurately represents the value you’re providing, and covers the cost of running your organization?
Whether you’re a brand new nonprofit or an established one, just starting to charge member dues or looking to re-evaluate your current pricing model, there are a few things to consider.
In this post, I’ll go over everything you should take into account when deciding on an effective and fair membership price, as well as the different types of membership pricing models you can try.
You’ll also hear from real-world membership managers about how they decided what to charge their members and how it’s been working for them.
Let’s dive in!
1. Look at Similar Organizations in Your Area
When deciding how to set up your membership pricing model, one of the first things you should do is look at what other organizations in your niche and area are charging.
This will give you a sense of what people expect to pay for membership at an organization like yours.
The reason why you want to do your research on a local basis is that prices vary greatly between regions. If you offer the same value as another organization down the street but charge twice their amount, your prospective members will undoubtedly question whether they’re better off joining them instead.
Even when starting a chapter of an existing organization, don’t simply set up the same pricing model as your parent organization or other existing chapters — you may be charging too little or too much in comparison to your local benchmarks.
“We benchmarked our sister organizations in the area to see what their dues were and what benefits members got. Then we budgeted according to our offerings and expenses.” – Carol Emmett, Greater Orlando Organization Development Network.
2. Consider your Expenses
Another important consideration is how much you’re spending to run your organization. Calculate all of your expenses and make a decision about what portion of them you expect to be covered by member dues.
Your expenses can include things like rent of your office space, paying staff members, your MMS and membership website hosting fees, the cost of running your programs, event related costs, etc.
Some organizations aim to have 100% of their expenses covered by membership fees. For others, that would make their member dues far too expensive, so they also rely on fundraising, grants and sponsorships.
“For our car club we added up the cost of running the organization over a year, divided by the number of members and rounded up to capture small unanticipated expenses, special projects, and anything else that comes up.” – Curtis Springstead, Delaware Valley Miata Club.
“We charge $60 per year dues for membership in the Ladies’ Library Association of Kalamazoo. That dues rate does not really pay for all of our expenses. However, we choose to keep our dues rate low so that we can include a wide range of members. We do ask members to give extra donations with their dues if they can to help pay for our expenses. We also raise funds from the local community through our public activities, which include programs, tours, teas, concerts, meals, etc. We are also applying for sponsorships and grants to support our events and to expand our activities.” – Janet Ruth Heller, Ladies’ Library Association of Kalamazoo.
3. Focus on Value
While it’s important to take other local organizations and your expenses into consideration, the most crucial aspect of membership pricing to pay attention to is the value you’re offering to your members.
No matter how affordable your membership is, if your members don’t find any benefit in joining or staying a member, they simply will not sign up or renew.
When promoting your membership, be sure to list out all the benefits that prospective members will receive when they join. If you find that you need to charge a bit more than people might expect, find a way to justify the cost by including more benefits and member development opportunities.
Remember that additional benefits for your members don’t have to be an additional expense for you. Options like access to a private Facebook group or a community forum on your website are highly valued as networking opportunities for your members, but don’t cost your organization anything extra.
Rather than promoting an affordable membership price, focus on promoting how membership in your organization will solve your prospective members’ problems and improve their lives. A truly valuable membership will be hard to pass, regardless of its price.
Once you have settled on a membership price, don’t ask your members to pay anything extra for special events or occasions — it diminishes the value of what they’re already paying for and makes them less likely to stick around. If you have additional costs you need to cover, find a way to save somewhere else, but never force your members to pay for something they expect to be included in their membership benefits.
“We wanted to be affordable and not nickel and dime members with forced hotel meals to hear speakers. So we provide a decent continental breakfast for our half day learning sessions. We also build partnerships so we can have use of meeting rooms without renting space.” – Carol Emmett, Greater Orlando Organization Development Network.
4. Consider Your Membership Base
Think about your existing members or the kinds of members you’d ideally like to attract to your organization. What age group do they fall under? What are their purchasing habits? Are they familiar and comfortable with subscription-type pricing models?
All these questions are important to answer when setting your membership price. Your membership base will determine how willing people are to pay the dues you ask for, how much they value your benefits relative to the cost, and how sensitive they are to changes in your membership price.
For instance, if your organization targets young professionals who are fresh out of university, you don’t want to make your member dues unaffordable for someone paying off student debt and maybe still looking for a job.
On the other hand, younger members are already subscribed to many services in their day-to-day lives, so they’re used to seeing a slight price increase every now and then. However, if your members are older, they may be extremely unhappy if you suddenly start charging more.
5. Consider Offering Promotions
Even when your membership offers great value to your prospective members at an affordable price, they may still need a bit of an incentive to join.
That’s when discounts and promotions come in.
You can offer a discount on the first month, few months or year of membership to encourage people to join. The lower price might entice them to try it out and hopefully, by the time their promotion is over, they’ll decide that the value you offer is worth continuing to pay for at full price.
You can also offer group discounts, encouraging members to convince their friends to join at the same time. Though you will be making less revenue per person than you normally would, it can ultimately lead to more paying members than you’d get otherwise.
“We had a healthy discussion on how to price corporate rates and do give a little bargain to groups bringing multiple members.” – Carol Emmett, Greater Orlando Organization Development Network.
Finally, you can encourage people to join as members by offering something for free that they’d otherwise have to pay for. For example, if you have an annual event, you can make admission free for members, while charging non-members a fee. Most people will prefer to pay for a membership that will unlock other benefits, rather than just paying for a ticket to a one-time event.
6. Choose the Right Membership Pricing Model for Your Organization
When it comes to membership pricing models, here are a few common options to consider:
1. One-time flat fee
All your members pay the same one-time fee and retain their membership for life. This model is enticing for members because it’s affordable, but can result in poor member engagement over time and doesn’t provide sustained revenue for the organization.
2. Annual or monthly fee
All members pay the same fee monthly or annually and retain their membership as long as they keep renewing. This model is one of the most popular ones because it’s simple and results in a sustainable revenue stream. It’s also easy to analyze whether members are still finding value in their membership based on the renewal rates.
3. Group membership
Members pay a lower price when they join as a group, family or company. This is a great way of making membership more affordable, while growing your community and revenue.
4. Freemium or flat fee with add-ons
The basic membership and some benefits are offered for free or at a relatively low flat fee, but members have the option to pay an extra charge for additional services/benefits. This model is a great option because it gives members flexibility and allows them to receive only the benefits they choose to pay for. Members never feel like they’re paying for something they don’t utilize and are more likely to see value in their membership overall.
5. Tiered membership
There are several levels or pricing (including free membership, if you choose), and each of them includes an increasing number of benefits. For example, for $10/month, members receive access to a member-only site, but for $20/month they also receive a weekly mentorship session.
This model works well for many organizations because it allows you to upsell your members and encourage them to move to higher levels of membership over time. However, when choosing this membership model, be sure to not create too many tiers — anything more than three or four will just confuse your members.
6. Donation-based / pay what you can
Memberships are offered on a donation basis and members can pay what they can or think is a fair price. This is a good option if your organization serves people who can’t afford to pay a high fee. In this case, you’ll have to rely more heavily on grants, sponsorships and donations from those members of your community who have the capacity to give.
7. Know When to Increase Your Membership Dues
Increasing your membership dues is a regular part of running a membership organization. As your organization grows, you will likely begin to expand your activities and therefore, your expenses.
It can be challenging to tell your members that their fees are increasing, but remember that every increase in price comes with an increase in the value they receive. Focus on this when announcing the price increase — tell your members about the additional programs and benefits they can look forward to as a result of the increase.
If you decide to go ahead with an increase, never make it a drastic one. A few dollars every now and then is much more manageable for your members and will be unlikely to upset them. Plus, if you have a fair number of members, a few dollars from each of them can quickly add up and go a long way.
Finally, don’t increase your membership dues too often, or your members will come to expect it and your retention rates will suffer as a result. An appropriate cadence will depend largely on the type of organization you run, but generally speaking, every 2-3 years is considered normal.
If you find that you’ve increased your dues recently, but still need more funds, look to other ways of making revenue, rather than asking your members to pay more once again. Your members will appreciate it and will be more likely to remain loyal and committed members of your community.
Read More: Non-Dues Revenue: The Basics
One Final Word on Membership Pricing
At the end of the day, setting up an appropriate pricing model for your membership requires some work. It involves a lot of research and open communication with your members — if you’re really unsure what to charge, you can always survey your members to ask what they’d be willing to pay for the value you offer.
It also involves a lot of experimentation. Don’t be afraid to try something, find out it doesn’t work, and then try a new model or different amount. The best pricing model will be unique to your specific organization, so take some time to experiment and find out what works for you and your members.
What type of membership pricing model have you set up or thinking of setting up? Let us know in the comments!
Originally Published by www.wildapricot.com