Membership Fee Pricing Strategies

This blog was originally posted on www.TheNPOGroup.com

Membership fees often represent a significant share of an association’s total revenue.   This article highlights a few specific strategies you can apply to help maximize this important revenue stream.

Review Membership Fees Annually

According to our 2020 OAX Report, almost half of all associations surveyed do not review their membership pricing at least annually.   Not reviewing membership fees with any regularity represents a missed opportunity for many associations.  Regularly examining membership fees may potentially generate more revenue for an organization and, in the case of fee decreases, bolster member satisfaction.

Determining Membership Fee Levels

Several factors should be taken into consideration when determining fee levels:

• What is the state of the industry or sector in which your association operates?
• Have your members been thriving or struggling?
• Is membership mandatory for members to work, or is it an optional/discretionary expenditure?
• How do your fees compare to fees of similar associations?
• Do members feel they are receiving fair value for their dues?

If members perceive you aren’t delivering fair value in return for their annual dues, first consider ways to strengthen your value proposition and ensure it is clearly communicated.  In saying that, associations should also explore the counter-intuitive consideration of lowering fees. It could actually boost membership numbers and improve membership retention and engagement, although it could come at the expense of a short-term hit to revenues.

Ending in 9 Pricing

If you are not already doing so, adjust membership fees to end in a 9, particularly when it results in a lower left-most digit, for example a price of $599 rather than $600.  Research suggests that such a psychological pricing strategy can have a positive impact on sales.  There have been many studies supporting this phenomenon, one interesting example being the research paper Penny Wise and Pound Foolish: The Left-Digit Effect in Price Cognition, Journal of Consumer Research, June 2005.

Offer an Incentive for Paying by Due Date

Offering a financial incentive for on-time payment of membership fees can be an effective way to accelerate cash flow and reduce collection efforts.  This price differential can be positioned in one of two ways:  as a discount for early payment, or as a penalty for late payment.

The discount or penalty amount should be sufficient to persuade members that it is worth paying on time.   Although the paid-on-time membership fee and the paid-late membership fee under the discount approach may be the same as under the penalty approach, positioning on-time payments as being “discounted” (carrot method) may be more palatable to stating that late payments will incur a “penalty” (stick method).

Find out more about membership pricing strategies – call me and we can have a conversation.  We can also talk about improving operating efficiency, reducing risk and strengthening your organization.  Reach me at 613-727-1230 ext. 212 or [email protected]

Richard MacNeill, FCPA, FCMA, CMC, Dipl. T. is a partner at OTUS Group, a team of advisors to business, government and not-for-profit organizations.