How Much Is Too Much for a Membership Dues Increase?
Whether you increase dues as needed or adjust the rate annually, it’s important to ask: How much is too much for membership dues?
Last week, Costco, the second-largest retailer in the United States, announced that it would be increasing member dues for the first time in six years, mainly due to disappointing earnings results.
The increase is modest—$5 more if you’re a baseline member and $10 more if you’re a premium member. But I’m a long-time Costco member, and it made me think: How much is too much?
Michael Connor, membership director of the National Association of Criminal Defense Lawyers (NACDL), thought the same thing. He cancelled his Costco membership in 2012 when the company increased baseline membership from $50 to $55 per year. “I was paying to not use it very much, so I just quit,” he says.
While a national big-box retailer and an association are two vastly different things, the membership model is a common denominator. Connor says he’s constantly thinking about member value and whether his members will accept small, regular rate adjustments on dues.
Being consistent with dues increases and keeping them modest can help an association financially, Connor says. In the last five years, NACDL has increased dues annually, and retention has held steady at 82 percent.
In a blog post, Tony Rossell, senior vice president of Marketing General Incorporated, says there’s evidence that membership retention can hold even through a somewhat significant dues increase. MGI research shows that membership rates can withstand a dues increase of as much as 20 percent before there’s a drop-off in renewals.
That doesn’t mean associations are likely to increase their dues by a double-digit percentages. In a recent Collaborate discussion (ASAE member login required), association leaders said that they usually increase dues by small amounts every year.
Before Connor joined NACDL in 2010, dues increased sporadically and noticeably, usually in the 10 to 15 percent range. He saw an opportunity to use an annually adjusted rate, which increases 3 percent each year. This change helped to offset a small decline in membership while keeping in mind the financial hardships members were experiencing at the time.
Connor says many NACDL members continued to experience economic pain even after the 2008 recession. “We wanted to carefully balance our rising costs, alongside the financial burden of our members,” he says.
NACDL started by analyzing economic and industry forces, as well as third-party research, like the MGI report on the effectiveness of annual dues increases.
“There was a coinciding change in the marketplace and the industry,” Connor says. “The fact of the matter was that public defenders were overburdened and private defense attorneys were struggling to find work. We hesitated to increase dues because we knew there was a hardship.”
To better understand its competitive position, the association analyzed how its dues rate compared to other voluntary professional associations. In many cases, NACDL’s dues were significantly lower, Connor says. Then in 2011, it surveyed members.
“More than 60 percent said they felt the value of member benefits outweighed the cost of the membership,” Connor says. “That helped us to confirm what we already were thinking—that a dues increase was needed.”
Before considering a change in dues, Connor suggests that associations perform a similar type of environmental scan. In NACDL’s case, they did both qualitative and quantitative research before implementing a new annual dues increase in 2012.
Communicate Member Value
NACDL’s success came partly from a strategy that emphasized individual member value and responsiveness. In communicating with members about the change, instead of focusing on the dues adjustment, he highlighted how NACDL was boosting member value through expanded programs, including continuing legal education courses.
“With the dues increase, we were able to hire staff and develop programs,” he says. “We didn’t want to call direct attention to the dues increase. Most people automatically accepted that our operating expenses were on the rise.”
At the same time, NACDL anticipated that there would be members who couldn’t afford to pay more in dues. “There were some who simply couldn’t afford to pay an adjusted rate, and they demonstrated a financial hardship,” Connor says. “In that case, I’m always willing to meet their needs.” Individual members in this situation were allowed to maintain their membership at a lower new-member rate.
Such flexibility almost always benefited the association long-term. When a discount was applied, the member usually renewed the following year at the full rate, Connor says.
The new dues model is a big success story for NADCL. Individual dues are $39 higher today than they were in 2012, and retention rates are higher too.
Does your association have a policy or practice for dues increases? How do you communicate with members about a rate hike or respond to members who complain? Share your ideas in the comment thread below.