How’s Your Pricing Strategy?
Success in some areas can lead to a false sense of satisfaction. A closer look can reveal where you might be leaving money on the table.
No money, no mission, the old line in nonprofitdom goes. Alas, that line contains no guidance on how, exactly, to earn that money. And, more precisely, how to price what you’re selling.
But if you’re struggling with that issue, you’re not alone. As I was working on my feature for the latest issue of Associations Now on pricing strategy, it quickly became clear that there are few hard and set rules about how to think about pricing. Except, perhaps, that you should be more confident about experimenting with pricing than you perhaps have been.
There are two reasons for that. One is that the lack of a coherent pricing strategy risks alienating members. Jay Younger, FASAE, president and CEO of McKinley Advisors, lamented the way that associations often handle pricing at the department level, rather than holistically. It creates “a dynamic in which your customer doesn’t really know what to expect,” he says. “And over time it lends itself to an opportunity for decreased satisfaction from your customer base or your member base, because it becomes apparent that the left hand and the right hand don’t know what they’re doing.” So thinking about the cost and value proposition of membership, meetings, publications, and other products and services is an opportunity to more sensibly price them.
The second reason is that there’s a chance that you’re leaving money on the table. That’s something that Destinations International discovered after revisiting its dues structure, which it hadn’t paid attention to for a decade. As part of its pricing strategy process, the association developed a “heat map” that showed which members were engaging most with it. Engagement was most intense in the middle range of membership, in terms of budget. “They were attending our events, they were buying our research, they were coming to our annual convention, they were paying their dues,” Destinations International executive vice president of member engagement Alison Best says.
But that success in the middle range created a false sense of comfort. Smaller organizations were less engaged and felt priced out, and larger organizations weren’t seeing value. “We weren’t providing the thought leadership that those large organizations needed from a trade association,” she says. “They were paying the checks because they knew it was good for the industry and they wanted to support the industry, but they really weren’t feeling the association in their organization.”
In the retooling process, Destinations International decided to introduce a hefty hike in dues for the members with the biggest budgets, in some cases quadrupling or quintupling dues. Of course, that demanded that Destinations International do more for those big-budget members, investing in a more robust research operation. And it also involved a lot of personal contact from the association with members.
“It was an all-hands-on-deck approach,” she says. “We did an annual report last year for the first time in a long time that spelled out the value proposition a lot more clearly. That helped. We got on the road and visited people who were resistant. That helped.” Best says there were six months of such conversations before the association launched the increase last April.
And what did those skittish associations want to understand about the dues increase? Value.
“They asked, ‘How are those additional dollars going to be spent?’” she says. “We had to be crystal clear on what we were going to deliver that we had not been delivering in the past. ‘Incremental money’ for most people meant, ‘What am I going to get? Incremental value.’ That was definitely a clear equation a lot of people talked about.”
There’s a fair amount of consensus in the association world about how to think about pricing—how meetings are big moneymakers, while membership and publications and so forth provide more modest profits or serve as useful loss leaders. Nothing I heard from the association leaders I spoke with upset that sense of the universe; some associations I spoke with went through the pricing strategy process and realized big changes weren’t necessary.
But that enlightenment doesn’t happen without conversation. It’s not just a matter of leaving money on the table; it’s also about seizing the opportunity to have a candid discussion about what value you’re providing to your membership.
How does your association handle pricing, and what changes has it made as a result of talking about pricing strategy? Share your experiences in the comments.
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