Name Your Price: The Challenges of Pricing for Associations
Putting a price on membership, products, and services can feel fraught with risk and uncertainty. How do you define the value of something? Will members revolt against a price increase? But pricing shouldn’t be guesswork: Patience, testing, research, and a little courage can lead you to the right number.
Time will erode the value of most things if you don’t maintain them. Your car. Your home’s roof. Your association’s pricing strategy. Member needs change as years go on. So does the nature of your industry, not to mention technological and economic forces that affect everybody. Those shifts change the value of membership in your organization, your products and services, and, as a consequence, the appropriate price tag to put on them.
But too often, experts say, associations are skittish about revamping and implementing a new pricing strategy.
“The default for most groups is to not have a coordinated pricing strategy,” says Jay Younger, FASAE, president and CEO of the association consulting firm McKinley Advisors. “It’s still extraordinarily common to have an operating environment in which pricing approaches are pretty much left to the direction of departmental leaders.”
Without a holistic approach to pricing, associations run the risk of leaving money on the table—especially when fees and discounts inadvertently conflict with each other. But with some sensible analysis, transparency, and a little courage, associations can revamp their pricing in a way that makes sense for the organization and its members and customers alike.Alison Best of Destinations International. (Geoff Wood)
About two years ago, Destinations International, a trade association of regional destination marketers, underwent an organizational overhaul that prompted it to look at its dues structure. Dues had been tiered by budget level, topping out at $7,750 for members with annual operating budgets larger than $10 million. That may have been appropriate 10 years ago, but member budgets had been increasing, says Alison Best, executive vice president of member engagement. Dues weren’t keeping pace, making up less than 20 percent of the organization’s revenue.
“It didn’t make sense, and none of us were around when those original decisions on membership dues were designed,” she says.
The association created a membership committee that worked with its finance committee to reevaluate, and earlier this year it announced a new dues structure that represented a significant increase for its largest members. (See “A Major Markup”.)
That “rightsizing,” as Best calls it, better represented the industry’s economics. But it also demanded that Destinations International revamp its value proposition. Those high-end members wanted more research from the association and more members-only content, she says. Because it now produces research that members had previously outsourced, a dues hike (in some cases a substantial one) didn’t sting quite so much.
A lot of face time helped too, Best says. CEO Don Welsh met personally with members to explain the rationale for the restructuring and gather feedback. As a result, it’s enjoyed a 95 percent retention rate. “Educating our members has been a lot of work, but I think it has set the association up for success for the long run,” she says.
Associations often underestimate members’ comfort level with price changes, says Davin E. Hattaway, CAE, account manager for association consulting at M Powered Strategies. Eagle-eyed members will notice even slight dues changes and complain, but if the overall effect is positive, an association should feel comfortable making tweaks.
“A price adjustment will invariably generate complaints 100 percent of the time,” he says. “But if you look at the overall satisfaction numbers, with a few exceptions, people are happier and you’re serving more people.”
Hattaway says the easiest way to determine members’ tolerance for price changes is simply to start tweaking them: Incrementally raise or decrease prices and see what member response is. He recommends looking at associations in similar industries to glean what prices might make the most sense.
A Broad View
Pricing discussions need to touch various departments within an organization, because no one product price exists in a vacuum. Adjusting dues, for instance, may affect costs for education, meetings, research, and more.
“One of the most difficult things for [pricing strategy] implementation is that you may have this great strategy, but you haven’t brought all departments together,” says Sheri Jacobs, FASAE, CAE, founder of Avenue M Group. “I’ve seen cases where publications or education departments have been given revenue goals and the only way for them to achieve them is if they either maintain the current pricing, or they continue to sell to nonmembers. And then you’ve got a membership department that’s trying to convert higher-paying customers into members.”
Such concerns were top of mind for the American College of Chest Physicians when it began retooling its membership model about three years ago. CHEST wanted to be more inclusive of the community of healthcare professionals supporting physicians and was preparing a tiered membership model to do so. Its work group included representatives from multiple departments, along with CHEST volunteers, to weigh in on the effects of pricing for members at different career stages and income levels.
“When you open your membership model to invite other healthcare professionals to be part of your organization, you also have to ask, is our education programming being responsive to this broader market of members as well?” says Sue Reimbold, senior vice president of market growth and chief marketing officer at CHEST. “And if so, what’s the price sensitivity for our annual meeting? What’s the price sensitivity we need to have for a new course or event?”
That may force a conversation about whether a product or service is designed to be a revenue driver. Not everything needs to be, says Younger. But that means the association needs to find the optimal price for the products that do have to be profitable, such as meetings, which are typically high-margin.
“The reason to optimize your pricing on the parts of the portfolio where you have more latitude is to know how much bandwidth you’ll have to produce programs and services that maybe either break even at best or result in negative net income,” he says.
In 2016, the American Speech-Language-Hearing Association decided to look at the pricing of its continuing education materials. Prices had been set a decade earlier, but ASHA had been shifting from print to digital delivery, altering the materials’ production cost and perceived value. Staff had heard rumblings indicating that these resources were seen as overpriced, but there was no hard data supporting that.
So ASHA pulled together a team representing education, marketing, professional development, and finance to explore the matter, regularly communicating with staff about its work. With McKinley’s assistance, the team conducted staff interviews, researched competing associations, and put the question about price sensitivity to members directly.
“I think the electronic survey that we did was most important,” says ASHA Marketing Director Leslie Katz. “We found out a lot about our members and what drives them to take continuing education from ASHA when there are 500 other providers you can choose from.”
ASHA’s takeaway from that research was that it didn’t need to make substantial pricing changes—it was in a “goldilocks” position, Katz says. One education-related publication was perceived as more valuable than ASHA had thought, so it gave the price a nudge.
“We edged it up just a little bit, but not enough to warrant some kind of member communication about that,” Katz says. “And we never heard anything about it, either. I don’t even think people noticed.”
That speaks to another takeaway that consultants and association staff agree on: Though large structural changes demand transparency, small upticks in price don’t require e-blasts and announcements from the stage of your annual conference.
“If you determine through your analysis that a product is reasonably well priced, but you have some opportunities to bump it 2 percent, 3 percent, typically we don’t recommend making a big deal about that,” Younger says. “It actually kind of works against you to raise too many questions.”
That doesn’t mean an association can abdicate its role to regularly revisit its pricing strategy. Best says Destinations International’s restructuring process has prompted it to contemplate not just dues prices but broader membership strategies, including attracting new groups rather than thinking about price hikes. And though dues increases may be necessary in the future, she says the association is more likely to implement small ones annually.
“We’re not going to wait 10 years again,” she says. “We’re having those strategic long-term conversations now.”