While the pandemic led many associations to offer free education and events as a way to best support members in 2020, now is the time for organizations to re-evaluate their pricing strategy to ensure sustainable revenue.
With 2021 upon us and a vaccine slowly rolling out, associations are starting to move out of the pandemic pricing mode and into a post-pandemic normal. But many are wondering what pricing should look like this year. Michael Tatonetti, CPP, CAE, a consultant who specializes in association pricing, said organizations should move away from the discounts that marked 2020.
“I think discounting and knee-jerk reactions to make everything free need to stay in 2020,” he said. “I understand that for 2020, we wanted to get the right education to our members. That’s noble, but moving forward, it’s not sustainable financially. It can undervalue you if you eventually decide to do hybrid [events] or if we go back to in person.”
Tatonetti recommends starting fresh this year and looking at all pricing to ensure it makes sense.
“Now is a good time to reevaluate the value, and not just for events and sponsorship, but for membership and education, certification, publications, everything we offer—whatever those offerings are,” Tatonetti said. “The best associations will keep price and value conversations in step with their strategic planning, asking not only what value they provide to their members, sponsors, and the public, but how will they monetize it.”
Monetizing will typically require charging something other than free. Associations can decide that price by aligning it with the value of their offerings.
“Sit back and ask, what is the value? What are we charging? What is the strategy?” Tatonetti said. “When we get into conversations about value, we are actually having a conversation about innovation because we are saying, what else can we do? How else can we serve? What new things should we be doing? What should we stop doing? Is there anything that is no longer of value that we can sunset?”
While it’s important to get pricing right, some associations may be wondering how to get members to accept the new pricing model after months of free events and other products. The answer is simple: communicate value.
Whether in sales copy or videos, according to Tatonetti, “you need to clearly hit on membership value, sponsor value, and make sure you are clearly communicating that.”
Tatonetti said it’s also important to remind members that 2020 was an outlier due to the pandemic, and now the association is returning to a sustainable model.
“You can say, our goal for 2020 was to make sure you had what you needed,” he said. “As we move forward in 2021, we can now breathe and make sure the value matches what you need and that our association and our community can have financial sustainability.”
In addition, Tatonetti recommended mentioning that the free offerings were possible “because of your membership dues, because you spent money on conferences before, because of our great sponsors. Now, we’re going to continue to offer these amazing things, and continue to grow into other things, and because of that, membership is going up, or the cost of certification is going up, or whatever it is that is going up is going up. I think if you communicate well, that will minimize—it doesn’t mean you won’t have any complaints—but it will minimize the complaints.”
However, if members do complain about price changes, Tatonetti said “it’s important to capture those complaints. Document them, categorize them, and evaluate them a few months out. That will teach you how to communicate better next time.”
The good news is that small price increases can significantly improve the bottom line. For example, if a product costs an association $40 and it sells it for $50, that results in a $10 profit. Raising the price to $52 would boost profit by 20 percent.
“The price raise typically has a way heavier impact on your bottom line,” he said. “We might think the price is only going up 1 percent, but that might impact 5 percent of the bottom line when you look at your costs.”
The key thing is to have those pricing conversations now and start introducing those changes with proper communication. “As we do come back to some level of normal, now is the time to introduce some new things, and try some new things, and reprice a bit because it’s almost expected,” Tatonetti said.
What are your plans regarding pricing this year? Share in the comments.