New Member Category Leads to More Revenue, Happier Members
Discovering an underserved segment of its membership gave one association an opportunity to create a new category to better meet needs. Bonus? A smart pricing strategy allowed them to double its price point and increase renewal rates.
Here’s a scenario: You create a new member category, rename it, introduce new benefits, double the price, and people still sign up—and you meet all projections. Sound impossible? It turned out that way for the Intellectual Property Owners Association (IPO).
While looking at membership categories, Director of Membership Development Matt Rankin, CAE, and his team noticed a small business category that was not thriving in comparison to other ones, which were in the 80 percent renewal rate range.
When they dug a little deeper into the data, IPO discovered that they weren’t actual small businesses, in the way the group traditionally defined them. They were vendors who were joining IPO to attract customers—and when they didn’t find the resources they needed, they bounced.
‘A Perfect Opportunity’
By looking at the types of companies that were lapsing and conducting exit interviews and follow-up conversations, the team realized these members were interested in business development rather than IPO’s main mission of protecting intellectual property.
So, Rankin’s team took the leap and created a new member category—Intellectual Property (IP) Service Provider—that was more targeted to their needs. Because they wanted to improve their business growth, “they had a vested interest in participating in our focus groups, interviews, and surveys,” Rankin said. “It turned into a perfect opportunity.”
During this same time, IPO was looking at a larger dues restructure. Discovering an underserved membership segment gave them an opportunity to test some new benefits and different pricing models. Serving this new member category in different ways was also considered low risk because it only involved tens of thousands of dollars in revenue, compared to millions of dollars in other categories. And because it was low risk, IPO’s board was much more receptive to taking a chance.
“Each membership segment is important to an organization’s revenue and mission,” Rankin said. “If you start off with one that is the least risky—both in terms of mission creep and revenue—it’s safer.”
A Smart Dues Pricing Strategy
A big surprise came when they began figuring out the pricing for the new member category. They used the Van Westendorp Price Sensitivity Model to determine the willingness of what members would pay. They asked members and nonmembers, who didn’t have a current reference point about what the cost should be, what they thought a fair price would be by giving them several options.
They told them all the benefits for the category and then asked what they would consider a bargain, what was too expensive, and what was too cheap. They took all those responses and plotted them to figure out the price elasticity. That process allowed them to statistically determine where the pricing sweet spot was.
Here’s the kicker: The price point for the original membership was $675. But once they made a few tweaks to the new membership category, changed its name, and asked people what they would pay for it, the price doubled. “We heard from members and nonmembers that the price should be $1,350,” Rankin said. “We rolled with it and hit all of our projections.”
The current renewal rate is 73 percent, nearly 10 percent higher than the previous small business category. The number of IP Service Providers had a net increase since launching in late 2019, which declined during the second half of 2020, and is currently up 14 percent.
While it can be scary to ask people what they think membership is worth, Rankin says it’s a smart move. “You have to get comfortable hearing the reality from your members and potential members about what the price ceiling is for what they’ll do,” he said. “Otherwise, you’re leaving money on the table.”
(Olivier Le Moal/iStock/Getty Images Plus)