Dues increases are an essential part of an association’s financial life cycle. Experts agree that associations should implement a small increase every year to adjust for inflation, but that rhythm was disrupted by COVID-19, as many organizations suspended increases or forgave dues altogether for members struggling with the pandemic. And associations that had left dues rates untouched for years before COVID found themselves in challenging financial straits.
Chris Vaughan, chief strategy officer of Sequence Consulting, recalls one association client that had gone 17 years between dues increases, creating a situation where costs began to outpace revenues. To keep the doors open and maintain its value proposition, it needed to increase dues by 43 percent. “That’s a massive jump, and you can’t do that in one year,” he said.
Associations implementing an increase that’s more than a small adjustment should prepare to phase in the increase over several years, Vaughan says—and do a lot of communication about it. In the case of his client, “it’s a long conversation about all the things that have happened in the last 17 years, all the benefits we’ve added, all the new events we’ve put on, really selling the value of membership.”
The organization started by implementing 3 percent to 5 percent increases a few years back, but it has since increased the pace to 10 percent annually. “We haven’t seen any torches and pitchforks,” Vaughan said.
At UTC, the increase was a relatively modest 5 percent, but still out of inflation-increase range at the time, so the association put its sales hat on. In physical letters, phone calls, and emails, UTC explained the increase and how it was calculated. But it also offered member companies the option to postpone the increase to the next fiscal year to give them a longer runway.
“That helped assure the folks who may not have budgeted for the increase for 2018, when it was applied,” Thomas said. “We allowed them to grandfather in the old amount for that year.”
Associations making small annual increases should still communicate them, if modestly, says Tony Rossell, senior vice president of Marketing General Incorporated. Usually, a mention in the emailed renewal notice or association publication is enough. There’s an exception, though, when the dues level hits a significant new price point—shifting from two to three figures, for instance.
“You might need some extra communication there, though there’s a lot of debate about it,” Rossell said. “If it’s a substantial dues increase, do we announce it ahead of time and say, ‘Renew now [at the old rate] and save?’” In such cases, an association should have a grasp of its members’ price sensitivity to gauge their possible response to an increase, he said.
Consider Retention
Sequence’s Vaughan suggests that one metric to look at is retention. “If your retention rate is 60 percent, the value proposition is obviously not there,” he said. “It’s not a good time to talk to members about paying more for something they’re not willing to renew at the same dues price.”
At UTC, the extra effort to communicate about the dues increase and attenuate its impact paid off. Thomas says that prior to the increase, renewal percentages were in the low 90s; the rates in 2021 and 2022 were 97 percent and 98 percent. The association is currently planning a dues increase for its associate members, and it has reassembled its ad hoc dues committee to apply lessons from the 2017 increase and from COVID-19 to determine the best approach.
“We’re taking into consideration what we learned from that first process for our utility members and looking at our technology partners’ needs,” Thomas said. “Those things are playing into how we determine the value propositions and the rates for those members.”
