Pricing Advice: The Good, The Bad and The Ugly
A chamber of commerce executive recently shared with me some advice she was given by a consultant in building her membership menu, which had her stuck. Since I encounter this regularly, I thought I would share how to fix it.
Using a tiered membership structure is different than building one, so be careful about who's advice you seek and take. I use FreshBooks cloud accounting system, but I haven't the first clue about how you would switch from Quickbooks. Where your organization needs help isn't necessarily in building a menu or tracking the delivered benefits. You need help in the transition -- the switch. How do you go from there to here without losing members or revenue? That's the trick.
SaaS software often charges different rates based on a scaled pricing system. Freshbooks, for example, is free for up to 3 clients, then it's $19.95 for up to 25 clients or $29.95 for unlimited clients. This works because the people who want a practical way to send invoices and get paid also want a payment mechanism that can grow with their business. It's brilliant, of course. And freemium models are making a comeback.
Generally speaking, an online subscription to software or services is much less sophisticated than a business-focused membership organization like your chamber of commerce. To illustrate my point, I'm going to use this particular example.
Here is an example of what NOT to do: In creating 5 levels of value, you could have 5 different discount levels for a feature such as a trade show booth.
- Join at $300 and you're eligible to buy a booth at the trade show
- Join at $600 and you get 15% off a trade show booth
- Join at $1000 and save 20%
- Join at $2000 and save 30%
- Join at $4000 and save 50%
Here are a few reasons why I don't like this:
- You're assuming every member wants your marketing -- they don't
- It requires an additional purchase, and therefore cannot be quantified without incorporating the additional costs associated with the benefit
- It doesn't scale - If you have 200 booths and 201 members who want to use their benefit, you're screwed. Or the members are.
In creating valuable benefits within your organization, keep these questions in mind:
- Does this benefit require an additional purchase? If so, your value cannot stand alone.
- Does the benefit scale? (What happens when you sell 50? 500?) You can still include a benefit that doesn't scale in your tiers if it is at the right level and price, but as a rule, avoid it.
"OK, Kyle. So what should be our first steps in building a better membership menu?" Glad you asked.
- Identify the business profiles you serve and what they want from you. You should attempt to create a membership for each of these member profiles.
- Assemble your list of current membership benefits
- Remove any features that require an additional purchase
- Remove any features that require a member to "show up" to use it
- Put a value on what remains.
- Create a ladder of price and value that increases by clear and distinct amounts.
- Create a package of marketing/visibility-related benefits worth double your base price utilizing your existing overhead. This is your second rung on the ladder.
- Quantify the value of these benefits and add the basic membership value. This is the total value of your second level.
- Create at least 1 value package for each of the remaining business profiles you identified in step 1. Yes, this is where it gets hard, especially if you stick to the rules I've laid out.
If your organization is looking to build a membership menu that allows your memberships to grow along with your members, stops the punitive nature of employee-count dues structures, and maybe doesn't reward your members for lying you to about how many people they employ, contact me to schedule a conference call with your team. There's a better way, and your members will love you for it.
// Kyle Sexton is a marketing strategist and international speaker. His innovations have been featured in The Wall Street Journal, and his book,Remembership - New Thinking for Tomorrow's Membership Organization, is fueling transformations in membership organizations throughout North America. He can be reached at 888.899.8374 or get his free resources and webinars at KyleSexton.com.