By: Will Ferguson
Have you been considering whether or not to develop a tiered membership model for your association but you’re not sure where to start? Leaving the safety of the way we’ve always done things can be very intimidating and confusing. One of our clients is currently making the leap and we’d like to share their story with you.
The first thing to consider is how you plan to determine the tiers of membership. Will you base it on the number of employees at the company? Or, perhaps base it on how much money the company earns each year? Then again, you could base the tiers off of the services your association will provide to the member. Just as each association is unique, so are your members’ needs.
For our client, we chose to present levels of membership based on how many of their employees the company wanted to be able to send to our annual conference and other events. In analyzing our associations’ strengths and weaknesses, we concluded that we have our biggest engagement around our annual conference and that our continuing education was the biggest membership benefit we offered.
Historically, the company itself had to become a member before their staff could join the association as individuals. In addition, to attend one of our meetings/events, the individual had to hold their own membership. So, every year leading up to the annual conference, we’d have a rush of new members (joining to get that low member only rate to the event) and also a long list of dropped members (who didn’t renew because they didn’t attend this year’s event). Not only did this create a strain on cash flow for the association, it also caused our members stress as they tried to keep count of who was already a member and who needed to join in order for everyone from the same company to get the discount.
Our new tiers of membership allow the company to pick how many of their staff they want to cover under their company membership. The company can then send that many staff to any of our events at the member rate. To determine the tier options, we ran an analysis on how many individual members we had and how many staff our company members employed. From there, we created the following tiers: 1-2 members, 3-5 members, 6-9 members, 10-14 members and 15+ members.
Now that you have decided how to structure your tiers, you must determine price. To properly market your new tiered structure to both current members and prospective members, you need to ensure that you’re giving an easily understood value. You could offer more benefits while keeping the price where it was to create that value. You could also lower prices to create the value, or use a combination of both.
We set our tiers by the number of employees covered by the company’s membership. To set our prices, we started with the cost of the company’s membership plus the cost of the number of individual memberships per tier. We went back to the analysis of our current membership and our budget to then set the amount of discount we could offer without sustaining affecting the bottom line.
However you decide to set your prices and your tier structure, make sure you use the same formulas and reasoning for each. You will need this information when you enter the next step of getting board approval. We already had a membership incentive program in place that offered a lower individual membership fee to companies who had more employees join. So as we reached the larger tiers in our new structure, we had to change the formula so our new levels continued to offer a significant discount. This oddity created a “sweet spot” at the 6-9 tier, where members would receive the biggest discount.
Make sure you can explain how you arrived at pricing for your new structure and offer your board an explanation of your choices based on your analysis of your existing membership. For example, we presented our board with the formula used to create the “sweet spot” and the fact that the majority of companies in this state employ 6-9 staff.
Next time, we’ll discuss how to market your new membership structure. In the meantime, if you have any questions, please leave them in the comments below. Have you changed your membership structure? We’d love to hear about it!