Is Your Association Leaving Money On The Table?
Most associations are. Maybe you haven’t increased your dues in a long time; Maybe you don’t have a rational framework for deciding dues; Maybe you really don’t know how much your members would pay. If so, you are not alone.
Most associations are terrified of increasing membership dues because it has been so long, or they don’t know how to justify it, or they don’t know what members will pay, or all of the above. They imagine a mass exodus of angry members who can no longer afford it or feel like the association is gouging them.
The truth is, associations are far more worked up about dues increases than their members are. Following a few simple rules can significantly increase dues with little blowback from your members.
The Best Financial Decision You Can Make
Increasing dues is the best financial decision you can make. Why? For one thing, every dollar of incremental dues goes straight to your bottom line. It delivers more revenue without additional cost. The gains compound. A dues increase drives additional revenue for years to come. A 5% increase today will lead to 60% more revenue over ten years. For many associations, that is game-changing.
Most importantly, it’s fair. In any good relationship, the value exchange is balanced. You get what you pay for and pay for what you get. Member relationships are no different. You deliver a lot of value, and your members expect to pay accordingly. They run their businesses the same way.
So how can you set the right level for dues and justify it to your members? There are three things your organization needs to do to increase dues successfully.
1. Know Your Benchmarks
One crucial benchmark is profitability. Even a nonprofit needs to make money. Therefore, you should generate more dues than it costs to serve your members. “Cost to Serve” is a critical metric. Simply put, it is the total cost of all the benefits you provide as part of your membership. Unfortunately, many associations have never done that math and are often shocked when they do.
Another critical benchmark is comparative pricing. How much do similar organizations charge their members? I say comparative because you may be in a space where you don’t have direct competition. Nonetheless, other organizations serve the same members or deliver comparable benefits.
A disciplined market scan to understand these relative dues structures does two things for you: On the one hand, it tells you what the market will bear (because the market is bearing it). On the other, it gives you and your Board confidence that a change in dues structure is reasonable and justifiable, “de-risking” the prospect of an increase.
What about member research? Be careful. It is a truism in market research that people do not always do what they say they will, especially regarding price. They may feel one way when completing a survey and a different way when writing a check.
There are ways to effectively research price sensitivity. However, they are more complicated and expensive than your standard survey research. “Conjoint analysis” is a survey technique that asks people what they would pay for different “baskets” of benefits. The analysis then reveals what each item in the basket is worth, which helps you get to the right price.
Even more expensive economic techniques like “yield analysis” can reasonably accurately predict what membership levels would be at different dues rates. Which is interesting, but is it necessary? Only for the most risk-averse Boards who need expert reassurance that higher dues will not tank their membership.
In general, member research is most helpful in dues discussions when you are considering significant changes in member benefits at the same time. In most cases, financial analysis and market research will tell you everything you need to know.
2. Stop Putting It Off
You should be increasing dues a little every year. A 2-3% “cost of living” increase keeps up with inflation and is eminently reasonable to members. Failure to do that puts you behind the inflation curve. One of our clients had only increased dues once– by 6%– in 17 years. They realized that to keep up with inflation, they would have to increase dues by 43%. That’s a deep hole to dig out of.
This brings us to the next point: Putting off dues increases also makes it harder to sell to your members. A 1.5% increase explains itself. A 15% increase requires some explaining. “Boiling the frog” is a gruesome analogy but apt for member dues. If you have trained your members to expect regular increases, they will pass without comment. If you have taught them not to expect an increase, you have made it more challenging to do so.
How much is too much? A rule of thumb is that 10% is the most you can jump at once without many members complaining. Spreading increases over several years may feel like a way to “soften the blow,” but it might not buy you much while leaving money on the table for longer. A rational, transparent “more value for more dues” story is often all you need to bring your members along.
Your members could surprise you. For example, one trade association had not increased dues for a long time for fear of alienating their large corporate partners. However, after doing their homework, they increase dues for some members by as much as 50%. The members thanked them because they had been feeling guilty about paying so little for everything the association did for them.
I can’t guarantee your members will thank you. However, I can reassure you that they probably expect an increase.
3. Make It About Value, Not Price
Maybe it’s been a long time since you increased your dues. What you do for your members has probably changed a lot since then. You may have enhanced benefits or added new ones. You may have upgraded the member experience. You might have exciting new content. These things add value, which is how you justify a dues increase.
Indeed, your costs go up, so dues have to go up, too. Members get that but won’t get excited about it. They will get excited about getting all that new value from you. If you can show them how much more you have to offer, they will be far more willing to pay more.
If you have not showcased all the new value you have created along the way, a dues bump may be an excellent opportunity. Since you are talking to them about value, talk about all the value you offer. Your members have probably not heard it all at once before, and they will like it.
A dues increase may also be an excellent time to increase your member value. One way is to “bundle” additional benefits into the membership. Increased dues revenue can offset any loss of income from doing it, and it creates visible new value for your members when you ask for higher dues.
A Membership Dues Increase Need Not Be Something To Fear
Dues increases are a critical financial imperative, and they need not be something to fear. If you’ve done your homework on benchmarks, started doing them regularly, and tied them inextricably to member value, you can continuously increase revenue without negatively impacting your membership.