Wednesday, September 5, 2007

Growing Revenue through Membership Packaging



Let’s look at an innovative and successful technique that associations can employ in order to generate more revenue from members. The technique is right out of the marketing 101 textbook; it is called product line extension.

Product line extension is defined by The Marketing Dictionary as "adding depth to an existing product line by introducing new products in the same product category; product line extensions give customers greater choice and help to protect the firm from a flanking attack by a competitor."

Associations are using this concept and delivering added value, growing revenue, and improving member retention by extending their membership product through a tiered membership structure.

The ideal tiered membership allows members to choose the value proposition that best satisfies their particular needs, professional designation, or budget. For example, an association might add a membership category that includes books as part of the membership. As soon as the association publishes a new book it is sent out to these higher dues paying “book members.”

When groups add this product to membership, they tend to find that the books supplied to members become the best selling books for the association because the member books have seeded the influencers in the field who recommend the book to others.

Another example of a bundled membership would be to automatically include optional items like periodicals, newsletters, or professional development into a premier membership category.

Tiered membership, however, is NOT a la carte membership. I believe that this is not a good direction for associations. A completely customized membership would increase servicing costs and perhaps lower overall product sales.

There are always members who want to buy the Cadillac of your association’s membership offerings. This approach of bundled membership packages that allow the member to select the membership tier that best satisfies his or her needs has been executed effectively by the Association for Supervision and Curriculum Development (ASCD). As presented on their web site, their membership structure offers:

  • Express Membership -- $29: online only services

  • Basic Membership -- $49: online services plus subscriptions to the monthly periodical and newsletter

  • Comprehensive Membership -- $89: basic benefits plus 5 association books shipped as they are published

  • Premium Membership -- $219: all of the above plus an additional newsletter, four additional books and a $100 professional development voucher

  • Institutional Membership -- $899: a package that includes one Premium membership and 10 Basic memberships

Another association that has looked at adopting this model is the Water Environment Federation (WEF). Jack Benson, Deputy Executive Director of WEF, says, “As I look at different ways of extending our membership product line, I am coming to the conclusion that in a changing and evolving marketplace, giving members a choice of what will best serve their needs makes sense. Providing members with a variety of options and packages for them to choose between allows our members to have a level of customization to meet their specific career and information needs.”

In addition to generating a higher level of revenue for an association, a tiered structure pays some additional dividends; tiered membership increases the perceived value of membership and typically improves member retention because members get the specific products that they desire.

And the costs of offering a tiered membership are often low. The benefits that make up the bundles can be drawn from existing programs and services, so the cost to service the higher tiers is limited to the incremental cost of shipping the items. Furthermore, the association saves marketing dollars because the products do not need to be separately sold to members.

Let me know your thoughts on this concept of tiered membership. Have you seen any working models using product line extension in membership?

4 comments:

Dan Ratner, ASCD said...

The tiered membership structure has been very beneficial to expanding our membership base over the years and MGI has done much to help us grow and expand those offerings. However, the back end processes of data entry, benefit fulfillment, billing, and renewal have posed/continue to pose many challenges in ensuring a quality membership experience.

The key to offering the books option Tony mentions is sampling (ie: offering a no-obligation or free trial period) to convey the value of the benefits -- not necessarily the tangible print materials but the quality of information and content within them. Once members understand that the books are selected by ASCD editors and experience the value over time they begin to trust we will send them what they need without making them take their valuable time to do the research and make a choice. As long as they are receiving the information they need from us, they will continue to remain a member. It's about building trust.

I'm always amazed to hear members say things like, "ASCD somehow knows what I need before I need it."

Quality products and content certainly help sell memberships. No amount of marketing can make up for a poor quality product.

Conrad said...

The Naval Institute has enjoyed success (with much help from MGI) with the beginnings of a tiered structure. We have seen a nice jump in new member revenue per order online. We have also had tremendous success in upselling members to the next level.

The only downside I've encountered is that our current database isn't set up to handle it well.

One question remains: How to translate this online success to traditional DM acquisition, where I've been holding onto the "sell one thing at a time" concept.

Tony Rossell said...

Dan and Conrad -- Thanks for your comments. It is easy to "theorize" about implementing new products. It is hard to actually see it happen. You both are great examples of working effectively to try and get good marketing concepts fulfilling their potential. As Thomas Edison is reported to have said, "Vision without execution is Hallucination". Tony

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