Increasing Member Value through New Product Development

There is much conversation around increasing the value of membership.

Here are some suggestions on increasing membership value through new product development, adding real value to what the association tangibly provides to members. New Product Development also keeps membership exciting and prevents you from being eclipsed by your competition.
When looking at new product development, an association has a choice of two strategies. First, an association can introduce new products in a current product line (e.g., new seminar titles, book titles). This strategy simply involves doing more of what you are now doing successfully. It is a lower financial risk, but also lower profit strategy.

The second strategy involves the creation of new product lines (e.g., starting a compensation survey or a webinar program). Obviously, this strategy involves much higher financial risk, but if done properly can result in significant new revenue for an association.Here are five characteristics that a new product should include to help ensure success.

1. Desirability -- It may seem overly simplistic, but start your evaluation of potential new products by making sure to select items with a high perceived value attached to them by the members or customers. Use focus groups, executive interviews, and surveys to determine your members and customers real and felt needs. And 'stay close to the customer' by spending time talking to your members to confirm the findings you receive from research. Then test market your new product idea to a small sample of your membership to see if your research is accurate and if the price is acceptable. Fundamentally, your best research is whether or not your sample of members opens their checkbooks and buys your new product.

2. Profitability -- After you have discovered what your customer wants, package the new product in a way that makes it economically feasible for your market situation. Take advantage of the leverage found in your particular marketplace. For example, is your membership small but has access to large sums of money? Then package your new product in a format that can command a high price and provide you with high profit margins. With a small market, a new book selling for $19.95 is unlikely to return the margins you might want for the effort required to produce and market it! Is your membership large, but lacks access to corporate funds or discretionary income? Then sell a high volume product at a lower cost like the $19.95 book.

3. Renewability -- Whenever possible make your new product a continuity product. The costs of making one sale are so high that profitability on any but the highest margin product becomes difficult. For associations, membership is the ultimate continuity product. Be creative and duplicate this success by designing new products around a regular renewal. For example, you may want to turn your seminars into a multiple course certification series. Encourage standing orders for your new DVD releases. Try turning your publications program into a book club.

4. Duplicability -- Your staff's time and energy is one of your greatest resources. So avoid creating highly customized products that require constant involvement and servicing by staff (e.g., customized workshops, research libraries). Instead try and let printing presses or web do the work for your staff. Try putting rapidly changing specialized information into an electronic newsletter.

5. Reach-ability -- Make sure your audience is reachable through the channels available to you. For instance, before you decide to hold a conference in Europe, be sure mailing lists exist in your field so you can appeal to potential attendees. Also some products can be sold through the mail or your Web site and others need a personal phone call or sales visit. Evaluate if you have the staff, expertise, and budget to market through these channels.

If you would like more information on growth strategies, you may want to look at some posts from last year. I did a number of posts related to the Five Growth Disciplines -- Introduced of membership marketing. One post related to extending the membership product line (adding new levels of membership).

What Is the Purpose of Easter?

This week I was traveling. So, although I do not usually have a chance to read USA Today, I did this week and came across a reflective article. It seemed to me worth sharing as a thought provoking piece for Easter.

The basic premise of the article is if there is nothing wrong with us, then there is no purpose to Easter. Click her for the link.

By the way, the daffodils are in full bloom in Virginia. Spring has arrived.

I wish you and your family a joyous Easter.

Even Consulting Firms Offer Membership

In my post Exploring Alternative Membership Models, I looked at how many organizations are building their relationship with their customer around a membership model. I just came across another example of using membership to build relationship with prospective customers or clients; this time with a consulting firm.

As you may know, McKinsey & Company is a very large management consulting firm advising leading companies on strategy, organization, technology, and operations. But you may not have know that you to can be a member.

Today, I received an email invitation to from McKinsey & Company to upgrade to a Premium Membership in The McKinsey Quarterly. For a year, I have been enjoying a free email membership with regular copies of the quarterly.

The email said that if I “upgrade by 24 March 2008 [I can] take advantage of our best rates: Two years of Premium online access plus print editions: US $225.00 (15% off standard rate)”

As a Premium member, I would receive:

· Access to the entire Quarterly archive
· A subscription to the collector's edition print journal
· Downloadable PDFs of all articles for offline use

By the way, one thing I particularly like about the McKinsey strategy is how they initially got me involved through a free email subscription. Now they have opt-in approval from me and they can very economically continue to dialogue with me about becoming a paid member. This is a method that more association should try.

Vindication at Last!

In my post on way back on November 7th, I took ASAE and the book Decision to Join (DTJ) to task for what I thought was a misreading of the DTJ survey data.

Here is what DTJ said: “the decision to join an association reflects an expanded understanding of what constitutes a benefit. It goes beyond the self-oriented assessment of the value received by the individual making the decision to incorporate a more other-oriented assessment of value generated for the community of interest.”

On the other hand, I claimed, “Clearly, we all are influenced in decisions for joining or buying any product in part because what the decision will mean for society. But I believe value, price, and usefulness are influencers that impact our buying decision more than joining for the good of others.”

If you visit the post, you will see it generated a pretty good debate.

However, I have to say that I now feel vindicated as I read the following in the latest membership book from ASAE and the Center, Membership Essentials.

It says: “For most members, it is no longer acceptable for the association to simply advance a cause or defeat forces that negatively affect its constituents. Today’s members expect a quantifiable return on their investment of dues dollars in addition to the association’s delivering on the mission. For every dollar they spend in dues, they demand at least a dollar’s worth of value in return. Membership dues have become a type of investment for today’s consumers, and the investments that yield lower returns are scrutinized or withdrawn entirely.” [1]

Which side do you take in this great debate?

[1] Membership Essentials: Recruitment, Retention, Roles, Responsibilities and Resources, chapter two, Jay L. Karen, CAE, and Ben Martin, page 10.

Help with the Creative Process

I have known people who do great work starting out the creative process with a blank sheet of paper. Scott McBride the founder of Marketing General, Inc. was one of those people. I am not that type of person. I need models and samples to look at in order to come up with new ideas.

That’s why I have appreciated the advice from Bob Stone, in his landmark book, Successful Direct Marketing Methods[1]. He suggests looking at what now exists and asking the following questions to get the creative thought process going:

  • Can we combine?

  • Can we add?

  • Can we eliminate?

  • Can we make an association?

  • Can we simplify?

  • Can we substitute?

  • Can we reverse?

The good news is that when it comes to membership marketing, there is a good resource to help you get started in the creative process. It is the ASAE and the Center, Models and Samples section of the web site. There is an entire section on Membership Marketing Brochures and Applications and another section on Membership Letters. Access is free to members of ASAE.

If you need help with a creative new idea, take a look at it.

[1] Stone, Bob. Successful Direct Marketing Methods. (McGraw-Hill; 7 edition (2001) p. 468.

Are Dues a Charitable Deduction?

It’s tax time, so the question comes up for 501 (c) (3) organizations; can I promote deducting dues as a charitable contribution?

Here is what the IRS says, “You may be able to deduct membership fees or dues you pay to a qualified organization. However, you can deduct only the amount that is more than the value of the benefits you receive. . . If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive.”

From my quick scan of the FAQ from a number of associations, not surprisingly, it looks like they believe that the value of their benefits is equal to the dues amount and therefore not deductible. For example, the American Society of Mechanical Engineers is a 501(c) (3) and includes the following on its web site.

“Q: Are my ASME membership dues deductible?
A: ASME dues are not deductible as a charitable contribution for federal income tax purposes, but may be deductible as a business expense. ASME estimates that 0.503% of your dues are not deductible because of ASME's lobbying activities on behalf of its members. ASME recommends that you contact your accountant for tax advice.”

Now deductibility as a business expense would still apply to a professional membership after removing lobbying expenses. However, I along with ASME recommend that you contact your accountant for tax advice.

Are any of your organizations handling this differently?

Article in the Association Forum of Chicago Magazine

Several months ago, Gregory Fine, CAE and the Director of Communications & Marketing at the Association Forum of Chicago asked me to put together an article for Forum magazine on the dues research we had conducted. Greg is a commenter on this blog.

The article appeared in the March edition of Forum. The editors were kind enough to allow me to provide a PDF of it to those who might want a copy. You should be able to right click on the images here of the article to download a copy.  If you have a problem, let me know and I can email a PDF to you. 

Survey Responses Tell Best Media for Acquisition and Retention

In keeping with the theme of looking at best practices from other industries, I thought that the following survey results were helpful.

Target Marketing just reported the results for their 2008 annual Media Usage Forecast. The survey was based on responses from 340 marketing professionals in many industries.

Overall the survey showed, “Going into 2008, direct marketers expect to devote more money to acquisition, after a mostly equal focus on prospecting and retention in 2007. Looking back to last year’s survey results, this represents a more dramatic shift to new customer growth; respondents indicated a heavier dedication to retention activities in 2006 (53 percent).”[1]

I think this underlines the principle that you cannot solely retain your way to growth. Acquisition is needed.

Another interesting set of results from the report show which media had the best ROI for customer acquisition and for customer retention. As the chart below shows, direct mail won for customer acquisition and email for customer retention.

From my experience, in the association world, direct mail remains the single best media for acquiring new customers because it is is highly targeted, responses are measurable, and the volume is scalable. Email is advantageous for retention because you have an established opt-in relationship with the member.
Do these results hold true for you. Will you be doing more acquisition in 2008? Are you finding mail as the best ROI media for acquisition and email for retention?
[1] Target Marketing, March 2008, page 44.

How to Lower Churn in a Rapidly Changing Industry

The telecom sector of our economy has had perhaps more turmoil than most. There are new products and wholly new technologies being launched every day that have the potential to draw customers from one provider to another.

Some association prophets say that the future of the association world may also soon experience disruption. So I thought the recent book, Customer Churn Reduction and Retention for Telecoms, might have some application for membership marketing. Are there best practices that we can put in place to reduce churn and retain more members?

Interestingly, it appears that the solutions for preventing churn and keeping customers in telecom focus on many of the same measures discussed in association circles. And intense competition has forced these telecom companies to implement many of these strategies.

Some of the strategies highlighted in the book include Lifetime Value, Product Mix, Predictive Modeling, and Customer Segmentation. Let’s look at these in an association context.

Lifetime Value: One of the reasons I like to follow the game of baseball is that it lends itself to statistical comparisons. Likewise, membership lends itself to statistical analysis. The fundamental analysis is Lifetime Value (LTV). In economic terms, all members are not created equal. Understanding the overall value of a member and then the value of a membership segment or individual is foundational for developing a retention strategy.

Product Mix: In the telecom world they now have the Triple Play (phone, internet, and TV) and some are looking at a Quadruple Play by adding wireless to the product package. We also have this option available in membership. It is called tiered membership. The fact is the higher you can move a member up the membership product line the more likely he or she is to stay with you. Offering the equivalent of a black Ford is not the optimum membership package to enhance retention.

Predictive Modeling: Admittedly this is a marketing tool that increases in usefulness with the size of a membership or customer base. Nevertheless, past behavior is best predictor of future behavior. So modeling should come more into play in getting and keeping members. In a recent acquisition model that we ran, we found that using the best model we could get 80% of the members by mailing 20% of the prospects. In the chart below, the x-axis is the percentile of the prospect database and the y-axis represents the percent of the members gained. The red line would be the results without a model.

Market Segmentation: Because all members do not represent the same economic value and they display different buying behaviors, it makes a lot of sense to segment members and communicate differently to each group. The exciting news for membership marketers seeking to build segmented communication to members is that technology as never before is allowing this. For example, we are looking to move the renewal and retention work that we do now from traditional printers and variable laser black copy to an iGen – a high speed digital color printing press -- which allows for real time variable printing. This means no inventory and the option for a different messages, graphics, and data for each person who receives the retention communication.

Human nature does not vary that much. So it is a great idea to take best practices from other industries and apply them to ours. It is also a good idea to find out what the best and most successful practices are from other membership marketers and apply them in your situation.