Using Discounts to Enhance Membership Retention


The other day on the ASAE List Serv, Scott Oser shared some interesting experiences from his previous employment at National Geographic. He outlined the results of marketing tests this organization had done on moving new members through the first couple years of membership.

Here is what he reported.

“While I was at National Geographic, we looked at renewals many ways but one was as follows:

  • New subscribers--any one who had been a subscriber for less than a complete year

  • 2-3 year subscribers--anyone who had already renewed once but less = than 3 times

  • Renew b-4s--anyone who had already renewed more than 3 times

We created those groups based on the renewal trends we saw when analyzing response rates. Our most worrisome group was obviously the new subscribers. Their renewal rate was traditionally the lowest because the publication was not yet part of their regular life. The second most at risk group was the 2-3 year subscribers and obviously the highest retention occurred within the last group.

As with most publishers we offered a pretty deep discount to get new subscribers in the door. Through testing we found that hitting these people with a full price offer in their first year as a subscriber significantly hurt renewal rates. We therefore developed a step up pricing schedule where depending on source we held the low price the same for the first renewal, increased it slightly for years 2 and 3 and then increased it even more for all of the renew b-4s. I realize it sounds kind of crazy, but we were charging our most loyal subscribers the highest price because we knew they would pay it.”

Do you have any comments or feedback on this strategy?

4 comments:

Lindy Dreyer said...

I saw this post on the listserv. I have to admit, I'm not totally convinced. I think the segmentation is sound, but I don't think the pricing strategy is universally applicable.

It's the subscription versus membership issue that's gnawing at me. Although, it would be interesting to apply this strategy to a "mailbox" membership category as a way to build prospects for full membership.

What do you think?

Tony Rossell said...

Lindy -- Maybe Scott will add a comment here, but as I read his analysis, NG tested this and found that extending the discount optimized renewals. I would never take one organization's program and adopt it without testing it first. But if an organization is using discounts in membership acquisition, I think that extending the discounts is something to consider. Tony

Scott Oser said...

Lindy,

One of the main reasons I think this was successful is the language that was used in the original offer. We sold hard core that the original offer was a special new subscriber price. I think this allowed people to mentally, whether they truly realized it or not, understand that the price was going to go up over time.

This strategy is not necessarily right for every association. I agree with Tony in that you must test it to see if it is right for an organization. There are lots of variables at play here that you can test and tweak this process for any organization. How much do you increase dues over time? How quickly do you increase them? Do you continue to offer the lower price as an incentive to get people to renew faster? As is always true with marketing finding the optimal solution is a unique process. I was trying to get the idea out there through one example that I had experienced personally.

Tony Rossell said...

Scott -- Thanks for clarifying. Let me add on overview comment. I would encourage all marketers to look objectively at opportunities. Many organizations have sub-optimized their potential because they have not tried new marketing iniatives. Tony