Supply and Demand Applied to Membership Marketing

With gas prices up and down, we are hearing a lot these days about supply and demand. So I was thinking, how does supply and demand play out with membership marketing?

Here are three observations.

  1. Demand for membership renewals is fairly inelastic. Meaning a percentage increase in dues rates generally does not translate into an equal or greater percentage drop in renewals rates.
  2. Demand for membership acquisition is more elastic. Meaning a percentage dues discount usually translates into more members.
  3. Membership supply is very elastic. Meaning it is easy to increase the number of member benefits (i.e. magazines) to meet increased demand.

What implications does this have for your 2009 planning?

  1. You may have room to increase dues rates on renewing members.
  2. You may want to try a dues discount to encourage new members to join.
  3. You can quickly and easily meet an increase in demand for more memberships, so push growth.

Let me know if you agree with these observations.

8 comments:

Scott Oser said...

Hi Tony,

I have to challenge a couple of your statements as follows:

1. Membership renewals is inelastic so you shouldn't worry about increasing dues in a time of economic concern (sorry for paraphrasing)--I think that if your organization is truly in a position of strength and provides a value that members cannot live without out at a fair price this could be true. Unfortunately I do not think many associations serve their members as well as they should and they therefore risk losing members if they increase prices any year, let alone in a year when the economy is lagging. I think there may be certain pockets within your membership where you could get away with an increase but I really do not think it is true for all renewals.

2. Try a dues discount to encourage new members to join--I really discourage associations from using discounts as I think it lowers the perceived value of the membership and that is not something any association should want. What I would recommend an organization do is figure out ways to lower the price tag without lowering the perceived value. Some things to consider could be offering shorter terms so the overall dues is lower, free months of membership so the cost per month is lower, etc.

Have a good weekend.

David M. Patt, Cae said...

If you reduce dues, do you rebate the remaining portion of dues for those who paid the previous higher rate?

HowardW said...

I also think that sometimes meeting demand means more than increasing member benefits, or at least traditional member benefits. I think we as associations have to look at competition as a multi-faceted jewel--there are many different types of things that can take demand away from the association and place it squareley on something altogether different from an association, like a State Department of Education's new professional development program, or Google, or a new e-book. How we see ourselves as competitors in the broad-spectrum marketspace is, IMHO, often overlooked by most senior association management.

JoRo said...

On the topic of increasing dues, the key might be to combine both propositions. Increase "membership supplied" (with low costs), and simultaneously increasing dues. So, although the actual value of membership has not increased dramatically, the increase in "perceived value" may justify to the consumer the increase in dues.

Also, I would not necessarily worry about keeping dues low, just because of the insecurity in the economy. Economically speaking, since dues are such a small percentage of members' incomes (again, making the demand inelastic), members will probably not move very quickly to eliminate this expense. So, there would need to be extended economic troubles for membership dues to be affected. We don't know which way the economy will turn, so I would avoid significant change of course just yet.

Tony Rossell said...

Thanks all for your comments. I really appreciate the feedback and the perspective each of you bring.

Let address a couple of issues. In the dues increase research that we did with 324 association executives, we found that as long as a dues incresase was kept under 20% there was a positive revenue outcome from the increase. This points to inelastic demand for renewing members. You can see more on this in my March 10, 2008, post and I am happy to share a copy of the article I wrote on the topic.

Secondly, I am still a believer in introductory dues discounts or special offers. I have tested the impact of a discount both on the front end of a soliciation and then followed the behavior of those who recieved a discount and those who did not over two renewal cycles. In the testing, the clear winner was getting the member in with a discount. Take a look at this analysis in my July 12, 2007, post. I am getting ready to look at those same members again three years out from the test to verify the outcome.

Let me know what you think. Tony

Tony Rossell said...

Hi David -- If an introductory dues discount (or some other special new member offer) is used, then it would only be available to new members. Existing members would continue to pay the list price. We all may argue with the "fairness" of this practice. But the fact is that a new member or customer often needs an incentive to give your product a try. So offering this incentive works in membership and also works in virtually every continuity marketing effort you may see from magazines subscriptions, to adding cable or online services, to netflicks, etc. There is something about the human psyche that requires an incentive to make a change in behavior. Does that make sense?

David M. Patt, CAE said...

It sounds like you are suggesting a lower introductory offer, not a dues reduction. Presumably, there will be perceived value in membership, but the initial discount may induce some to join.

That would seem better than lowering dues, which is more of a fairness issue to those who have already paid.

Tony Rossell said...

David -- Good point. As I look back at it, I was not clear in my original post. Yes, I am suggesting using an introductory dues discount for new members because their demand is much more elastic (price sensitive). Once they join and find value in the benefits, price becomes less of an issue. The discount helps them take action. Tony