Monthly Installment Dues Billing: A Case Study

Everyone wants to increase their membership recruitment results and renewal rates and here is one tip to do just that – monthly installment billing of dues.

If you think about it, our society has moved to a month by month financial focus. Your cell phone, internet, car payment, and service contracts are paid each month. In fact, our likelihood to purchase these products would be greatly diminished if we were required to pay for the year in advance. We are also more likely to continue the services when the payments are automatically debited from our credit card or bank account.

However, most membership organizations do not offer the opportunity to pay monthly. A member is typically required to pay the full dues up front.

Over the past several years, we experimented with making monthly installment billing available to members. I wanted to share with you today a case study from one organization that has tried this program.

Let me start out by admitting that putting this type of program in place is an administrative challenge. Credit cards expire and have transaction fees. In the case of electronic funds transfers (EFT), bank accounts open and close. So this type of change will require staff time and programming time. The higher the dues payment, the more beneficial this type of program will be.

For my case study group, the idea to test installment billing was first raised as a method to increase response rates on membership acquisition mailings. Research showed that the $225 price tag for dues was an impediment for members to join.

So we built a head to head acquisition test for this organization. The control offer with the $225 price went to 37,640 prospects and the same package offering the additional option of an automatic credit card payment of $18.75 a month went to 37,623 prospects. The results were impressive. The control package generated 436 new members for a 1.16% response rate. However, the test package with the installment option produced 657 members fro a 1.75% response rate.

Clearly many prospects were more willing to join if they had the option to pay monthly.

The next question was how will members who select the monthly installment renew compared to members who pay up front. Our latest data reports on members who renewed on time. The on time renewal rate for members NOT on the installment plan is 55.7%. However, the on time renewal rate for members participating in the installment plan is 82.0%. The non-installment member rate will probably rise to 70% when late renewal payments are included. But even when late payments are included, a potential twelve point lift in renewals is a major improvement.

The bottom line for this organization is that making an installment dues option available to members has caused an increase in the work load for staff, but it has helped produce more new members, more revenue and a better renewal rate. It may be something that more membership organizations should test.


Ieuan said...


This is an interetsing case study, have you got any data on the effectiveness of flexible monthly payments? If you give members the option to pay what they can does this result in a higher average return? Thanks

Tony Rossell said...

Leuan -- Yes, installment payments do result in higher overall retention of members. If by "flexible" you mean varying the amounts paid each month, no I have not seen this type of program put in place. Tony

Ieuan said...

Hi Tony, by flexible here I mean members set their own monthly payment above a minimum subscription rate i.e. the mimimum amount you'd need to pay to become a member is $10/month but you decide how much you'd like to give us, if you can afford $15/month it would allow us to do even more of the terrific work you believe in so much! This is a tactic employed by some not-for-profit organisations particularly.

Tony Rossell said...

Leuan -- Very innovative thought. I do not know anyone doing this, but others are welcome to comment if they have an example. My personal preference is to set up membershp bundles that make sense for the memmber and are economically sound for the organization. This gives flexible options, but also assures financial stability. Tony

BBoydFlynn said...

Hi Tony,
Thanks for this. It helps my thinking as we look at ways to increase our recruitment/retention efforts for our small org.

Did your study break down the cost per member for the necessary administrative changes? (We explored online dues payment, and leaving aside the WHY, found that so few of our members were paying as individuals the cost per potential online payer was prohibitive), so paper it is (for now).

Another point where we got significant pushback from our finance department was fear of the potential loss of interest income if dues payments were meted out over a year instead of being booked en masse at the beginning of the year. Any thoughts on how to mitigate that?

We do offer an option of 4 fixed installments, though very few use it, and most who take us up on that pay in full within 3 payments (and do so by check!). We don't promote it to new prospects, but rather to existing members at renewal time.

I'm thinking of piloting something like that this year for recruitment, but I know I'll have to answer "how many will drop out mid-year? What do we do with partial-year members?" Did your study capture that?

Tony Rossell said...

Great questions. Installment programs work best when the individual pays the dues instead of the corporation. As far as administrative costs go, I would estimate that the program would make economic success if you can get over 1,000 members involved. Don't forget that you eliminate normal renewal expenses when members enter this program.

As far as your finance department goes, I do not know where they have the money invested, but I doubt that they are getting a 10% interest rate. So if you can match the increase in renewal rates from our case study, the higher renewal rates more than offsets any loss of interest by holding the money in the bank. Tony

Michael said...

Hi Tony,

I know I’m relatively late posting on this issue and I have followed it on the ASAE list serves. My question is how many of the associations that currently use automatic membership renewals or payment plans are currently PCI compliant and how are they working thru their compliance with their respective AMS systems. I am looking into adding this feature as an additional membership benefit, but I want to put my ducks in a row first before I submit a proposal.

Tony Rossell said...

Hi Mike -- You put your finger on a very important point. Many new AMS systems are PCI compliant. Some older systems may not be. To hold credit card information in your system you need to be PCI compliant. HOWEVER, there are third party companies that will do the installment billing for you and hold the data. Let me know if you want me to put you in touch with a company that does this. Tony

automuri said...

There are so many ways to set up a monthly payment. That is not the problem. The problem is that when a client sets up a monthly payment plan he is more likely to cancel it.

Scott Oser said...

I am curious to know what evidence you have that shows that people who sign up for autorenew are more likely to cancel. From what I have seen the people who sign up for autorenew are less likely to cancel. Autorenew via credit card does have issues with members changing credit cards or credit cards expiring but from what I have experienced autorenewal has a higher response rate than regular renewal.