Choosing the Right Membership Model

Choosing the Right Membership Model
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Whether or not you’ve seen membership declining in your association, it’s clear we’re now operating in a more challenging environment than before. And given how much has changed—free information and resources are available to anyone with an internet connection—it isn’t exactly surprising that that’s the case. But that doesn’t mean that we’re in trouble—just that we need to adapt. And the best way to do that is to evaluate the biggest impact on revenue: your membership model.

Membership models—or how membership and membership dues are structured within your association—are critical to attracting and recruiting members. After all, they determine who pays for what, how much they pay and how much value is attached to different dues levels.

Because, in truth, people want to join your association. They do. But if your membership model structure doesn’t align with the value your potential members see, they’ll go elsewhere.

At McKinley Advisors, we’ve partnered with many associations on membership model analysis and restructuring to help reach their goals. So, if your organization is facing membership challenges—or you just haven’t touched your membership model in about a decade—­here are a few things to consider.

Two Models and Three Factors

Whether you’re part of a trade association, a professional association or a hybrid of the two, you have two types of membership models to consider: value-based and ability-to-pay.

But before we get into what each model comprises (and which type of association they work best for), it’s important to start by addressing the needs of your organization. After all, this isn’t about applying the “latest and greatest”—it’s about looking deep into your structure to determine which membership model will work best for your members’ needs.

Typically, at McKinley Advisors, we’ll begin any model assessment with two basic questions:

  • Who do you want to serve?
  • How do you want to serve them?

And while these are questions that you definitely think you know the answer to, they’re worth reconsidering when it comes to your membership model.

Do you, for example, serve organizations, individuals or both? Because each group poses unique revenue challenges to your association. Flexibility is an attractive membership feature (but limits your ability to predict revenue) while stability provides consistent revenue (but limits your ability to create appealing membership ROI).

And when it comes to serving members, how do you want to proceed? Is your audience more likely to respond to a-la-carte service offerings, or are the more traditional, “one price, full access” models a better fit?

By considering these “obvious” answers, what you’re really doing is identifying three key factors in determining which membership model is right for you:

  • Market Desire: What do your members want from a membership model?
  • Feasibility: How possible is it for you to give your members what they want, given your own goals?
  • Risk: What is the most reasonable level of risk, given that you’re trying to balance internal and external forces?

Determining Your Membership Model

Once you have a better idea of who your audience is, what they want and what’s possible to provide, you’re ready to make a decision about which membership model type will be the most appropriate for you.

As mentioned above, there are two: Value-Based and Ability-to-Pay.

Value-Based Membership

A value-based membership model type is one that allows members to choose services and benefits either a-la-carte or as bundles, depending on where they find the most value. Offering different levels of flexibility to your members, this model type is much more in line with other, non-association services your audiences already interact with.

However, because of the different service levels (and different dues associated therein), value-based membership creates significant unpredictability in your revenue. As members experiment with different services—or simply opt for the lowest-level memberships—your bottom line can fluctuate. And, if your association uses membership to fund necessary programs (advocacy, for example), it can be risky to transition into unpredictable model territory.

We’ve seen professional associations, some trade associations and other organizations serving individuals have great success with value-based membership. Even those members that prefer a single-cost option (it is easier for a member to get a single cost approved by their company) can choose bundles of services that produce the more explicit ROI associated with the value-based model type.

Ability-to-Pay Membership

On the other hand, the more familiar, ability-to-pay memberships are single-cost, all-access plans that offer the breadth of your services to anyone who joins. Long considered the industry standard, ability-to-pay memberships create predictable revenue streams for your association, but are less attractive to those seeking flexibility. Specifically, because ability-to-pay memberships can’t be directly tied to ROI (e.g., a member will pay for a conference as part of their dues, whether they attend or not), smaller groups and individuals have a much more difficult time justifying the cost.

Further, while ability-to-pay memberships appear to offer a safer bet for associations, they do require their own set of considerations:

  • How do you determine what your membership dues should be?
  • Do you provide a flat fee, or offer a sliding scale dependent on where your members are in their careers?
  • Do you leverage a formula structure that ties every dollar of revenue to a dollar increase in dues?
  • Do you settle for a less complex, less precise fee structure?

The ability-to-pay membership model tends to work best for organizations seeking more predictable revenue. With predictable revenue, you can factor necessary advocacy costs into your dues-structure, even at the lowest-paying level.

Value-Based/Ability-To-Pay Hybrid

Organizations can also combine an ability-to-pay structure with a value based component, allowing the member flexibility in price point and benefits access while maintaining a more predictable revenue stream for your organization.

This is achieved by offering members an option to “upgrade” from a “base” membership to a “premium” that offers more benefits for a higher price. Both “base” and “premium” memberships are priced based on the member’s ability to pay.

In Summary

While both value-based and ability-to-pay membership models offer a host of advantages and disadvantages, the choice comes down to who your association serves and what level of revenue risk your association can manage.

While it’s easy enough to say, “we’re going to do what we’ve always done” or “we have to adapt our dues-structure to current consumer trends,” it takes a lot of consideration and analysis to determine (and implement) the most effective membership model.

At McKinley Advisors, we provide a full-service approach to membership modeling. From a deep dive into your current model and membership cohort to implementation and market testing of a new model, we can help simplify the process while taking your membership revenue to another level.

Want to learn more about our Membership Model Assessment?
Contact us and schedule a call with our team today.