The Key Ingredients to Pricing

The Key Ingredients to Pricing

How does pricing relate to your mission and how do you set your member price?

Our fearless leader, Jodie Slaughter, and I visited a few friends in the Chicago area a few weeks ago, and we weren’t surprised to see that so many of the conversations drifted toward the subject of pricing. In today’s economy, every penny counts, so it’s understandable that associations may want to take a closer look at how they price everything they offer, from membership to tangible products to intangible services.

There are many different pricing strategies to consider, and they involve several key factors: the existence (and quality) of competitive offerings, the member/customer’s willingness to pay, and the costs related to developing the product or service. Like for-profit companies, associations likely have offerings at various stages of the product life cycle, and they should strive for a certain profit margin for each product or bundled package of goods. However, whereas a for-profit company often has a strong focus on maximizing shareholder value by driving profit, associations by and large can claim a more direct focus on helping to advance their respective fields and the careers of those they represent. With that in mind, associations need to carefully evaluate how closely a certain product relates to the organization’s mission. If the product is directly related to the sole purpose of the association, profit expectations may be lowered in favor of ensuring that more professionals from the field can take advantage of the offering. On the other hand, services that are developed as unique to the field, but less critical to the organization’s mission could be offered at a higher price point.

Another key issue that is characteristic of the association world is the member/non-member pricing dynamic. Profit margin for each product is certainly related to the ratio of member to non-member buyers. But while an association may promote its member price as a “discount,” it should consider the price internally to ensure it cover costs. By the same token, the non-member price is not the starting point, but the “up charge” that results in sheer profit for the organization.

These certainly are challenging issues to consider, but they become clearer with a consistent pricing strategy and reliable data. Associations that understand the needs and pricing tolerances of their professionals, determine their costs and collect information on other available products will be well-equipped to increase revenue and serve its members at the same time.