Defining your Membership Model

A membership model is a critical pillar of your business.  It defines what people get when they join your organisation and what it will cost them. Your membership model is critical to your site’s success for two reasons:

1. Firstly, your price point defines your projected revenue.  e.g. $11.99 per month for 100 customers provides $1199.00 per month in revenue.
2. Secondly, your membership model defines your costs – whether that’s time, money or technology required to deliver the member content included in your fees.

It’s important that your membership model is well thought out and really clear and drives customers towards making an informed choice. The information in your membership model informs your sales page. The last thing you want to do is create a membership website with sales pages that customers don’t click on.

You may want to consider these three questions:

1. What will your members get with membership?
2. What pricing structure will your membership take?
3. How much will you sell it for?

What will your members get with membership?

What content, knowledge discounts or other benefits do your members get when they join? As you consider this point, we should be considering newsletters, member directories, online courses, workshops, reports, networking events, discounts and other types of merchandise.  If you know the exact reason your members join your organisation, you should zoom in on this benefit and create value here.

What structure will your membership take?

From a membership perspective, there are probably two different types of structures of membership. One which suits the online world, and the other which suits a hybrid or real-world model.

In the real world, where there are tangible benefits you will find the models relate more to discounts and the duration of the term. For example, you might get a student discount and you may have a choice of yearly or lifetime dues.

In the online world, there are a number of factors to consider.  The first is the ease of purchase.  If you swamp people with too many options it may cause confusion and without anyone to help them (as you would in real-life) the potential customer may go elsewhere.

At Membership Minds, we encourage people to focus on duration as the primary basis of membership. If you need to offer discounts, then this can be done using a coupon at checkout. You should consider, however, that it is very challenging to verify the authenticity of things like being a student, online.

How much will you sell membership for?

When considering how much a membership costs, you do need to factor in things like your costs, your time and the profit margin you wish to make.  When starting out, you may just be happy to break even, but over time you will lose interest if your site does not continue to turn a profit.

I am a bit advocate of pricing your goods at what they are worth. If your offering (what you sell) is worth the money, people will buy it.  If you find you set the price too high, don’t worry, you can always offer discounts to find the best price for your membership base OR find more creative ways to tease out the real value of your products.

The way I encourage people to price is to start with a monthly fee.  How much revenue do you want to achieve per member, per month?  If someone only joins for a month, what represents a good exchange for the products and services you offer in your membership?

Let’s say you settle on $11.99 as your monthly fee.  From there, I would generally suggest a three monthly fee and a yearly fee.  You may decide that 3 months is $33 (a minor saving), while a yearly membership costs $119.00 (a two month saving on the monthly price). It’s pretty clear to see using this type of model, how you can influence savvy purchasers to move towards an annual membership with some good marketing copy.

Various pricing models you can consider

When it comes to membership pricing models, here are a few common options to consider:

1. One-time flat fee

All your members pay the same one-time fee and retain their membership for life. This model is enticing for members because it’s affordable, but can result in poor member engagement over time and it relies heavily on you attracting new members in order to have ongoing funding to run your site.

2. Periodic fees

All members pay a fee (e.g. monthly or yearly) and they continue their membership at that price as long as they continue to renew. This is a simple and popular model because it results in a recurring revenue stream. By recognising the ratio between new sign-ups and cancellations, you can see whether members continue to find value in their membership.

3. Group membership

Members pay a lower price when they join as a group, family or company. This model may make membership more affordable while you grow your community.

4. Freemium or flat fee with add-ons

The basic membership and some benefits are offered as a free or reduced-price tier, but members have the option to pay an extra charge for additional services/benefits. This model is a great option because it gives members flexibility and allows them to receive only the benefits they choose to pay for. This can be really good when membership consists of diverse offerings e.g. blog posts, tarot cards, mentoring, readings, etc.  Some people may want some components and not others. When tiered add ons are used, members could see more value in their membership overall.

5. Tiered membership

There are several levels of pricing (including free membership, if you choose), and each of them includes an increasing number of benefits. For example, for $10/month, members receive access to the member site and blog posts but for an additional fee, they receive a service (e.g. mentorship). Be sure to not create too many tiers — anything more than three or four will just confuse your members. 

6. Donation-based / pay what you can

Memberships are offered on a donation basis and members can pay what they can or think is a fair price. This is a good option if your organization serves people who can’t afford to pay a high fee. In this case, you’ll have to rely more heavily on grants, sponsorships and donations from those members of your community who have the capacity to give.

Considerations about setting your price

There are some things we have discovered over the year that should influence your different price points.

1. Reward people for purchasing a membership of a longer duration.
2. Your profitability increases for longer memberships because you have reduced gateway fees (the costs of processing your membership through Paypal or Stripe) and your support costs will reduce beyond the first month.
3. A member who joins and cancels in the first month will be the least profitable because you will deal with the bulk of support issues in the first month of membership.
4. If you offer a free trial, your profits will be eroded by free support. Trial members should choose a monthly membership can cancel if they do not wish to proceed.

ACTIVITY

20 minutes

Consider what you will include in your membership product, be as detailed as you can and think about how you would sell this to a person considering your membership.

Consider the value of this membership offering and how much you would want in exchange for providing access for a month?

Consider how you will support new members through the first month of their membership, and how much time might be required per customer to support the types of issues that come through.

Write your notes in your journal.