You Should (Probably) Increase Your Membership Fee
By Dave Bayless
Members of paid communities are more engaged, which leads to better results for the members and the host. An element of constructive exclusion is key, and the price of membership is a signal that engagement is worthwhile. There is good reason to believe that a membership price increase (up to a point) will result in higher membership and revenue over time. That said, it takes patience and courage to commit to increasing your membership fee. The alternative—a membership fee that is too low—leads nowhere fast.
Biased…but Not Wrong
The other day, a newsletter from Mighty Networks dropped that claimed the following:
People pay attention to what they pay for…Members of paid [networks] are more engaged, more excited, and get better results.
They’re biased. After all, Mighty Networks takes 2-3% of membership subscriptions processed through their platform. You’d expect them to pump up the virtues of paid networks.
That doesn’t mean they are wrong. In fact, Mighty Networks is in the position to substantiate such statements with data gleaned from thousands of networks.
Let’s assume that paid networks—and communities—are more engaged and successful. Why might that be?
Grounded in Purpose
Communities are purposeful. Members are motivated to collaborate in order to achieve personal and collective goals. Striving to achieve something meaningful together is what distinguishes a community from a network or audience.
Any discussion of price presupposes a valued purpose. A community’s purpose determines who its members should be.
The Kindness of Exclusion
Many of us are hesitant to charge a membership fee, much less increase it. I suspect that is for a couple of reasons:
- All things equal, selling membership at a high price is harder than selling at a low price.
- At least as important is our aversion to excluding anyone.
However, constructive exclusion is central to the positive relationship price has on engagement and results.
In The Art of Gathering, Priya Parker writes:
People who aren’t fulfilling the purpose of your gathering are detracting from it…Excluding well and purposefully is reframing who and what you are being generous to—your guests and your purpose.
She calls this the kindness of exclusion.
Price is Not the Only Cost of Membership
People are understandably reluctant to commit to membership because the membership fee is not their only cost. Their time, attention, and social capital are often the more valuable currencies that must be invested. Nobody wants to waste them.
Price is a signal that engagement is worthwhile.
Price is a signal to prospective and current members that only those people who are motivated to achieve the purpose of your community will be “in the room.” Price is a signal to prospective members that they won’t be among a lonely few who are pushing the community toward achieving its purpose while the majority do little or nothing. Price is a signal that engagement is worthwhile.
Price Drives Results—Including Financial Results
Engaged members help ensure the purpose of your community is fulfilled, which benefits members. But, what about results for the host? Might a membership price increase result in a decrease in revenue over time?
On the contrary, I think there is good reason to believe that a membership price increase (up to a point) will result in higher membership and greater revenue over time.
- Paid memberships are correlated with higher levels of engagement.
- Highly engaged members are more likely to make effective referrals than less-engaged members.
- Highly engaged members are more likely to remain members for longer than less-engaged members.
Referrals can—with time—add a super-charger to the inflow of new customers above and beyond your marketing efforts. Attracting members faster and holding onto them longer results in an increase in the number of members over time.
The positive link between price and revenue doesn’t last forever, of course. At some point, the financial cost of membership becomes too high, and the rate at which new members join can’t keep up with the rate at which members leave the community. At that point, membership and (eventually) revenue decline.
So, there is a pricing sweet spot. For the kinds of communities with which we’re most familiar, a monthly price from between $49 and $99 per month feels about right. Depending on the situation, a higher price might be appropriate. A lower price probably is not.
Community is an Experience
Price is an important signal, but it may not be enough to overcome a prospective member’s hesitancy. Community is an experience. It’s not something that’s easily translated into features and benefits. It makes buying community hard.
That makes member-initiated referrals particularly valuable. However, it takes time for the referral rate to grow. In the early days of a community, even an enthusiastic membership isn’t going to generate many referrals.
That’s why trial memberships are so popular. Trial membership allows prospective members to experience the community before they commit to joining.
Trial memberships aren’t without their pitfalls, though. Community membership isn’t like a software subscription. The value of the latter might be experienced immediately. The value of the former is assessed as a function of the cadence of connection, conversation, and collaboration. The “spark” that affirms the value of community might not happen right away. Human relationships are hard to initiate on-demand.
So, a limited duration trial might be a hit-and-miss affair. On the other hand, an extended duration trial starts to feel overly inclusive and can degrade the experience for everyone.
A question that’s very much on my mind these days is the extent to which two-tier membership pricing might allow for an extended trial without abandoning the advantages of a paid membership on engagement and results.
Committing to a Higher Price is Hard
Even if you accept the preceding as true, it takes patience and a fair amount of courage to commit to increasing your membership fee. It takes a while before increased rates of referral and membership retention translate into tangible financial results. In the meantime, membership and revenue growth can be slow. It might take a couple of years before you start seeing the payoff to a higher price. Raising your price is not for the faint of heart.
However, the alternative—a membership fee that is too low—leads nowhere fast. You end up with a low level of engagement, little perceived value, and insufficient revenue. The world is full of low-cost and worthless “communities.” Yours shouldn’t be one of them.