Saturday, May 22, 2010

Why It Never Makes Sense to Lower Dues

An association was recently considering lowering their dues in response to member complaints and to demonstrate empathy for members in our current economy. It was interesting, quasi-radical thinking of the kind I generally support, but not something that should actually be implemented. Dues are not like taxes: both represent revenue streams funding what are to some extent "social goods" but the resemblance ends there.

If an association's research identifies pockets of discontent defined by type of individual or organization, it's better to address these groups by developing new/refined services that deliver greater value, communicate more effectively, offering and honoring satisfaction guarantees, or when necessary extending hardship dues forgiveness to a class of members or on a case-by-basis.

The top reasons you shouldn't lower dues include:
1) As an association, we're in a great position because we "compete on non-price." Memberships are not commodities, so our customers don't immediately check out the competition and engage in switching behavior when prices change. If your dues levels haven't changed but you believe willingness to pay has, there are two logical courses of action open:
a) Conduct broad-based research or mine past research to determine if occasional complaints represent a more commonly held perception of inadequate value relative to price paid.
b) Find ways to deliver greater value.
Your association membership consists of a large body of customers (some who complain) who pay the prevailing price for a bundle of benefits that your membership comprises: to me, mass behavior speaks much louder than minority protest. Better to increase value to match the current price, than to lower price to match the lower value perception held by a portion of your membership.

2) Demand for membership is very price-inelastic, so lowering dues means fewer resources, which can undermine delivering an increasing level of value. This means that the proportionate change in volume is low, relative to the proportion change in price. On the way up, this is good news for us: increase dues by 8%, and the corresponding decrease in membership is unlikely to be more than 1%-2%. On the way down, it's more ominous: a 5% dues decrease might attract 1% growth. In these two cases, gross dues revenue increases 6%-7% or declines 4%. If resources are an issue within the association, staying put and accepting a 0% revenue change may be your best option if current economic conditions and member perceptions truly prevent you from implementing normal, low-threshold increases.

3) Decreasing dues tells a strange 'story' that affects your ongoing communications and relationship to your members and audience at large. In contrast, periodic/CPI-type increases in dues can often pass without any communication, and larger dues increases can be accompanied by statements that it's really a deferred increase because dues haven't changed in 5 years; increase dues are required to fund increasing quality and quantity of programs and/or to reflect increasing costs of doing business, reflecting your circumstances.

Decreasing dues is enough of a 'man bites dog' story that even a small change warrants some communication, but if you're not careful, it's hard to escape the sense among members that you will have to do 'less with less,' or you'll reinforce the sense that the organization had a big cushion before and now you're trimming fat. Either implication isn't terribly productive, and in my mind a small percentage decrease may still beg the question of why not just stay put. As long as our economy isn't in a true deflationary cycle, holding off increases for a few years is the same as implementing a 5% decrease today.   – Kevin

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