Every association and non-profit organization dreams of having more resources to meet its mission. Imagine what you could achieve with incremental funding for more staff, more research, or innovative ways to draw in new members and keep them active.
At the same time, most associations and non-profits face strong financial headwinds. The combination of increased competition and tougher economic times for members has started to slow growth and reduce margins. But some organizations have seized this situation as a wake-up call instead of a cause for concern, seeking out specific answers to three basic questions which are easy to neglect when times are good:
1. What groups are you trying to serve through your mission?
2. How valuable are the services you provide your members?
3. Are you making sure they are receiving the services they value?
Answering these questions with clarity and confidence can increase contribution levels and margins. Collectively, these three skills – segmentation, bundling, and value-based pricing – give you an edge if you cultivate them and ultimately master them. And that, in turn, requires a shift in your marketing-focus, to something closer to the non-profit and association directive, but often lost in the business of running a group. You need to serve, not sell. Here’s how it works.
The first step is segmentation. The value of your services will differ from member to member because they expect different things from you. Grouping members into proper segments starts with a fresh look at your mission and deciding whom to help and why. The more you put yourself in the members’ shoes and understand who values what, the better you can serve each group instead of merely selling them products and services.
As we helped one association examine the first two questions about segments and value from a member’s perspectives, they quickly noticed the “great”, “good”, and “not so good” they offered. Their in-person conferences delivered superior value, while their other support materials (print publication, online professional library, and webcasts) did not offer enough differentiation or depth to provide superior value.
Success started with understanding which customer groups would be more willing to pay for those products. When they focused on conference benefits (what the members required) instead of content (the content, speakers, and perks), they saw two major segments. Some members like to attend conferences in person, while others would like to, but cannot justify the ancillary costs. Attending would mean leaving their business unattended and incurring a revenue loss. When the association offered web access to conference sessions at comparable prices for in-person attendance, it became a “win” for all parties.
The second step is bundling. When you shift perspective from selling your products and services in isolation and toward understanding what each member segment needs and expects, you can create valuable bundles for each segment by adjusting the mix of conferences, continuing education, publications, reference material, etc.
Your internal question is no longer “how much should this conference cost?” or “how much should our annual magazine subscription be?”, but rather the question of “what combinations of services best serve my segments?”
To create bundles, our client thought about what their segments needed from each vertical. Only then could they ask what combination of products drive the most value for each segment, and then price that mix of conferences, books, meetings, journals, etc. according to the overall value.
Common Pricing Approaches
The third step is to create common pricing approaches. Pricing decisions in most associations are decentralized, done by product managers whose knowledge of pricing practices can vary widely. This helps explain why most associations rank very low on our World Class PricingTM maturity scale. Centralization and reducing managers’ authority is usually not the solution. Rather, the solution is coordination. The secret lies in sharing best practices built around common pricing approaches and methodologies, and giving each business unit the tools to apply them.
The organization we worked with began to calibrate the price of all of their products to match value. The fresh insights from their members’ prompted them to invest in improving the subject relevance of their print publication, webcast, and library. Only after they improved the quality and established the higher perceived value could they consider and justify price increases.
Their conclusion, after their efforts paid off, seems obvious in hindsight: the better you price, the better you serve your members. While we guided them along a customized pricing roadmap for improvements in the short, medium, and long term, in less than four months, we had also helped them find $500,000 in annualized “Quick Win” pricing opportunities. Once they had that proof in hand, it was an easy decision for them to institutionalize what they learned and then build on it.
We have the experience, the processes, and the benchmarks to identify which steps your organization can take right now, and what capabilities you need to develop, including World Class PricingTM capabilities. Your mission will always be too important to trust to outdated or overly simple approaches to pricing. But use pricing best practices to serve – not sell! – and you will see real pricing improvement.
Article written by Pricing Solutions’ Kirk Jackisch, Vice President, Pricing Strategy & Management and David Schnetzer, Senior Consultant. Pricing Solutions is an international pricing consultancy dedicated to helping clients achieve world class pricing competency. Kirk is headquartered in Boston and David is based in Dallas.