What are membership dues?

Historically, membership dues have represented the primary revenue source for associations. During the last decade, as associations struggled to build membership, they focused on programs designed to generate non-dues revenue. Recently, associations have recognized that membership dues, in combination with other revenue sources, are an integral part of the overall financing solution necessary to provide superior, sustainable levels of service.

Fundamentally, people do not pay membership dues just to receive discounts on association products but because they wish to join a community of peers. Membership dues represent the financial investment of the individual in belonging to the group. The amount of dues they pay represents the dollar value they place on this affiliation with their professional community.

Why do associations use membership dues?

Inherently, membership dues are the primary financing option of associations because they provide a stable funding source for the creation and maintenance of the association and help create a clearly defined market for the sale of association products.

Marketing Strategy

By collecting membership dues, associations force members to make a financial commitment to the association. In essence, the association asks the member to invest in the long-term stability and growth of the organization. This investment creates a bond or affiliation between the member and the organization, which the association can leverage to achieve the broader mission and specific strategic objectives.

Specifically, membership dues can be used as a marketing device in some of the following ways:

• By keeping membership dues low the association encourages more people to join so that a specific target audience is identified for the sale of association products.
• By keeping membership dues high, the association establishes a sense of exclusivity.
• By gradually increasing the cost of membership, you can predictably increase the financial investment of members into the organization while continuing to build affiliation.
• By coordinating membership with product pricing you can create incentives to join or incentives to purchase based on the objectives of the association.

Financial Stability

Membership dues represent an extremely high value revenue source. Membership dues have some of the following advantages:

• The return on investment of membership dues is extremely high. The cost to retain a member is significantly less than the investment necessary to acquire a member.
• Membership dues represent a long-term financial resource. Traditionally, 85% - 90% of members retain their membership in the organization each year thus allowing the association to project long-term revenue from this area.
• Membership dues are not tied to specific programs. As a result, they are traditionally allocated to areas of the association that do not generate revenue.
• Membership dues can be timed to balance the cash flow of the association resulting from the variable nature of cash flow as a result of programs and activities.

Membership dues create a stable, predictable resource base for the support of association operations and activities. As a result, membership dues must often be adjusted to reflect the realities of operational and programmatic changes.

What limits the use of membership dues as a revenue stream?

Membership dues as a financing tool are limited in several respects:

• Membership dues can only be collected from members. If the total membership market is limited, membership dues can only be increased in the following manner:
  • Increase the membership dues per member.
  • Identify and solicit new membership audiences.
• The membership market will only accept increased membership dues up to a certain point. Eventually, it becomes more cost-effective to purchase the services of the association on a case-by-case basis.
• Both indirect and direct competition of the association impacts the ability of the association to collect membership dues.
  • Direct competitors offer related programs and services and accompanying opportunities to potential members.
  • In-direct competitors represent competing options for member budget dollars and time.

How do you evaluate the use of membership dues?

Few associations review and implement strategies that integrate membership dues into the pricing and delivery of other association products and services in a coordinated manner.

It is important for the association to look at the entire pricing package of the organization and coordinate the cost of dues with the price of conference attendance or product purchases to avoid several issues.

• The total cost of participation with the association should not be greater than the value of that participation to the member.
• Individual products or membership dues should not be priced in a vacuum. For example, you would not want an individual to drop their membership so that they could afford to attend your conference.
• If individuals do not join your organization where will they go? At some point it becomes more feasible for an individual to purchase a product or service at full price instead of paying membership dues for a discount.

You must integrate the use of membership dues with the other strategic initiatives of the organization. Membership dues must reinforce the success of all other activities.

The end goal is to create an affiliation between the member and the organization and establish a defined market for the sale of additional products and services. This provides for a growing, predictable revenue stream to maintain member services and pursue new initiatives.

There are several different methodologies for reviewing how the association uses membership dues as a financing tool.

• Compare your current or anticipated dues to associations of similar type or size using the ASAE Operating Ratio Report.
• Compare your dues structure to those of related organizations. Understand that the entire competing organization must be analyzed because different organizations use dues in different manners to achieve their financing and marketing goals.
• Evaluate the potential for one-time dues assessment designed to raise funds for a specific initiative.

When are membership dues most important?

Membership dues as a revenue source are most important to associations that reflect some of the following characteristics:

• The association relies on highly variable income sources.
• The association has a limited market for new products and services.
• The association provides an extensive amount of services that do not generate revenue.

How might your association use membership dues as a funding mechanism?

When reviewing the membership dues strategy consider several questions.

1. What is the strategic goal of the association 's use of membership dues for both financing and marketing purposes?
2. What is the specific marketing needs relating to affiliation and market creation that are enhanced by the use of membership dues?
3. What are the financial issues, including stability and cash flow, faced by the association that can be addressed by membership dues?
4. What will be the relationship of membership dues when integrated into the existing pricing and delivery structure of other programs and services of the association?
5. How will the funds generated be used?
6. How will the increase of membership dues be communicated to the membership?
7. What will be the implications of a membership dues increase on the delivery of other association products and services?

Many association executives face the issue of a dues increase with trepidation. Your board must understand that dues are only one component of a portfolio strategy for revenue generation. By developing multiple sources of revenue, including dues, for the association, you avoid relying on a single income source and increase your options for generating the revenue necessary for new initiative or improved service.

In conclusion, members who are resistant to paying dues might not be unwilling to pay more money for services; they just might be unwilling to pay you versus one of your competitors.

Dean A. West

Dean West is President of Association Laboratory, a Chicago-based consulting firm that specializes in the creation of marketing and organizational strategy for associations. He can be reached at dwest@associationlaboratory.com or by calling 312.466.5702.