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The Detroit Regional Chamber was one of the participants. In 1996, DRC transitioned from a fair-share membership structure to one based on tiers. In the first year following the launch of the new structure, DRC increased its membership revenue by 7 percent. In addition, the chamber's average membership sale in the tiers above the entry or product level increased from $304 to more than $393, and membership increased by 9.2 percent. Moreover, sales of new memberships in the entry level nearly doubled, enabling the chamber to significantly increase its nondues revenue by about 30 percent.
Making the transition
DRC began its transition to a tiered dues structure after thoroughly evaluating its marketplace in Southeast Michigan. In that area, the competition for membership is fierce, with many businesses joining DRC only to take advantage of its affinity programs. The most popular programs center around group health insurance, and there is little perceived differentiation between DRC and the associations that offer similar benefits. Similar to most metropolitan chambers, membership dues account for somewhere between 20 and 35 percent of DRC's total revenues.
Setting goals
One of DRC's goals was to grow total revenue by increasing participation in its affinity programs--an option that's available at its lowest level of membership. At the other end of the spectrum, DRC's goal was to allow members to select higher levels of membership, which would provide the service, involvement, and connection points that fit their expectations. Through the fulfillment of these goals, DRC wanted to become the Wal-Mart, the price leader, at one end of the spectrum and the Nordstrom, the relationship leader, at the other end, with varying levels in between.
Prior to the initiative's launch, the chamber's dues base stood at $3 million, averaging $294 in dues per member, with a one-size-fits-all formula. Now, the dues base stands at $3.5 million, averaging $407 in dues per paying member. Significantly, product revenues for all the chamber's affinity programs have about quadrupled during the past nine years.
Measuring member value
DRC measures the value of a membership account based on a combination of the kinds of revenues generated by the member (dues, affinity programs, advertising, sponsorship, event attendance, and so forth). Because of the chamber's emphasis on a total financial relationship versus only membership dues, DRC has built a large membership base, and total membership now stands at just more than 21,000 firms versus just more than 10,000 firms when the program was launched.
As DRC's example illustrates, launching tiered dues programs has the potential to reap significant benefits. However, during the initial stages of a transition, your association may experience challenges similar to those encountered by the Detroit Regional Chamber and others that participated in Introspect's study. Here's some advice based on DRC's experience:
Stick to the plan; don't waiver when losses occur. Your association may experience a decrease in membership initially or other setbacks, but you shouldn't give up on your transition plan. Despite an intensive orientation and training period, it took about two years for DRC's membership sales representatives to begin consistently selling higher-level memberships.
Concentrate on the quality, not the quantity, of members. Recruiting members who value and take advantage of your products and services should always take precedence over signing up a large number of members who are not interested in the organization's goals and objectives in the long term. Among DRC's 21,000 members is a core group of more than 3,000 members, and more than 700 of those firms are at the Nordstrom levels of membership.
Encourage your board to stay the course. Boards will want to change the program. However, if they stay the course, they are likely to reap the benefits. They must believe in and support the concept. The Detroit Regional Chamber went through a lengthy, detailed planning process, which at times included volunteer leaders from its board of directors, who assisted in evaluating the options.
Looking at the big picture
Any review of a membership structure needs to be part of a broader analysis. A tiered membership program is part of an overall strategic plan. It cannot, for example, be a project that is coming from the membership department and operating in isolation from the rest of the association. It requires a change in organizational culture and how your association does business.
Before implementing a tiered membership program, be sure to review your group's overall revenue sources, objectives, priorities, and member needs. DRC's planning process was intensive and focused on the competitive landscape, the question of value, an analysis of its membership, and the chamber's financial goals.
Deciding if tiers will work for your association
One of the most challenging strategies in the process is evaluating everything you do, or should be doing, in an effort to cluster your products and services into tiers.
DRC created seven membership tiers, ranging from $80 at the entry or product level to $5,700 at the gold level. Value elements were added at each tier. Often the elements had to be created, and sometimes they were mined from the value inherent in many of the chamber's existing programs. DRC tiered down to make itself the price leader for affinity programs and tiered up to attract and keep members wanting deeper relationships, higher connectivity, and higher service levels.
Assessing needs
Following this example, an association first needs to assess its members' needs and determine whether its organizational structure is defined to meet those needs. You cannot simply borrow ideas from a tiered dues model and slap them onto your association. A successfully designed tiered dues membership program consists of specific components. To ensure that such a program has potential for your association, determine whether these components are viable, considering the benefits you provide and your members' expectations:
* Predetermined number of investment tiers that are matched and then priced to reflect market realities and customized to match segmented audiences.
* A value proposition created for each tier as well as added value throughout the tiers.
* A sustainability plan to keep the tiers from becoming static.
Once you've decided to move forward with a tiered structure, much of the success of the program rests in the association's relationship marketing strategy. This program forces the organization to engage in ongoing communication with members about what benefits they want and need to ensure the longevity of their involvement with the association.
Counting the cash
Each organization and market is different so you'll want to design a membership structure that fits your organization's goals in your unique marketplace. Ultimately, you need to focus on the dollars the association earns every month instead how many individual or company members joined. For-profit companies rarely count only the number of clients as a barometer of success; they use revenue or total sales to gauge their performance. While there is a need and value in knowing how many members an association has, the focus must shift to total dollars. The reason is simple: If an organization has been effective in attracting members to increasing levels of benefits (and dues), it can have a small membership base that generates high revenues. By attracting quality members willing to pay for increased value, the association will increase its long-term profitability.
BY DAWN MOLITERNO
Dawn Moliterno is president and CEO of Introspect Associates, Ltd., Canfield, Ohio. E-mail: dawn@introspectassoc.com. Edward Wolking, Jr., executive vice president, strategic directions, for the Detroit Regional Chamber contributed to this article.
EDITED BY APRYL MOTLEY
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