To discount or not to discount?

Tony Rossell posted an interesting comment on the ASAE marketing listserve about discounting member dues the first year. Here's his post, very slightly condensed:

Should you discount dues in order to acquire new members?

Based on the comments that have been posted on this topic, it seems like this is a valid item to test in your acquisition efforts. Here are the results from one such test that we have completed.

In a large membership acquisition mailing, we evenly split prospects. Half were offered membership at full price and the second half received a $10 dues discount. The group receiving the discounted membership dues offer had a 40 percent higher response rate than the group offered the full dues rate. This added response more than paid for the discounted dues.

But the association examined the data beyond the front-end response rate. They tracked the members in both the full price and discount groups over two full renewal cycles in which the full dues amount was charged. After two years, they found that the discount group still out numbered those originally joining at full price by 35 percent.

Based on this test for this association, it would appear that discounting membership by $10 in the first year in order to increase long term membership for the association by 35% was a sound economic decision. If this association had not done this test and stayed with a full dues offer, then they would be sub-optimizing their membership by a substantial amount.

Several people in that discussion thought that discounting devalues membership. I unfortunately did not keep any of those emails so can't quote anyone directly (I did try and search the archives but got irritated with the interface and gave up - sorry), but there were a couple of thoughts, as far as I can remember, that if people are not willing to pay full dues when they sign up, why would they be later? And, that a better idea is to give 18 months for the price of 12 instead.

I have been thinking about this a bit since. In Tony's example above, I don't know what the $10 off represents as a percentage of the full amount. But what I do know for my own association, is that we give fully 50% off dues ($500 instead of $1000) the first year. Our dues are pretty high for a small professional association. For the privilege of paying that grand, we also expect most of our members to teach and otherwise volunteer their time for free. But we believe, and this goes back to the Decision to Join theme of membership being as much for the "benefit of the field" as for personal benefit, that our members are willing to pay that in order to help to advance the field (by teaching, and doing community outreach work, and participating in various ways). And our members have said that they believe this too, quite openly.

At the same time, we know people have financial issues which might mean the full dues are unaffordable, so we have a system in place for people to request a discount based on their personal hardship situation. We prefer that people be fully enfranchised, active members, even if they can't pay the full amount, over moving them to a lesser category of membership, in the belief that they value the association and will pay the full amount at a later time. We ask everyone to re-apply for "financial hardship" status annually.

On the other hand, we also automatically confer active membership on our students as they graduate from our two main training programs. This means that from a financial standpoint, they go from paying tuition ($1800 to $2500) to $500 at that point, which presumably they see as a good thing, but it also hopefully shows them that we are not simply putting our hooks into them upon graduation and trying to keep them as members purely for the dues. We are, of course, trying to keep them involved as members, but the idea is that they will, in their first year, see all the things they can continue to do as members, beyond their past training as students, then obviously stick around for many years to come. ( I can say we have an extremely low dropout rate - I think we've lost two people in the last 3-4 years).

So, to go back to the original dissenting opinion that discounting devalues membership - I have a couple of thoughts about that.

1) The 18 month for 12 month idea - that probably does work for some associations. I don't really understand it, but we operate on fiscal year - everyone gets invoiced in July. I know others work on the basis of renewing from the annual date of joining, so maybe that could work for them.

2) Everyone loves discounts. You can't tell me that it's not likely that more people will join if they are offered a discount than if they are not. I cite myself as an example - just yesterday, I got a letter in the mail from the Smithsonian, offering me "Supporting Membership" benefits at the "special offer" price of $60 instead of the normal $120 -or whatever the normal rate was. I can't even remember, because I didn't think twice about it - I just thought, "Sweet! Been meaning to do this!" and wrote my check.

3) If membership is worth it, then it will still be worth it next year when it comes to paying full price. But surely it gives people a chance to see for themselves first. Like I mentioned, we have had almost no drop-outs, so that tells me people do think it's worth it.

So if "discounting devalues membership", then maybe the value of that membership should be re-examined as to why it's that closely tied to how much it costs.

Maybe that kind of membership value reflects the old assumption that membership is only (or mainly) about personal benefits - something that is being proven wrong by the results of DTJ.