How to Set The Right Price For Your Membership Site Today
Striking the perfect balance between value and profitability can help you increase the conversion and grow your online membership business.
Whether you’re launching a new membership site or seeking to optimize current membership plan, understanding the the different pricing strategy and models can elevate your success for any membership type in any niche.
KEY TAKEAWAYS
- Pricing strategy that balance the members’ perception of value and willingness to pay is key to building a profitable membership business
- The 5 most effective pricing strategy are; value-based pricing, competitor-based pricing, cost plus pricing, penetration pricing and price skimming.
- There is two key to creating a successful membership business, one choosing the best membership platform for your business, two give your members so much values that paying for the membership subscription seems cheap.
What Is a Membership Pricing Strategy?
A membership pricing strategy is a method used to establish the best price for a product or service.
The member pricing strategy helps you to choose a price that can maximize your profit and shareholder’s value while balancing the members’ perception of value and willingness to pay.
What is a Membership Pricing Model?
On the other hand, a membership pricing model is the price format offered to the members joining your membership service, each pricing model will enjoy a different membership experience. Some of the common pricing models are:
- Flat-rate pricing or fixed price model
- Pay-as-you-go pricing model
- Tiered pricing model
- Price per user model
- Lifetime membership model
- Subscription and recurring membership models
Pricing model offers options to different segments of target audience, offering flexibility, and aligning with the value they perceive in your membership offerings. With the right membership platform, you can choose to adopt various pricing model for your business.
How is Membership Pricing Strategy Different From Membership Pricing Model?
A membership pricing strategy is talking about the way you set the price for your product and service, while a pricing model is the price format or rather the way you package and present your product and service to your members
Setting the right price for your membership is not just slapping a subscription price onto your subscription, it is:
- A reflection of your membership’s worth
- A reflection of your audience’s preferences
- A reflection of your business goals
Your membership pricing strategy and pricing model needs to work hand-in-hand to have different price points or pricing tiers to create the optimal price for each members that join your membership program.
Regardless, if you edupreneur or a business owner, you can benefit from understanding the different price based strategies.
5 Most Common Types of Membership Pricing Strategies
There many pricing strategy, but some are better than other, which many fortune 500 companies have use to help them build their empire. Here are some of the best membership pricing strategies.
1. Value-Based Pricing
Value based pricing is when business aligning value with price of the membership. It is a pricing strategy where the price of the membership is based on the value it brings to the members.
Understanding their pain points, needs, and aspirations allows you to set a price that resonates deeply and justifies the experience you provide.
- Creating Tailored Features: Craft exclusive features that cater to different segments, enhancing the perceived value.
- Personalized Add-ons: Offer add-ons that members can opt for, providing a personalized experience.
- Pricing Confidence: A pro makeup artist willing to pay $50 for makeup tutorials versus a hobbyist’s $15 choice showcases value-based pricing in action.
2. Competitor-Based Pricing
Competitor based pricing is done through analyzing your competitors’ pricing strategies is like sailing in familiar waters. This approach involves setting your membership price based on what your competitors charge for similar offerings.
By strategically positioning your price relative to theirs, you can carve out a unique value proposition.
- Competitor Analysis: Identify key competitors and assess their pricing, features, and customer reviews.
- Finding the Sweet Spot: Set your price at a point that reflects your unique value while remaining competitive.
- Differentiation Matters: If your membership offers an integrated community, adjust your price to reflect added value.
3. Cost Plus Pricing
Cost plus pricing is the key pricing strategy that can help business to balance costs and profit, creating a solid financial foundation for your membership.
By calculating all your business costs, both fixed and variable, and adding a margin to determine the membership price this give you the option to price your membership with a margin you desire.
- Incorporating Margins: Determine the margin percentage that aligns with your profit goals.
- Simplicity and Alignment: While simple, this approach lacks direct feedback from members and market dynamics.
- Know Your Bottom Line: Focus on the 20% of your inventory that drives significant profits to optimize cost-plus pricing.
4. Penetration Pricing
Penetration pricing is a double edge sword, it offers as captivating invitation to join your membership capturing a wider audience and is especially popular for new startups or new business looking to penetrate into a market.
However, prolong low pricing can be harmful for the business and is not sustainable.
By setting a low initial price to rapidly build a substantial member base, it can subsequently raise the price in the future.
- Market Entry Strategy: Use a low initial price to attract members and gain market share swiftly.
- Economies of Scale: The increased membership volume can lead to cost efficiencies.
- Cautious Consideration: Be prepared for potential price wars and ensure the pricing is sustainable long-term.
5. Price Skimming
Price skimming is to get into a new market with innovation that is exclusive for the business. It can be a new technology, new software or a new idea that is not common but high demanded by the consumers.
By launching at a high price point and gradually reducing it over time as competition increases it increases your margin when you first launch which let you gain the resources to further innovate your product and service.
- Innovative Products: Ideal for unique, innovative offerings with no direct competition.
- Targeting Early Adopters: Launch at a high price to capitalize on tech enthusiasts willing to pay more.
- Market Evolution: Lower the price as the market matures to reach a broader, price-sensitive segment.
Setting The Right Membership Pricing Strategy For Your Membership Business
Every pricing strategy have it’s own uses and can benefit different membership business of different industry and stages of the business.
When setting the right membership pricing strategy, it can depends on many factors and here are some of the key factors to consider.
Member Demographics
Understanding who are your members is key to choosing which pricing strategy to deploy.
Gain a deep understanding of your members and the demographic can changes the type of pricing strategy that resonates with your customers.
Behavioral related demographic considerations:
- Ages and Gender
- Location and Geography
- Marital Status and Family Size
- Ethnicity and Cultural Background
Pricing related demographic considerations:
- Technology and Digital Behavior
- Income and Education Level
With a deep understanding of your members, you’ll know what pricing strategy will resonate with your members more.
Thorough Competitive Analysis
“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.”
Sun Tzu, The Art of War
No I am not saying your competition is an enemy, but it is good to know who are the other players in the party that you are dealing with.
Understand their strategy and see which strategy makes them successful, but don’t forget to look at the competitors who are not successful, and learn from their mistakes.
- What pricing strategy are they using when they just get started?
- What pricing strategy have they evolves into using?
- What pricing strategy is being used by successful membership business?
- What pricing strategy is being used by not so successful membership business?
- What is the pricing strategy used by the fastest growing membership business?
You do not need to reinvent the wheel, just look at your competitors and and learn from their success as well as mistakes.
- Analyze your competitor’s pricing models
- Understand the features they provided
- Read feedback from their members
Distinct Value Proposition
What is your value proposition?
If you reply saying “you don’t know” then same goes with what your members will suggest.
Be very clear about your value proposition for your business.
- Clearly define the unique value your membership offers
- Ensure your chosen pricing strategy aligns seamlessly with this value
Keep in mind on the value proposition that you offer to each of your members, so they can benefit from being a member of your community.
How To Set The Right Price For Your Membership Site
The only “rule” for pricing of your membership is that the price should be somewhere between the cost you used to create and maintain the your membership and the maximum amount that your audience are willing to pay for benefits and value for being a member.
Here are some steps you should take when determining your pricing:
- Look at what your competitors are charging with the amount of value they provide.
- Survey your audience and see what price range they will be willing to pay.
- Understand your own goals for the business. Do you want to reach out to the masses, or only the high-end clients?
With that set a pricing that is within the price range that you are comfortable of and your audience are willing to pay.
Membership Pricing Guideline
And if you are still wondering what price you should actually set, here is a simple guideline that I’ve created.
| Industry | Membership Type | Price Range |
|---|---|---|
| Coaching | Personal Coaching Sessions | $50 – $500/month |
| Finance | Investment Insights, Financial Tips | $10 – $150/month |
| Fitness | Basic Gym, Premium Program, Fitness App | $5 – $150/month |
| Food and Cooking | Recipe Subscriptions, Cooking Classes, Boxes | $5 – $60/month |
| Hobby and Crafts | Craft Tutorials, DIY Projects | $5 – $35/month |
| Language Learning | Language Courses, Personal Tutoring | $15 – $100/month |
| Music | Instrument Lessons, Band Membership | $10 – $200/month |
| News and Magazines | Digital News Subscriptions, Premium Content | $2 – $15/month |
| Online Learning | Skill Training, Masterclass Membership | $20 – $300/month |
| Photography | Photo Editing Tutorials, Photography Tips | $5 – $40/month |
| Software Services | Basic Software Access, Pro Features | $10 – $300/month |
| Streaming | Video Streaming, Live TV, Exclusive Content | $8 – $60/month |
From the table, you can see that coaching offers the highest pricing, but it is also because there is much more time and energy is required to maintain it.
Creating online course membership site seems to be a good choice too, as it offers high price range as well.
Depending on your industry, generally, a membership is priced less than $100. Here is the distribution on how the pricing is commonly distributed.
| Membership Price Range | Percentage |
|---|---|
| Less than $10 | 15% |
| $10 – $25 | 20% |
| $25 – $50 | 20% |
| $50 – $100 | 15% |
| $100 – $250 | 10% |
| $250 – $500 | 10% |
| More than $500 | 10% |
Of the various price range, membership that is priced less than $10 (3.35% churn rate) and $50 to $100 (3.84% churn rate) have the lowest churn rate, making it a great price point to get started.
Popular Membership Subscription Pricing Strategy To Create Your Own Membership Site
When starting your own membership business, it can be hard to get your first member. But there are many strategies available where you can use to build your own community.
Used by mega corporations when they first started and still being used today, here are some pricing strategy you can consider.
- Introducing Trial Periods: Capture the interest of potential members by providing 7-day or 14-day trial periods, allowing them to experience your offerings firsthand.
- Simplified Price Structure: Present a concise selection of pricing options, designed for easy comprehension by your target audience.
- Harnessing Psychological Pricing: Employ the power of psychological pricing, utilizing figures like $19.99 to create the perception of a lower cost.
- Welcoming New Members: Attract fresh sign-ups through time-bound promotions, offering exclusive benefits to those who join within a specified timeframe.
- Guided by Data and Feedback: Rely on comprehensive research, competitor insights, and member input to guide your pricing decisions.
Getting Your Membership Pricing Priced at The Right Price
As the membership site owner, developing a membership pricing strategy to charge for your membership requires a deep understanding of your audience’s needs.
It is the value that you can give to your audience that you should be focusing and not how much you can earn from your business.
By focusing on creating value, money will soon follows.
Pricing is an ongoing process, regardless which pricing strategy you choose, you can always revisit and update your pricing periodically to ensure it aligns with market trends, member feedback, and the evolving value you provide.
Stay attuned to your audience, track your results, and adjust your pricing strategy as needed to ensure your membership site thrives in the competitive online landscape.
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Antony C. is a dividend investor with over 15+ years of investing experience. He’s also the book author of “Start Small, Dream Big“, certified PMP® holder and founder of IncomeBuddies.com (IB). At IB, he share his personal journey and expertise on growing passive income through dividend investing and building online business. Antony has been featured in global news outlet including Yahoo Finance, Nasdaq and Non Fiction Author Association (NFAA).
