The Right Price for Going Global
ASSOCIATIONS NOW, August 2012, Feature
By: Mark Athitakis
|Summary: Associations need to be flexible when they enter new markets, but they sometimes err on the side of undervaluing their products. A close look at your balance sheet, your goals, and the country you want to expand into can help you arrive at appropriate prices.|
Here's more evidence, in case you needed it, that globalization is moving at a breakneck pace: In the next three years, an estimated 100 airports will open in India. For Lowell Aplebaum, CAE, director of membership and councils for the International Facility Management Association, that data point represents both good news and a challenge.
The new buildings mean there's a growing pool of people who are potentially interested in IFMA's offerings. But what does IFMA offer first? Does it lead with membership or products? Once that decision is made, what price tag will be put on them? "Every place we go to has different histories and different needs," Aplebaum says.
There's no single right way to establish pricing around the world for an association's products and services. Each country has its own attitudes about what it considers the appropriate price for something, not to mention how it perceives the importance of belonging to associations in general. Even so, there's a good chance associations may be underselling themselves when they enter new markets. A healthy amount of confidence in your organization's worth, matched to solid research on the markets you plan to enter, can make an association's global efforts more valued—and more profitable.
Terrance Barkan, CAE, founder and chief strategist for GlobalStrat, says that one of the first pricing questions associations need to answer when they go global is why they're in a new country in the first place. Are you there because you want to expand the organization and generate more revenue? Or are your intentions more altruistic, designed to broaden the association's mission around the world even if you do it at a loss? Too often, Barkan says, associations really want the former but behave like the latter.
"If it's your strategic objective to reach as many people as possible, then that could be an argument in favor of discount pricing," he says. "But that's where associations have to make a declaration [that says] … 'We are doing this to spread the word and help less developed countries. Price discounting is part of the effort, and that actually costs us money.' If you're going to do it, it should be a conscious effort, and you should know what the implications are. I think a lot of times that isn't thought through."
A more conscious effort, Barkan says, requires a close analysis not just of a particular country's current association infrastructure, but of for-profit entities that might be presenting education and other resources that an association can compete with. Professionals "really don't care if they're getting their education or training from an association versus a nonprofit," Barkan says. "They're after the content. If you have two offerings that look roughly equivalent and one is priced at half of the other, a judgment is made: 'They're only charging $200, this company is charging $500, so the one charging $200 must be inferior.' Associations are not doing themselves a service because they're not pricing the product correctly."
That argument mirrors the experience of the Society for Human Resource Management in India and China. According to Brian Dickson, senior vice president of professional development and strategic partnerships, SHRM works to keep the pricing for its training programs consistent around the world (10,000 of its 250,000 members hail from outside the United States), and particularly in its current focus areas of India and China.
"The issue of global pricing is a very complex one—it's one we've debated quite a bit here," he says. "For our core products, we are trying very hard to maintain unitary pricing. We have used discounting, but our overall approach is to maintain pricing and then build more customized products. That gives us more flexibility."
Flexible, But Not Cheap
"We're trying to be reasonable with our pricing, but we're not looking to undercut ourselves or undervalue what comes with affiliation with us," IFMA's Aplebaum says of its work in India. That sounds simple, but it can be a tall order.
Part of the problem is that IFMA's dues structure in the United States would be prohibitively expensive in India and that the typical U.S. chapter structure isn't appealing to Indian members. "Financially, people can't pay for multiple chapters, but they want to be part of multiple groups," he says. "We're working that into the pricing structure." IFMA leadership took an unconventional approach to address the Indian membership: Chapter dues in India give members access to all chapters in the country. That's a financial hit on the front end, Aplebaum says, but establishing an Indian office offsets that cost because IFMA avoids the transfer fees connected to sending money to U.S. headquarters.
India is a particularly complex region for associations, according to Tarnbir Kaur, CAE, director, association management and consulting, Middle East, North Africa, and India, for MCI Group. Though associations are familiar to Indians, the U.S. approach to membership isn't.
"India does have a lot of associations that are local and homebred, but the concept that a lot of Indian associations have is one of lifetime membership," she says—that is, members pay a one-time fee instead of renewing annually. Kaur adds that many Indian professionals are just beginning to accept non-native products—the country opened itself to imports only 21 years ago—and that Indian companies have only recently seen the value in covering training costs for employees.
Kaur says that associations looking to build a presence in India need to ask themselves, "Do you want a smaller number of members in the first year, or do you want to gain critical mass? If you want to gain critical mass, you've got to make yourself relevant, not just to the small percentage of consumers who will pay a higher cost but to the large section of middle-class, very value-conscious customers."
Regardless, what works in India for IFMA won't necessarily work in Brazil or the Netherlands, two other countries where the association is building a presence. And going forward, IFMA will focus more on partnerships than formal memberships. "The idea of us launching chapters and trying to get full dues just doesn't seem to be the future," Aplebaum says. "If we're able to build a stronger global alliance that has a much wider base, then we can use the certifications we offer, which are highly looked upon. From a fiscal standpoint, that will help the organization grow."
Who Needs Membership?
Members often complain about the high cost of dues, but association leaders know that membership is often only marginally profitable, if not an actual loss leader: The cost of serving individual members can outstrip the revenue received from dues. Add in the expense of establishing an association's presence in a new country—working with volunteer leaders, establishing offices, mailing magazines overseas—and the membership model starts to look like a nonstarter internationally.
In the Middle East, Kaur says, a sense of value trumps the sense of being connected to membership. "The value that membership brings is not considered very high," she says, adding that discounts on conferences or on training are not especially relevant to a member in Egypt or Saudi Arabia, who might rarely use them. "What they want are things they can use, and they don't mind paying for that," she says.
SHRM's Dickson concurs: "We need to be a global organization, but that doesn't mean SHRM needs to create 140 offices around the world. We need to build our portfolio of products."
Membership isn't just questionable as a short-term revenue strategy; a failed membership drive can wreck an association's long-term reputation. "Membership is a bundle of services that includes face-to-face networking with other members," says Barkan. "If you don't have critical mass, or you don't have the infrastructure in place, you can't deliver on the full membership promise. So you've got a case where it costs you money and you can't deliver. … You'll get members for a year, but they'll never come back."
So what approach works best? Pricing products to reflect what they're worth can be done in two ways, Barkan says. One method is practical "cost-plus" pricing: Analyze what it costs to deliver a product or service (including staff time), and assign a markup of an appropriate percentage. Another is to study what's already being done in the countries you want to work in. "You can see if there's another domestic association and learn what they charge for their membership, what they deliver with their membership, and try to draw up some kind of analogy," he says. "Or you can go to for-profit education and training providers and see what they charge for training sessions and workshops."
It may be that the final price tag that you arrive at in a particular country will be less than what you charge American members for the same product. But an association's goal should be to establish its authority in its discipline and to cover the necessary costs of going global. Red ink, after all, is what wrecks most failed association initiatives. "That's when the board says, 'Hey, international doesn't work,'" Barkan says.
Mark Athitakis is a senior editor at Associations Now. Email: email@example.com
Sidebar: What's the Matter With Dubai?
Americans flipping through fashion and business magazines have been trained to think of the Middle East emirate of Dubai as home to a glimmering, skyscraper-studded city of the future. But if you're reaching out to potential users of your association's services there, some deep discounting may be in order. "In India, discounts can be viewed as your product being too cheap and not doing very well, and that's why you're offering it at a discount. In Dubai, that's not the norm," says Tarnbir Kaur, CAE, director, association management and consulting, Middle East, North Africa, and India for MCI Group.
What gives? One major reason for the difference, says Kaur, is that much of Dubai's labor force is made up of immigrants from Asia, including the Philippines, India, Sri Lanka, and Nepal. "All of the people who are working there are coming from cost-conscious countries," she says. "They need tools and services at an affordable level."
That dynamic wouldn't necessarily apply to executives there, but Dubai lacks an association culture; an effort to allow associations to set up offices there currently awaits court approval. In the meantime, Kaur says, associations can take advantage of opportunities to connect with Dubai-based professionals by partnering with the government or with universities that have established branches there (including Cornell, Georgetown, Carnegie Mellon, and Texas A&M). Associations that can deliver education and training in oil and gas, technology, telecommunications, and engineering are especially in demand.
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