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The Lowdown on Raising Dues
Membership Developments, March 2008
By: Tony Rossell
Raising dues periodically is an unavoidable part of the association lifecycle, but the when, why, and how of a dues increase can have a significant impact on its effectiveness. One association marketing firm surveyed associations about their dues increases, and the results reveal a wide variety of practices.
A dues increase can be a complicated and risky proposition for an association. Yet remarkably little literature exists on the topic to guide association executives through this process.
To help build an understanding of the practices organizations follow when raising membership dues, Marketing General surveyed association executives to determine when, why, how much, and what the outcomes have been with dues increases. Altogether, 324 association executives from a wide variety of professional and trade association shared their experiences.
Based on the results of the survey, five key practices emerged from the data.
1. The Frequency of Dues Increases
The most consistent recommendation reported by survey participants was to raise dues each year by small amounts. As one respondent commented, "We learned to raise dues every year—even if that raise is only 1 percent. Our costs go up every year (salaries for staff, insurance, rents, utilities, and so on). Raising dues each year is a given, it's just a question of how much."
However, the survey revealed that only 18 percent of responding associations follow this advice and raise dues on an annual basis. The vast majority—nearly 66 percent of associations—raise dues only on an as-needed basis.
Not raising dues was in the clear minority. Only 3.5 percent of respondents claim that they never raise dues. One comment in support of this view maintained that, "A dues increase should always be a last resort. I think the winner in business is the one that finds the way to give the customer/member the most for the dollar."
Interestingly, trade associations were much more likely to have raised dues in 2007 than were individual membership associations.
2. The Amount of Dues Increases
When associations raise dues, they're very conservative in the amount of the increase. Based on when dues were last raised, 59 percent of associations increased dues between 1 percent and 10 percent. Only 21 percent raised dues at a more moderate rate of between 11 percent and 20 percent.
Some groups have had to resort to much higher dues increases. Fifteen percent of associations raised dues by more than 20 percent with their last increase. And in the past 10 years, 5 percent of associations have had a dues increase of more than 50 percent.
We'll see a little later what the impact of these larger dues increases has been on the associations.
3. The Justification for Dues Increases
The justifications that associations use with members for a dues increase depends largely on the amount of the increase. The number-one reason associations use to justify higher dues is inflation. This is the reason given for 54 percent of the increases.
But the number of associations citing inflation declines as the percentage of the dues increase rises. Associations raising dues by more than 11 percent are significantly more likely to cite the additions of new programs and services as the justification.
As one association executive commented in the survey, "Never raise dues unless you have added value associated with it."
Funding-increased advocacy is the third most common justification for a dues increase.
The bottom line, one person wrote: "The larger the dues increase, the more detailed the explanation has to be. Small incremental increases don't require much if any, explanation."
4. The Announcement of Dues Increases
How associations announce dues increases to members provided the most diverse recommendations.
Some organizations communicate the dues increase broadly and frequently. As one responder commented, "Say it more than once, more than twice, and more than three times... eight months later, we still have members saying, ‘We didn't know.'" Others attempt to educate members over the long term to expect dues increases: "You can never start too early to educate [members] of the need for an increase and you can never communicate enough for the need."
But some associations advocate not making a big deal about an increase. "The less you make of it, the less of an issue it will be for members as well."
Forty-four percent of associations announced their most recent dues increase through a letter or email to the association and/or through a letter in the renewal notice. Not surprisingly, the least popular forum to communicate a dues increase was an announcement at the annual convention, with only 18 percent of associations using this method.
5. The Results of a Dues Increase
The survey results produced one major surprise. The conventional wisdom shared by survey respondents was that the best philosophy in raising dues was to raise the price annually by two or three percentages points. However, the survey highlighted the difference between operating on intuition compared to data.
Although the majority of associations most recently raised dues at 1 percent to 10 percent, the reported data shows that association memberships will support an increase as high as 11 percent to 20 percent. In fact, associations in the study raising dues by 11 percent to 20 percent had the highest percentage of revenue increase, no reported revenue decrease, and the lowest percentage of stagnant revenue. Additionally, nearly 20 percent of these associations saw membership grow in numbers after raising dues.
However, there is a limit to how far organizations can boost dues rates without negative consequences. Dues increases of over 20 percent showed a diminishing rate of return. With these higher dues, 35 percent of associations saw a decline in overall membership, and 18 percent actually experience a decline in revenue after the increase. No wonder one responder commented, "Our primary members' dues increased at 30 percent... I would do a smaller increase more often rather than a large increase at once."
The 324 responses for this survey resulted in a margin of error of +/- 5.4 percentage points. In other words, if all the recipients were surveyed, we could expect that the results of that survey wouldn't vary more than +/- 5.4 percentage points in 95 out of 100 instances.
Free copies of the Dues Increase Survey Report are available by contacting the author.
Tony Rossell is the senior vice president of Marketing General, Inc., in Alexandria, Virginia. A frequent writer and speaker on association marketing topics, he is a contributing author to two books, Membership Marketing (ASAE, 2000) and Membership Essentials (ASAE, 2008). Email: Tony@marketinggeneral.com
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Robert -- I agree that the data is a snapshot. However, some of the principles still apply -- like how to announce a dues increase or the impact of regular small increases compared to very large increases. Tony
The survey is very good, but is just a snapshot in time at this juncture. In light of the ongoing financial crisis, I would suspect the results of this survey would reveal significantly different results should an association raise their dues in this environment. Unfortunately to assess these results would require a follow-on survey, perhaps after significant decreases in membership has occurred.
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