Do New Member Discounts Really Work?
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By Greg Schultz, CAE, Executive Vice President of Kellen
Do you buy things on sale that you wouldn’t have bought at regular price? I have long been skeptical about the long-term wisdom and return on new member discounts. Is a modest discount a motivator to join if the value is not there at full price? Will those who received a discount rejoin at the full rate? Does discounting membership damage the association brand for members who previously joined at full price or in the market?
New member discounts work as a viable tool to incentivize people to join your association, according to data from respected association management research firm, Marketing General Inc. (MGI).
MGI conducted a test on 400,000 prospects for an individual membership association (professional society), splitting the list in half. Half of the prospective members 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. (We don’t know what percentage of the original dues cost a $10 discount represents, but it is reasonable to say it is “modest.”) More importantly, after two years, the group who received the new member discount still outnumbered those who originally joined at full price, by 35 percent. So there was a slightly higher lapse rate from the discount group, but overall the association ended up with far more members.
MGI did a similar test with a trade association, offering a “substantial” dues discount for new members. The deep discount doubled the response rate compared to the typical response. As expected, several years later, the discount group had retained members at a lower rate, but the association still had far more members overall from the discounted group than from the higher priced promotions.
Some will make the case that the value of the membership alone should encourage a prospective member to join. Certainly, the value provided will determine whether or not a member continues with the organization. However, the purpose of a new member incentive is to encourage the prospect to give membership a try. Without taking the step to join, the prospect cannot really understand the value the association offers.
People are motivated by a special offer to act now in making a buying decision. MGI notes the importance of testing the level of discount or incentive. In tests, a 15% discount performs pretty much the same as a 30% discount. Providing very deep discounts is not always required for a successful new member promotion.
What is your strategy for attracting new members? Often associations set a membership growth target without a strategy or allocating resources (direct costs, staff time, etc.) to actually make it happen. And they often don’t use data to make sure the math works. Yet, without an understanding of your cost of acquiring a new member and the lifetime value of each member, you can’t make a smart decision about membership development investments and targets.
