Deciding what to charge for your membership dues is one of the most important decisions your organization will make. You need to strike a balance between charging an amount that is both fair to members for the value they’re receiving and generates enough revenue to cover your costs.
But how exactly do you strike this balance? How often should members pay dues? And once you’ve decided on the price, how do you communicate this to members?
This “membership dues for associations and nonprofits” guide covers these questions and more, including:
- What are membership dues?
- Why are membership dues important for associations and other organizations?
- Membership models: multi-year vs. annual vs. monthly dues
- Understanding membership tiers
- How to increase your membership dues
- How to collect membership dues
- Top tips on collecting membership dues
What are membership dues?
Membership dues refer to the price members pay to be in your association, chamber, nonprofit or organization. They’re called dues instead of fees because association and chamber memberships are usually paid recurrently. A “fee” implies that it’s a one-time payment.
Dues are structured in one of several models based on what makes the most sense for each organization. These include multi-year, annual and monthly dues.
Choosing the right membership model for your organization will involve considering multiple factors, such as the pros and cons of each model and current cash flow (discussed in detail later).
Why membership dues are so important to associations, chambers and other organizations?
Membership dues are one of the biggest revenue generators for associations and nonprofits. They help you:
- purchase software
- pay your staff
- plan conferences
- offer member events
- build benefits packages
- much more.
Because they’re fairly predictable, you can use the data about incoming dues to track and monitor membership numbers and retention rates.
Membership dues also form part of operating revenue or the revenue an organization generates from its primary activities. By determining operating revenue and distinguishing it from total revenue, you can gain insights into how profitable and productive your primary business operations are. Setting membership dues at the incorrect level—a price not deemed fair for the value provided—will erode this profitability and sustainability.
Note: Even though membership dues are a significant source of revenue, don’t make the mistake of putting all your eggs in one basket. Instead, diversify your revenue streams with these 12 non-dues revenue ideas.
Membership models: multi-year vs. annual vs. monthly dues
How often your members are asked to pay their dues plays a significant role in their experience and retention. Most common payments fall under monthly, yearly, and multi-yearly cycles. There are pros and cons to each.
Many organizations are finding success with multi-year dues, where members can receive a discount when paying for three to five years upfront.
- Appealing to businesses or individuals that are 100% committed to your organization
- Paying once and forgetting about it is convenient for members
- Upfront payments allow members to take advantage of cost savings
- Members stay with your organization for multiple years, leading to better retention
- You can lose revenue you didn’t have to if your discount is too large. When offering a discount, consider the overall impact on your bottom line.
- Not everyone can afford to pay for membership dues upfront
Annual dues are paid once per year, either on the date of joining or on a pro-rata basis.
- Many members like the convenience of paying once and forgetting about it for the year
- Annual membership often comes with a discount, providing an incentive to sign up
- Members are unlikely to drop off before their term is done
- Your organization gets a cash boost and a predictable revenue stream
- Tracking annual payments is much easier than monthly payments
- It’s harder to analyze how well your organization is doing at offering value to members, since you won’t know whether they’ll renew until year-end.
- You’ll make less revenue per member if you offer a discount on annual membership
- Paying annual dues can result in a pay-and-forget mentality, impacting engagement
Monthly dues are paid either at the beginning or end of the month, 12 times per year.
- A lower monthly price tag makes members more likely to sign up
- New members sign up with little hesitation, knowing that they can cancel at any time
- If you have membership tiers, it makes it easy for your members to move as needed
- You can analyze your renewal rates every month and see what is and what isn’t working for your members
- It’s easy to track monthly revenue
- You make the most revenue because members pay the full price of membership
- Some members don’t like the hassle of making monthly payments
- It’s easy for members to leave at any point, so revenue is less predictable
- If you’re managing payments manually, it can be challenging to track down every member’s payment
- Yearly and longer membership commitments are often cheaper in the long term, and can be more appealing to new members
Choosing a membership dues model
When trying to decide what membership model is suitable for you, consider:
- Weighing the pros and cons listed above
- Previous models you’ve used and how effective they were at helping you achieve your goals
- Current cash flow. If cash flow is a concern, you’ll likely want to use an annual or multi-year dues model to get that cash upfront to cover costs
- Surveying current members to see what they would prefer
- Looking at what similar organizations offer their members
Understanding membership tiers
You should also consider whether you want to offer a flat rate for everyone or membership tiers or levels with different prices and benefits.
Flat rate memberships
Everyone pays the same amount and receives the same benefits and level of access. Flat rate memberships are common among smaller organizations or organizations with members who have similar budgets and seek the same value.
Tiered membership models
Members can choose between more affordable options with fewer benefits or more expensive options with more benefits. You can also create tiers to accommodate members in different career stages.
For example, many organizations offer free membership to students and inexpensive options to young professionals. Tiered models are common among larger organizations or organizations that provide many benefits. Their members also vary greatly in the benefits they’re looking for and what they can afford to pay.
How to increase your membership dues
The beauty of membership levels is that the price you set doesn’t have to be permanent. You can start with one structure and prices—and if it’s not quite working, change things up and increase prices.
Why would you increase membership dues?
There are many reasons, including:
- Growing your organization and expanding employees
- Adding new benefits to increase value
- Keeping up with inflation and the cost of doing business
How to communicate a dues increase
Raising prices can be a hard decision, and you’ll want to keep as many members as possible. This is where communication can help.
Here are some tips for communicating due increases to manage expectations and increase the chances that members will renew.
1. Be transparent
Never hide or gloss over the fact that prices are increasing. Let members know ahead of renewal, so they have enough time to process the increase and make an informed decision about renewing.
Best practice? Give a few months’ notice at a minimum.
2. Explain why
Be open about why prices are increasing. Don’t go into a crazy amount of detail (e.g., if your conference center has raised prices and you need to hire more staff, don’t specify this exactly), and don’t complain.
But do let your members know you want to provide them with the most value and best experience possible.
To do that, you may need more funding.
If you’re planning on offering a specific benefit, new feature, added member bonus, or anything else with a price increase, share it! Giving your members a tangible thing to connect the price increase to can soften the blow. They’ll be pleased to know that you’re still focused on and committed to providing value.
3. Re-emphasize your organization’s value
You should explain to members what they’re getting in return. Remind them why they should pay that higher amount in your membership renewal letters and emails.
Highlight your membership benefits and the value you offer to compensate for the increase.
These could include more community and networking opportunities, an improved mentorship program, an online membership directory, various conferences and workshops, and unique volunteer experiences.
Highlighting benefits and value applies to membership dues, conference registration, certifications, training, etc. Basically, whenever there’s a price increase, respond with “It’s worth it because….”
4. Offer flexibility
Offering flexibility depends a little bit on how significant the price increase is. If it’s fairly substantial (enough that members might walk away), provide some flexibility.
- Keeping communication open between current members and your team
- Grandfathering prices for a short time
- Giving as much notice as possible to mitigate shock or concern
- Offering existing members a discounted new due or some compensation (ad space or sponsorship opportunities can work)
If you do want to unroll a big change in membership dues, introducing membership tiers could work well for your members.
How to collect membership dues
Regardless of your membership structure, collecting membership dues is often the most challenging part of membership management. There will always be those who forget to pay and complain that they’ve lost access to their benefits.
Having a standardized collections cadence or calendar will help simplify collections, ensuring they occur on a set schedule, so members become accustomed to an ongoing financial commitment.
Using Association management software (AMS) can also help streamline the collections process, simplify your team’s work, and improve your members’ experiences.
Association management software for membership dues collection
An AMS with automated dues collection simplifies dues collection in the following ways:
- Automatic email reminders. An AMS automates the process of sending reminder emails, so members know when to renew. Any decent AMS will have ready-to-go email templates with the option to renew by including a clickable button that takes the member to your payment page. Simply customize these templates to fit your needs and set them up to send automatically, so you don’t have to lift a finger.
- Automatic renewals. Members who know they’ll be around for some time also have the option to automatically renew their membership without a reminder email even going out. This cuts out unnecessary work while retaining members who otherwise forget to renew.
- Online payments. Allowing members to pay online is convenient and fast. Most AMSs will integrate with a preferred payment processor, so members feel safe and secure about paying online.
Learn more about how an AMS can help you collect membership dues.
Top tips on collecting membership dues
You want to give members enough time to receive and process the renewal, so the earlier you start reminding people to pay their dues, the better.
How early depends on the type of dues you collect.
If monthly, remind one week in advance.
Yearly? Three months.
Multi-yearly? Six to eight months.
Personalize your reminders
The best renewal emails are personalized, addressing the member by name and specifying the exact renewal date and amount. This personalization improves the chances of members actually reading and responding to your emails. It also helps eliminate the suspicion of spam.
The right AMA lets you create these personalizations automatically by pulling relevant data from a contact database you set up.
Read more: 3 Membership renewal letter samples to boost your renewal rates.
Allow your members to pay online
In this day and age, convenience is K-E-Y. Period. The easier it is for people to pay their membership dues, the more likely they are to do so. Nothing is easier than online payment, which, as you saw, is possible through an AMS.
Your members are busy. Sometimes, the thought of renewing their membership simply slips their mind. Don’t punish them for that. In fact, it’s better for everyone if you offer a grace period of some sort. Members are more likely to renew in the grace period than after the period has completely lapsed.
Many organizations also let their members retain membership for free if they’re unemployed. This allows members who’ve recently lost their job to take advantage of the networking opportunities that your organization offers at a time when they need it most. Once they’ve found employment, you can ask them to become a paying member again.
Membership dues 101
Collecting membership dues allows you to run events, hire staff, organize member benefits and create value for your organization. Just be sure to raise prices when needed, communicate with members, track and renew with a plan, and consider tiers to make the most of your dues.
Also, don’t forget the value of Association Management Software in dues collection and helping you further stabilize your revenue by allowing you to send automatic email reminders, set up automatic renewals, and accept online payments.