Tiered up for membership: a tiered membership structure lets members decide which benefits they value most.

"FOR YEARS ASSOCIATIONS HAVE BANKED ON AFFINITY programs and recycled ideas to provide value for dues," says Dawn Moliterno, president and CEO of Introspect Associates, Ltd., Canfield, Ohio. "Offering members a one-size-fits-all benefits package can and will always be a challenge. So associations are left with this quandary: How can you realistically raise dues without adding value and not watch your retention numbers dwindle?"

Faced with this question, many associations are rethinking their membership structures. One of the most common structures used by both trade and professional associations is the fair-share structure where membership categories, benefits, and dues are determined by a specific characteristic of the individual or company. For example, a trade association might determine its company member dues based on annual revenue, and an individual membership organization might set dues based on professional specialty categories.

This model has proven problematic for some associations, however, because while all members receive the same benefits, some pay higher dues based on the established criteria.

As a result of member discontent with the aforementioned model, more organizations are exploring a tiered membership structure in which membership and subsequently dues are based on membership levels or benefits packages rather than on categories determined by specific demographic criteria. "Embracing one of the fastest growing trends nationwide, more associations are turning to a tiered membership structure to replace outdated dues structures that do not communicate value to members," says Moliterno, who has worked with several organizations in their transition from a fair-share model to a tiered membership structure. She outlines these primary reasons for the switch:

To give members control and choices. A tiered structure accommodates companies regardless of size (or individuals regardless of professional specialty) and ensures appropriate investment for the resulting delivery of services and products. Participants customize their memberships by selecting their levels of involvement and investment.

To realign business purposes to match customer needs. A tiered membership structure allows associations to easily adapt to rapid change and significant competitive challenges because they can adjust their benefits to address new trends while adding value to their memberships at specific levels. They can also demonstrate a return on investment for members, since the tiers are segmented to match specific products and services to member needs and desires.

To create one clear and concise message. Often, members say that they don't know what they receive for their dues. When shown the tiered concept, however, members appreciate the compartmentalized areas of information that they can easily digest.

HDI--an association based in Colorado Springs, Colorado, that provides professional development for technical support staff--offers five levels of membership, ranging from bronze to platinum-plus and priced from $75 to $1,295 per year. The Detroit Regional Chamber has a similar model. It offers four primary tiers, ranging from business builder to gold and priced from $495 to $5,700 per year. Both organizations established their levels with the goal of generating more revenue and increasing retention. In the articles that follow, you'll learn how each organization implemented its tiered structure.

Going for the Platinum

HDI HAS ALWAYS HAD a membership structure based on tiers or different levels of membership. During the past 15 years, we've expanded from two to five levels--bronze, silver, gold, platinum, and platinum-plus, ranging in price from $75 to $1,295. In 1989, we started with two basic levels of membership, and then we built up and down from there to address the different needs of the organization. We have always felt that the tiered membership structure enabled us to achieve the highest revenue per member as well as higher retention rates. Our approach is to focus on upgrading members to higher levels of membership at renewal time rather than simply renewing them at the same level every year.

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Currently, HDI has 6,000 individual members in the United States--7,500 members worldwide. Our members are customer service and technical support professionals who work in help desk and support center operations. They value our certification programs, online training, and annual meetings.

HDI's membership is divided 50-50 between those who have memberships at the gold or lower levels and those who have memberships at the platinum and platinum-plus levels. Our goal is to upgrade people to the next level during the term of their memberships. We have an online calculator for that purpose so that members are readily aware that not only can they renew electronically, but also they can upgrade their memberships and receive additional benefits and services, such as more copies of industry publications, access to online training, and self-evaluation tools.

Overall, the tiered dues membership structure has been successful for us, and we've learned some important lessons as we've worked to reinforce the value of membership.

Member input. We believe in asking our members what they want and then giving it to them. We have a member advisory board, and we value its guidance. Before making any changes to programs or membership levels, we present our plans to this board. In addition, we have an annual summit with our local chapter leaders every summer to solicit their input.

When we first considered introducing the platinum-plus membership, we actually polled our members to find out what additional deliverables they wanted to receive. For example, we asked them how many additional staff people they wanted to receive benefits from the membership along with the primary member. They told us five or six people, primarily middle managers, so we built the membership that way. In the first year that platinum-plus was available, we recruited 1,000 members at this level. Today, 30 percent of our members are platinum-plus.

Retention. Our retention rate is better at the higher levels of membership because our members see the value in all the deliverables that they receive. Members were pleased when we introduced the platinum-plus membership because they wanted our highest level of service, and they were willing to pay for it.

Our overall retention rate is 60 percent, and we are working toward our goal of achieving a 65 percent retention rate. The retention rate for our platinum and platinum-plus members is more than 70 percent. We believe this is the case because these memberships are tied to an organization. While there is one member of record, multiple staff members at the organization's site are taking advantage of HDI membership benefits. Renewing silver and gold memberships is more difficult because people change jobs, and it's hard to maintain contact with them. We truly believe that this is the reason we lose members. It's not because members don't value our deliverables.

Administration. The tiered dues membership structure has helped us resolve specific administrative challenges, while creating others as our benefit offerings become more complex. For example, the bronze membership was introduced to help us manage our relationship with local chapters more effectively and it has improved that administrative problem. Basically, we collect the dues for HDI's nearly 60 local chapters in the United States and Canada and send them the money to fund their operations. Prior to introducing the bronze membership, we didn't have any records for our local chapters. Local chapter members would call the national headquarters requesting their discounts on meeting registration and other products, and we had no information about them. Having the bronze membership solved this problem.

On the other hand, we have experienced some administrative challenges with our higher-end memberships. Pulling data to ensure that members receive the benefits to which they're entitled still involves some manual work. Further, our biggest challenge with the platinum and platinum-plus memberships has been devising a way to attach or connect people to companies. For example, if the member record is not updated properly, people may continue receiving discounts after their organizations' membership has expired.

For the most part, we've achieved our goals using the tiered structure, and we do not anticipate modifying our current membership levels a great deal. Of course, any additional services and benefits will be added at the higher membership levels. Our continuing challenge will be to reinforce value to our members.

HDI's Membership Tiers Comparison

                            BRONZE  SILVER  GOLD   PLATINUM  PLATINUM-
                            $75     $115    $340   $560      PLUS $1,295

Annual conference and expo
discounts                   X       X       X      X         X
Special event discounts     X       X       X      X         X
Training discounts          X       X       X      X         X
E-store discounts           X       X       X      X         X
One association local
chapter membership          X       X       X      X         X
Web access for members
only                                X       X      X         X
Leading industry
publications                                1 set  1 set     5 sets
Discounts for entire
employee site                                      X         X
Online training                                    1 course  2 courses
Online support center self
-evaluation                                        1         1
Annual subscription to
Support World                       X       X      X         X
Access to the Support
Professional Information
Network (SPIN)                      X       X      X         X

BY RON MUNS AND PEGGY LIBBEY

Ron Muns is founder and CEO and Peggy Libbey is chief financial officer for HDI, Colorado Springs, Colorado. E-mail: [e-mail].

Benchmarking the Concept

TO HELP OUR CLIENTS TO better measure the pros and cons of implementing tiered dues programs, Introspect Associates, Ltd., conducted a study with 50 local and state chambers throughout the country. The study was designed to assist Introspect's clients in benchmarking the tiered membership concept. Because tiers are customized, benchmarking can be tedious and misleading if not completed on a one-to-one level.

Each chamber submitted a written survey, and then we personally interviewed the respondents to ensure that they had interpreted and answered the questions correctly. A sampling of the data shows that at least six of the participating chambers have experienced an increase in new membership revenue since transitioning to a tiered dues membership structure.

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The Detroit Regional Chamber was one of the participants. In 1996, DRC transitioned from a fair-share membership structure to one based on tiers. In the first year following the launch of the new structure, DRC increased its membership revenue by 7 percent. In addition, the chamber's average membership sale in the tiers above the entry or product level increased from $304 to more than $393, and membership increased by 9.2 percent. Moreover, sales of new memberships in the entry level nearly doubled, enabling the chamber to significantly increase its nondues revenue by about 30 percent.

Making the transition

DRC began its transition to a tiered dues structure after thoroughly evaluating its marketplace in Southeast Michigan. In that area, the competition for membership is fierce, with many businesses joining DRC only to take advantage of its affinity programs. The most popular programs center around group health insurance, and there is little perceived differentiation between DRC and the associations that offer similar benefits. Similar to most metropolitan chambers, membership dues account for somewhere between 20 and 35 percent of DRC's total revenues.

Setting goals

One of DRC's goals was to grow total revenue by increasing participation in its affinity programs--an option that's available at its lowest level of membership. At the other end of the spectrum, DRC's goal was to allow members to select higher levels of membership, which would provide the service, involvement, and connection points that fit their expectations. Through the fulfillment of these goals, DRC wanted to become the Wal-Mart, the price leader, at one end of the spectrum and the Nordstrom, the relationship leader, at the other end, with varying levels in between.

Prior to the initiative's launch, the chamber's dues base stood at $3 million, averaging $294 in dues per member, with a one-size-fits-all formula. Now, the dues base stands at $3.5 million, averaging $407 in dues per paying member. Significantly, product revenues for all the chamber's affinity programs have about quadrupled during the past nine years.

Measuring member value

DRC measures the value of a membership account based on a combination of the kinds of revenues generated by the member (dues, affinity programs, advertising, sponsorship, event attendance, and so forth). Because of the chamber's emphasis on a total financial relationship versus only membership dues, DRC has built a large membership base, and total membership now stands at just more than 21,000 firms versus just more than 10,000 firms when the program was launched.

As DRC's example illustrates, launching tiered dues programs has the potential to reap significant benefits. However, during the initial stages of a transition, your association may experience challenges similar to those encountered by the Detroit Regional Chamber and others that participated in Introspect's study. Here's some advice based on DRC's experience:

Stick to the plan; don't waiver when losses occur. Your association may experience a decrease in membership initially or other setbacks, but you shouldn't give up on your transition plan. Despite an intensive orientation and training period, it took about two years for DRC's membership sales representatives to begin consistently selling higher-level memberships.

Concentrate on the quality, not the quantity, of members. Recruiting members who value and take advantage of your products and services should always take precedence over signing up a large number of members who are not interested in the organization's goals and objectives in the long term. Among DRC's 21,000 members is a core group of more than 3,000 members, and more than 700 of those firms are at the Nordstrom levels of membership.

Encourage your board to stay the course. Boards will want to change the program. However, if they stay the course, they are likely to reap the benefits. They must believe in and support the concept. The Detroit Regional Chamber went through a lengthy, detailed planning process, which at times included volunteer leaders from its board of directors, who assisted in evaluating the options.

Looking at the big picture

Any review of a membership structure needs to be part of a broader analysis. A tiered membership program is part of an overall strategic plan. It cannot, for example, be a project that is coming from the membership department and operating in isolation from the rest of the association. It requires a change in organizational culture and how your association does business.

Before implementing a tiered membership program, be sure to review your group's overall revenue sources, objectives, priorities, and member needs. DRC's planning process was intensive and focused on the competitive landscape, the question of value, an analysis of its membership, and the chamber's financial goals.

Deciding if tiers will work for your association

One of the most challenging strategies in the process is evaluating everything you do, or should be doing, in an effort to cluster your products and services into tiers.

DRC created seven membership tiers, ranging from $80 at the entry or product level to $5,700 at the gold level. Value elements were added at each tier. Often the elements had to be created, and sometimes they were mined from the value inherent in many of the chamber's existing programs. DRC tiered down to make itself the price leader for affinity programs and tiered up to attract and keep members wanting deeper relationships, higher connectivity, and higher service levels.

Assessing needs

Following this example, an association first needs to assess its members' needs and determine whether its organizational structure is defined to meet those needs. You cannot simply borrow ideas from a tiered dues model and slap them onto your association. A successfully designed tiered dues membership program consists of specific components. To ensure that such a program has potential for your association, determine whether these components are viable, considering the benefits you provide and your members' expectations:

* Predetermined number of investment tiers that are matched and then priced to reflect market realities and customized to match segmented audiences.

* A value proposition created for each tier as well as added value throughout the tiers.

* A sustainability plan to keep the tiers from becoming static.

Once you've decided to move forward with a tiered structure, much of the success of the program rests in the association's relationship marketing strategy. This program forces the organization to engage in ongoing communication with members about what benefits they want and need to ensure the longevity of their involvement with the association.

Counting the cash

Each organization and market is different so you'll want to design a membership structure that fits your organization's goals in your unique marketplace. Ultimately, you need to focus on the dollars the association earns every month instead how many individual or company members joined. For-profit companies rarely count only the number of clients as a barometer of success; they use revenue or total sales to gauge their performance. While there is a need and value in knowing how many members an association has, the focus must shift to total dollars. The reason is simple: If an organization has been effective in attracting members to increasing levels of benefits (and dues), it can have a small membership base that generates high revenues. By attracting quality members willing to pay for increased value, the association will increase its long-term profitability.

BY DAWN MOLITERNO

Dawn Moliterno is president and CEO of Introspect Associates, Ltd., Canfield, Ohio. E-mail: [e-mail]. Edward Wolking, Jr., executive vice president, strategic directions, for the Detroit Regional Chamber contributed to this article.

EDITED BY APRYL MOTLEY