A lot of creators turn pricing into a complicated mental struggle.
“Should I charge $5 or $50?”
“Should I have a free tier?”
“What if my price scares people away?”
Reasonable questions, to be sure, but don’t worry; we’re about to resolve them all.
As with any product, the best pricing strategy for your membership depends on your goals.
What is your #1 goal for your membership?
The answer to that question will determine the optimal membership pricing strategy for you.
Here are some guidelines to follow for picking a price to charge.
Goal: Build the largest possible membership base.
Best for: Creators who want to build and grow a platform to engage with as many members as possible, regardless of revenue generated from membership subscriptions.
Optimal pricing strategy: Offer your membership for free or a very low price
Goal: Make the most revenue from membership subscriptions.
Best for: Online entrepreneurs who want their membership to serve as one of the primary profit-generating pillars of their business.
Optimal pricing strategy: Set your price high enough that members will take it seriously and engage with the membership, but low enough that the monthly recurring charge won’t lead to high churn. A good test for this is “how much are they already spending monthly to solve problems in the same topic area?”
For example, people who hire personal trainers tend to spend a lot on them (say, $300/month), so you can price your fitness membership relative to that ($149/mo), while most people don’t spend much on home organizing ($0 for most people), so you’ll want to price that membership lower (for example, $19/mo).
Goal: Upsell members into a professional service
Best for: Consultants and coaches who offer memberships as a lower-cost option for prospects considering a services engagement.
Optimal pricing strategy: Price your membership relative to the service you’re going to upsell your members on; as a rule of thumb, the price should feel like a no-brainer if they’re considering your other service but it’s “just a bit more than [they] can spend right now”.
So if you charge $1,000/month for your service, offer your membership for $500 per month. If you price this too high, you’ll begin to cannibalize your service sales, but if you price it too low, you’ll have a hard time upselling members to something that’s 4-5x more expensive.
Regardless of which price you choose, a smart method that many successful creators like Dave Delahunty use is to start for free free, and then raise your price:
“You need to test your product first before you start asking for people to give away their hard-earned money.
I knew my 5 Ideas a Day product would work because I had built the community prior to launching the membership.
I had spent the previous year uploading 5 ideas every day for FREE! I posted my ideas on Instagram, Twitter, Facebook, Medium, LinkedIn and many forums to maximize my community growth.
I had built up a solid community of engaged fans who loved seeing my daily ideas. They loved them so much that they were prepared to pay the $4.99/month.
Build the community, test the product and if it works, ask them to pay.”
But if you want to charge from day one — perfectly reasonable, since you’re providing something of value! — then follow the advice of Callie Willows, Head Honcho at the Membership Site Academy:
“When it comes to pricing, there is no right or wrong answer or set guide to what to charge and it will depend on things like your monthly deliverables, the amount of access to you and your audience and market.
It can take some experimentation to find your sweet spot. So my top tip is that if you're not sure about your pricing, start with a lower price than your end goal - it's much easier to raise your price later (and create some reverse discount promotions in the process!) than to realise you have set your price too high from the start.
This also has an added benefit of rewarding your first members for getting into the membership early - they get the best ever price and get to keep this for as long as they are a member, which then helps with retention.”
Most membership software platforms let you charge monthly or annual subscriptions.
Both structures have their pros and cons, and it’s important to understand them to choose one that’s right for you.
Monthly billing offers a lower member commitment and is easier to sell than annual billing, which requires a higher financial commitment (unless you discount it steeply).
On the other hand, annual billing guarantees that you won’t have monthly members leaving each month, while monthly billing gives your members the option to cancel frequently.
The cash flow benefits of annual billing can’t be ignored, either, as getting paid upfront gives you the opportunity to invest your revenue faster and grow your business.
But monthly billing will also reduce issues that are common with annual plans, like credit cards expiring between payments and members forgetting about your membership because they don’t see the monthly charge.
A rule of thumb to help you decide on a pricing structure is: will your members get massive value in the first 30 days of their membership? - Tweet this
If the answer is yes — and the value in the first month is reflective of the value they can consistently expect to get each month — then your member churn (members leaving each month) will likely be lower, so monthly subscriptions are fine.
But if the answer is no — for example, if members will see their biggest return on investment if they stick around for 4-6 months or longer — then you’ll be better off with annual pricing, as members paying monthly are far more likely to drop off before getting value from the membership.
Additionally, you can offer annual billing with a slight discount as an option when selling a monthly membership model. This lets most members select the easier-to-stomach monthly subscription, while letting those who prefer to pay upfront for a discount do so.
Note: If this is your first time selling online, we recommend skipping this section on pricing tiers. Keep things simple so that you can get your membership off the ground, and then add tiers when you’re comfortable with the rest of the process and ready to take things to the next level.
One of the most powerful tools that membership creators can use to increase signups and deliver a better experience for their members is to offer membership tiers.
Here’s why: Tiers make it easy for your prospective members to choose a plan that fits them.
Tiers can help shift your prospect’s decision from a binary one (“should I sign up or not?”) to a best-fit one (“which tier is right for me?”). - Tweet this
Plus, tiers can have a massive psychological effect on how your prospects perceive your pricing.
A quick and fascinating story about bread makers
What does your membership have in common with bread making machines?
A lot, actually.
In the 1990’s, William-Sonoma introduced a bread maker in their stores, priced at $275.
It was one of the first bread makers in the market, and when it launched…sales were disappointing, to say the least.
Concerned, the retailer hired a research firm to help them figure out why the bread maker wasn’t selling.
The consultants came back with an interesting recommendation:
“Make a bread maker that’s slightly better, but price it twice as high.”
Williams-Sonoma did what the researchers suggested, and guess what?
But it wasn’t the newer, pricier bread maker that was selling…
…it was the cheaper, original one.
What happened here?
The answer is one that pricing experts have known for a long time: relative pricing.
Initially, customers had no idea if the $275 bread maker was a good deal or not; they had never seen a bread maker before, and didn’t know how much it “should” cost.
But by introducing a much more expensive model that was only a little bit better…Williams-Sonoma made the original model look like a fantastic deal!
You can apply the insights into relative pricing from this story to your membership by offering tiers, like The Portable Faith Community does:
Step 1: Choose the price you want most of your members to select. That’s your “middle” tier.
Step 2: Next, choose a price that’s 25-50% lower. That’s the price of your “low” tier, which will be far less valuable than your middle tier. The price-to-value ratio difference (the middle tier is far more valuable but only slightly more expensive than the low tier) will make the middle tier feel like an excellent value.
Step 3: Finally, choose a price that’s a lot (for example, 100%) higher than the middle tier. That’s the price of your “high” tier. This tier will have the most premium benefits, but the high cost will also make the middle tier feel inexpensive in comparison.
Here are some ideas — with example pricing — for how you can structure your tiers to get the price-to-value ratio right:
Low Tier ($15/month)
A “light” version of your membership.
Middle Tier ($20/month)
This is the main membership tier, and where you deliver the primary value proposition of your membership.
This tier will include the “full” version of what you have in the low tier.
High Tier ($50/month)
Stack this tier with benefits that have high perceived value, like personal coaching sessions, email Q&A and private group/channel access.
Curious about lifetime membership tiers? That's its own can of worms to digest, but we've put together an article on lifetime memberships that explores it in-depth if you think that might be your speed.
OK, with your membership model, structure and pricing set, it’s time to build!
Building membership websites can be a breeze with the right software, or it can be a long-slog through membership plugins without it. In the fourth chapter of this guide, we look at the tools you can use to create a membership website, including all-in-one solutions, and the different features creators need to make the most of their membership programs.
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