The Membership Guys

How Perceived Value Impacts Your Membership Pricing Strategy

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Pricing your membership should be straight forward…

You do your research, decide on a price and you run with it, right?

For some people, yes that's how it works.

But for others, it's not that simple…

You see, when it comes to pricing your membership, there are so many different ways to approach it…

And a lot of different factors to consider.

Quite a lot of the time, pricing is downright illogical

Because so much of it has to do with the perception of the value that your membership delivers…

And that's not an easy thing to gauge.

So if you're preparing to launch your membership

And are struggling to price it…

Here are some important things for you to consider:

The perception of value

When pondering how much you should charge for your membership website…

There’s a multitude of different influences to contend with…

And trying to pre-empt various subconscious decisions that potential members may or may not make before deciding whether or not to join your membership will tie you in knots.

Often it comes down to this one simple thing…

Perceived value.

Perception affects how your potential members will interpret your pricing…

And perception is different for everyone.

Some will say your price is too high…

And others will say you should charge more.

So, if you’re worried about getting the price perfect, forget it…

As everyone will perceive it differently..

And you can't keep them all happy! 

What we’ve learned from buying a house

Let’s frame this with a very timely example…

Callie and I recently came to the end of the long process of buying a house…

Which has been very stressful and taken way longer than we anticipated, but that's by the by!

Along the way, we've learned that there are so many different factors at play in the whole house buying process…

And just how absurd the notion of value really is.

Lots of different perspectives involved in buying and selling a house…

Confused where I'm going with this? Bear with me… 

It’s all about perception.

When it comes to buying a house you have the seller who wants the best possible price for the property…

They just want to charge as much as they can ‘get away' with!

The realtor/estate agent also wants a good price…

But they'll be more mindful of what's happening in the wider housing market.

Then there's the mortgage company who will be looking at the risk and the practicalities of the situation.

They're looking at things from a purely logical perspective

And finally, there is the buyer…

Who is a total crap-shoot in terms of predicting what they'll base their purchase decision on!

All of these different perceptions affect the price.

Somehow you need to land somewhere in the middle of all of these different approaches to determining value.

This is something you should keep in mind when pricing your membership.

What is the competition doing?

One big thing to consider is your competition.

What alternatives will your potential members weigh up to compare to yours?

How they price their membership will impact the overall perception of how you price yours.

You don't want your potential members to think like this…

 

But you need to think of the bigger picture when pricing your services…

So, it’s not just about perceived value and the work you put into it…

It’s also about what other options are available for customers.

Will they be willing to pay your membership fee if they can find the same thing cheaper?

Pricing based on practical considerations

Looking back at the house purchase example, let’s look at the practical considerations.

A mortgage company will be looking at the concrete reasons behind a house valuation.

They need to know they’ll get their money back if you don’t pay….

That’s it…

They don’t care about how nice the property is, local amenities or anything like that.

This is one perspective to take when pricing your membership.

How much work went into this membership?

What are the raw ingredients of time, energy, money, and so on?

What are the bricks and mortar of your business?

This is similar to what some call the “cost plus” model of pricing…

It’s what goes in + a bit extra on top.

And is probably one of the simplest ways of pricing your membership.

Consider how much it costs you to run and the margin do you want to make on top of that…

Those two together equal your price.

For example, say it costs you around $50 a month to maintain your membership per member or to acquire new members, and you want a 20% markup.

Your price would be $60 per month.

By the way, if your membership is costing you that much per member you may have a few other issues to worry about other than price!

The customer’s affordability

When purchasing a house, a buyer will have to decide how much they’re willing to pay…

And this decision comes down to a combination of things.

The main one is budget, how much they can afford….

It doesn’t matter whether or not they love the house if they can’t afford it…

And the same goes for your membership.

You don’t want to price all your potential members out of your community.

So you need to take into account the affordability profile of your target audience…

Remember, your membership isn’t the only thing they have to pay for each month.

Don't price out your target audience…

Think about what other things they could be paying for and what their disposable income looks like.

For example, if you’re running a membership on personal finance tips or frugal living, charging a high amount each month might turn most of your target audience away.

Also, consider whether your membership is a must-have or a nice-to-have.

This will impact how likely people are to sign up and stick around.

For example, will people be willing to give up their daily coffee to buy your membership?

Personal perception of value

The most variable thing to consider with pricing is the perception of value and what your membership can do for your members.

How does it affect and improve their lives?

This will be different for everyone.

Some people will get a lot of value…

Other people will find it irrelevant.

Going back to the house example, some people will place a lot of importance on being in a good school district…

But this is something that would be completely irrelevant to those without kids. 

Which brings us to your membership, you need to take into account what your members care about.

Where are they right now?

What’s going on in their lives, and how will you help them on their journey?

Pricing your membership may sound like a simple thing to do…

But as you've read it's not quite that clear cut for some.

With so many different factors coming into play, it’s hard to get it perfect…

But the good thing is that it doesn’t need to be perfect.

In fact, I’d go as far as to say that you simply can’t make it perfect.

You can’t pick a price that absolutely everyone will be happy with (yourself included!)

Because we all perceive value differently.

But by considering all the points I've outlined above…

You can make a more informed and logical decision based that will make your membership an attractive prospect to your target audience.

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