Are you looking for strategies to drive revenue to your association? Rather than reducing product costs and increasing sales, you could reconsider your organization’s pricing strategy.
Choosing the right pricing strategy for your association’s services and products can offer powerful results. However, pricing mistakes can set back your organization’s viability, impacting member satisfaction.
Read our blog to learn why your association should adopt a pricing strategy and how to avoid common pricing mistakes.
Why associations should adopt a pricing strategy
Did you know that when you choose the right price for your products and services, a 1% price improvement can lead to a 10% increase in profit? Adopting a pricing strategy will help your association capture the true value of your services and products. Remember that the cost of your products and services don’t influence your prices. Instead, the willingness of your members to pay for your products and services influences your prices.
3 pricing mistakes your association should avoid
As you build your association’s pricing strategy, there are several common mistakes you’ll want to avoid. Here are the top three pricing mistakes your organization should avoid when creating your strategy:
1. Not aligning pricing with association goals and objectives
As you build your association’s pricing strategy, be sure to align with your association’s goals and objectives to ensure that pricing decisions support your association’s initiatives. Consider these questions to get to the heart of creating your pricing goals:
- What are our primary revenue goals?
- How does our pricing align with the value we provide our members and does that value meet their expectations?
- How do we compare to competitors and what unique value we offer to justify our pricing?
- What are our costs?
Use these questions to focus on your organization’s pricing goals. By reflecting on these questions, you can get started with a well-aligned pricing strategy that allows your team to achieve its goals!
2. Overlooking the value of your product or service
Do you understand the true member value of your products and services? Before you price your products, you’ll want to consider the value it offers to your members and customers. Consider value-based pricing strategies to deliver more value with your products and services:
Value-based pricing
Value-based pricing can help your organization price your products and services based on the way your members view them. It’s focused on setting prices according to perceived value delivered to members and customers, rather than solely on product costs or competition. A value-based pricing strategy ensures that pricing resonates the most with your target audience, ultimately increasing satisfaction and willingness to pay.
Value-based pricing helps convey the worth of your product or service, but this does not mean that you should ignore your costs or competition. The questions you reflected on previously will help you define and understand your unique value.
3. Don’t underestimate all associated costs
One common pricing mistake organizations make is underestimating all associated costs, including production, operational, and distribution expenses. Factoring in these costs ensures that you fully understand what expenses your pricing covers. Ignoring hidden or indirect costs can lead to underpricing or poor member experience.
One common forgotten expense is payment processing:
Credit card processing fees
It’s important for your organization to understand the total value of monthly credit card payments that you can accommodate. Per transaction, processing fees can cost your organization approximately 2-3%. Some organizations consider surcharges to make up these fees. Keep in mind, credit card surcharges are regulated by state governments and is illegal in certain states. There are also limits per transaction. This pricing strategy can increase your risk and add more regulations for your organization and monitor and stay compliant with.
Incorporating these fees into your pricing strategy ensures that your organization can maintain profitability while offering members convenient payment options that they know and expect.
Checks
If you’re like most associations, you accept checks, paper billing, and invoicing. However, there is a hidden cost of accepting checks. Banks typically charge organizations for account transactions, monthly fees, and cash deposits. Between business accounts transaction, cash deposit and monthly fees, checks can cost anywhere from $4.00-$20.00 each. These fees add up quickly over time.
It also takes your association’s employees more time to organize, and process check transactions, costing your organization valuable time that could be spent on enhancing the member experience.
Cash
Cash payments, while avoiding processing fees, can pose security risks and require time and labor for counting, reconciling, and transporting cash to the bank. There are also security expenses associated with handling and safeguarding cash. These factors contribute to the overall cost of cash transactions and should not be ignored.
By adopting a strong pricing strategy that incorporates all operational costs—including credit card processing fees and the administrative burden of checks and cash—associations can avoid common pricing pitfalls but also ensure long-term success and profitability.
