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Nice post Joe (and thanks for the link love). I'd like to push one of your points, though: where you say you can move people from group 2 (buy some stuff) to group 3 (become members). I think that is a fine point and goal, but just to be clear, it doesn't necessarily have to be the goal. Bruce makes the point very well that we are so focused on membership, we tend to not pay enough attention to customers. It's okay for someone to be a customer but NOT a member. In fact, we may want to build customers who we KNOW will never be members. We can still seek to grow membership, but if we stay too focused on the "funnel them to becoming members" mindset, we may miss some opportunities.

Thanks Jamie. I agree in full, actually. The push to funnel people toward membership can be a costly one if you expend your efforts on prospects who are highly unlikely to join. In those cases, the focus should be on still generating some revenue from them, if possible, and that's where the micropricing can come in. For the people who do appear to be good prospects, then of course try to work them through the funnel. In fact, by offering micropriced resources, you could be able to analyze buying habits to discern who may or may not be good prospects for membership and thereby better focus your recruitment efforts.

My intention in mentioning the potential to move people through the funnel is just to make the micropricing idea a bit more palatable to orgs that rely on dues dollars for some significant portion of their revenue. I don't think membership is going away, so I don't see the pendulum swinging fully the other way toward associations focusing on only customers. A healthy balance of both would be best. Trickier than just one or the other, but worth the effort, I believe.

There are of course obvious reasons why associations don't (and perhaps won't) embrace micro-pricing despite this well-reasoned synopsis of the customer-member continuum ... accounting and product line issues that are very traditional, but issues nonetheless.

Most of our products have low volume potential (even with an expanded market of customers) and they're not attractively divisible for a true micro-pricing strategy. The typical product line sorted by total participation and current revenue features items such as face-to-face education, technical standards, subscription products, books, webinars, etc. at the top. Cash cow items might sell for $499 for full registration or $35 for a book (based on a reasonable allocation of marginal production costs), and they're difficult to justify selling by day or by chapter.

Any association that has diligently attempted to extend their content into alternative, price-per-unit formats such as single-session online/CD/audiotape(!) product lines and seen typical weak results may see this as a new, digital rationale supporting something that hasn't worked well for them in the past ... even if poor performance probably reflected them starting with a traditional publishing or educational delivery model then trying to modularize the content and to promote primarily to the same people who were there physically or who saw the pre-pub/conference promotions and decided not to buy or attend. Most of the time we remember something didn't work, but we don't know as much about why it didn't work.

Our interchange and related per transaction fees would be fairly dismal for association-type quantities and product lines: iTunes & Kindle turn a nice profit in part because their individual items are generally bought as part of a multiple-item shopping basked by music and book lovers, whose tendencies are in turn fed by online store designs that feature zillions of products, attractively displayed, cross-referenced and cross-sold.

Given the nature of our content, and as association products are configured now, we may well see quite a few single-item transactions if sold within our own sites. Our product lines for now are not very diverse or divisible into bite-size chunks that facilitate trial oriented micro-transactions that will collectively be profitable enough for us to dedicate more effort, and to promote heavily to the universe of customers who should be interested in our specialized content.

Perhaps the best approach for us as associations would be to form a cooperative with other associations producing content, and linking to a combined nonprofit "online retailer" so we offer more "one-stop shopping" fed by links from our sites, more expert SEO, etc. If outsourced to an entity that learns what works across all associations, we'd also have a better chance of not getting caught up internally with conflicting priorities in product development, or of running afoul of a natural impulse to "protect" our membership and our existing non-dues revenue producing product lines. We'd make some money but, more importantly, accomplish our ultimate goal of attracting attention from Group 1, and migrating some individuals from 1 to 2 and 2 to 3...

Like online job boards or mailing list managers, using an intermediary might generate lower marginal revenue than a homegrown solution would provide in theory, but in return for not generating as much net revenue, we would ensure rapid startup, ongoing implementation, and not miss the opportunity to fulfill our missions through more effective use of what could be a great pricing strategy and content delivery model.

Thanks too for the shout out and I might add that my partner, Peter Houstle also weighed in on the topic (his second post in as many years to the blog which only goes to show that micro-pricing is flash point - check it out http://ow.ly/10NBe).

I was struck by Kevin's reply and specifically his notion of form a cooperative. I believe that we should explore many pricing models and know though that its risky - what I found interesting in Kevin's reply it that we could in fact spread the risk as we test.

The bottom line is that we must generate revenue to advance our mission work and that means we need to look outside the member model to include customers. All this means is that we need to embrace pricing models that consumers are embracing.

The first blog link is interesting and definitely worth reading. I agree that Bruce Butterfield of the Forbes Group has great points in comparing the association world to the newspaper industry. There are alot of commonalities.

I'd like to challenge this blog on the Groups 1-3 definitions, but only on changing the levels to membership in Group 2 and higher priced, higher valued products & services in Group 3.

Let me explain...associations should put their highest valued product at the highest price point. That's a general criteria of success for any business - get the highest dollar amount a customer will pay for any product. Two examples of companies who have done this well: Starbucks & American Girl. In many cases, I would guess to say in the majority of associations, membership is not the highest valued product. But why are dues to become a member typically the highest priced point product in an association? Old model, newspaper pricing thinking is why.

I attended the ASAE & The Center Leadership Conference in November. A group I was with spent a good deal of time discussing some models for associations in the future. One possible conclusion discussed was the AARP model. Low entry-level dues and then higher amounts for member specific products and affinity programs. I think this should be the future model of associations, as it creates alot of benefits just by having such a large pool in your "membership" (think of the legislative impact, just for one). However, the difficult thing is I ran the low dues, higher fees for products through my association and it would be a radical change that if it didn't work, could force my, and any, association to close our doors for lack of funding. So how do you make the leap?

Overall, I'm not saying the AARP model should be universal. Associations are a diverse group and have many financial, membership, products & pricing models that work. But I certainly feel that 'micro-pricing' should be considered for dues for many associations. Now you have them, your customers, 'in the door'. Next, have them buy things, at premium price points because they need these products & resources to succeed (again think $4 Starbucks coffee vs. $1 gas station coffee), because these are the products that are truly the highest value to customers.

Please challenge me on this, as I know I'm missing something.

Thanks everyone for the comments. You've all made some great points, and I think the moral of this story is, as Peggy put it, that associations should explore as many pricing models as possible.

It may be the case that micropricing may only work for some associations and not for others based on the types of products they offer. And it may work for some products at one association and not for other products. But that doesn't mean I don't think it's worth a shot.

I agree with Kevin that a lot of products are difficult to break into small quantities, and I agree with Martin that some products are simply too high of a value to sell for anything less than a premium.

The bottom line for this post, though, is that I want to push associations into thinking about all the various ways some items can be turned into even modest revenue generators and away from the either/or line of thinking about some products being members-only. You might not be able to get a lot of money out of any given member of Group 1, but the size of Group 1 could be enormous; it's only limited by your ability to convince those people that you offer even one small thing they might need.

I like all of these ideas that have been suggested here. These types of pricing structures are where the "rubber meets the road" when it comes to higher-level business-model thinking.

Some more discussion on this topic over on Kevin Holland's blog, at http://www.associationinc.com/658. He offers some good thoughts on why micropricing might be a "ludicrous" idea. Just FYI if you're interested in pondering this further.

I'm thrilled with the conversation my Executive Management Section listserve has generated. One of my clients sometime ago asked how to break their association's dues dependency. I suggested that he offer to reduce dues by a dollar for every dollar of product or service purchased with a floor. The idea was like an elevator where the car drops as the counterweight rises. Of course, this only works of the products and services are market priced not subsidized or discounted. The idea was too scary for him at the time.

My comparison of newspapers and associations suggested the knowledge cooperative model that people like Steve Brill are experimenting with. Cooperatives could be grouped by sector (e.g. healthcare, education, financial services, etc.)with contributors sharing revenue based on content contribution.

It seems to be time for the association community to really address some tough questions about the 20th Century model we cling to. Who's willing to form a "skunk works" to pilot test some of these approaches? How about ASAE?