#bestchamber practices - Tiered Membership Dues Structure for your Chamber of Commerce - Detroit Regional Chamber

A vintage case study, but one worth reading for any chamber considering the switch to a Tiered Membership Dues Structure.

Benchmarking the Concept
ASSOCIATION MANAGEMENT, May 2005

By: Dawn Moliterno

A tiered membership structure allows members to decide at which level they want to join an organization. But is it the solution to your association's membership challenges? Learn how associations are implementing this structure and determine if it's right for your group.  

 

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.
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. To learn more, go here:

American Society for Association Executives