Explore best practices for membership pricing strategies. Learn how to set, adjust, and present prices to maximize value and grow your member base.
By Joanna Taylor • Updated 13 October 2023
Wouldn’t it be great if you could learn how to choose an effective pricing strategy for your membership site?
To maximize profits and offer value, you need a membership pricing strategy that’s suitable for your membership site and the content you have to offer. A solid pricing strategy boosts customer retention and increases your total revenues.
In this post, we will take you through the most common membership pricing models, making it easier for you to find the one that suits you most. Let’s dive in.
The tiered pricing model makes it easier for you to offer multiple packages to customers with different needs. Such packages are always categorized into different tiers, depending on the resources offered.
And the trick here is to offer two or three tiers. Anything above that will confuse your customers - there are high chances that they might get indecisive as they are browsing through your payment plans.
In other words, offering more than three plans can be counterproductive.
On a pricing page, typically the entry-level tier is referred to as the basic plan. It’s a good payment plan for customers who only need the most basic level of access to your content or services.
The top-tier plan, on the other hand, is known as the premium or pro plan. As a top-tier payment plan, a premium package features everything a customer might need to execute high-level tasks.
The tiered pricing plan can be suitable for you if you are offering a lot of resources in your membership program, or can break down your content into different access levels or tiers.
For example, if you have high-value resources and simple resources, you can offer them in different tiers. You might also provide access to more basic training or courses in your lower priced plans, and include access to everything in a more premium plan.
As the name hints, this model helps you find a middle ground between free and premium plans. By offering free resources, you can easily market your membership site to potential customers for a certain period of time, until you convert leads into premium users. A win-win situation.
While freemium plans shouldn't be confused with a free trial as these are different concepts.
With a free trial, members will normally be required to provide payment information while signing up. This can be a barrier to entry for some potential customers. Other users don’t like sharing their personal information, especially when signing up for free trials.
With a freemium pricing model, your customers can easily access certain resources for free, without sharing their personal information beyond their name and email. This means they will always have access to the most basic, free level of your membership.
When creating a freemium plan, you need to draw a line between free resources and premium resources. Look for something that’s attractive enough to pique the interest of prospects, but does not compromise the value of other premium resources.
For those who want to aggressively market their membership programs, this pricing model might be perfect for your business. If you're good at email marketing and converting members once they're engaged in your content, this could work well for you.
Unlike the tiered pricing model, which features multiple payment packages, the flat-rate pricing model has one payment plan only.
As a result, everyone gets access to the same functionalities, features, and resources. The good thing about this pricing model is that it makes it easier for customers to sign up for your membership.
They won’t spend a lot of time analyzing multiple payment packages to come up with a solid decision.
Trends.vc Pro membership has one simple yearly pricing plan for all members
The flat-rate pricing model can be a double-edged sword for pricing success. While customers might not feel indecisive while they are choosing a payment plan, a flat-rate pricing model might not be diversified enough for some customers.
There might be a subset of customers that are prepared to pay more for premium resources, whilst some may not join your membership because the one-tier pricing is too high for them.
It's worth testing the flat-rate pricing option - just bear in mind this can sometimes leave money on the table which could come from having a more diverse pricing strategy.
This fixed pricing model might be suitable for you if you have a simple membership program, which doesn’t have lots of different resources.
To use certain resources, most organizations usually pay a certain price, based on the number of users under their wing.
With this pricing model, you can offer fair prices to different types of organizations and teams - an incentive to motivate more groups to join your platform or program.
The group fee pricing model is an ideal model for membership platforms that are always used by teams and organizations.
When it comes to the add-on-based pricing, users can easily select the resources they need and pay for them.
Think of it as a customized experience.
You'll be giving your customers the chance to select the resources that suit them most. While users can opt for certain add-ons, most products usually come with premium benefits that have a certain tag. Users have to pay for such benefits to access additional features and add-ons.
But here’s the thing:
Dealing with customized products can be quite hectic. Since such products are customized in a unique way to satisfy user needs, it can be challenging to streamline the customer experience for various users.
If you are dealing with something that has tons of resources, the add-on pricing model can be suitable for you.
Instead of revising your payment plans every time you introduce something new, you can offer new features as add-ons via the add-on-based payment model.
The one-time pricing model has a lifetime payment option, which gives users access to everything on your platform.
Since you won’t be handling multiple recurring payments, you don’t have to spend a lot of time trying to figure out what you should include in different payment plans.
Besides that, it’s an ideal model for attracting many customers. Well, this pricing model saves customers the trouble of paying recurring monthly fees to access certain resources.
Also, who doesn’t like the convenience of a lifetime payment plan?
For those who don’t have the time to update their resources every month, this payment plan might be perfect for you.
Good pricing strategies can easily attract customers to your membership site. For instance, if your payment plans are designed to satisfy the needs of various customers, you can easily attract customers who are willing to pay different prices to access your resources.
Moreover, payment plans offered via the lifetime pricing model can also be a great bargain for customers who want to access your resources for life.
Payment plans can show the value that you are offering to your customers. Prices above a certain threshold can easily demonstrate value.
Not to mention, some customers always prefer premium payment plans to entry-level plans, so it’s quite easy to capture their attention with premium plans.
On the contrary, extremely low prices can create the wrong perception.
Once you come up with a good pricing model, you can use different (key performance indicators) KPIs to estimate your cash flow and revenue. For instance, the customer retention rate can help you calculate your monthly revenue.
Additionally, the customer traction rate can be multiplied by different payment plans to estimate your projected annual revenue.
The first thing that you need to consider is the profit margins of your payment plans.
To make some good profits, your final rates should be higher than the operational and production rates.
Start off by calculating the amount of money you'll spend while hosting and maintaining your site - operational costs.
If a lot of effort went into the project, calculate the hours you spent on your membership site. Next, multiply your working hours with your hourly rate to come up with an estimate of the production costs.
By adding the production cost and operational costs, you’ll have a rough estimate of the money that you spent on your membership site.
And here’s the thing: the final rates should be higher than the money spent on your membership site.
Your competitor’s rates can be a good reference point. Such rates will give you insight into the standard membership pricing. With that said, you need to assess your competitors' pricing strategies to determine the average costs of different payment plans.
Getting more insight into the purchasing power of your target audience makes it easier for you to come up with reasonable and affordable prices.
Besides that, you have to analyze the value of your membership site. By doing this, you’ll know the value that you are offering your customers and how to charge them based on the demonstrated value.
As a result, you’ll create payment plans that are neither cheap nor expensive. For starters, some customers might question cheap payment plans. Expensive payment plans, on the other hand, might affect customer traction.
The Van Westendorp’s price Sensitivity Meter can guide you as you’re coming up with prices of various payment plans.
A large market will give you access to many customers. However, if you are dealing with something that doesn’t have a large market, the number of customers might be limited. So, you should set your membership pricing, depending on the market size.
In a large market, the profit margins might be low, but you’ll still make a lot of profit due to the high conversion rates.
For those who are dealing with a small market, the best move would be to set a high price with high-profit margins.
To choose a suitable pricing model, analyze your business model, market size, and the resources that you are offering.
Once you select a certain membership pricing model, stick with it for a certain period of time, and ask for customer feedback.
This makes it easier for you to know whether your payment plans are compatible with your target audience.
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