Membership pricing is not a one-size-fits-all topic. In fact, different memberships in different industries command their own pricing strategy due to the nature of potential customers, their buying habits and features of the product itself.

In today’s online landscape, the traditional offering of a monthly and annual plan shouldn’t be the starting point. Instead, your pricing structure should be determined based on the unique characteristics of your membership product and how those characteristics match up with the problems faced by your target market.

<aside> <img src="/icons/bookmark_gray.svg" alt="/icons/bookmark_gray.svg" width="40px" /> The Big Picture: Your membership pricing structure should be viewed as a feature of your product that uniquely serves your target market.

The Statistics:

Memberships that utilize a Price Spectrum strategy see churn rates that are 40% lower than those that don’t
On average, monthly memberships produce revenue churn rates that are 49% higher than those of longer-dated plans (such as quarterly and annual plans)
Consumers that purchase longer-dated memberships are more engaged and deliver a Lifetime Value that’s 3.8x higher than than the average monthly-renewing member

🚀 The Action Plan: Leverage this formula for implementing a quarterly-annual pricing strategy to maximize your revenue and minimize churn

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📘 Table of Contents

Part 1: Pricing and Risk: A Delicate Balance

All pricing decisions introduce risk - to you as the operator and to your current (and potential) members. Risk exists on each end of the spectrum of outcomes. On one end, pricing your membership too low will risk leaving significant income on the table. On the other end, pricing it too high means your customer acquisition and churn will suffer.

Both of these are extreme outcomes. But what happens in the middle of the spectrum - the area where current and prospective members constantly weigh the decision to keep paying you or to even pay you at all?

This is where outcomes are determined - and the two most important factors in play here are:

The price of your membership
The frequency of the renewal

And how the above two items match up with the ongoing value and utility of your product needs to help shape your pricing strategy.

Below, we’ll look at the strategic approach to determining the price of your membership and then how to determine the optimal renewal frequency for your product.

The Right Price Doesn’t Exist. Perceived Value Does.

Pricing is everything. But how do you know the right price for your membership product?

There is no right price.

Let me explain…

Each member and potential member carries a unique view and tolerance for pricing. Those views and tolerances are constantly being shaped by influences outside of your control - macro and micro-economic factors, life circumstances, etc. The list goes on.

For any member, their perceived value of your product will constantly change over time.