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Membership dues might not be the most flashy aspect of building a community, but they are the fuel that keeps programs going.
Maybe you organize a membership program and need a way to determine pricing, payment schedules, tiers, and how to collect dues. Or maybe you're a prospective or current member of an organization, curious about why membership dues exist and the value they offer.
Either way, you've landed in the right place. Below is just about everything you need to know to understand, manage, and track membership dues.
What are membership dues?
Membership dues are the fees someone pays to an organization to gain entry or involvement. You'll often see nonprofits, associations, chambers of commerce, professional societies, and clubs with membership programs.
Organizations provide value through dues paid by members, which are typically collected regularly. Some organizations have monthly dues, and some use annual models, which we'll explore shortly.
Why membership dues are so important to associations, chambers, and other organizations
A great source of revenue: Membership dues introduce another income stream to fund operations and expenses and impact revenue recognition.
More value for members: Dues increase the services and benefits organizations can offer, making membership programs attractive to new members.
Financial stability: Organizations can better predict and strategize their budgeting decisions to grow steadily.
Membership models: multi-year vs. annual vs. monthly dues
Below, we'll discuss two common membership models, providing opportunities and points to consider as you decide what's best for you.
Responsive Table
Organization contribution type
Limitations on the percent you can deduct from adjusted gross income
Multi-year membership
Only having to remember to pay once a year is convenient.
Revenue planning is more predictable.
Dues are paid upfront for the whole year.
Commitment is easier and boosts retention.
There are fewer renewal reminders and opportunities to cancel.
You may see stronger membership loyalty with a long-term investment.
It’s harder to track success throughout the year.
Member engagement may be impacted.
There are less frequent opportunities to upgrade.
There may be more of an initial commitment hurdle.
There is less flexibility to modify tiers, cancel, or skip months that many modern consumers enjoy
Monthly dues
A lower commitment level may lead to more sign-ups.
Monthly payments break up the financial burden.
Monthly revenue can be easier to track.
There’s more flexibility for members to join or leave.
You may have more frequent engagement opportunities.
There is adaptability to meet the needs of diverse members, especially younger generations or those with financial strain.
It’s harder to track down monthly dues and increase prices.
Revenue is less predictable, and members can cancel at any time.
Churn rates may be higher, which can impact loyalty and donor relationships.
There is naturally more administrative work to handle new, existing, and churned members.
Revenue and budgeting are more challenging to predict as cash flow ebbs and flows.
Marketing and retention costs tend to be higher.
Understanding membership tiers
Membership tiers help organizations offer members options at various price points and benefits. The structure also allows people to grow their commitment and see more value.
Top tips for creating and pricing membership tiers
Research your ideal members: Start by analyzing the demographics, needs, preferences, and challenges of current members. From there, create tiers that offer them the most value.
Define the value of each tier: While your middle tier may equate to the average dues you plan to charge, you can create a tier below and above that. For each, consider the value correlating to the monetary contribution and clarify that distinction for members.
Show the benefits of growth: Make sure to leave members wanting to move up a tier by showcasing the ease of progression and offering benefits that appeal to them.
Consider accessibility: Make sure lower-tier memberships still feel included, giving members more options to stay involved instead of churning if financial strain or uncertainty hits.
Whether you're using an annual or monthly structure, with tiers or without, calculating membership dues carefully is critical. Below, we'll walk you through important considerations for pricing your membership dues and a simple formula for implementing what you learn.
How much should you charge for membership dues?
The first step to calculating membership dues is to assess your organization's costs.
Here are some costs you'll want to keep a pulse on from your financial statements:
Operational costs: Employee salaries, rent, utilities, tech, and admin expenses
Program costs: Events, education, publications, and member services
Marketing costs: Expenses from member acquisition and retention
Advocacy costs: Where applicable, these costs are associated with lobbying efforts and advocacy for specific causes members join to support
From there, you want to understand your revenue goals for the year. Examining industry standards and what similar organizations charge members is also helpful.
Membership dues formula
The following formula will help you determine annual and monthly membership dues. You can land on a base price that you can adjust slightly for your preferred tiers.
Annual base membership dues formula
Monthly base membership dues formula
To adjust for tiers, you can take your base membership dues and subtract or add the percentage that you determine to be equivalent to the value of each tier.
How to increase your membership dues
Naturally, membership dues will increase with the economy and an organization's growth trajectory. The membership dues formula is a great tool to return to.
As an organization's costs or tier values increase, the formula will produce the impact it may have on dues to maintain scalability.
Top tips on collecting membership dues
Now that you know what to charge, let's discuss the best way to collect membership dues. The following tips will help you build a new membership program, manage price changes, or refresh your current program to boost retention.
Explain the value
Whenever you ask members for dues, it's important to reiterate the value they will receive from the transaction.
Be sure to:
Highlight specific benefits of being a member each month
Showcase the impact that the membership program has
Emphasize cost savings and discounts for members
Introduce networking and community-building with other members
Be transparent about how dues are used
Lead with gratitude
Always thank members for their commitment to your organization and let them know how their contributions make the program possible.
Here are a few ways to say thank you:
Personalize messages of appreciation
Highlight members online and on social media
Share perks for members who hit certain milestones
Ask for feedback as a way to show how much each member means
Make it easy
Add the easiest way for members to take action on your communications. Whether you're trying to get them to pay monthly dues, prompt them to upgrade to a new tier, or remind them of an upcoming renewal, make completing the transaction as easy as possible.
Make sure your members can:
Scan a QR code or click right from social media or emails to get to a simple payment page
Use any device they'd like without hitting barriers
Complete payment with any method they trust and love
Transparency is key when it comes to communicating your membership dues. The sooner you update members about an impending price increase, the better.
Imagine how much better it feels to get a 60-day preview of a membership due increase instead of a few day's notice. That extra time to nurture your relationships and share the reasoning behind the increase (and the added value for members) goes a long way to retaining them.
Lean on membership management software
Membership management software can make personalized and frequent communication much easier. Automation and insights drawn from strong data strengthen membership programs.
Case study: Greater Lowell Chamber of Commerce's successful membership program with Zeffy
The Greater Lowell Chamber of Commerce transformed its operations with Zeffy's membership management solution and fundraising platform. With a smooth way to strengthen the community and collect contributions, the Chamber raised $3,100 in annual membership dues and saved $155 in fees.
The organization uses creative language to position the membership dues as an investment that offers strong value to businesses that sign up. The customized online membership form’s flexibility offers annual, monthly, or quarterly plans to capture a wider array of members and sustain predictable revenue.
The Association of Nonprofit Accountants & Finance Professionals offers some helpful advice regarding the role of membership dues in the accounting process. We encourage you to dig in when determining how membership programs can enhance your fundraising strategy.
Here’s a summary:
Membership dues are recognized as revenue from contracts with customers.
Member benefits are deemed promised services or goods from the organization and "performance obligations" that must be documented when recording membership dues.
Organizations should document how they derive the value of each member benefit for tracking and accounting purposes.
Annual financial audits may request justification for member benefits
Annual dues might be better for some organizations, while monthly may be best for others. The chart earlier in this article helps you weigh the pros and cons.
Here are a few reminders:
Consider what your members prefer and respond to by tapping into your data
Determine which model helps you maintain financial stability
Ask yourself if your member benefits best align with monthly dues or annual commitments
Membership dues are tax-deductible donations to a nonprofit organization or other charitable cause. The organization collecting dues must have 501(c)(3) status and the transactions must be well documented and accompanied by a valid tax receipt.
Nonprofits can use a platform like Zeffy to generate tax receipts for members automatically.
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