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January 24, 2008

If you don't tell members about a dues increase, you'll make more money

Today I got a copy of my real estate tax assessment. On the assessment, the county shows the current assessment as it compares to the last one so I can see how much of an increase there was from year to year. Contrast this with the advice from the Membership Marketing blog advocating for no explanation to members about a dues increase.

My gut instinct was to agree with Tony, and I actually commented to that effect. But on second thought, it's not that simple. This is a classic dilemma in association leadership. Sweep a dues increase under the rug and make more money, or be transparent about a dues increase and -- according to the research -- lose out on revenue?

Which way do you lean? How would you feel if the tax man intentionally obscured an increase? Ordinarily I'm not inclined to emulate the government in my business practices, but in this case, it seems like an idea worth considering.

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Scott said...

It is my opinion that if the increase is negligible then you can sweep it under the rug. Members understand that costs do go up over time and as long as it is a small percentage increase you really don't need to explain it. Larger increases are another story. Many organizations do not increase dues for years and when they do the increase is a whopper. That needs an explanation and a good one. An excuse like PEPCO (my friendly neighborhood electric company) just used--we haven't raised rates in a long time and therefore an increase is long overdue, does not work. People need to see some benefit in the increase. They need to know what their higher dues are going to do for them or the organization.

I correlate sweeping the increase under the rug to what happened when magazines tried to hide credit card auto renewal in their offerings. Publishers would not tell subscribers they were signing up to get their credit card zapped once a year without warning and when that charge hit subscribers would feel cheated and lied to. Is that how we want our members to feel? I think not.

Lindy Dreyer said...

Ben, I'm happy you're exploring this here. I agree with Scott--regular, small increases need no explanation. But only when, as Tony mentions in comments to his post, the price still falls in line with members' perceptions of the value.

In the case of a group who hasn't set the expectations of incremental increases, throwing one in and not mentioning it seems to undermine the spirit of trust and collaboration that associations exist to foster.

On the trust topic, my new friend Steve Field from Edelman turned me on to their annual Trust Barometer. This seems right up your ally, and at least tangentially pertinent to this discussion. (whoa...that sentence is a little much, isn't it?)

Chris Hanson said...

Good topic and conversation. I agree with what's been said on incremental increases not needing to be broadcast in advance, and in giving advance warning on significant jumps (say, greater than 20 percent or so).

The only quibble I have is characterizing the decision to not broadcast incremental increases in advance as sweeping it under the rug, which implies deception or a cover up. A dues increase is transparent whether it’s broadcast in advance or not (except for automatic payments, which should receive special consideration). It is right there on the invoice. If I visit my local coffee shop and look up on the board and see that the prices increased, I wouldn’t think that they’re hiding something. I’d just decide whether the value I receive is worth the cost—the same as our members do every year, whether the dues increased or not.

Explaining large jumps in advance makes great sense. It bolsters the value-for-value argument, helps members decide to continue at the higher price, and retains the organization’s credibility.

Ben Martin, CAE said...

Great discussion. I'm not sure that "small increases" justify no mention of the increase in my view. Perception is reality. If you fail to make the increase readily obvious, it could quite easily be interpreted by members as intentional deception. Again, back to my tax assessment... Even with a small increase, as a taxpayer and a citizen, I feel the government owes me full disclosure on year-to-year adjustments in the rate, which is the basis for calculating my tax bill. Dues have often been equated with taxes. Why are associations held to a lower standard?

Kevin said...

Ben, with all due respect, dues are not taxes and governments are a poor example to follow. Unless an association falls into one of those rarefied circumstances where their members must belong in order to practice at all, dues are more comparable to magazine subscriptions than taxes (by which I mean, who keeps track of how much subscriptions cost from year to year?).

In our organization's case, our dues have changed (increased) in each of the last three years, ranging (depending on membership category) between 2 and 10 percent. We have never mentioned it, not once, other than the amount in the invoice. Each year our retention rate has increased, and people have paid faster (meaning, each year we send fewer notices to more members). Obviously those good things did not happen BECAUSE we raised dues, but because of various other things, but the small increases did not impact us.

Now, each organization and constituency is different and we need to be smart about what our members are experiencing. I note you work for realtors, and based on what I've heard about the housing market, I'm guessing that they are not doing as well right now as they were relatively recently. If it was me, in a case like that, I might be a little more careful -- perhaps a little more "transparent" -- in raising dues, if I did so at all.

Thanks for an interesting conversation, as always.

Scott said...

This is a great discussion and I'm not sure on which side of the question I fall - there are good arguments on both sides. To me the key in this is how we as associations communicate our value to members on an ongoing basis. When they see continuous and (hopefully) increasing value, members probably won't think twice about a dues increase. It's when they have to keep asking "what have you done for me lately" that they probably will be more tuned into changes in what they're paying.

Bucko said...

It's not about dues increases per se, it's about what is being done with the additional funds. Marginal dues increases to cover cost-of-living kinds of overhead are significantly different than "we intend to change the strategic direction of the association and we needs a significant dues increase to do it." In my experience members understand cost increases, but they have greater comfort when they understand how the funds are being used. Marginal increases need little explanation, but members are entitled to a comprehensive briefing when dues jump significantly. There's no sweeping dues increases under the rug...

Ben Martin, CAE said...

I love seeing new commenters. Welcome, Scott, Bucko and Chris!

Kevin, your argument would be more effective if you could elaborate on your assertions that governments are poor examples to follow and that dues aren't akin to taxes deserve explanation. Or do you expect us to accept your opinion as a matter of fact?

First of all, because of sunshine laws, governments are far more transparent than associations. A lot remains to be done, but there is much in the public sector that is worthy of emulation, especially when it comes to openness.

Associations are not businesses like Wal-Mart and they are not governments. We fall somewhere in between, so looking for effective practices in both the public and private sectors makes very good sense in my view.

Secondly, dues are more like taxes than magazine subscriptions in my view. A magazine subscription gets you a magazine. That's all. Dues get you a range of products services (lobbying, publications, research, etc.) just as taxes do (libraries, police protection, parks, sewer, etc.). And dues are equated with taxes in association literature (Professional Practices in Association Management).

Is it impossible that your retention rate could have been the same or higher if the dues increase were disclosed? Unless you've tested disclosure against non-disclosure, your experience proves nothing to me.

Here's another way to consider the matter: Which is the more ethical tactic? MGI's research seems to show which is the more profitable.

CindyAE said...

I understood Kevin's comments. Taxes are required by law. If you don't pay taxes you lose a house, get wages garnished, go to jail. Dues are voluntary. If you don't want to pay dues, you rip up your bill and go on with your life. Not the same.

Those in politics for decades are very aware of the lack of relationship between mandated transparency and ability for public to make significant change because don't want to pay taxes or utility bills. Still have to pay, period. Dues are not a tax so it doesn't matter if a handful of disgruntled want to call it that. They could call dues a cow, and it's not a cow either.

Many believe magazine subscriptions in certain organizations alone are worth the dues amount (regardless of other benefits) - e.g., AARP magazine and Associations Now. At dues time don't want to give magazine up and renew. Like me with ASAE.

The members who don't engage and don't read (any communications) likely first to say "what's this increase". Real issue is THEY never engaged by THEIR choice and want to hold the organization responsible. That little group is looking for free dues or someone to implement the one thing they want - by complaining about a bill, not engaging during process. We find 95% really get it and appreciate membership - it's only that last 5% - at dues time.

The disclosure ON or WITH the dues bill is an issue. If give amount and why an increase apart from the bill, it's still full disclosure. It's the mea culpa or "we had to" letters associations may send with dues bill that ticks people off, and sometimes enough to be the catalyst to make them drop. Even when amount would otherwise have been perceived as reasonable for value. Associations can talk their members out of staying the day they get the bill with their "explanations". I recently got 3-page letter explaining a minimal dues increase - by the end was wondering why in the world I was staying and had never questioned my membership before. It's possible to be transparent without running amok.

Ben Martin, CAE said...

Cindy, I never said dues are the same as taxes. I said they are akin to taxes and have been equated with taxes. Perhaps compared with taxes is the best way to put it.

Kevin said...

Ben, I'm a little perplexed by the confrontational tone of your response to my comment -- but it's your blog, so okay.

Cindy actually hit all the nails on the head with her excellent comment -- dues are voluntary, taxes are not.

I'm also sorry for offering our organization's experience up as an example, and I'll be sure not to do it again -- though I hope your categorizing it as meaning "nothing" won't stop others from offering their own, perhaps alternate experiences. I'm very interested in *real* experiences with this sort of thing and always looking for reasons to try new ideas.

I am curious, though -- given that members tend to belong to associations for different reasons (or at least, I must rush to add, that's my *opinion*), would an association's attempt to "disclose" the reasons for a small dues increase be focused on the things that an individual member actually finds valuable? Or would you propose treating all members as if they value all the things an association does equally (as, unfortunately, governments tend to do)?

Thanks, as always, for an interesting discussion.

Ben Martin, CAE said...

Kevin, I apologize for the confrontational tone. It is not my intent to inflame the debate. I'll try to tone it down a little. ;-)

I appreciate that you shared your experience, and hope you'll continue to do so. For your set of questions, yes, in my view, if an association feels it needs to justify the increase of dues along with the disclosure, the message should be targeted somehow. Though I imagine that could become quite a difficult puzzle in a trade association, where the dues payer might not be the primary user of the association's services.

Chris Hanson said...

Thanks for the welcome, Ben. I’ll be sure to check in regularly.

Going back to your argument, I don’t see government as being particularly comparable to association management. The two systems are quite different. Taxes and regulations are mandatory and imposed by force, while association dues are voluntary. While I agree that some parallels may be observed, they are coincidental and one doesn’t make for a very effective model for the other. Let’s put our efforts to better use by turning to the for-profit world for lessons, and vice-versa. Should we look to force our members to pay up or face jail time, or create value propositions—trust and ethics included—that keep them coming?

Tony Rossell said...

I wanted to clarify one item. The research on dues increases highlighted in my blog outlined which strategy tended to generate a better financial outcome for an association. We should not confuse results with ethics. If an association would compromise its promise to members by not telling them dues were going up, then members should be told even if there will be negative financail returns. Tony

Ben Martin, CAE said...

Tony, that's a brilliant comment.