June 9, 2021
In a whirlwind of motivation, you sign up for a premier (but pricey) gym not too far from your home. The monthly membership fee includes access to all the machines you could ever need, a huge collection of free weights, group classes, an indoor pool, tennis courts, and an indoor jogging track.
It’s wonderful and gives you grand visions of all the new hobbies and fitness routines you’ll adopt. But as soon as your membership begins, reality sets in.
You really only signed up for the gym to take advantage of the free weights and fitness classes. So why are you paying so much for a membership that includes all of these other amenities you won’t ever realistically use?
What if you only paid for the amenities you actually use?
Enter the case for usage-based pricing.
In the gym membership scenario, usage-based pricing would mean there wouldn’t be any extra charges for the amenities you don’t need, and you wouldn’t feel like you’re wasting money on other equipment and benefits that are already baked into the membership fee. You’d only pay for what you need.
Usage-based pricing is a structure we as consumers have grown accustomed to from the early pay-per-text-message cell phone plans to the SaaS-based platforms we use every day.
But can this pricing strategy work for associations?
Imagine if instead of monthly or annual membership dues, your association charged based on the features and resources your community uses.
This could look a few ways.
It could be a flat charge for every action or resource utilization. The concept of membership would become more broad and user-based. Users would pay individually for things like:
Your association could offer these benefits on a pay-as-you-go basis, or in the form of monthly credits that go towards benefit usage with additional charges for overages.
Another option could be a hybrid approach, in which you charge a monthly rate based on benefits, with options to pay extra for additional features. Here’s an example of what those tiers could potentially look like:
Of course, the outline above is purely hypothetical — your association will have to figure out what works best for it. Check out a few examples of usage-based pricing below for inspiration.
Here’s a glimpse at how some popular companies approach usage-based pricing.
Hubspot charges by the number of contacts:
Zapier charges by the number of tasks you can automate:
Google Drive bases its fees on how much storage you need:
Twilio offers pay-as-you-go pricing based on the number of text messages sent or received:
Usage-based pricing isn’t the right fit for every organization, but it’s an interesting concept to explore. According to research gathered by OpenView Advisors, SaaS companies that utilized a usage-based pricing strategy experienced more growth in year-over-year revenue than those in the broader SaaS index.
While usage-based pricing may not be the best fit for your association, it’s helpful to understand what’s working well in other industries and evaluate if those lessons can be applied to your operations. Have you tested the waters of usage-based pricing? We’d love to hear from you about your experience! Connect with us on social media.
If you’re ready to increase your membership organization’s revenue, connect with an entire community of purpose-driven leaders and grow yourself, we’re ready to help you do it.Learn More
Emily Herrington is a New Orleans-based digital marketer specializing in SEO, content, and pay-per-click advertising. She can usually be found at her desk obsessing over data and rankings, or in the kitchen covered in flour.