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Why discounts aren’t a membership pricing strategy

Michael Tatonetti
May 14, 2021
Why discounts aren’t a membership pricing strategy

Have you ever seen an ad that says “New Low Price”?

What effect did that have on you? Did it make you want to purchase the item?  Or did it make you question why the price was lowered?

In this article, we're going to talk about the psychology of how you position discounts, and why it matters. 

I recently saw an ad online that said, “We've dropped our prices.” That was it - it was an image with this verbiage and their logo.  No discussion of why.

When I saw it, my immediate response was, “Eww!”, and here's why. 

Whenever I hear that someone has dropped their price, I think of four things: 

  • First, that the product is bad quality. 
  • Second, that the organization realized that they were overpriced. 
  • Third, that the organization was desperate for sales. 
  • And fourth, that the organization lacks a pricing strategy. 

Typically, the organization always lacks a pricing strategy if they lead with a statement of a price drop alone.

The only type of buyer who is going to respond well to an ad that specifically says “we've dropped our prices” is someone who is extremely price sensitive, and who is a bargain shopper. And even then, unless they were already sold on your product and price really was the actual barrier for them in purchasing, this is not going to drive anyone to purchase. Instead, you're going to plant some subliminal messages in your audience's head that you're doing things sporadically and you lack intention. 

That's a losing game. 

Instead, organizations should lead with value, so that the audience knows that they are receiving a quality solution.

Now, can you give offers or a percentage off, or is that a bad thing? 

It's not necessarily a bad thing to communicate that there is a discount or a new (lower) price, but you shouldn't lead with it. The biggest text on your ad or marketing collateral should not be “New Lower Price”.

Instead, your value should lead and then mention that there's a lower rate. 

Let’s make this super practical and think of something you’d buy as a consumer.

Let's say that you find a photographer that you absolutely love, but they charge $400 for a session, and that's out of your budget for this year’s family photos.

You follow that photographer on Instagram or Facebook to stay in the loop, and a few months later you see that they're holding mini sessions for one day only at a lower rate.

That sounds like a win!

Now if they lead with “New Low Price” you might think they haven't booked any sessions, or maybe they're getting complaints and no one's rebooking because their editing isn't that good, or they're just desperate for sales.

Instead of leading with that price discount, what the photographer should say is that they are having one day only of mini sessions at one location. The photographer will have 8 slots available for 30 minutes each, and once those slots are gone, they’re gone. The photographer won’t have to travel, spend money on gas, or reconfigure their lighting and props. Instead, the families and individuals will roll in to them, the photographer can still make their day rate, and they get to offer a great deal to whoever the first eight clients are to book.

And because of that you understand that you're getting a lower rate because you're losing the customization of picking your photography location, the dates of your shoots, and possibly even the time since there's restricted time slots that you can sign up for on one specific day. 

Here’s a better advertisement:

“Are you ready for the photoshoot you’ve been waiting for?  Join me for one day only at location for your 30-minute mini session.  You’ll receive 15 edited photos and capture memories worth sharing.  There are only 8 slots available, so grab your spot for $199 before they’re gone!”

There are still advantages to this: You get the photographer that you love, you get the editing style that you love, and you get whatever props they would normally have for this type of a photoshoot. But they're leading in their sale with the ease and convenience that you get as the consumer. 

If you’ve been sitting on the fence, you’ll probably think “Okay, great. We've wanted to work with this photographer. Let's book it.” 

Bringing that back to associations, if you say membership is now lower, people are going to think:

  • “Their membership numbers are down”
  • “They're not getting the renewals that they need”
  • “They're just trying to sell spots”

Never lead with lower prices.

Instead, lead with the value, lead with why it is a unique opportunity, and therefore the price is lower and in alignment with the lowered value being given. 

Want to learn more about the future of pricing for associations? Register for SURGE Forward to attend Dr. Michael Tatonetti’s presentation as he unveils his new eBook, developed in partnership with Sidecar, about how expectations and best practices have changed!

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Michael Tatonetti

Dr. Michael Tatonetti is a Certified Association Executive and Certified Pricing Professional on a mission to advance associations in their pricing models for financial sustainability. As the Founder of Pricing for Associations, he and his team work with associations to harmonize pricing and value across membership, education, sponsorship, events, and marketing. He is also the Vice President of Professional Pricing Society, overseeing strategy for education, marketing, membership, and sponsorship. Dr. Michael is a proud Association Forum Forty Under 40 honoree for his dedication to the association field. You can learn more about the work his team is doing at www.pricingforassociations.com.

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