Building Effective Pricing Governance for Associations
The following is an excerpt from our book, Pricing for Associations, available now on Amazon.
Purpose of Pricing Governance
Pricing governance and policies are critical for ensuring organizational cohesiveness. When pricing decisions are made inconsistently or without clear guidelines, it can create confusion and frustration for both customers and employees. By establishing a clear framework for pricing decisions and discounting policies, organizations can ensure that everyone is on the same page and working towards the same goals.
Furthermore, pricing governance and policies can help organizations maintain financial stability and sustainability. By considering factors such as cost of goods and services, competitive landscape, member and customer demand, market trends, and revenue goals, organizations can set prices that are fair, competitive, and reflective of the value being offered. This, in turn, can help ensure long-term financial success and enable organizations to continue providing high-quality goods and services to their members and customers.
For non-profit associations, pricing governance is particularly important for financial sustainability and the ability to carry out the mission of the organization. As non-profit associations rely on member dues and non-dues revenue to fund their operations, they must be especially careful when setting prices and discounting policies. Without proper pricing governance, there is a risk of setting prices too high, which can deter potential members or sponsors, or too low, which can result in insufficient revenue to cover the costs of operations.
Additionally, pricing governance helps non-profit associations remain accountable to their stakeholders, including members, sponsors, and the broader community. By establishing clear guidelines for pricing decisions and discounting policies, non-profit associations can ensure transparency and fairness in their operations, which can build trust and support from their stakeholders. Ultimately, pricing governance plays a critical role in enabling non-profit associations to continue fulfilling their missions and serving their communities.
Purpose of Value Governance
Delivering value to members and sponsors is critical for non-profit associations to achieve their mission and maintain their relevance in their respective industries. Understanding the needs of members and sponsors is key to delivering value that is tailored to their specific requirements. By offering services and benefits that are aligned with member and sponsor needs, associations can foster a sense of community and enhance engagement, which can, in turn, increase retention rates and attract new members and sponsors.
Value delivery is also essential for fulfilling the mission of the organization. Non-profit associations exist to serve their members and stakeholders, and delivering value is a key aspect of that service. When associations deliver value, they demonstrate that they are meeting the needs of their members and sponsors and are fulfilling their mission of providing a platform for collaboration, education, and advocacy. In this way, value delivery not only ensures the financial sustainability of the organization, but also its overall impact and success in achieving its mission.
Purpose of Pricing Strategy
A pricing strategy is a set of guidelines and tactics that an organization uses to determine the price of its products or services. It involves considering a range of factors such as production costs, competition, customer demand, and market trends to establish a price that is competitive, profitable, and reflective of the value being offered. A well-defined pricing strategy is critical for business success as it helps organizations to maximize revenue, maintain market share, and achieve financial sustainability. Additionally, a pricing strategy can play a key role in shaping customer perceptions and building brand reputation, which can be critical in today's highly competitive marketplace.
Strategic Pricing Objectives
Each individual product or service that your organization provides to members or to sponsors is advancing a specific pricing objective, whether you realize it or not.
There are typically four strategic pricing objectives that you can pick from. Each product within your portfolio can have a different objective.
The first objective is for ‘profitability’.
You are looking to maximize your profitability on a specific product or service so that your margins are healthier, and you can therefore use the additional bottom-line profits for your reserves or for new programming that can advance your mission forward.
The key is to use value-based pricing, value-based marketing, and value-based selling so that you are capturing and delivering the right value to the audience, and then capturing your piece of the pie through pricing to maximize your profitability.
The second strategic pricing objective would be ‘volume’.
Volume is about reaching as many people as possible. An example would be to make something affordable, in a way that you could be charging more because of value-based pricing but you choose not to, so that more people have access to the product or service.
This is typically considered a loss leader, although you do not always have to be taking a loss on the price versus your cost of doing business. You could absolutely be profitable, just not at peak profitability, because your goal is not profit but about reaching as many people as possible and accessibility financially.
The third strategic pricing objective is to acquire new customers.
Acquiring new customers can mean that it's priced competitively, or it could mean that it's priced for value. The bottom line goal is that the value is communicated in such a way that it is a no-brainer for cold audiences to convert.
This is an entirely different strategy than pricing and value for your warm audiences because they are already familiar with your organization. Whether they are a returning client for a conference, or whether they would be a new customer for another product, let's say that they're a member but they've never paid to attend a conference before, that is one strategy in pricing versus pricing for a brand new customer who is new to your organization.
This pricing is also typically done on one or two specific products, such as membership and digital education so that there is a natural entry point where people can experience what your organization has to offer.
The fourth strategic pricing objective is favorable price perception.
This can easily tie into the rest. Most associations are afraid to discuss pricing, value, and profitability because they are afraid that their members will have an unfavorable perception of them if they are focused on profits or volume or acquiring new customers.
Outside of favorable price perception being an objective, because of insecurity, favorable price perception can also be a valid objective if your organization has been considered as price gouging or not delivering on the value promised, and therefore you need to do a strong reset and a public relations initiative that backs up that you are only taking prices based on the value that you provide.
Purpose of Value Strategy
A value strategy is a set of guidelines and tactics that an organization uses to determine the value of its products or services in the eyes of its customers. It involves understanding the needs and preferences of customers, identifying areas where the organization can create and deliver value, and communicating that value effectively to customers. A well-defined value strategy can help organizations differentiate themselves from competitors, build customer loyalty, and increase revenue and profitability.
To develop a value strategy, organizations must consider a range of factors, including:
Customer needs and preferences: understanding what customers want and need from the organization's products or services is critical for developing a value strategy that resonates with them.
Competitor offerings: analyzing competitor offerings can help organizations identify areas where they can differentiate themselves and deliver unique value to customers.
Unique selling proposition: defining the unique selling proposition (USP) of the organization's products or services is key to communicating value effectively to customers.
Pricing: setting prices that are competitive and reflective of the value being offered is critical for the success of a value strategy.
Marketing and messaging: developing effective marketing and messaging that communicates the value of the organization's products or services to customers is essential for building brand awareness and customer loyalty.
