How to Price Memberships (Part 3): Final 4 Considerations

In parts one and two we talked about the anchoring effect and four important insights to consider when pricing your membership subscriptions. In part three we’re bringing you four more considerations that we hope will help you find the perfect price.

Ready? Here we go!

The Grandfathering Clause

As your subscription offerings grow in both quantity and quality, there will come a time when you need to raise your membership subscription rates. At this time, we encourage you to consider adding a grandfathering clause to your new terms and prices.

A grandfathering clause essentially means that all your existing members and any new members that sign up before your rates go up will not be affected by the price hike. This method is a highly powerful tool for single purchase products but is even more appealing when used for membership offerings, as it means a lower rate for recurring payments.

Personally, I have several membership subscriptions like this right now. There's one in particular that I purchased for $27/month in 2010. The membership subscription rate for this particular product is currently at about $100/month for new clients, but my price has stayed at $27/month right since the day I signed up.

Even though I don’t use the service much anymore, I have a hard time convincing myself to cancel my subscription. What if I need it down the line? I don’t want to have to suddenly pay $100/month!

The grandfathering effect increases your sales drastically by enticing all those potential clients who have been teetering on the fence, but it also encourages loyalty among your existing customer base. Those who have been with you since the very beginning are much less likely to leave now when the cost of coming back would be far more.

The Precision Effect

There's one price battle that has been going on since the beginning of time and has been the cause of many a debate: the battle of prices ending in 9 versus prices ending in 7.

But fret not, dear reader. Recent research has uncovered that it doesn’t necessarily matter what number your price ends in, as long as it's an odd number. In a 2010 study researchers concluded that these odd numbers indicate more precision than a number ending in 0 (or even an even number) and that people tend to under-estimate more precise numbers:

… we find that precise prices are judged to be smaller than round prices of similar magnitudes. For example, participants in this experiment incorrectly judged $395,425 to be smaller than $395,000.

So could a price of $57.81 work for you? Probably better than a price of $60.00.

Bundling & Consumption

Cruise lines do it. Insurance companies do it. Costco definitely does it. But should someone running a membership site do it? Bundling can be a great way to boost sales and, when done right, can be much more effective than trying to find the perfect price for each of your individual products. (However, when done incorrectly, it can seriously devalue your membership offering and come off as desperate.)

Providing more value to your customers is generally a good idea, but because bundling has the built-in ability to mask the cost of each individual item, it is sometimes used for evil.

For example, if you had two products that individually were $50 and $40, but you offered them as a bundle for $80, your customers would be thrilled about a slight price break and would be much more inclined to buy the bundle.

But if you were to offer the same two products for $100, you might make some sales, but most people will catch on to your shady antics pretty quickly – and there goes your reputation.

When bundling memberships or membership perks, it’s important to recognize that you’re dealing with recurring payments. So even though your member might be getting a great deal, bundling might create problems for you if the value of the bundle doesn’t consistently deliver on the promises you made.

The science of consumption and recurring products is actually quite interesting, and I highly recommend this read on the benefits and dangers from the Harvard Business Review.

Data-Driven Price Changes

Recording and reviewing analytics about how your customers are behaving is important for your business, period. But with pricing it can be a powerful tool to use when trying to determine if a price change (raising or lowering or even completely changing your offering) is necessary.

For example, imagine you started a basket weaving membership site that started out at $15/month, and you noticed that many of your members were canceling their subscriptions after two months on average.

In this scenario, it might be appropriate for you to offer a lifetime subscription for a $45 flat fee. This way, you would be receiving “3 months” of revenue up front, and your customers would have unlimited access to the content you are already providing.

So let’s review and wrap things up.

Remember that pricing can be complex, and despite lots of research, it's still an art. However, by taking all of these methods, theories, insights, and effects into consideration, you should be able to set a price at something reasonable for your industry and ideal consumer market.

Always start at the lower end of the price spectrum (it’s a thousand times easier to raise your prices than to lower them), collect lots of data, and adjust depending on the scenarios that come your way.

We hope that you’ve found this series helpful, and we can’t wait to see the new and exciting membership offerings you build with this information!

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About Blair Williams

Blair is the creator of MemberPress and Easy Affiliate. He is an experienced software developer who has invented large scale web apps for scores of businesses. Blair now focuses on WordPress and Ruby development. You can read his blog by visiting