It’s a question every membership site creator needs to answer before launching a membership program:
“How to price a membership site to attract the right mix of members and make it a profitable project?”
There’s no easy answer, but in this article, we will take a look at the membership pricing formula that will help you determine your pricing sweet spot. After all, your membership pricing strategy should feel like a win for you and your members.
In this article, we will dive into various examples of real recurring revenue membership businesses and examine their pricing strategies.
What is a membership pricing strategy?
A membership pricing strategy is how membership sites determine the right price for their membership program. It involves carefully considering several key factors to arrive at the pricing options that can attract the right mix of members while delivering enough value and being profitable to run as a business.
Where to start with your membership pricing strategy?
There are two primary membership pricing methods:
When your audience size is too limited to conduct a comprehensive survey, the competitor-based pricing strategy emerges as an excellent starting point. By studying your competitors’ pricing models, you can gain valuable insights into the market dynamics and position your own membership pricing competitively.
As the name already mentions, this pricing is based on the wide range of experiences, knowledge, etc that you are offering to your customer base.
Value-based pricing lies at the heart of maximizing profits for your membership program. It hinges on the perceived value that members attribute to the offerings you provide, making it a powerful strategy to adopt. Now let’s dive a little deeper into this pricing strategy, with real-life examples:
How To Determine What People Want and How Much They’ll Pay For It Via a Membership Site
Let’s start with a story to illustrate what goes into pricing a membership program or membership website.
Back in 2010, I was a fledgling health food coach and I had successfully sold my first online course.
But I knew I wanted to offer a recurring membership, so I asked my audience what they struggled with the most and what they would love to see me offer.
The resounding answer was that they were bored with eating salads and they wanted more great tasting recipes. They also hated wasting food, and meal planning felt like a chore.
All of this feedback led to me creating a membership site that included tons of great healthy recipes, and a drag-and-drop software tool that automatically generated a grocery list and menu plan for you each week.
I offered access to this membership website for $27/month or $127 for 6 months.
My membership pricing strategy was not sophisticated. I just picked a number based on what I was seeing as my competition.
I saw that books with healthy recipes were often priced at $20–30, and there weren’t that many easy to use applications for menu creation back in the day. Plus, I was constantly adding new recipes.
These days there are plenty of apps that would do what my menu planner did. However, the other piece of the puzzle is that I had built a relationship with my audience and I was also positioned within a specific healthy eating niche for vegans.
That’s why you need to create the right membership program, for the right audience.
I ended up running this membership program for about a year, with respectable results but not enough revenue to justify the effort that went into it.
Let’s take a look at how I would decide on a membership site price today, with everything I’ve learned running two successful recurring businesses since then.
The Membership Pricing Formula
With most membership website pricing models you need to assume that some people will always prefer to stay on a free membership if you offer them. Similarly, some people prefer to take online courses instead of signing up for recurring payments.
That’s why it’s a good idea to diversify your offering and have an online course as well as a subscription business. Understanding what people are willing to pay can go a long way in helping you figure out your pricing model.
Value x Stickiness x Confidence = Your Average Revenue Per Member
Define value: think about how much value one member will receive from joining your membership. For example, if this person is able to resolve an issue in their marriage and avoids a costly divorce, put that number down.
If it’s corporate training that gives an employee the ability to ask for a raise worth $5,000 then put that number down.
Next, we look at where your number lands in the marketplace and within the business model of your own business.
Some business owners use memberships as a lead-in to a higher price point offering down the line, while others offer a course or service upfront and the membership is the long-term plan.
Decide if you plan to start low or high, based on where this membership sits in your product offerings. Use this to influence your “value” number down or up.
You might also want to look at the competition and pick the average price of competing memberships in your space, or alternative products that people may be comparing.
Then see if your value is higher or lower, by comparison. When it comes to pricing membership sites, you don’t want to just anchor your price based on your competitive research. It’s much better to know if you are aiming for a volume pricing model or if you want to be premium.
Define stickiness: does your membership lend itself to a long-term relationship, or does it solve more of a short-term problem? Estimate how many months someone may stay on board to get this number.
Define confidence: the confidence factor is where you get to experiment with different ratios. For example, if you were able to bring $5000 in value, but you don’t think that employees would pay that much then adjust the confidence value down to reach a number that feels more in line with what people might pay. Calculate this number based on the percentage someone would pay of the total value that you bring. Using the $5000 value as an example, if you think someone would pay $250, then this number would be 5% or .05.
Example of this membership pricing formula in action:
Value 4000 x Stickiness 3 x Confidence 0.05 = $600 Average Lifetime Revenue Per Member
That makes your monthly membership price set to $200/month, based on this fairly high value.
Income x Number of Members = Average Revenue
The pricing sweet spot is where you have potential customers easily willing to pay your recurring payment and it feels like a no-brainer to them.
At this point, it’s a good idea to calculate how many members you need to reach your revenue goals.
Using this formula you can see that by increasing the number of members you have, your annual revenue increases in line.
Income $600 x 100 Members = $60,000 annual income from this membership site
Revenue – Costs = Your Profit Margin and Take-Home Income
Whether you decide to offer a recurring payment model or you want to offer lifetime membership options in your business is up to you.
Keep in mind that a membership business tends to do best when you can depend on regular monthly revenue, so you can cover monthly costs for running your business.
Calculating the costs of running your membership site might be hard if you haven’t started running it yet. Recurring payments allow you to forecast your income, which can give you more confidence in how you price your membership.
On top of these costs, think about any other inputs like your own time or anyone you might hire to help manage or run the membership.
You might estimate something along these lines:
Revenue $60,000 – Costs $10,000 = $50,000 net income
Beware that sometimes it can take a long time to reach your desired member goal, and you need to be willing to stick with it and keep promoting to grow your membership base.
How does one get to the point of feeling confident enough to charge these amounts?
Let’s take a look at how you can construct your membership content to get there, and what steps you might take at a lower price point, too.
What’s Included for the Membership Site Price
Many people make the mistake of thinking that they need to pack their membership sites with so many valuable features that justify recurring payments. But a successful membership and online business know that pricing strategy is not about overwhelming your members.
For example, you might have 1000s of video lessons inside your members’ area. But if no one watches any of them because it’s too overwhelming or badly organized, then the value isn’t there.
On the other hand, you might have just a handful of videos but if insights in the first one lead a customer to take action in a way that changes their life, then that’s a huge amount of value.
Now let’s dive into what’s typically included in online memberships, and how it might play into your pricing model.
How You Release Content
There are a lot of different ways to sell memberships online, including:
- The content buffet: this is a Netflix-style all-access model, where all of your content is released when someone signs up.
- The new monthly content plan: where everyone gets the same new module or item per month. With this model, you could sell past content separately, or make it available to new members, too.
- The evergreen model: where everyone has the same series of content released to them based on when they join. The experience is always in the same sequence.
You might be tempted to charge less for the options that don’t include all of your content, and that’s fair.
Just remember that value is what really counts, and that if you charge more for your “buffet” and people don’t feel like they’re eating enough to justify the cost, they are more likely to cancel.
Most membership site subscriptions are purchased with disposable income, so depending on your price points members might feel justified in canceling if their expenses go up and they need to save money.
This type of cash flow basic math is something people do periodically, so don’t let it affect your confidence in offering a membership site. You’ll make more money when more members stay long term, so think about what exclusive content you can offer that isn’t available anywhere else.
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Run your online courses, memberships, coaching programs, and communities in one place.
One of the biggest benefits of online membership programs is the ability to connect with other members. It’s often said that people buy for the content, but stay for the community.
So while you may not focus on the community in your marketing, you’ll know as the membership site creator that making it easy for members to network is one of your most important jobs. (Depending on what kind of membership you’re creating, of course!)
It’s impossible to put a price on the community, but if you’re including one on your membership site make sure its’ value is clear.
You’ll also notice that early adopters who join your membership site and get to know each other in the community are more likely to stay in the long run. It’s a good way to get started, build social proof, and help you reach your revenue goal quickly.
Facilitation or Live Coaching through your Membership Site
If you’re facilitating your membership program through live coaching, answering questions, or other direct interaction with your members then you can charge a higher price.
Most people sign up for a membership because of the person behind it. That means you should price accordingly.
Some program creators choose to create different membership tiers with different levels of access. For example:
- Self-paced and no live access, priced at $19/month
- Monthly group coaching, priced at $49/month
- Weekly group coaching, priced at $99/month
- Individual monthly coaching, priced at $299/month
Obviously, your niche and what results you offer in your coaching will determine the exact amount that you’ll want to charge.
Send Physical Products Beyond Your Membership Website
Some recurring membership programs come with a physical component that gets sent in the mail.
Read this Subscription Box business case study to get an idea of how you can incorporate physical products into your membership program.
When you’re adding a physical product, you’ll need to calculate the additional cost of sourcing and shipping products, so make sure to do your math before committing to a price.
How to Get People to Say Yes to Your Membership Price
Beyond picking the right price for your membership site, there are a few different ways you can encourage people to give your membership a shot.
How you name your different membership tiers matters a lot when it comes to perceived value.
If you’ve done your homework and built a membership experience that delivers on your promises, then getting people to try it can be one of the best marketing approaches out there.
Offering a free trial
You can offer a free or discounted membership trial, for a short period of time like 14 days or a full month.
The mechanics of offering a trial aren’t complicated when you have a solid membership management tool, but the psychology of a trial is where the power lies.
If you can give people enough of a taste of what’s possible when they come on board as a full-fledged member, then you’re more likely to have people stick around long term.
Sure, you might have some people take your trial and try to speed through all of your content and cancel, but the ones that see the value will be happy to pay to stay on board.
Yearly vs. Monthly Membership Plans
Many membership sites offer a choice of yearly or monthly membership payment plans.
The benefit to you as the site owner is that you get more cash flow upfront if someone takes the yearly option or a steadier, more predictable monthly income as your monthly members grow.
By offering both options, you can also incentivize people who are going to be there for the long term. For example, a common practice is to offer a price break on the yearly plan or to give additional bonuses for those who choose the annual payment.
A monthly option can also act as a trial for those who aren’t quite sold yet but want to give your membership a try with the ability to cancel easily.
If you’re offering a monthly and a yearly plan, you might also want to create a third option that is higher priced.
Why? Because having a bigger package that costs more can put the affordability of your regular membership program into perspective.
You might offer a more tailored one-to-one program that costs 10 times the price of your recurring membership. Put that option on the sales page for your membership program, and you might get people who want the premium experience to go for it.
Some membership site owners choose to offer a Lifetime Membership, where a customer will pay once and remain a member for the lifetime of the program.
This is a great move when you’re trying to figure out your membership pricing, and you don’t have a lot of members yet because you can test different price points. (It also pairs well with a founding member offer, see below!)
The downside is that it removes the recurring revenue aspect of your membership program, and if you have a small market or niche you might not be able to get in front of enough new members to make your membership sustainable without recurring income.
That’s why I recommend only offering lifetime memberships if the price is significantly higher than your average customer lifetime value, if you plan to have other products and services to sell down the line, or if your market is very big.
It helps to have real people helping you when you’re just getting your membership site off the ground. These are your founding members!
You can offer a special price (like a lifetime deal or a long-term discount) to the first few people who join your membership. How many people you accept as your founding members will depend on how big your audience is.
For example, those with a larger audience may choose to invite 100 Founding Members, while others might cap it at 30.
Founding members should get additional perks because they’re the first to dive in. That could mean additional bonuses, time with you, or better networking because the group is still small.
They will also be a great source of feedback, so be sure to listen and take their input to heart as you continue to improve and build your membership program and site.
Raising Membership Prices Over Time
Whether you started off with a lower price for Founding Members, or you decided to start low and raise prices over time, it’s a good idea to consider how you will do it when the time comes.
The worst thing you can do to members is to pull the rug out from under them by increasing the cost of your membership.
Instead, I recommend letting non-members know that the price will be going up before you raise it. That gives anyone who has been on the fence a chance to join and lock in a good rate.
But for existing members, it’s best not to raise their subscription prices. That’s because they’ve been there the longest, and have already paid you the most over time.
In a way, new members are paying a higher rate because of all the work and new materials you’ve added over time that has been paid for by past members.
It’s best to stair-step your pricing, as you raise your rates. This way, you get to keep testing your membership price without scaring off potential new customers. And having members at different tiers just means people are less likely to cancel because they might lose their exclusive pricing.
More Membership Pricing Examples From Real Membership Businesses
Now let’s take a look at some real membership examples, and what they include for their costs.
- $25/month or $250/year for a digital scrapbooking membership site: The Scrapbook Campus is a membership program that offers PaintShop Pro tutorials, templates, and discussion forum access to help members create their own digital scrapbooks.
- $57/month for a hormone re-balancing membership site: Melissa Ramos’ Sexy Lady Balls program offers women a supportive step-by-step plan that is tailored to each person, based on their current hormone profiles and circumstances.
- Started at $27/month, now at $57/month: Esther De Charon De Saint Germain’s Brave Business Academy started at 27 dollars and is now up to $57/month with plans to increase to $97/month. The membership includes accountability circles, guest experts, ‘vortex sessions’ branding advice, and monthly Q and A’s.
- Currently at $19/month: Kelly Pietrangeli’s Project WE is aimed at busy mothers who want step-by-step guidance for getting their lives on track and staying on top of it all (while enjoying the journey!). With plans to raise the price to $29 eventually, the membership is open for anyone to join at any time.
Time to pick a price
Now that you’ve done all of your research and looked at some membership site pricing examples, and what goes into pricing decisions, it’s your time.
Start using the Membership Pricing Formula to get a starter number and adjust from there!