I'm part of the Customer Success team here at Memberful, and I work closely with our customers to help them advance their membership businesses. As we continue to engage with more customers and help them grow, I'll be sharing some key learnings and outcomes we're seeing when it comes to overall membership strategy.
Recently, a hot topic of discussion for our customers has been price increases. Folks are asking the following questions:
- "How do I know if I'm able to successfully raise prices without inducing a major churn event?"
- "How much should I raise prices?"
- "When is the right time to raise prices?"
Clearly, there's no one-size-fits-all solution here. And without a detailed strategy in place, there's considerable risk around raising prices - however, after walking through this journey recently with some of our customers, I'm confident in saying there are clear signals that indicate when prices can successfully be raised with minimal risk. These signals include:
Strong adoption of annual plans vs. monthly plans
Memberships that see strong organic adoption of an annual plans over monthly plans hold major pricing power. When memberships see at least 70% of first-time subscribers purchasing an annual plan over a period of at least four months, this is highly indicative of the membership being undervalued.
In such cases, a price increase of 10%-20% will likely be well-received by members.
Continuous expansion of content formats
Memberships that continuously expand their content formats can raise prices often (i.e. once per year). Take the case where member benefits have historically been newsletter-focused. Expansion of those benefits into new formats such as podcasts, video and others can increase the perceived value of the membership.
Whether it's content that's been repurposed or content that's entirely new, content expansion creates a runway for ongoing price increases in the range of 5%-10% every 12-18 months.
Operating in an under-served market
Memberships that operate in under-served markets can charge more. In such cases, competition is low and there are very few qualified experts to compete with in the marketplace.
A membership that offers in-depth analysis and cutting-edge research, in a niche topic, will attract high-profile executives, thought leaders and innovators in similar markets. This is an audience who's willing to pay a lot to understand the impacts on their industries and customers. Memberships that find themselves serving such groups in these markets hold significant pricing power.
Statistics and guidance
Here are some more general trends we've noticed during our research:
- Customers who have seen the most success raising prices do it slowly - never exceeding more than one price increase every 12-18 months.
- If a pricing strategy involves yearly prices increases, 10% per year is absorbed well by members.
- Annual memberships that have not raised prices historically (or for a period exceeding 18 months) and have yearly retention of at least 75% can likely raise prices as much as 20% without negative impact.
- Customer results indicate that the frequency of price increases is more significant than the increase itself - as long as the customer is operating within the 10%-20% price increase range.
I hope this is helpful. I'll be sharing more of these learnings as we continue to move forward!