Pricing the membership site can cause a bit of a headache, especially for newbies in the Internet business. In truth, knowing how to price your membership plans is something which you only get better at with experience
In this chapter, I am going to lead you through several factors that will affect how you price your membership site. Setting up the right price for your membership site is not something to be taken lightly. The price can neither be too expensive nor too cheap.
Other than discussing the factors that will affect the pricing for the membership site, I will also show you how to improve the price of your membership site – but we’ll get to this later in the chapter.
This is especially useful for some of you who have already owned a membership site for quite some time – this will help you get more out of your site.
The Price Factors
There are many factors that can affect how you price your membership site. I won’t talk about all of them, but here are the four main factors that you can take into account when you are deciding on a suitable price.
- Return on Investment (ROI)
- The Decoy Effect
- Price vs. Worth
- Prices of your competitors
These are the factors that you need to consider before setting up the price. They are closely related to the behavior of your consumers and target market.
When you are able to understand these factors, you will then be able to know how to price your membership site.
Return On Investment (ROI)
This is the first important factor that will affect your decision. Considering the ROI of your membership site is of utmost importance when it comes to deciding on the price of your membership site
You can start calculating the ROI of your membership site even before you start setting up the membership site. Calculate this when you are drafting the business plan, so that you will have a rough idea on how to price the membership site.
ROI is determined when the business owner calculates the benefit to the investor resulting from an investment of some resource. For membership sites, it means how much your membership site will benefit the subscribers if they purchase with the price you’ve set. If the benefit that is brought to them higher than the price they pay, they are more likely to take the offer.
Therefore, the higher the ROI, the higher the price of your membership site should be. This is why ROI should be considered when you want to price your membership fees.
The Decoy Effect
Now, let’s move on to the decoy effect. The decoy effect will occur when there is a third option.
To give you a better picture of the decoy effect, I want you to imagine this scenario:
There are 2 prices for membership site. The first one is $27 a month, and the second option is $199 a year. With just these two options, it might make it hard for your prospects to decide which payment plan to opt for.
But what if there is a third option of three hundred and ninety seven dollars for two years?
The third option will make a huge impact on your visitors. If there is a third option of $397, you are more likely to pick on the second option which is $199 a year. This is because the third option is only marginally cheaper compared to option one but is so much more expensive than the second option. This highlights the value of the second option and this is how the decoy effect works.
The decoy effect reflects that the tendency of people to change their preference of choice between two options in the cases when an extra similar option, or asymmetrically dominated option, is introduced.
This technique is commonly used in the marketing, by setting up a more expensive decoy service in the market. So, what you can do when you are considering how to price for your membership plans is to offer three separate payment plans with different prices, with one of them being a decoy. This will help your prospects make the best decision, which will be profitable for you as well.
Price vs. Value
“Price your product with the right number.” Remember this sentence always. When you have the right price tag on your product, it can turn your offer into a no-brainer must grab offer, almost instantly.
You may be wondering how you can measure the right number or price for your product. When you are considering the prices for your membership site, put yourself into the shoes of your potential subscribers and think like how a consumer would think.
Is this product worth the price I pay? This is definitely one of the questions they will ask. This leads back to the ROI of your product again. The price of your membership site should depend on the worth of your product.
Consumers make decision based on this factor. ROI and this factor are sort of linked together. If the benefit of your product is worth more than what they pay for, they will buy the product or, in this case, they will sign up with your membership site.
Price Comparison Vs.Your Competitors
Last but not least, you want to conduct research on the price set by your competitors. Understanding your competition is the key to success when it comes to businesses. Regardless of what kind of business, understanding the competition and market is vital.
To truly understand the strengths and weaknesses of your own business, you must understand your competition. So, through researching on your competitors, you can improve and enhance your business.
Search engines have made this easier for you, simply search for the keywords of your business in search engine, and you will get what you want.
Research the prices your competitors offer for membership sites and from there you can get a rough idea on what prices you can offer your memberships for, too.
Apart that, you can also consider joining other people’s membership site to gain exposure as well. This allows you to gain exposure and network with people in your niche as well, which can be very helpful for newbies.
After you’ve joined the membership site, you will have the opportunity to evaluate and understand how other people manage and maintain their membership site and what a certain priced memberships offer its subscribers.
