OPTIMIZING MEMBERSHIP DUES - Q&A WITH BOARDROOM MAGAZINE

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How does a private club decide on the ‘optimal’ level for club dues?

There are many methods available to determine 'optimal' dues, but successful clubs use a combination of tools (market -driven, value-based, etc.), and know that the key factor to consider is always the member first. The more you know about your ideal target member for each category of membership, the better you'll be able to provide what they value, and you’ll be more confident in what you’re able to charge.

There’s sensitivity around raising dues ‘too much.’ How much is too much? What are the deciding factors? What’s the ‘break’ point for members?

The break point for members can be any number of reasons, but for clubs in competitive markets it’s usually when there is an acceptable alternative. This boils down to supply and demand, and how your club compares both in terms of price and quality.

We recommend clubs evaluate competitive dues using a statistic we call Minimum Membership Obligation (MMO). Consider all of the required, recurring costs of membership and include all the little fees (base dues, capital dues, assessments, locker fees, cart fees, range program, food minimums, etc.) and add them up. The goal is to compare apples to apples. Many of our clients find that after looking at the market this way, their dues rate may be high relative to other competitors, but the MMO is lower overall. Every membership salesperson should know this cold.

When considering dues increases, what must the Board of Directors take into consideration?

When asked why they chose to leave a club, most members will scribble either “financial” or “lack of use” on their exit surveys.  Both are indicators that the member’s perceived costs have outweighed the perceived benefits that their club membership offers. To combat this, Boards must consider how to continue to bolster their member benefits, and to ensure effective communication of these benefits both to prospective members and current members. 

How do today’s dues affect the next generation of club members?

Many clubs today are faced with situations where the club membership is aging out faster than they can recruit new, younger members. Clubs must appeal to the next generation of member, and realize that this next generation may be completely different than their existing members.  There are great Legacy dues programs, Young Executive memberships, and even Preview membership that provide a pathway to full membership for the next generation of club members. But fundamentally, clubs need to be much more aggressive in creating value through innovative programs, services and enhancing the overall experience for the next generation of club members.

In concert with monthly dues are the club’s initiation fees? How does a club decide on the ‘correct’ initiation fee so that it doesn't hurt future recruitment member retainment?

There are so many factors that go into equity initiation fee pricing, especially when equity / refund liability is involved. Absent of that dynamic, non-equity initiation fees are market driven. On the buyer side, they are a symbol of status and perceived quality. On the club side, they enhance the brand and serve to create downside risk for the member to walk away from their investment. In this case, setting the correct initiation fee is simply an exercise in supply and demand. Depending on the market conditions, lowering initiation fees can have a seriously negative impact on brand – we always encourage clubs to first look into adding value and/or creating motivation vs. lowering fees.

From a case study point of view, can you discuss a club or clubs that have increased their due too much, and the effect that has had upon the club?

I’m sure there are many. Without naming names, a direct competitor of one of our client clubs raised dues to near the top of their market after they added some minor capital improvements that they thought justified the increase. Unfortunately they also cut member services to pay for the capex. Needless to say, they had a mass exodus of upset members.

Conclusion

Most clubs let the market dictate their pricing, and that may be just fine. But all clubs can benefit from a more value-based philosophy. Our recommendation would be to encourage clubs to examine their value proposition, and if necessary, think of ways to create value. There are only two ways to do this: 1. Create a better product or service (better offer); or, 2. Articulate the product or service differently or more clearly (better marketing).

Mike Phelps

Redondo Beach, California 90278