Thursday, September 20, 2012

Free to Fee: One Association’s Response to the Freemium Membership Model

[This is Part 2 of Maximizing Association Membership via Engagement.  Part 1 was posted 9/20/21.]

After eight years of watching its membership stalled at 5,000 members, the board of the  Small Business Association Of Michigan (SBAM) decided to make a change. Despite Michigan’s businesses mired in a long recession, SBAM was not satisfied with the status quo.

SBAM is a broad-based “chamber-like” organization advocating for Michigan small business. With 15,000 members (5,000 paid members), it is one of the top 3 voices for business in the state. But, the association had a desire to engage more small businesses to enhance our voice within Michigan.

I visited recently with Rob Fowler, president/CEO of the Small Business Association Of Michigan and asked him to share SBAM’s story and the decision to dramatically expand membership and clout with a 10-year growth strategy that features a free membership.
“Our potential membership is infinite (all small businesses) but with many potential members unknown as new businesses start all the time and others go out of business,” Fowler shared. “Our challenge is that we are not a household word among small businesses. We need to enhance our brand, become more visible and market to potential members. It is an ongoing effort. Our messages focus on cause (“join the fight for Michigan small businesses”) NOT on the benefits you’ll receive. Once they have joined the free category, we urge them that ‘now you know us, why not join us.’”

After brainstorming about how it could do better, SBAM created a “free” membership category.

In exchange for giving SBAM basic information and permission to call them a member, they get access to “low value” products and services, a subscription to our magazine (printed), all electronic communications and opportunity to attend our annual conference as a member.

The free strategy allowed SBAM to grow from 5,000 to 15,000 members in four years. And, they found that getting big growth in numbers is the key to the system.

SBAM provides free members – those who provide basic information and give us permission to call them members – access to “low value” products, services and discount programs. They receive our print magazine, electronic information and the member rate at our programs. Our paid members receive all these benefits plus access to high value programs and services such as group health insurance and workers compensation insurance.
“Our Revenue per Member (RPM) is our key metric,” Fowler said. “As projected, it dropped when we began the free membership program. We expect to see it come back as the free members buy services, register for programs and convert to paid membership.”

Fowler identified three key non-dues revenue sources:
  1. Small “commission/fee” from products and services. This is where #s matter. 
  2. PAC contributions. Because they allow us to call them members, we can seek PAC donations from them. In last 2 years, PAC donations have more than tripled. 
  3. Sponsorships by giving companies access to our members (again, numbers matter). Because of the information we have, we can partner with “sponsors” and provide them access (always through us) to the types of businesses (members) they are seeking. 
Our job is to engage (“recruit”) nonmembers into the free membership category and then convert them to dues-paying members.

Some of the side benefits of the increased numbers include:
  1. Helping us achieve our mission to be a positive influence for small businesses. 
  2. Increased clout: “I saw it in the eyes of the Michigan governor when he heard our president announce that our membership the prior year had grown from 8,000 to 15,000,” Fowler said. 
  3. Enhanced its bargaining clout with business partners: because of its increased membership numbers increases the value of our organization to our partners. 
“The free member category has created a virtuous circle,” Fowler said. “Because we have more members, we have more clout which provides more influence which increases awareness which increases member numbers.”

In reflecting on their growth strategy, Fowler offered three thoughts for other associations:
  1. Free is a strategy not a tactic. 
  2. It needs to be accompanied with real marketing, real ways to monetize the increased numbers and appropriate marketing and measurement. 
  3. Know your strategy to monetize the increased number of members. Generating a revenue stream is vital to making the change successful. 
Fowler noted that SBAM has not seen paid members switching to the free option. But, he noted, most of our paid members are not aware of the free option.

“This was new territory for us and there weren’t (aren’t) many examples out there as role models for this system,” Fowler said. “Our success relates to our ability to monetize the free members, restore our Revenue Per Member metric and move small businesses from nonmember to free member to paid member.”

1 comment:

  1. I believe the Freemium model is giving away the farm. Many associations are forced into looking at this model because their association is still doing what members can get for free or things they feel the association will do anyway. When you focus your entire benefit structure around "doing things for your members they can't do themselves effectively," then there is a huge desire for membership because the association has things members can't get anywhere else.

    The danger you have is if a nice % of your current members view the "free" membership as a level they are satisfied with, the unintended consequence is you lose members as well to the lower level.