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Remember: Price should always match the value.

Before you even begin to drool over the idea of hordes of members paying you a recurring fee each week or month, ask yourself how your membership business delivers value to its members. Is value delivered evenly over the lifetime of membership? Is the majority of value delivered in the first months of membership?

The answer to this basic question is what determines how you price your membership options. Pricing your membership or subscription options in a way that is contrary to the value delivered is a set up for failure—you do not want members to stop and ask themselves, “Hey, why am I still paying for this?” That’s a sure way to create a bad feeling and lose members.

If you’d like to read more about this topic, Jason wrote a post earlier all about this that included some case studies.

Here’s another way to think about value pricing: how much do you want to make?

Now this may seem like a silly question, the answer to which is “As much as I can possibly make!” But if you are truly honest with yourself, you should be able to set a realistic revenue target or goal. Using this revenue target, you can back into membership pricing (and possibly even refine your business model).

For example, let’s say you set a revenue target at $30,000 per month. This could be achieved via several pricing models:

• 750 members paying you $10/week.
• 1,000 members paying you $30/month.
• 835 or so new members per month committed to paying you $36/year.

Which of these is most achievable given the premise of your membership site? How can you deliver value along the timeline of your membership to retain these members? Is it possible for you to grow to a member base of this size?

If you’re still thinking about pricing from this high level, you might want to read Jason’s series on pricing that starts here before diving into the details below.

If you have an idea of the type of pricing you want or otherwise just want to browse through the options below, continue reading. Here are some common pricing models we have seen used for member-based businesses.

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Fixed Term Membership

In this pricing model, the membership level has a set term with expiration. Members must renew to maintain membership. We often see this pricing model used for set term of the calendar year (January 1 to December 31). This is a comment pricing model for traditional Associations and Organizations as well as benefactor groups that report membership on an annual basis and require people to “renew” that term each year.

You can do some creative things with this pricing model, such as offer a discount for early renewal, a discount for purchase a multi-year membership in advance, or even prorate membership for people who sign up mid-term.

For more reading on this model, see:

• Have all Members Renew on the Same Date
• Allow Members to Select Auto-Renewal via Checkbox on Membership Checkout [New PMPro Plus Add On]
• Provide a discount for early membership renewal
• Offer Expired and “Old” Members a Membership Renewal Discount for Coming Back
• Proration Add On for Prorated Payments with Paid Memberships Pro

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Recurring Subscriptions with Fixed Price per Period

This is a very popular model of membership pricing, where a specific price is charged “per month” or “per year” for the life of membership. Most payment gateways also allow pricing per week or custom periods like every 3 months, every 60 days, etc.

Recurring subscriptions work well for newsletter-based businesses, sites with content written by “experts” or coaches, as well as online social communities and listings sites.

The important caveat to this type of membership pricing is that you continue to deliver value each term. If your members are paying you monthly, you better be certain that there is “new stuff” (good new stuff) delivered to the member each month.

This model is very easy to set up with the base Paid Memberships Pro plugin. You would achieve this by setting an initial payment and recurring subscription of the term of your membership.

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Front-loaded Membership Pricing

Jason is a fan of front-loaded pricing models—where a higher amount is charged at signup, then a lower rate is charged each term. This can be a single up front higher cost, or an installment (i.e. $100 per month for the first 3 months then $15 per month).

This is a key model to consider if your answer to when value is delivered is “mostly in the first few months” (or weeks). I see this pricing model for health and fitness sites aimed at weight loss or a software businesses with a “get started” rate then maintenance rate.

For more reading on this model, see:

• How to front-load your membership pricing and double revenues.

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Installment Plans

Installment plans are a bit like the front-loaded membership, but they do not have the ongoing recurring payment. This model is useful if you need to charge a high price but know that your customers cannot afford that large expense in one payment. I have seen this model used for executive coaching, training programs, and the sale of physical goods.

This model is very easy to set up with the base Paid Memberships Pro plugin. You would achieve this by setting an initial payment and recurring payment of the term of your membership, with a “payment limit”. You can optionally set an expiration date on membership as well. Let me break this down for a membership level that you want to charge $400 for over the course of 4 months and maintain the user’s membership for 1 total year.

• Initial Payment: $100
• Recurring Subscription: $100 per 1 month
• Billing Cycle Limit: 3
• Expires in: 1 Year

One caveat of an installment plan is that you want to lock a member in to paying for the full installment. If you’ve giving a customer a $400 physical product, and they cancel membership in the second month, you’re out a big chunk of money. See this guide for help on locking a user from changing their level during the installment period: Methods to Block Users from Logging In, Selecting or Changing Membership

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Free or Reduced-rate Trial Periods

We aren’t a big fan of this pricing model, but it is one you see a lot in the wild. [Jason: I’m a fan of free trials if your goal is to get more people using your service or product. When you’re actually ready to make a profit, switching to a model that charges based on true value of your product up front is best in my opinion.]

In general, the free trial model charges a lower rate for the first few terms of membership, hoping to hook the customer into maintaining their membership after the trial ends. I have see this model used in a lot of online software and tools, but also for “subscription boxes” (get your first box – just pay shipping!), and other digital communication or financial tools.

In all of these cases, its important to remember that you must prove the worth of your full price membership during the trial period. You don’t want to price yourself so high that people aren’t able to maintain membership at the full rate, and you don’t want to deliver all the value of membership during the trial so there’s no reason for them to stay on.

If you’re a fan of the membership trial model, we strongly suggest offering a reduced rate trial instead of a completely free trial. This forces your members to be a bit committed to your product and can help insulate you from the workload created by loads of free trial members that never really intended to stick around.

For more reading on this model, see:

• Add a 30 day free trial to an annual payment plan
• Offer Trial Memberships That Can Only Be Used Once
• Methods to Block Users from Logging In, Selecting or Changing Membership
• Restrict Discount Code Usage to One Time Per User

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Lifetime Membership

You can add a “lifetime” option to almost any pricing model you select. Sometimes a reduced-price lifetime plan is offered for a limited time as an incentive for early adopters. Sometimes the lifetime plan is always available for customers who just want to pay once without worrying about recurring subscriptions.

To figure out what to charge for your lifetime plan, you would take some multiple of your monthly membership, perhaps 30x a monthly membership or 2.5x an annual membership rate. Ideally, your lifetime plans should result in the same “customer lifetime value” as someone paying per period. So having a good estimate of your renewal rates and customer lifetime value will help you to find the sweet spot.

Sometimes a higher-priced lifetime plan can be used as a decoy and will not be selected by a significant number of people, but will make your regular price look like a better deal. We’ve heard from some sites with lower-volume, higher-priced lifetime plans report that “every once in a while you get a little bonus when someone chooses the lifetime option”.

This model is very easy to set up with the base Paid Memberships Pro plugin. You would achieve this by simply setting an one-time initial payment on the membership level with no recurring subscription or expiration.

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Group Pricing / Sponsored Membership / Umbrella Plans

This model is useful when you have a breakdown of individual members as well as corporate or company-type members. For this model, you would take your individual member pricing and offer a value to the parent account that is purchasing more than one membership at a time for a team of people. For example, you could offer a single membership for $125 per month and then a group license of $500 for a 5-member organization.

For more reading on this model, see:

• Plugin for Sponsored Members (Link Parent and Child Accounts)
• Allow a Specific Number of Active Sessions with a Single User Account (Useful for Corporate, Education or Group-type Memberships)
• Sponsored/Group Members Add On

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Addon Pricing Models

In this “build your own” membership model, users may be charged a base price, then have the option to select additional membership features. These features may be added interest groups for a newsletter or blog category subscription, or a la carte features of membership, such as an annual resume review service, a consultation phone call or other “one-off” products. We have seen this model used for traditional newspapers that offer an online and optional physical printed edition.

For more reading on this model, see:

• Sell Access to a Single Post Category Using the Addon Packages Plugin
• Sell Access to Post Categories “à la carte” Using Price-Adjusting Register Helper Fields
• Addon Package Add On

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Utility Pricing

In this pricing model, users are charged based on some kind of consumption metric. You may recognize this model as used by most email marketing services that charge based on number of members in your list. Cloud hosting companies might charge based on the disk space and/or bandwidth used.

We wanted to include this pricing model even though Paid Memberships Pro doesn’t offer utility pricing in the core plugin or any of our add ons. It can be a smart model if the cost to you as a business is truly based on a member’s usage. Some gateways like Stripe and Braintree allow you to adjust a user’s subscription amount whenever you like. Others like PayPal offer changes within a certain range. With some custom coding, you could track the metric you need to calculate the monthly/annual total, generate an order for that, and then attempt to resolve that order against the customers credit card stored at the gateway.

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Donations or “Pay What You Want” Membership

If you go the route of a donation-based membership, its best to enter into things with low expectations. These types of membership sites are often run by producers who would be doing their thing regardless of payment. If you’re a passionate product reviewer or write your own digital music and just want to get your stuff out there, then asking for optional donations can be a positive way to make a modest income without the pressure of a traditional membership model.

We like the “Pay What You Want” model, especially if you put some social pressure on your potential members: “Most people pay $5 per month.” Another option is to include bonuses above a certain amount to encourage higher revenue per sale.

For more reading on this model, see:

• Collect an Optional Donation at Membership Checkout
• Allow users to “set their own price” for membership
• Donations Add On
• Variable Pricing Add On

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Now put on your thinking cap.

I hope this post has exposed some of the traditional and not-so-traditioanl ways you can price your new membership or subscription-based business. And don’t feel shy about changing a pricing model for an existing business—we did that here at Paid Memberships Pro when we really did some thinking about value pricing. The majority of our value is delivered in the first few months of membership, when the support customer is just getting their membership business off the ground. We offer a discounted annual renewal rate because there is ongoing value delivered via our blog posts, code recipes, and continued development to the Plus Add Ons.

Let’s keep the conversation going in the comments below.

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Other Posts on Pricing

• Jason Talks About Pricing on The Art of Value Podcast
• Membership Pricing: What’s the value of a membership to your customers?
• Membership Pricing: Time and Materials x Margin
• Membership Pricing: Basic Methods Part 1
• Seth Godin on Pricing
• Membership Pricing: Some Advice