How to price your membership site

Jan 27, 2021

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A membership site is a great way to run a successful Knowledge Commerce business. Not only can it be quite profitable, but you can foster a strong community of like-minded people.

We’ve covered what should go into creating a membership site, but many people ask “What price should I set for my membership site?”

Let’s go over what to consider when setting the price for your site. Get ready to dive into your membership analytics.
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Calculate membership pricing based on profit

Membership sites, like most digital products, are typically very profitable. Unlike physical goods, digital goods can be created once and serve thousands of new customers with limited additional costs.

To set membership prices that will make your site profitable, you’ll need to charge more than what it cost to create and maintain your digital product offering. That means your pricing should cover:

All your software expenses, including membership software
Operating expenses like office rent and equipment
Your time: the hours you work on the site are valuable and should be accounted for.

For example, let’s say:

Your initial software costs were $100 a month.
You work from home but paid $1200 for a new computer, so your monthly operating expenses are $100 a month for the first year.
You’re putting in 100 hours a month at a self-valued rate of $25/hour.

This means you have $2700 in monthly costs. If you estimate you’ll have about 100 subscribers, you’ll need to charge each of them at least $27 per month to turn a profit.

It’s fine if you’re not profitable right away. Sometimes, your costs to get members will outstrip your monthly revenue. But it’s a good idea to set your pricing so that it can consistently produce profits after a reasonable amount of time.

Choose a price that’s affordable for your niche

Successful pricing also considers what your customers will pay. You could set a $1 million dollar price for a membership site about underwater basket weaving, but it probably wouldn’t attract customers.

A recent report on membership pricing revealed that 43% of business-to-consumer (B2C) membership sites charge between $25-49 for their monthly membership fee. The next most popular price range was $14-25.

This isn’t meant to prevent you from setting your prices outside these ranges but it should give you a good idea of what consumers are willing to pay.

Set your membership fees at a level where you can attract enough customers to hit your financial goals. You can develop a membership pricing strategy by:

Asking your potential customers what they’re willing to pay. Send surveys to your existing email lists asking about pricing. If you don’t have a list, reach out to your ideal customers on LinkedIn or through Facebook Groups.
Doing competitive research. What are similar membership sites pricing at? What are they offering for that membership fee? You don’t have to mirror them, but this gives you a good signal on what the market will pay.

Test different price points

Once you’ve launched your site, you can always monitor and adjust your price point. While your initial pricing research should have eliminated any major miscalculations, it may serve your business to test out different prices over time.

For instance, perhaps your initial price point is selling much better than expected. That could be a sign that it’s time to increase the price of your membership.

On the other hand, you may find that many people start the sign-up process but leave when they get to the pricing options. That could be a sign that you need to lower your prices a bit.

You’ll want to evaluate how to price your membership site on an ongoing basis, not just prior to launch.

Think about the value you deliver

It’s important to remember that you don’t have to charge what your competitors do. You should price according to the value you will deliver to the customer, even if that’s much higher than the competition.

You may miss the mark sometimes and have to lower membership prices. But you might also find that people find your content extremely valuable. If that’s the case, capitalize on the positive response and use social signals to prove your value to potential customers.

Social proof is a crucial part of setting the right membership pricing. People assume something is worthwhile when they see that others have enjoyed the product as well.

For your business, this means testimonials! Showcasing the clients you’ve helped will not only build community, but also make those membership fees look worthwhile to other potential customers.

Also consider the value added by your knowledge commerce business. If your site helps your customers get a certification or adds skills to their resume, then your membership pricing strategy should reflect that added value.

Use membership prices to meet your goals

You have financial goals you want to hit as a knowledge entrepreneur. Your membership pricing should reflect those goals.

For example, let’s say you want to generate $10,000 a month in revenue from your membership site. One way to think about pricing is doing simple math of how many members at what price it would take achieve that:

1,000 members paying $10 a month
500 members paying $20 a month
100 members paying $100 a month

Admittedly, this is basic math that doesn’t account for subscription metrics like churn and operating expenses. But it’s a great starting point for figuring out what you want your membership pricing to look like.

If you’re just starting out, your financial goals can change as you receive more information. And that’s okay. It’s important to be flexible as you gather new information. But you should still keep your financial goals in mind as you’re setting your prices.

Membership pricing strategy: One-time fee or recurring payment?

You can charge a one-time fee for your membership site or you can have customers pay on a recurring basis (monthly or yearly). Let’s go over the pros and cons of each.

One-time fees can lower the barrier of entry for your service and allow for more enticing offers. For example, you can advertise that a customer gets years of value for just one payment. Who doesn’t like getting the most out of their money?

A one-time fee does mean you’re constantly looking to acquire more customers. That can get pricey or challenging over time as your marketing channels get saturated. One potential solution is to provide a one-time fee for membership but also offer members upsells. That way, your revenue isn’t dependent on constantly finding new members.

So, what about a recurring payment model? A recurring payment is often great for your bank account because you can rely on steady income every month or year (depending on how you bill). It’s easy to project your future monthly financials with recurring membership fees. With that projection, it’s easier to make bets around advertising channels or new office space or a new employee.

Recurring membership pricing presents its own challenges though. Your customers will likely demand more and more offerings every month or year to see the value in their subscription. Additionally, if you bill annually and automatically renew without notice, members could get upset.

There are a few other membership pricing models to you can use in conjunction with a one-time fee or recurring payment:

Variable pricing: You can vary what you charge based on your audience or acquisition group. For example, you can offer corporate memberships at a higher price than you offer your individual consumer membership. This can get complex but may work depending on what you’re offering.
Lifetime membership: This is typically a large, up-front lump sum for lifetime membership. We define this as the lifetime of the membership site, not the person buying it. This is often used as a way for early adopters and superfans to contribute at the beginning of a site. Make sure the math works out on this when you’re pricing. You probably don’t want the lifetime membership to be the cheapest over the span of a year or two.

Using Kajabi for your membership site

Kajabi is designed to provide all the software tools you need for a wildly successful membership site. With our all-in-one business platform, you can use one tool to: