This article is adapted from an upcoming research report on chamber of commerce revenue models, which focuses on trends, commonalities, best practices and trajectories of the most common engines that power chamber revenues: dues, total resource campaigns, community events, economic development funding, sponsorships, affinity programs and publications. The report is sponsored by ACCE and the Western Association of Chamber Executive (WACE).
For chambers of commerce, the revenue mainstay has long been annual dues based on company size. Dues historically accounted for 70 percent (or more) of most chambers’ revenue, but that number has been in steady decline for 30 years. In large chambers today, dues range from 27 percent to 37 percent of total revenue. Even small chambers now see less than half of their income coming from dues, according to ACCE’s 2012-13 Operations Survey.
The last decade saw an accelerated shift from the traditional dues model to tiered dues, and the trend continues. A 2013 survey of WACE members found that 28 percent had a tiered dues structure, more than double the 12 percent counted in 2006, according to Steve Snyder, WACE vice president. ACCE’s 2012-13 Operations Survey tells a more dramatic story: nearly half of the 294 reporting chambers said they have a tiered dues structure. Neither survey takes into account chambers that use a hybrid of tiered dues and fair share models. (A hybrid model typically places employee count restrictions on some, or all, tiers to prevent large companies from joining at significantly lower prices than what they were paying before the conversion.)
As the name implies, tiers are levels of benefits received for a specified dues amount. Under the traditional fair share dues model, the cost of membership is scaled according to the number of employees or revenue of the member, with occasional variations such as total deposits for bank members or the number of beds for hotel members. With tiered dues, benefits increase as the investment level increases, no matter how many employees are involved.
Lower tier benefits include listings in directories, web sites and mobile apps. Typical middle tier benefits include free email blast advertising, booth discounts at trade shows, or a profile of the CEO or company in chamber publications. Upper tier benefits usually include all the benefits of the lower tiers plus such things as invitations to select events like breakfast with the mayor or advocacy trips, customized research reports and free consulting services.
According to ACCE’s survey of chamber operations, only 40 percent of the smallest chambers (revenues under $450,000) use a tiered dues formula, compared to 50 percent of chambers with revenues above $2 million, and 64 percent of the largest chambers (revenues above $5 million). The largest chambers also were more likely to be early adopters. Fifty percent had been using tiers for more than five years, compared to 21 percent of chambers with less than $900,000 in revenues.
In August 2011, the Tucson Metro Chamber in Arizona switched to a tiered dues structure. One year later, dues revenue had increased 16 percent; this year it jumped another 16 percent. Not surprisingly, Mike Varney, chamber president and CEO, is a big proponent of tiered dues. Without them, he believes leaders are “leaving money on the table and missing an opportunity to improve the chamber’s revenue stream.” Before arriving in Tucson, Varney had converted the Las Vegas Chamber to a tiered dues schedule. He’s now increasing the number of Tucson’s tiers from four to five, adding consultative services to some benefit levels, and developing customization within tiers, among other changes.
In Destin, Fla., dues revenue increased more than 40 percent from $210,000 to more than $300,000 when a tiered structure was enacted in 2005, according to Shane Moody, CCE, FCCP, president and CEO of the Destin Area Chamber of Commerce. Post-recession, dues contribute about $260,000 annually to the chamber budget.
In Chester County, Pa., membership revenue has risen nearly 14 percent to $376,000 since the chamber introduced tiered dues in 2009. At first glance, that number may not seem remarkable, but during that time the chamber saw a net loss of 80 members related to downsizing, mergers or closures during the recession, says Nancy Keefer, CCE, president & CEO of the Chester County Chamber of Business & Industry. Today the average dues per member is $420, compared to $374 before the conversion. (Editor’s Note: Effective Oct. 14, Nancy Keefer became president and CEO of the Daytona Regional Chamber of Commerce in Florida.)
Changing demographics, post-recession penny-pinching, technological change and the promise of revenue increases have heightened the buzz about tiered dues. It’s a growing trend, but it’s not a revenue panacea and it’s not for everyone. Many chamber executives don’t feel the need to switch from the fair share model. Some believe tweaking the fair share model will accomplish their goals. Others maintain that their board is not ready to make the switch. One executive said he didn’t think the tiered structure would work well with the preponderance of small businesses in his community. Another didn’t think a tiered dues model would co-exist well with a total resource campaign, although some chambers do both successfully. These are well-founded concerns; not every experiment with tiered dues is a success.
Show me the ROI
Tiered dues would not have staying power if the benefits were one-sided. “Members are questioning the value they get for membership in ways they haven’t before,” says Varney. With tiered dues, members can easily understand the services they will receive in exchange for their investment. As a result, proponents say the model is well suited to a time when potential members, especially younger ones, place significant weight on ROI, rather than joining the chamber because “it’s the right thing to do.”
Tiered dues advocates note that today’s consumers are accustomed to bundled packaging from cable TV providers, health clubs, and even their local car wash. “Younger members grew up with a pay-as-you-go model for their cell phone minutes and music downloads, which is contrary to the pay up-front, full-price model traditionally used by chambers,” says David May, president and CEO of the Fort Collins Area Chamber of Commerce in Colorado.
Some chambers use
Lorraine Clarno, president/CEO of the Beaverton Area Chamber of Commerce in Oregon, says younger business owners “are not joiners. They make purchases of services.” May and others say the nation’s economic woes sharpened the focus on ROI as cash-strapped businesses scrutinized expenditures more closely.
Beyond that, technological change has affected what members need from chambers. Social media and web sites allow businesses to connect with customers around the corner—and around the world—without attending chamber networking events. With webinars, TED talks and other information and education online, middle managers may not feel the need to attend chamber leadership seminars.
To some, the advantages of tiered dues can be summed up by what it is not: a system based primarily on employee counts. “There’s nothing fair share about the fair share schedule,” says John Quigley, president and CEO of the Elmhurst Chamber of Commerce and Industry in Illinois. Members “should pay based on what [they] want out of it.” While Quigley’s chamber still uses a traditional dues structure, he continues to study tiered dues models and is confident his board will make a change in the not-too-distant future.
Indeed, says WACE’s Snyder, it can be difficult to justify the fair share model when talking to large prospects. In his days as chamber executive, he found one of the most difficult objections to overcome came from owners of large businesses who said, “Why do I have to pay more just because I have more people when I’m not getting any more [benefits] than the one- or two-person shoe shop?”
Kyle Sexton, a Salem, Ore., marketing strategist who helps chambers develop tiered dues structures, offers a more blunt assessment of the shortcomings of the traditional dues model. If “you use a fair share model now, you are punishing your members for growing, and rewarding them for lying to you,” Sexton says. “Neither is a good premise for a long-lasting relationship.”
For Clarno, the switch to tiered dues 10 years ago was a key part of her strategy to move the Beaverton chamber “from being events-driven to becoming a business services organization.” She also believed that tiered dues might offer an opportunity to increase retention. She was right. During economic downturns, she says, her chamber has been able to retain members even if financial concerns caused them to renew at a lower tier. Under the fair share model’s take-it or leave-it pricing, some members would have dropped their membership altogether, she says. Now that companies are on more secure financial footing, the chamber is taking calls from businesses wanting to upgrade to higher tiers.
Abandoning the fair share model has other advantages. With tiered dues, chambers reduce the number of “asks” in one year and members in higher tiers reduce the number of checks they write because many benefits are included in the tiered dues payment. Businesses with headquarters outside the chamber’s region may be more willing to join the local chamber when they have a choice of benefits—and control over which ones they buy.
“When we went to a tiered dues business model, it was much easier for the membership to understand,” says Moody of the Destin chamber in Florida. The chamber currently has five membership tiers, ranging in price from $325 to $6,300. The change in dues structure also allowed the chamber to take a “better look at what we were doing and how we were doing it,” he says. Moody is not alone when he says switching to tiered dues was also precipitated by a desire to close “a pretty big gap” between the average cost of providing member services versus the average dues. In other words, the chamber was providing too much for too little.
Marianne Virgili, CCE, IOM, president and CEO of the Glenwood Springs Chamber Resort Association in Colorado, concurs. She believes that chambers have historically sold themselves short. Too many chambers believe members are helping them by joining. “No,” she says, “We’re helping them out. We’re a centuries-old brand.”
Implementing tiers is no guarantee of increased dues dollars, and the conversion is not a simple adjustment. Lost revenue, unhappy members, or even job termination might result if a new dues model generates disappointing results. Internal hurdles such as retraining salespeople may be an impediment. A chamber that struggles with billing processes will be challenged in tracking members’ usage of benefits.
Cathy Lewis, IOM, vice president of membership for the Lawrence Chamber of Commerce in Kansas, has sold businesses memberships under both the tiered and fair share models. The chamber recently switched back to the fair share model, in part because of a leadership change. “You’re not doing the chamber a favor or the member a favor when you try to think you know what they need,” she says of the tiered model. She believes that chambers with tiered schedules should be wary of selling memberships solely on the benefits within each tier, without stressing the overall economic development contribution that the chamber makes to the community.
Mick Fleming, president of ACCE, agrees. “The most successful tiered models recognize that the people who give the chambers the most money may not care about the benefits in either a fair share or tiered dues membership kit. These companies are led by community investors who think of the chamber as a conduit for their contributions to the larger good, and as the voice of the employer community. The top tier value description should be as much about what a company gives as what they get,” he says.
John Bosse, vice president of the Cincinnati USA Regional Chamber, is aware of the shortcomings of both the fair share and tiered models. Four years ago, the chamber took a step toward tiers by offering a Gold Membership in which members paying 50 percent above their fair share rate were entitled to certain benefits such as limited event tickets and a complimentary conference room rental. The strategy was successful; the chamber is on target to have 600 Gold members this year, out of 4,300 total members.
For the past year, Bosse has talked to chamber executives nationwide and collected a binder full of information on tiered dues schedules in anticipation of rolling out a new tiered schedule this fall. But he could not find a satisfactory way to make the tiered model work for the organization’s members. Now the chamber plans to retain the fair share model and the successful Gold option, and it will unveil two packages of benefits that can be purchased separately. “At the end of the day, [switching to tiers] is not about the revenue to chambers,” he says. “It’s about what members want and what they need.” Bosse did not want members feeling “like they were forced to buy something they didn’t need.”
He was also concerned about how a tiered schedule would affect the chamber’s smallest members. Cincinnati, Bosse points out, already has a higher basic membership fee ($455) than many area chambers. And, he says, depending on how the tiers were structured, event attendance might have declined, a problem for any chamber linking event attendance to sponsorships.
Bosse is hammering out details of the new packages, which will be available to any size member. One will be branded as an “Access” package, while the other will be a “Marketing” package. In the Access package, one of the seven benefits will be an invitation to a VIP reception before the annual lunch, where attendees will be able to meet and mingle with the speaker. The Marketing package will offer seven options, such as a credit for banner ads on the chamber’s web site and top preference to be featured in testimonials about the chamber.
Studying the benefits other chambers offer under tiered models helped him create some of the new benefits included in the packages. He and his staff also sought input in-person and conducted surveys to determine the most popular and least popular benefits, an exercise that helped in developing the new packages, he says. Now Cincinnati is studying the feasibility of a third package focused on specific perks for members’ employees.
Designing a Tiered Dues Schedule
Creating a tiered dues model involves tough choices. Here are some major considerations and common variables that affect decision-making:
Number of tiers: There is no magic number or formula; it depends on the size of the chamber and its ability to offer a variety of benefits, the demographics of the customer/prospect base, and the local competition for products and services. The minimum number of tiers generally seems to be three or four, says consultant Cathi Hight. No matter how many tiers you choose, it’s essential that you offer appropriate benefits and services to differentiate them, she says.
“People want to have choices,” says Clarno of Beaverton, Ore. “They don’t want to be overwhelmed.” The same goes for the staff. Executives would be wise to consider how many tiers and value packages the staff can comfortably manage, says Lewis of the Lawrence Chamber in Kansas. Her chamber switched from a tiered structure back to the fair share model in January 2013. In hindsight, she says, the organization’s 10 tiers were “too many to administer for our size chamber.”
You may find it valuable to give a special name or recognition to members paying at the highest levels. For example, the top three tiers in the Fort Collins dues structure are considered “Trustee” investors. Dues range from $3,000 to $10,000. The highest dues amount paid by a non-Trustee-level investor is $1,500.
The Knoxville Chamber in Tennessee offers 11 levels. The first six are designated “Base Tiers,” while the last five are called “Premier Partner Tiers.” Portions of the dues from all of the Premier Partner levels are used for economic development, according to Michelle Kiely, the Knoxville Chamber’s vice president of development. Knoxville also offers variable pricing within upper tiers, which helped simplify the chamber’s conversion process to the tiered structure, says Melissa Spangler, vice president of member services. That way, two businesses paying different rates under the fair share model could participate in the same tier without a significant loss in revenue for the chamber.
In Tucson, Varney is trying something different for his chamber as he rolls out a revised tiered schedule this fall: variable pricing in his second-highest tier. Businesses investing in the Chairman Tier will pay anywhere from $5,000 to $14,999. “If you’ve got a great program of work, they’ll invest more money” based on the value they perceive, he says.
Including Full Time Employee (FTE) Restrictions: The concern chamber leaders express most often about tiered dues is whether large members will choose a lower level tier. For this reason, chambers may opt to establish a tiered system of benefits, but add FTE count restrictions to some levels. Sexton advocates such a practice, which he refers to as a “safety net clause” whereby large employers are not eligible for lower membership. By doing so, chambers offer a “great transition from fair share models,” he says.
How chambers implement these size limitations varies. Some place a maximum FTE count on one or more of the lowest tiers. Others charge a range of prices at various tiers, depending on employee count. Still others list a base rate for certain tiers, but require businesses with a certain number of employees to pay an extra amount per employee. No matter how you implement such restrictions, it’s critical that businesses with a small number of employees realize they have the freedom to join at their level of engagement. At the Chester County Chamber of Commerce in Pennsylvania, one of the investors in the highest tier is a home-based business.
Selection of Benefits: Tiered dues are “about selling what people want, not what you think they need,” says Virgili of the Glenwood Springs chamber. The benefits each chamber offers will vary depending on business model and member needs, but there are some universal considerations. Current members probably won’t look kindly upon the reduction of benefits, which is why Sexton advises that “Your current benefits will be your basic business tier.” Adopting such a strategy “obviously puts pressure on your chamber to add benefits to complete your marketable packages.”
The key to setting up an effective dues schedule (at least at lower levels) is to find benefits that don’t cost your organization much but are highly valued by members, Virgili says. And while chamber leaders want to offer popular benefits, they should be careful not “to offer benefits that aren’t scalable,” says Hight. If you offer every member at a certain level an ad on your home page, what happens if so many people choose that level that you can’t deliver?
Then there are benefits that you may choose to leave out of your tiers altogether. When Keefer established the tiers for the Chester County Chamber of Business & Industry, she decided to keep sponsorships separate. By doing so, she says the chamber was better equipped to weather the recession. Other chambers offer investors discounts on sponsorships or the ability to sponsor select events. In hindsight, Cathy Burwell, president and CEO of the Helena, Mont., Chamber of Commerce, says she would not have offered members at certain tiers a free foursome in the chamber’s golf tournament because the tournament regularly sells out. By doing so, she likely gave up revenue because investors at the highest level probably would have invested anyway and paid to enter the tournament had it not been included, she says.
Some chambers offer investors at the highest level a position on their board of directors. Hight has mixed feelings about this. On the one hand, it provides businesses that are the most committed to the chamber an opportunity to lead and the prestige that comes with it. It also helps ensure that the highest investors are the most highly engaged. But if the board is “made up of top investors only, will you have the representation of all your members?” she asks. And what do you do when the popularity of such a tier means the board grows to an unmanageable size?
No matter how you construct your tiers, realize that what you initially roll out does not constitute the final word. Chambers frequently tweak the benefits within each tier, depending on what’s working and what’s not. After a year or two, some chambers may find they have more, or fewer, tiers than needed.
Pricing: Perhaps nothing varies more from one chamber to another than price points and the price differential between tiers. Both the actual cost of providing benefits and the perceived value need to be factors in setting tier rates. At the same time, it’s advantageous to study the various price levels at which many members are currently paying and tweak benefits accordingly. For example, chambers that have a lot of members paying about $700 in the fair share model likely will want to create a tier within “comfortable reach” of that price point, says Hight.
When determining the value of services, factor in how much it would cost members to buy those services outside your organization, says Hight. Chambers tend to undervalue their services, and it’s prudent to compare some of your benefits to those offered by other membership organizations, and for-profit businesses. For example, she asks executives if they figure the value of their mailing list by comparing prices offered by list brokers.
Never underestimate the dollar value of the highest price point, says Burwell. In fact, she advises picking a high investment level even if you aren’t certain who will invest there. “Never say it’s not achievable,” she says. There is “always someone who wants to be the biggest and the best. For some companies it’s about showing they are a big supporter of business in the community.” The Beaverton chamber added a new top level after it had implemented its tiered schedule.
It’s not only top investors who may surprise you. Sexton estimates that 10 percent of new members are likely to move up to a higher tier within the first year of sales after a transition. This typically yields an increase in revenue among that group from 18 percent to 23 percent, depending on pricing, he says.
Pricing for Non-Profits: Some chambers with tiered dues, such as Beaverton, Ore., do not designate a separate tier for non-profits. Clarno believes that non-profits should choose their level of engagement just as other businesses do. Other chambers label their lowest tier as the tier for non-profits. The Fort Collins chamber offers a tier labeled only for non-profit organizations. All the benefits match those in the base tier, but the non-profit tier is priced lower. There are many variations on this theme. Your philosophy and track record with other non-profits should dictate your approach.
Member Input: A little member input can go a long way toward developing an effective tiered dues structure. In Beaverton, Clarno solicited input from a task force of board members and other leaders, then test marketed the structure with all new members for six months. “That worked really well,” she says. The trial period not only gave her board confidence in the plan, but also provided an ideal “training ground” for staff, allowing them to fine tune their sales pitch. The tiers were tweaked slightly before the chamber sent bills to existing members at the end of that year. An added benefit of test marketing was that new members became “some of the best champions” of the revised dues structure.
Degree of Customization: Advocates of tiered dues say the model offers investors more flexibility by allowing them to pick benefits best suited to their needs. Once they pick a tier, investors may be offered additional customization options such as choosing between four tickets to the annual dinner or the awards luncheon. A magazine ad credit would allow the business to choose the issue and size ad desired.
Some chambers also offer a la carte pricing on some services in conjunction with tiers. Beyond that, it’s common to allow investors at the highest tier to customize their benefits packages just as they do under the fair share model.
The Tucson Metro Chamber will soon offer greater customization within three of its five tiers. Investors in the top three tiers will be able to choose any three benefits from a list of six. Benefits include a $200 advertising credit, two hours of CPA services and two hours of consulting with a marketing expert. All of the consulting services will be offered by chamber members at a nominal fee to the chamber. Members offering the services embraced the idea and saw it as a way to meet potential customers.
Clarno sees tiered dues as the first step toward offering custom membership packages. Ultimately, she believes chambers will need to offer 100 percent customizable packages, regardless of investment level. She just hasn’t figured out how to implement such a system—yet.
Katherine House is a business writer based in Iowa City, Iowa.
The hard work of implementing tiered dues doesn’t end once the dues schedule has been developed and announced. There are complex logistical and customer service issues to resolve.
One challenge of changing your dues structure is explaining to members how the structure works and why it’s preferable to the old system. Here are examples from chamber web sites, press releases and newsletter articles that explain tiered dues. Links to more samples.
“This new dues structure allows us to better support the companies that support our entire membership while preserving the benefits that everyone in our network currently enjoys.”
“As a business development organization dedicated to helping our Members profit and grow, we have various levels of investment designed to maximize one’s ROI and answer specific needs. Whether you’re looking to connect individually with the most influential senior executives of leading businesses or seeking the maximum amount of exposure in our region, we have the level of offerings right for your business model.”
Chicagoland Chamber of Commerce
“ … membership levels are structured on a benefit-driven tiered system that allows you to choose a level based on support of our efforts and and/or benefits that you would like to have access to.”
Fort Collins Area Chamber of Commerce
“ … we are confident that you will agree that the tiered membership plan recognizes the diversity of our membership and provides tangible value. … We recognize that these different member groups derive different benefits from a Chamber, and with the tiered dues structure we have the ability to meet the diverse, evolving expectations of our local businesses.”
Greater Binghamton Chamber of Commerce
There are countless permutations of dues packages. If you’re trying to figure out tiers for your chamber, here are some of the 70 we’ve collected from various chambers’ tiered dues schedules. They are arranged in approximate order from the lowest tier to the highest. The full list is available online at http://goo.gl/o9uV6v.
For a more detailed look at how chambers set up tiered dues schedules, links to four actual examples are below. Links to more samples.
Beaverton (OR) Area Chamber of Commerce
Six tiers ranging from Bronze ($250) to Mission ($2,000).
Chester County (PA) Chamber of Business & Industry
Six tiers ranging from Entrepreneur Membership ($285) to Visionary ($6,000). Non-profits with 1 to 49 employees are eligible to join at the Entrepreneur Level; those with 50-plus employees must join at the next tier ($500). Entities applying for the Entrepreneur Membership must pay a $35 application fee.
Destin (FL) Area Chamber of Commerce
Five tiers ranging from Business ($325) to Trustee ($6,300).
York County (SC) Regional Chamber
Eight tiers ranging from 1-Star Membership Investment ($368) to 8-Star Vision Leader Membership Investment ($20,000).
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