How to Price a Membership Program For Maximum Loyalty

Worried no one would join a paid membership for your brand? The only barrier to customers joining your membership program is the perception that it's too expensive for the value received. Remove that barrier and watch conversions and repeat purchase rates soar.

Properly pricing your membership program is key to unlocking sustainable revenue growth. When priced correctly, paid memberships drive retention through financial commitment, generate excitement with premium perks, and boost LTV by rewarding purchases rather than passive behaviors.

Step 1: Determine the break-even threshold

If your program is too expensive, customers won't join. If it's underpriced, you won't realize the full revenue potential. To calculate your break-even price, you’ll focus on balancing affordability and profitability using this formula: 

Step 2: Consider the perceived value

The membership fee should be above the break-even threshold and also offer obvious value to the customer. Benefits like early access, exclusive gifts, and discounts create a sense of exclusivity and increase the perceived value.

For AOV over $150, customers are willing to pay more for membership but expect premium perks like free gifts, early access, and expedited shipping. For AOV under $150, memberships should be lower-priced yet valuable, with benefits like cashback credits, free shipping, and first-order discounts.

Regardless of AOV, customers should see a path toward recouping the membership fee in three orders or less. In that timeframe, it’s easy to calculate the value in a way that feels achievable. Meanwhile, you see the LTV bump from the customer returning three or more times.

Step 3: Test your membership pricing

Start with an initial price that's above your break-even threshold but generally less than 10% of the average customer's yearly spend. 

• Collect feedback on adoption rates, LTV, and AOV
• Adjust pricing until you find the profitability sweet spot

Consider pairing your paid tier with a free tier to capture information from first-time buyers and engage 30-40% of shoppers.

Ready to launch your membership program?

Inveterate helps you get live quickly with a proven membership solution designed to grow LTV and boost revenue.

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