The Membership Debate - How Much Money Do They Really Save Your Company?
by Diana L. Martin
Several years ago, we published a blog titled, “Are Memberships Worth the Cost?” which generated more views than any other blog up to that point. Today it still reigns as the most-viewed blog we’ve ever posted and we’ve received some passionate comments on it.
Fast forward five years and in 2023 memberships are still going strong as a marketing and sales tool. I want to spend just a few minutes revisiting this topic today since it’s still quite a popular one.
Let’s be clear from the start - the point of today’s blog is not to say that memberships are bad; it’s simply to say that before you sign on the dotted line make sure you’re going to get your money’s worth.
Here are a few questions to consider before paying for a membership:
1. Will you recoup and exceed the cost of the membership during the year?
Evaluate the discounts and any other perks received with the membership. How many purchases will you need to make to receive discounts equal to the cost of the membership? Will you make that many during the term of the membership? Will you typically exceed that amount, and by how much? If you only break even, there’s really not much point in signing up.
2. Will you spend more with the membership than you would without it?
Will you buy things you don’t need just to get a discount or a reward? This can be a double-edged sword. Sometimes you just need to add a little bit to an order to qualify for a special discount and after the discount is taken, the final total ends up being less than what you would have spent originally even though you bought more than you intended to, but other times it’s not such a good deal. If you have to add a significant amount to get that discount or reward, you usually end up adding something you don’t really need and may not use for a long time. Those add-ons start to add up and they add to your bottom line in a negative way.
3. Can you maintain your membership each year simply by paying the fee or do you have to spend a certain dollar amount each year to keep it?
This ties in with number 2 above. If you have to spend a certain dollar amount, you can get into the same trap of buying things you don’t need. “Savings” are only savings if the end result is that you spend less than you would have without it and for a business that means not only spending less per order, but in total for your monthly/quarterly/annual budget.
4. Are the benefits you get for the price worth it to you?
Are the perks extraordinary enough to warrant paying for them? If you didn’t buy the membership, are you that much worse off? What is the likelihood that you will use all the extra benefits you’re paying for?
Here’s the biggie…..
5. Can you get those discounts/perks/benefits somewhere else for free?
Since most of our readers are businesses, let’s use Amazon Business Prime as an example. Amazon Business Prime has five membership levels, ranging from $69 to $10,099.00 per year. According to their website, the membership offers 10 benefits, most of which are available on all the plans except the lowest one. Two of the benefits are only offered on a couple of the higher-priced plans. (Posted on the Amazon Business Prime site as of May 1, 2023.)
Here are some of those benefits:
Fast, free delivery - At least in the office supply world, next-business-day delivery is pretty much standard for everybody, so there’s no reason to pay extra for it.
Convenient Business Shipping - Amazon says you can pick one day of the week to have all your orders delivered and if you have a large volume of orders they’ll deliver on pallets for no additional charge. We handle requests like that every day - it’s a normal part of the way we do business and we’ve never charged for it.
Spend Reports - again, something that we do for free as just a regular part of business.
Guided Buying - Amazon says “Create policy rules that guide employees to approved products and help prevent procurement violations.” Basically, this is saying that they’ll let you restrict your employees to only buying certain products that you’ve approved. This can be accomplished in a few clicks in our system and shouldn’t cost any extra - ever.
Extended Payment Terms - Extended terms are offered on their three most expensive plans. If you are a large company and would like extended terms with us, all you have to do is fill out a free application. If we approve it, you’ve got it - at no extra cost.
Another benefit in their list is Optimal Deployment. The description says, “Achieve optimal visibility and policy settings via your Business Prime features with expert assistance from Amazon Business Professional Services.” I’m not exactly sure what I get with this benefit. It sounds like it might be something that a company that sells on Amazon might use. If it’s for a company that just makes purchases on Amazon I’m not sure I’d ever use it.
So you can see where I’m going with this. Out of the 10 benefits the membership fee covers, at least five of them are things you shouldn’t ever have to pay anyone extra money to get. Subtract those from the equation and look at the remaining ones. Assign a value to those remaining ones and determine whether you would actually use them. Is the value you assigned more or less than the cost of the membership? Will you use all the benefits or will you be paying a lot for a little return?
Also, take note that with some companies’ memberships, some of the perks are only available in their stores and can’t be used online, so when you’re calculating the value of those perks and making your determination, remember to include the cost of payroll for the employee who makes that trip - their time is part of your expense and adds extra cost to the price of the membership.
Now look at the price of the membership again and ask yourself - is it still worth the money? How much will you actually save?
We’d like to hear from you now - take our poll and tell us what you think!