Wednesday, December 8, 2010

Do You Want Your Members to Be "Smart" or "Stupid"?

I mentioned Michael Schrage a few posts ago as one of the HBR bloggers that I make sure I read each time he posts. Here's one of his latest: Should Your Best Customers Be Stupid?

In it, he dissects the difference between customers who know how much your services really cost (referring to them as "smart" customers) and those who don't (referring to them as "stupid"), and shares experiences he's had with companies that charge "stupid" customers much higher prices than "smart" ones. In some ways, the post is a little too business school for me (i.e., information asymmetry"), but definitely worth a read.

And it got me thinking. Are association members generally "smart" or "stupid"?

Well, using Schrage's definitions, I'd have to say most in my experience have been "stupid," in the sense that they generally don't know the true cost of the association products and services that they access and use. But unlike Schrage's case study, in which the "stupid" customer overestimates this value, and is therefore willing to pay higher prices for the service, I'd say most association members underestimate the cost of association services. Remember the look on the face of your program chair when you told him the hotel coffee costs $85 a gallon?

And this sets up a competely different dynamic in many associations from the one Schrage describes. Schrage is talking specifically about IT consulting. There, the "stupid" customer says, "Wow, that software is cool! It must be really expensive." And is willing to pay a premium for it. But the "stupid" association member attending one of your conferences says, "Ugh, that box lunch was awful! Why did you charge me $40 for it?" In Schrage's world, if the customer finds out how much the software really costs, they’ll demand a lower price or go to another provider. But in our world, what will the member do if they find out how much that box lunch really costs? And what if we're not talking about something as commoditized as a box lunch? What if we're talking about the cost of the professional expertise and administrative expense necessary to manage a certification program?

I think we'd all agree that there's value in educating your association Board about how much things actually cost so they can make better decisions about the organization's competencies and capabilities. But I would argue that we should also be helping our regular members better understand the value--and cost--of the services they are receiving. Too often association managers seem reluctant to share this information, afraid, I suppose, that members will decide the services aren't worth the price they have to pay to support them. But the alternative, I think, is worse. If they know how much things cost, they may be better able to help you tailor those services better to their needs.

If they knew, for example, that you could lower the registration fee for the meeting by letting them pick up their own coffee at the Starbucks in the lobby, they just might take you up on it.


Joe Rominiecki said...

That's an interesting take on association members, Eric. A similar thought comes to mind whenever I hear or read doomsayers who talk about how social media and the increasing ease of self-organizing is going to put associations into extinction. Certainly, those new dynamics will push associations to adapt in significant ways, but I'm yet to understand how self-organizing groups will be able to replace the types of association services that are highly resource intensive. Sustained education programs and face-to-face meetings, for example, which are still highly valued, need money and administration to make them happen. And, as you say, it's easy to underestimate how much money and administration is necessary. Voluntary contributions and goodwill can only go so far. I think you're right that extraneous offerings like $85 coffee can go away, but the core costs won't. I'm definitely in favor of associations sharing more of that info with members. More information on both sides (symmetry, if you want the jargon) means better transactions.

Eric Lanke said...

I'm with you, Joe, and thanks for the comment. But it's a two-way street. Association members need to appreciate the real costs of the services provided to them so they gain a more honest appreciation of their value, but also to push us association managers to better target those resources on their real needs.

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