Last year at the SIPA conference I heard Robbie Kellman Baxter speak on “The Membership Economy,” which is a model that is becoming increasingly popular, especially with online businesses. A simple illustration of the membership model is the difference between a video rental store and a Netflix subscription. The key points being …
- There’s a recurring payment that continues until you cancel (what Baxter calls a “forever transaction”)
- Members benefit from the organization, but also from one another
- The pool of members generate data that is a benefit to the organization and/or the members
Some of the material in Baxter’s book of the same name is familiar territory to people who have been in the subscription business for a while, but there are some interesting distinctions between subscriptions and a membership model. I’ll review some of them here.
First, two words of warning. Too often I’ve seen publishing colleagues latch onto some new business model or concept and think that it is the key to their success. “This is the new thing. We have to do it or we’ll be left behind.”
Well … sometimes. Publishers do have to innovate, but there is no single model that works for every business, and the crucial thing is to pick and choose the aspects of the new model that will work for you and your customers. Trying to force a model onto a situation it wasn’t designed for – or isn’t appropriate for — is a good way to ruin your business.
Also, what I’m saying here is my take on Baxter’s book. I may not be representing her views exactly the way she would like, so if you want to eliminate the middle man, read her book, or watch one of her Youtube videos.
With that out of the way, I’ll highlight the key takeaways I got from Baxter’s book, under four headings: make it easy, make it personal, get members involved, and focus on member success.
Make it easy
Baxter advises removing friction from transactions whenever possible. Most people in publishing know that, but we have to remind ourselves from time to time, because there’s a constant temptation to try to get more data. And for good reason. Data-driven companies tend to have higher value in today’s economy.
So, while it would be nice to know the age of your users, every field you add to the sign-up form makes potential users less likely to complete it, and every time you bug them you’re adding friction to the process. Err on the side of making things easy.
One of the big questions with the membership model is when to use a free version. Baxter says a lot about that, but I’ll highlight a few points that seemed particularly on target for subscription publishers.
With a membership there may be an implicit assumption that the dues or subscription fee will remain constant forever.
Well that’s annoying.
Many publishers have an introductory and a regular price. You come in at $8/year, but we bump you up to $19.95. It’s not that we’re greedy. It’s the only way to make the numbers work. The publisher can’t get enough new subscribers at $19.95, and can’t pay the bills at $8.
Making this work with a membership model may take some tinkering, and once again raises the question whether a freemium will help.
The utility of a free version is to get more trials, to generate viral marketing and networking, and to add value by the content these users provide. Free makes sense “when users themselves, by using the service, create incremental benefits for future users,” or when they help in attracting new users.
When those things apply, it may make sense to use a freemium.
However … “If people had already proven that they were willing to pay for the service, then developing a free service as a means of increasing trial might not make sense.” Unless it’s hard to get enough volume on the paid side, and the free version is necessary to widen the top of the acquisition funnel.
“[F]reemium makes sense when it generates three key benefits: viral marketing, the network effect, and up-selling.”
Another way a publisher might be tempted to “make it easy” is to use an existing platform, like LinkedIn or Facebook. “The risk,” says Baxter, “is that the organization might lose control.” To which I say, precisely. In the margin I wrote “Facebook is not your friend.” Those other platforms exist to further their own business model, and they not only don’t care if you go out of business, that might be part of their strategy.
Make it personal
A membership differs from a subscription in the attitude the member has towards the organization, and vice versa. A membership model may apply when the product or service is personal in some way. That is, it can be customized, or it’s part of the member’s self-image, or his professional identity.
I’m a member of my church, but I don’t want a “membership” for the tea I drink. That’s just silly. At least it is for me, but there are memberships around coffee (Gevalia) and “member-like” structures for selling consumables like tea – where you get an automatic shipment every so often. The point here is that “membership” isn’t an on-off thing where you have to implement every aspect of “the membership economy” or forget about it. You’re allowed to pick and choose. Do what makes sense for your product or service and your audience.
Another way a membership can be personal is if the members rely on their membership status for professional affiliation and/or prestige. This is a way to transition from publisher to membership. E.g., don’t just sell guides to the FLSA, provide training and certification.
Different models manage membership status differently. Sometimes it’s analogous to continuing legal education, while other times it’s just being a gold member, or being a top commenter. I usually find those things rather silly, but Baxter says “Members are more reluctant to cancel memberships when they’ve achieved status.” So it’s worth thinking about.
Get members involved
When it comes to true membership models, the first 30 days are crucial. You need to have systems in place to get members engaged, and you need to monitor engagement to see how you might need to nudge people along – with automated emails or other reminders.
“Members who participate heavily in the first few months of the membership are much more likely to renew than those who merely lurk.”
Member involvement can mean different things for different companies. Sometimes it means the members create content for one another. They may also provide feedback and suggestions on your content, or they may post reviews and ratings, e.g., on movies or books. Sometimes members help other members understand how to use the service, or they may help enforce the community rules.
“Enable your best members to teach one another your content. Bring them together to talk about what you do so well and how others can do it.”
Customer-generated content is a tricky thing, IMO, and I have a strong feeling that “crowdsourcing” may be close to jumping the shark. Baxter is quite right to condition her statement: e.g., “enable your best customers ….”
It’s nice to believe that “everybody has something of value to contribute,” but an hour on Twitter or Facebook will cure you of that. Some people are idiots. You’re going to have to work hard to create an environment where people can contribute something of value, and you might have to monitor things to keep out the garbage.
Members can become evangelists and recruit / train / police other members. Or they act like a mob.
“An organization’s most loyal customers disproportionately drive revenue and profitability.”
This is one of those rules you might have to be skeptical about. I’m sure it’s true for coffee, but is it true for a newsletter? Sometimes the “most engaged customers” are a drain. You might be able to come up with clever systems that target their “loyalty” in a profitable direction … or you might not.
I liked this as an idea for a new revenue stream.
“Consider an in-person event once you have reached critical mass in a particular region.”
Focus on member success
There was a plaque in our old building that said something like “We expect our subscribers to act on our advice and profit from it.” Our chief editors truly have that mindset. They’re in it for helping the people they write for.
In some cases that means giving people what they want, but … not always. There are situations where you really should only listen to the experts. I don’t want crowdsourced advice on doing my taxes, but I do like to hear what the hoi polloi say about the latest Bond movie before I rent it.
An ideal membership organization can find the right balance, where members can genuinely contribute to one another’s welfare, and the organization itself can facilitate that process. This usually requires constant tinkering.
“Subscriptions can lull organizations into a false sense of security, convincing them that they don’t need to adjust their offering or improve service because the members seem happy.”
Right. Because a traditional subscription model doesn’t give the sort of constant, normal feedback that a membership model can. Subscription publishers can monitor renewal rates, customer complaints and letters to the editor, but in a membership model the publisher can get a lot more data and fine tune accordingly.
Baxter says, “Innovate like an anthropologist. Watch what your members do, and adjust your approach.”
I hope it doesn’t say anything too bad about me that her statement conjures up images of Jane Goodall.
P.S. — as a follow-up on last week’s email, take a look at this. Facebook, Twitter and Instagram massively over-rated by marketers, says Prof Mark Ritson.