The Membership Economy by Robbie Kellman Baxter

Summary

  1. This book describes the future, the changes that create a two way relationship between customers (members) and companies. The pendulum has slowly been swinging from ownership to membership as manufacturing has gotten digitized in many cases. The membership economy will have as large of an impact on society as the industrial revolution

Key Takeaways

  1. Members are in a relationship with an organization in which they are engaged over a long period of time – forever transactions that tie customer to company and vice versa. Done properly, membership is a win/win. It provides predictable revenue, builds a direct relationship, provides an ongoing data stream for companies and allows members to get recognition and value but allows them to quit at anytime if they choose to
  2. You must put the customer rather than the product or business at the center. Transaction —> Membership, Ownership —> Access
  3. People are wired to want to be in a community they respect and have good standing in
  4. Membership based companies don’t always have communities, but they often do. This facilitates loyalty, engagement, and referrals, not to mention can tap into network effects
  5. Types of membership based companies – nonprofits, digital subscriptions, online communities, loyalty programs, traditional membership companies (AmEx), small business and consultancies
  6. Strategies to successfully align with membership economies
    1. Build the right organization – culture and attitude are central to making the customer the core
    2. Build a bottoms up acquisition funnel – with a forever transaction, retention is far more important than acquisition. Start at the bottom (with the core value and the ideal members that this would resonate with), and then build up to the top of the funnel
    3. Onboard members for success and super users – first few days are key to the member experience and their long-term engagement. Think about first steps, roadmaps, how they should get started. There are 3 key steps – remove friction, add immediate value, reward behavior and actions you want to incentivize. In other words, make it easy, make it personal, get them involved
    4. Model pricing for simplicity and flexibility – risk is too much complexity too early in the relationship. Value needs to be clear, transparent, differentiated. Cadence needs to be tested as well and see if monthly, annual, consumption based, etc makes the most sense. Some pricing strategies: subscriptions (with or without tiers, typically 3 tiers), ancillary products (swag, things that will make the membership more valuable), partnership streams, aggregated analytics, advertising, free products and service offerings. Beware discounts, pricing too low or too high at the beginning,
    5. Incorporate “free” as a tactic, not a strategy – free is powerful but only if it supports the overall business model. Use it to build awareness and increase size of funnel, build a large community that can aid paying members
    6. Use the right technology and track the right data – social / marketing automation, CRM, engagement, community, customer success, loyalty, billing.
    7. Retain members but know when to let them go – loyalty is vital but the wrong customer will be very expensive
  7. In a membership economy, focus for the CEO shifts from product to relationships , marketing moves to two-way communication, sales are compensated through LTV rather than one off transactions. Every stakeholder is treated as a partner and coordinate to find ways to improve the experience of a member
  8. Innovation is a verb, not a noun. A process,  not a point
  9. Super users do the following:
    1. Check in regularly and often
    2. Create content that others can access and benefit from
    3. Police the community
    4. Have a two-way relationship and feel comfortable offering feedback
    5. Genuinely care and want to help other members
    6. Attract new members
    7. Aid in the onboarding of new members
  10. How to raise prices – grandfather current members, create a more expensive tier with more benefits. Always be transparent about reasons if you do have to raise on current members
  11. Move from free to paid through volume of usage, duration, features, additional services, removal of ads
  12. Some ways to increase loyalty among members
    1. Make it easy – keep pricing simple, give value immediately, make onboarding great, have a free option, build loyalty through the free trial, remind to cancel before paying if they’re not using
    2. Make it personal – periodically give something extra, allow members to connect with you personally, allow members to customize and personalize, experience adapts over time to create increasingly personalized experiences, help create status / milestones
    3. Get others involved – connect others, create stickiness by forming relationships between members, engage customers for inspiration on ideas, content, community,
    4. The forever transaction is the key to retention in the membership economy – favor relationships over transactions
  13. Loyalty programs are incredibly important and effective. Your most loyal customers drive disproportionate profits. Track demographics, preferences, and behaviors
    1. Keep it simple, remove friction, make the member feel special, add value, give recognition
  14. Some huge advantages that smaller companies have include: Focus, exclusivity, and recognition

What I got out of it

  1. I listened and immediately re-listened to this book. A ton of practical advice and thoughts on how to build a robust, loyal community