The following is an excerpt from “The Membership Economy:”
Innovation is motherhood and apple pie in nearly every type of organization, but for the Membership Economy, continuous innovation is especially important. The best Membership Economy organizations are constantly tinkering with their offerings. For example, American Express has offered all kinds of evolving benefits to its members over the past several years, ranging from discounts to exclusive access to special services. And Amazon continues to add features to its prime membership.
Innovation is not an event. It’s a process which needs to be ingrained in an organization’s culture. Innovation is described as the act of introducing new ideas, devices, or methods. In the Membership Economy, innovation is continuous. It must be, because the relationships are continuous. Most organizations think of innovations as nouns, as in, “This innovation really differentiates us from the competition.” But it needs to be thought of as a verb. Organizations need to innovate constantly and always look for new and better ways to provide value.
Still, membership organizations often fail because of their lack of tinkering. Here’s a complaint I’ve heard from leadership more than once. In this case, the executive director of a well-known nonprofit for children told me, “Members just don’t behave the way they used to. They expect more from our organization. What’s wrong with them, and why are they so selfish?”
For this executive director, the changing attitudes of new members were surprising and frustrating. But change is inevitable, and organizations need to assume that constant innovation is the norm. Too often many organizations demonstrate an unwillingness to tinker and to be flexible. Many organizations invest heavily in a single big effort to set up a program to bring in members and then rely on it. Think of NPR with its pledge drives. It has only recently begun tinkering with 48-hour “double your pledge drives,” which are short and sweet—responding to member feedback. And there are always dozens of other ways to attract and retain members.
Once you bring in a new member, the member is likely to stay for a long time. And since retention is so important to revenue, it sometimes becomes the only thing organizations really focus on. So unless you are tracking new member acquisitions as carefully as you track overall revenue, you might find yourself with an aging population—and no awareness or relevance to prospective members. Constant tinkering to bring in new members while retaining the ones already there can minimize this risk.
Members are more forgiving than customers with regard to their loyalty. Every time a customer transacts with an organization, customers have to make a decision to open their wallet and engage with the organization. But with membership, payments are automatic, and it’s the act of unsubscription that requires an action. As a result, members stay engaged much longer than transactional customers.
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 members seem happy. However, at some point, if the discrepancy between the value the enterprise offers and the price charged becomes too great, not only does the organization lose existing members, but it also struggles to bring in new members. This kind of stumble can mean months, if not years, of poor results.
When people find out that I am an expert in subscription and membership businesses, they immediately want to tell me about the most unfair memberships they have encountered. They tell me about their frustrations as children signing up for BMG and Columbia’s music clubs long ago. (Remember? Those clubs sent unrequested CDs you had to keep unless you returned them with a tight timeframe.) Or they’ll complain about how the airline loyalty programs actually reduce loyalty. More recently, we’ve seen complaints about software companies that stop selling packaged software the buyer can use for years in favor of monthly “subscriptions” that customers feel provide no additional value.
The fundamentals are what they always were: the customer-company relationship is based on good value in exchange for a fair price. You simply cannot run a long-term successful business if you don’t seek to improve the condition of your customers and members constantly.
Your organization should have someone strategically managing your product and marketing teams who intimately understands your buyers and your offerings, and who can explain how and why people choose to be loyal to you, as well as how and why to find new members. If this is not who’s onboard now, you may need to think about staffing changes. If you don’t know, consider bringing in an outside expert to evaluate your organization. Understanding the market need and environment is the single biggest determinant of a Membership Economy organization’s success.
The Membership Economy
Copyright © 2015 by Robbie Kellman Baxter
Publisher: McGraw-Hill Education
Publication Date: February 19, 2015
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We recently invited Robbie Baxter to discuss the main lessons from her book. Click below to watch it:
