The Membership Economy: What It Is, Why It Matters & How You Can Join

Robbie Kellman Baxter, Strategy Consultant, Peninsula StrategiesCompanies like Amazon, LinkedIn and Spotify are winning. Winning the hearts and voices of their customers, and building the kind of loyalty that traditionally was reserved for family, community and church. The secret that these organizations know is that people are craving membership. Great products are the price of entry, but the products themselves are only great if they serve the needs of the customers. Organizations that build their businesses around people’s need to belong, to be connected, and to be admired. Organizations that are focused on relationships over products, are thriving in today’s economy.

Evidence of the Membership Economy is every where you look, and it’s easy to understand why. Subscription models drive higher valuations, predictable revenue and engaged customers. Online communities build stickiness and a source of ‘free content’ valued by members. Loyalty is the goal.

How are these organizations building such loyalty, and what do you need to know to do the same at your company? The good news is that it’s possible for just about any type of organization to incorporate principles of membership into their businesses. The Membership Economy is transforming the way organizations connect with their customers. To understand why the Membership Economy is becoming so vibrant and how it fits into the bigger picture, we have to take a step back. As a global society, we are moving faster and spending less time in traditional communities. This alienation is driving consumers to seek greater flexibility and connection, often from new kinds of organizations, going beyond the traditional clubs, religious institutions and family gatherings of the past.

The Membership Economy is a reaction to these social trends. And it is enabling all kinds of organizations to build social capital and create meaningful connections. Maybe it’s not that we’re no longer connected, but rather that our connections are popping up in new places, many of which are enabled by new technologies. A shift has begun. Membership is timeless, important, and powerful. People crave it. Membership is an attitude, an emotion. A subscription is a financial arrangement. It’s quite possible for something to be both a subscription and a membership organization. In fact, the Membership Economy is the logical extension of
subscriptions. Many Membership Economy organizations might not define themselves that way. They say, 'We have a subscription business,’or'We're a sharing business,’or,‘We’re a transactional company with an affinity program,’ or, ‘We’re a social network’. Sometimes, they say that membership organizations must be mission-driven non-profits or about connections among members. None of this is true. What makes a membership organization is the attitude of the organization and the feelings of its members - not whether members subscribe. This ‘membership mindset’ is at the core of the best long-term formal relationships between organization and customers. Companies that fail to see themselves as part of this bigger trend can limit their potential to build relationships and strengthen their models.

Access trumps ownership and the subscription model ties customers to organizations in an ongoing relationship with an opportunity for benefits on both sides

A subscription does give access and an array of choices. A transactional customer might own dozens or even hundreds of movies. But Netflix has thousands- from different countries, genres, and more - providing tremendous choice and the latest options. Almost since its inception, Netflix had one of the largest collections of Bollywood titles in the world. And the monthly price is low which protects the customer’s cash flow. Access trumps ownership and the subscription model ties customers to organizations in an ongoing relationship with an opportunity for benefits on both sides. The Membership Economy has come about and is growing because of massive social trends and developing technology. In the midst of this change, however, human needs remain constant, and organizations that respond to those needs best will be the winners.

Three Things You Can Do Right Now
1. Determine Your Forever Promise: What do your customers really want from you? What ongoing need or opportunity of theirs do you fit into? People don’t want to own software - they want to use software to achieve their goals-much of ownership is just a necessary burden. People don’t want to take a training class-they want to be skilled. Once you focus on the customer need instead of your product, you’ll open up to many new options for laying in value and justifying a forever transaction. Make the problem go away, forever, and you’ll get lifetime loyalty.

2. Ensure Product Market Fit Before Turning on the Loudspeaker: Many companies rush to sell new products & services before they’re sure that customers will like the product. When you have a subscription-based product, managing churn becomes a prerequisite for investment in acquisition. If you acquire too early, your leaky bucket will ruin you.

3. Adopt a Model Where the Customer's at the Center, Not the Product: Too many tech companies have fallen in love with the product, to the determinant of the customer. These are companies that talk about how the customer ‘doesn’t appreciate’ the many features that are better than the competition. And the ones where the product team has the most power. What you want is a focus on the people you serve, so you can solve their problems. Also, the better you know your customers, the harder it will be for a competition to get through you.

4. Ultimately, the goal of every company is to have loyal customers and predictable recurring revenue. When you treat your customers like members, and commit to handling their problems for the long term, customers can take off their shopper hat and don their member hat. When they know they can trust you, they can worry about other things, and no longer need to consider alternatives to your products and services.