In this video, Robbie defines membership economy. She explains why it's happening now, and how it's affecting consumer expectations about their relationships with organizations.
- In spring of 2003, I started consulting with Netflix. I ended up working with them on a series of projects lasting about two years, but before I even walked in the door, I had already fallen in love with Netflix as a member. I loved the ability to have three movies out at a time, especially when I was up in the middle of the night with one of my two small children. As a customer, Netflix provided me professionally created video content, available when I wanted it, and it it gave me cost certainty.
And best of all, no late fees. But after I spent time at the headquarters learning how the business of Netflix worked, I fell in love with their business model too. And as I was falling in love with it, everyone else was too, and I started getting calls from organizations who wanted to be the Netflix of news, or the Netflix of music, or software, or bicycles, or cosmetics, and I started to see that a massive transformation was happening across dozens of industries as organizations were striving to build long-term formal relationships with their customers using techniques like online communities, marketplaces, and subscription pricing models.
I called this transformation the membership economy. So, what characterizes the membership economy? It's about organizations changing their focus from ownership to access, from anonymous transactions to known relationships, from single one-time payments to recurring payments, and from one-way communication by the organization to multi-directional communication between the organization and the customers, and among the customers themselves under the organization's umbrellas.
There are many organizations doing this well that many of us every day, places like Amazon, SurveyMonkey, Spotify, Weight Watchers. And that's a retailer, a software company, a music content company, and a health company. They're all part of the membership economy and they're all applying the same principles. There have always been organizations based on membership models. Health clubs, trade guilds, book of the month clubs, just to name a few. Consumers love it when they can achieve these basic needs that were outlined by the psychologist Abraham Maslow in the 1940's.
Once our basic physiological needs have been met, things like food, shelter, Wifi, we all want to mitigate risk, we want to feel like we belong, we want to be held in high regard by our peers, and ultimately we all want to reach our full potential. Membership economy companies, with their focus on the long-term, are much better suited to achieving these goals. And it's easy to understand why the organization's love it, predictable revenue is the holy grail, allowing organizations to better manage cash flow and resulting in higher multiples with investors.
So, why is this happening now? Two things, first technology's extending the infrastructure that enables trusted relationships. Historically, membership organizations were limited by space and time. If we were going to have a long-term relationship with an organization, we had to know that organization and be able to communicate with it. But now, advances like wearable devices, big data analytics, and the ability for users to create and share content at virtually no cost make it possible to build relationships with people we may never meet.
The second thing that is helping fuel this explosion is the influx of capital to support disruptive new business models. This makes it possible for entrepreneurs to invest in meeting the customers long-term needs without the short-term cash flow retirements that traditionally limit innovation. So, here's what I want you to do. If you own a business, consider how you might apply these four transformational elements. For example, what would it look like if your members accessed instead of owned.
And if you don't have a business, think of the organizations you're a member of. You might pay them on a subscription model, or have a password, or have their card in your wallet. Just make a list of as many as you can think of and then look at the ones you love and think about what makes you love them the most, how did they earn your loyalty? As you can probably see by now, the membership economy is changing the landscape of business. And the timing is right. If you can tap into this trend, you have the potential to create life long engagement and loyalty with your customers, and build a real competitive advantage.
In this course, Robbie Kellman Baxter—author of The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue—goes into the types of skills required in a membership economy company, why onboarding matters so much in long-term customer relationships, and how to optimize the experience for loyalty. She also outlines pricing for value in the membership economy, when free makes sense, how technology can extend the infrastructure of trust, and best practices for customer success and retention.
- Building the forever transaction, the right organization, and an effective acquisition funnel
- Onboarding members for success
- Starting simple with pricing
- Leaving room in pricing for flexibility
- Using the right technology
- Tracking the right data
- Knowing when to retain members
- Transitioning from idea to going concern
- Recovering from a pricing mistake
- Understanding the difference between loyalty and inertia