The Membership Economy summary

Imagine going to a store to buy a hammer. After you’ve paid for it, your relationship with the shop is over. This is the classic model of customer interaction. The membership model, on the other hand, is different. When customers commit to a company, they get all the benefits and responsibilities of an ongoing relationship.

This relationship could be determined by a subscription (as with Netflix) or a user ID (think of Facebook), or with a simple membership card, like what you’d get at the gym. What’s important is this: in the membership economy, the relationship between customer and company changes. Unlike traditional “customers,” members have a stake in the company.

As we’ve discussed, members are the meat and potatoes of any membership-oriented business model. But how does a company attract members? Well, you just need the right acquisition strategy, and soon enough members might start recruiting new ones, all on their own!

An optimal acquisition funnel will follow four phases. We call it a funnel because the first (or top) phase tries to include as many people as possible. In each successive phase, some people will drop out. Then, in the last phase (when we’ve reached the bottom of the funnel), a relatively small amount of potentials will actually become loyal members.

Imagine if Facebook and Pinterest had zero members. If no one posted or pinned content, the platforms would basically be worthless! And that’s the thing about membership organizations – if members don’t regularly participate, the companies fall apart.

That’s why you need a good onboarding strategy that kicks in right after sign up. Typically, onboarding should progress through the following three phases:

When buying a car, you factor the price of repairs into your purchasing decision, to understand the long-term cost. But how do you calculate the cost of membership?

Subscriptions are one of the most common pricing models in the membership economy – and for good reason. A company offering subscription-based pricing can provide ongoing value for the duration of a user’s membership. Plus, tiered pricing offers greater flexibility because it’s based on the value provided to each member.

As we’ve discussed, members are the foundation of any membership organization. And thus, keeping them content is the core task of any successful membership organization.

To do so, keep your service simple and personalize the user experience to build loyalty. In addition to the onboarding strategy we introduced earlier, there are a few easy ways to promote member loyalty.

When first launching, start-ups often encounter the “chicken and egg” problem: they need a critical mass of members to gain any members. Because remember, without members creating content, there’s little value to attract new users.

To overcome this problem, the company needs to follow the membership principle from day one. Meaning, if you truly want your new venture to be part of the membership economy, you have to start with the right team and company culture.

Technology has made it possible for people to get access to products and services via the cloud. But in the process, it has narrowed the market for ownership. This transition, from ownership to access, hasn’t been easy. But for some companies, it’s necessary to make the shift.

Still, before you plunge into the membership economy, make sure your company is eligible for the membership model. Not every company is suited to this style of doing business, so if you’re thinking of making the transition, consider these points: