The Membership Models Issue

ONE

HOT TIME FOR COOL MEMBERSHIPS

Brands are using membership models to deepen relationships with customers. As privacy trends make it harder to reach people who have interacted with your brand on a casual basis, expect to see more and more membership models and other relationship devices emerge. In other words, customer acquisition is getting harder. Retention is where it’s at.

Membership is not only about retention, however. New entrants are using membership as a way to disrupt industries that are reliant on conventional business models. And platforms like Mighty Networks and Ghost are fueling the creator economy, with thousands of new membership communities starting each month.

Where are the members coming from? Is this a pandemic thing? Or have a couple decades of internet-driven fracturing caused us all to look for community?

It's mixed. Some membership models are indeed about cozying up to other humans, but others are about sheer utility or discounts for members or patronage. In a way, the membership trend is about reimagining—and in many cases monetizing—interactions that were already taking place.

But what exactly is a membership? Let’s break it down.

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TWO

THE TAXONOMY OF MEMBERSHIP

There’s membership. And then there’s membership. Membership can mean anything from a café loyalty program to a private club to group health insurance. Honestly, the English language could do with a few more words to describe this concept.

The major types, in no particular order:

Donation. If you are a “member” of the American Civil Liberties Union, you are really a donor supporting a cause. Numerous non-profit organizations use membership as a mechanism for fundraising. Sometimes, you get a tote bag to show your love.

Service Delivery.  When was the last time you heard anyone say, “I just got my new my Triple-A card!”? Never, right? Membership programs like AAA are really about paying for services, and less about affinity or affiliation.

Buying Club. Who doesn’t love Costco? Pay for membership and get access to discounted products.

Access. Becoming a member of the Whitney Museum gets you access during special hours and discounts at the museum shop and restaurant. It’s a cousin of service delivery but often has some aspect of exclusivity attached to a scarce resource. See also “all-access.”

Club. Possibly the original form of membership. Gentlemen’s clubs in 19th century England were effectively a home away from home for men of a certain ilk. Direct descendent: Soho House.

Loyalty. Starbucks’ loyalty program is designed to drive retention. Buy enough drinks, get a free one. Etc.

Affinity and Affiliation. Hello there, retired person. Want to join with other retired people and have a big lobby in D.C.? Join AARP!

Insurance. Health care has applied “membership” to complex, consumer-unfriendly insurance programs for decades. Frankly, it seems like an abuse of the term. We feel you, membership.

Business models and pricing structures vary across membership types: free trial, freemium, monthly or annual fee, subscription, tiering. We could spend 17 more paragraphs expanding on options but we won’t.

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THREE

HOW TO CHANGE THE MEMBERSHIP GAME

Spark has been tracking some of the cleverer membership models to see what learnings we can apply to new product concepts we are testing on behalf of our clients. A few strategies that you may find useful:

Reinvent the Buying Club. With single-product direct-to-consumer models on the outs, entrepreneurs are innovating on business models. Beauty Pie, the brainchild of Bliss founder Marcia Kilgore, offers a Costco-esque membership model: members pay a monthly or annual fee for access to wildly discounted products sourced from the factories that supply the world’s top brands. The quality is indeed notably high, and the economics are worth a scan if you are considering business model innovation: one analysis suggests that BP has margins 50% higher than other beauty brands, even while passing on real savings to members.

Make the Exclusive Slightly Less Exclusive.  Health care has been dabbling in concierge medicine for years, but the $40K membership fee is giving way to new models. At $3K to start, Sollis Health is still well beyond the means of most people, but if you must have house calls, it’s a good place to start. Other concierge-minded membership upstarts with lower price points: primary care club The Lanby, long term-focused Forward, and holistic medicine purveyor Parsley Health.

Out-Innovate the Innovators. Uber and Lyft already reinvented short-trip transport, right? Not so fast. Here comes Alto, a ride-sharing service where a membership model solves a lot of the problems associated with early entrants, like safety, surge pricing, and terrible music. A membership model allows for employee drivers, standardized SUVs with HEPA air filters, and music controls via the Alto app.

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MEMBERSHIP ON YOUR MIND?

Wondering about the best way to design membership for your business? Take inspiration from the innovators above, but design a model that is both the quintessence of your brand and different from other brands.

Be specific about benefits.

Make it about the members.

And test.
Test more than one approach with more than one audience. Be confident you've nailed product-market fit before you launch.

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