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The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships
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The Future of Membership: The Top Ten Things Companies Should Do to Build Strong Customer Relationships

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A white paper about the Membership Economy(tm). Nimble companies that have developed a Membership model are thriving. Others have been run off the road by newer models that adhere to the principles of …

A white paper about the Membership Economy(tm). Nimble companies that have developed a Membership model are thriving. Others have been run off the road by newer models that adhere to the principles of membership.

Entire industries are reeling—just look at the drastic changes in the past few years to gaming, software, music and journalism. Major changes in technology and access are redefining historically slower-moving industries like financial services, hard goods and even airlines. New companies including those that rent, lend or offer unlimited or premium access instead of just “ownership,” have the opportunity to leapfrog industry leaders.

This white paper tells you what your company should do right now, to avoid being left behind by the Membership Economy. We will look at what the best companies are doing, and how industry leaders like AT&T,

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  • 1.    The  Future  of  Membership:  The  Top  Ten  Things  Companies  Should  Be  Doing  To  Build  Strong  Customer  Relationships  by  Robbie  Kellman  Baxter  Executive  Summary    Entire  industries  are  being  reshaped  by  the  Membership  Economy™,  an  important  trend  in  which  companies  emphasize  access  over  ownership.    This  transformation  is  taking  place    for  three  reasons.    First,  technological  changes  allow  people  to  be  constantly  connected,  second,  sharing  of  con-­‐tent  is  easier  than  ever  before,  and  third,  storage  of  this  content  is  becom-­‐ing  increasingly  affordable.    Organizations  that  have  always  used  membership  as  a  key  component  of  their  business  model  have  a  unique  opportunity  to  take  advantage  of  these  trends  and  leapfrog  their  competition.  These  organizations  include  professional  associations,  hospitality  companies,  entertainment  compa-­‐nies  and  insurance  organizations.    Unfortunately,  most  of  these  compa-­‐nies  have  historically  been  slow  to  move,  and  have  not  taken  advantage  of  the  changing  technology  landscape  to  maintain  advantage.    This  article  recommends  tactics  traditional  membership-­‐based  busi-­‐nesses  can  use  to  leverage  their  position  to  take  the  lead  in  the  Member-­‐ship  Economy    What  is  the  Membership  Economy?    Companies  are  moving  in  droves  from  ownership-­‐based  models  to  mem-­‐bership  models.    We  are  all  familiar  with  ownership-­‐based  models.    We  buy  something,  and  it  is  ours  to  do  with  what  we  like.  For  example,  since  I  own  my  home,  I  can  remodel  it,  rent  it  to  others,  live  in  it,  tear  it  down  or  change  it  in  any  number  of  ways.    If  I  were  renting  my  home,  my  control  would  be  more  limited.    I  could  put  up  my  own  pictures,  and  maybe  even  paint  the  walls,  but  since  the  home  isn’t  mine,  I  can’t  make  lasting  major  changes,  and  my  options  of  how  to  use  the  home  are  limited.    Similarly,  I  own  my  car,  my  clothes,  and  my  computer.    The  great  advantage  to  own-­‐ership  is  control.    Things  I  own  are  mine.  
  • 2.  Technology  advances,  such  as  cloud  computing,  the  radically  decreasing  price  of  storage,  and  handheld,  always-­‐with-­‐you  devices,  are  driving  dra-­‐matic  changes  in  consumer  and  business  behavior.    Individuals  willingly  share  their  own  content  with  strangers  (and  expect  the  same  from  oth-­‐ers!),  while  smart  businesses  are  enabling  this  kind  of  engagement  and  new  relationships  between  the  company  and  its  customers,  and  among  the  customers  themselves.    We  call  this  major  trend  the  Membership  Economy.    You  can  see  evidence  of  the  Membership  Economy  across  nearly  every  industry,  from  cars  (ZipCar),  to  travel  (AirBnB)  to  retail  (Gilt).    You  even  see  elements  of  the  Membership  Economy  in  business-­‐to-­‐business  ori-­‐ented  industries  as  companies  leverage  the  cloud  to  provide  shared  serv-­‐ices,  and  as  Software-­‐as-­‐a  Service  becomes  a  standard  option.  Some  ex-­‐amples  include  the  SalesForce.com’s  AppExchange    Marketplace  in  which  app  developers  designated  as  “partners”  get  special  privileges,  access  and  community  benefits;  as  well  as  Yammer,  which  enables  employers  to  cre-­‐ate  membership-­‐based  communities  for  employees.    Successful  Membership  Economy  organizations  emphasize  access  over  ownership,  and  focus  on  meeting  three  key  human  needs:    1. The  need  to  belong,    2. The  need  to  be  safe  (insurance),  and      3. The  need  to  be  admired  (aspiration).    While  many  ownership-­‐based  businesses  can  provide  some  of  these  core  attributes,  they  are  generally  unable  to  keep  up  with  the  benefits  of  their  Membership  Economy  competitors.  The  reason  is  that  ownership  is,  at  its  core  a  private  matter.    What  I  own  is  mine,  and  not  necessarily  to  be  shared,  so  while  I  may  feel  some  community  with  people  who  own  similar  things,  or  feel  more  secure  for  owning  an  emergency  first  aid  kit  or  backup  generator,  or  I  may  even  build  prestige  for  myself  for  driving  a  certain  type  of  car,  these  benefits  are  limited.    There  is  tremendous  opportunity  for  newly-­‐launching  companies  to  rede-­‐fine  their  industries  with  radically  different  business  models  that  take  advantage  of  new  technology  and  human  behavior.        However,  there  is  also  a  big  opportunity  for  the  membership  organiza-­‐tions  themselves  to  take  a  look  at  these  innovative  startups  with  their  ag-­‐gressive  business  models,  and  think  about  what  they  can  do  to  stay  rele-­‐vant.    What  Does  This  Mean  for  Membership  Businesses?    
  • 3. What  does  the  Membership  Economy  mean  for  traditional  businesses,  especially  those  who  already  use  a  model  that  depends  on  membership?    The  Good  News.    Companies  that  have  always  embraced  membership  are  in  a  strong  position.    Professional  associations,  social  and  health  clubs,  insurance  companies  and  the  many  companies  in  the  hospitality  industry  are  leaders  in  the  Membership  Economy™,  or  they  can  be  if  they  continue  to  evolve  and  seek  new  ways  to  provide  value  to  their  members.  Numer-­‐ous  case  studies  have  been  written  on  how  Caesar’s  Entertainment  Cor-­‐poration  has  used  its  TotalRewards®  program  to  build  its  casino  busi-­‐ness  into  a  membership  organization.  The  AARP  has  long  been  held  up  as  a  model  of  membership  organizations  offering  three  key  benefits  to  members:  access  to  discounts,  access  to  information  and  the  security  of  knowing  the  AARP  is  advocating  for  key  rights.  Many  other  associations  and  companies  have  built  strong  loyalty  among  their  members,  which  gives  them  a  position  of  strength  from  which  to  grow.    The  Bad  News.    Unfortunately,  it  is  often  these  front-­‐runners  that  end  up  losing  the  race.    In  his  book  Only  the  Paranoid  Survive,  Intel  founder  Andy  Grove  discusses  the  common  missteps  organizations  make  when  they  as-­‐sume  that  their  current  leadership  represents  the  natural  order,  rather  than  a  moment  in  time.    Put  simply,  companies  are  often  slow  to  innovate  because  of  their  past  success.  If  they  don’t  take  advantage  of  already  hav-­‐ing  a  loyal  membership,  someone  else  may  steal  their  members  via  new  technology.    Membership Associations are being attacked by new model companies. Cor-porations are building professional communities which may make profes-sional associations irrelevant. These new communities often feature freemembership options as well as paid, as a means of building a large communityAnd  have  strong  online  community  features  which  enable  sharing  of  data  and  ideas,  and  integrate  mission-­‐critical  business  tools  with  the  commu-­‐nity  experience.    Examples  include    • LinkedIn    for  HR.    In  many  corporations,  HR  is  the  Rodney  Danger-­‐field  of  functional  departments,  earning  limited  respect  from  lead-­‐ership.    Traditional  associations  for  HR  have  been  ineffective  at  raising  the  profile  of  recruiters  and  other  people-­‐professionals,  and  LinkedIn,  by  providing  tools,  online  communication  and  even  offline  conferences  for    cutting  edge  thinking,  is  becoming  a  de-­‐facto  professional  association  for  a  historically  neglected  group.  • Salesforce.com  for  sales.  Much  has  been  written  about  how  Sales-­‐force  has  allowed  sales  people  greater  control  over  their  prospects  and  customers,  decentralizing  a  system  that  has  historically  been  owned  by  corporate,  and  moving  a  strategic  function  out  of  IT  and  into  sales  and  marketing.    • Intuit  for  small  business  owners,  has  allowed  hundreds  of  thou-­‐sands  of  small  business  owners  to  bypass  accounting  firms  and  bookkeepers  and  manage  their  own  finances,  with  access  to  shared  best  practices  and  a  large  community  of  like-­‐minded  peo-­‐ple.    Intuit’s  stated  goals  around  becoming  a  destination  for  small  business  owners  to  meet  and  share  best  practices  is  jeopardizing  
  • 4. chambers  of  commerce  and  small  business  owner  associations  around  the  country.      Ten  Things  Companies  Should  Be  Thinking  About      Traditional  membership-­‐based  businesses  should  consider  the  following  tactics  that  are  being  successfully  leveraged  by  Membership  Economy™  leaders,  like  LinkedIn,  Salesforce.com  and  Weight  Watchers.    Here’s  my  top  ten:    1. Subscription  models.    Subscriptions  are  considered  the  holy  grail  of  business  models  because  they  provide  such  predictable  revenue  streams,  often  amortizing  a  fixed  cost,  and  with  low  variable  costs.    Subscriptions  appeal  to  members  because  they  provide  flexibility,  smoother  cash  flow  and  often  because  they  provide  access  to  some-­‐thing  much  bigger  and  more  valuable  than  a  customer  could  build  or  own  themselves.    Most  membership  organizations  have  subscriptions,  but  very  few  have  relevant  tiers,  that  provide  ongoing  value  in  a  way  that  is  recognized  by  members.    Too  many  membership  organizations  have  static  benefits  that  are  not  used  by  their  members—and  then  are  surprised  when  members  unsubscribe.  • Ask  Yourself:  What  kind  of  value  can  your  organization  offer  members  on  an  ongoing  basis?  What  market  segments  would  be  interested  in  paying  more  for  additional  access  or  benefits?    2. “Free“  Value.    Marketers  have  long  known  that  trial  is  a  key  step  in  the  buying  process.    In  membership  businesses,  this  trial  component  is  even  more  important,  because  the  value  of  a  new,  loyal  customer  is  generally  so  high.    Consider  offering  a  free  trial,  maybe  in  the  form  of  limited-­‐time  access,  a  guest  pass  or  even  a  free  subscription  at  the  lowest  level  of  service.    Many  membership  businesses  focus  too  much  on  current  members  without  spending  enough  time  thinking  about  bringing  in  new  members.    • Ask  Yourself:  Is  there  a  “free  membership”  option  for  your  members?    What  are  you  offering  to  your  target  audience  that  does  not  require  payment?    3. Referral  Programs.    Existing  members  are  often  so  loyal  that  they  can  be  tremendous  sources  of  new  members.    In  addition,  they  under-­‐stand  the  benefits  of  the  organization,  and  can  easily  show  their  friends  why  the  membership  can  be  so  valuable.    The  best  member-­‐ship  companies  ask  for  referrals  from  their  members,  make  it  easy  for  members  to  bring  in  their  friends,  and  may  even  offer  special  benefits  or  status  to  members  who  bring  in  others.        Multilevel  marketing  or-­‐ganizations  understand  this  behavior  and  have  built  their  whole  busi-­‐ness  model  around  referrals  and  recruiting—but  there  is  plenty  of  room  for  nearly  any  kind  of  business  to  work  more  thoughtfully  with  existing  members  to  bring  in  new  members  and  make  them  feel  wel-­‐come.      
  • 5. • Ask  Yourself:  How  easy  is  it  for  your  members  to  invite  others  to  join?    What  kind  of  reward  or  recognition  do  they  get  for  do-­‐ing  so?    4. Network  Effect.    Belonging  is  core  to  membership.    You  want  your  members  to  feel  connected  to  other  members,  but  also  to  the  organi-­‐zation,  its  employees  and  to  any  physical  or  electronic  gathering  places  for  your  members,  whether  that’s  a  store,  a  website  or  a  hotel.    Knowing  their  name,  preferences,  friends  and  history  with  your  orga-­‐nization  can  all  help  members  feel  like  they  belong.    Facilitating  this  sense  of  belonging  is  critical.    It  also  contributes  to  building  a  “net-­‐work  effect”  which  is  the  value  that  each  new  member  adds  to  the  community  by  joining.    For  example,  the  more  members  can  learn  from  one  another,  the  more  valuable  the  community  is  for  each  new  member.    • Ask  Yourself:    How  does  the  value  of  membership  increase  with  each  new  member?    Are  you  providing  unique  ways  and  lever-­‐aging  technology  for  your  members  to  benefit  from  their  peers.?  Are  you  enabling  these  connections  and  shared  value?    5. Consistency.    With  event-­‐driven  businesses  where  a  good  customer  engages  in  multiple  transactions,  keeping  the  customer  off-­‐balance  and  enticing  them  with  new  and  different  offers  can  be  effective.    However,  in  the  Membership  Economy™,  consistency  trumps  excite-­‐ment.    Any  time  that  the  customer  considers  changing  their  relation-­‐ship  with  the  organization,  there  is  a  risk  of  losing  the  customer.    Changing  the  price  or  the  offering  can  cause  the  customer  to  pause  and  reconsider  their  membership.    Even  a  pause  in  the  autopay  proc-­‐ess  due  to  poor  handling  of  an  expired  credit  card  can  result  in  lost  trust  and  ultimately  in  attrition.  So  changing  pricing  or  packaging  should  be  done  carefully,  and  technology  should  be  used  to  minimize  friction,  complemented  with  a  human  intervention  when  there’s  any  possibility  of  losing  a  member.      • Ask  Yourself:    Where  are  you  losing  customers?  Are  there  leaks  in  your  membership  experience  that  can  be  fixed?    6. Sharing.    People  are  growing  increasingly  comfortable  sharing  their  own  content.    Online,  this  can  translate  into  shared  expertise  and  ad-­‐vice,  product  reviews  and  stories,  or  videos.    In  strong,  trusted  com-­‐munities,  members  also  appear  willing  to  share  their  physical  belong-­‐ings—sports  equipment,  cars,  and  even  homes.    Sharing  creates  unique  value  within  the  community  and  creates  stickiness,  with  minimal  cost  to  the  organization.      • Ask  Yourself:    Do  you  provide  both  physical  and  virtual  oppor-­‐tunities  for  your  members  to  connect  and  share  content?        7. Status.    There  are  some  memberships  that  people  take  pride  in—their  country  club,  the  Young  Professionals  Association,  or  even  the  latest  online  community.    In  other  cases,  it  is  one’s  status  within  the  organi-­‐zation  that  confers  status—president  of  a  professional  association,  Black  Card  holder,  or  Amazon  top  reviewer.  Some  organizations  have  
  • 6. levels  that  provide  increased  access  to  special  events  or  benefits  as  a  result  of  usage-­‐based  status,  common  in  hospitality  and  online  gaming  communities,  but  even  without  the  associated  perks,  having  a  publicly  differentiated  status  program  can  increase  feelings  of  loyalty  among  members.  Status  can  also  be  conferred  as  a  result  of  achievement,  such  as  hitting  success  milestones  within  the  organization—authentic,  earned  status  is  best.    • Ask  Yourself:  How  does  your  organization  confer  status  on  members?  What  kind  of  certification,  popularity  or  activism  do  you  track  and  reward?    8. Risk-­‐reduction.    A  key  benefit  of  membership  is  the  reduction  of  risk.    Certainly,  insurance  organizations  are  explicitly  structured  to  mini-­‐mize  risk  across  a  membership,  but  there  are  other  ways  that  an  or-­‐ganization  can  minimize  risk  in  exchange  for  loyalty.  For  example,  members  of  Zappos  can  return  items  for  up  to  an  entire  year,  reducing  the  risk  normally  associated  with  ordering  online.    And  AAA  exists  primarily  to  make  members  feel  safe  in  times  of  car  trouble.  • Ask  Yourself:  What  do  your  members  worry  about?    How  can  you  leverage  your  community  and  resources  to  minimize  that  risk?    9. Stickiness.    Companies  talk  about  stickiness,  or  features  that  make  it  difficult  for  a  customer  to  stop  using  a  particular  product  or  service,  usually  because  it  becomes  a  habit,  or  because  switching  costs  would  be  high.    Membership  organizations  are  uniquely  suited  to  creating  stickiness  because  the  actual  community  itself,  and  the  individual  member’s  status  within  that  community,  become  so  important.    If  you  leave  a  sticky  community,  you  lose  those  relationships,  and  the  earned  status  within  that  relationship.    Too  many  traditional  membership  or-­‐ganizations  neglect  stickiness,  and  have  slowly  become  irrelevant  for  members,  with    members  feeling  disconnected  from  a  group  that  was  once  important.      • Ask  Yourself:  What  do  your  members  give  up  (if  anything)  when  they  leave  your  community?    What  might  they  need  to  rebuild?    How  can  you  make  your  community  part  of  your  members’  daily  routine?        10. Big  Data.    Organizations  built  on  membership  and  loyalty,  such  as  those  in  the  hospitality  industry,  can  be  quite  adept  at  gathering  and  analyzing  large  quantities  of  data,  which  track  demographic  and  be-­‐havioral  information  about  the  consumers.    However,  most  of  these  organizations  stop  there,  and  dont  think  creatively  about  the  applica-­‐tions  for  this  data.  In  many  cases,  the  data  is  valuable  to  the  members  of  the  organization,  who  are  interested  in  benchmarking  themselves.    The  benchmarking  data  can  also  be  sold  in  aggregate  form  to  other  organizations  trying  to  understand  certain  demographic  groups.    For  example,  the  aggregate  data  on  LinkedIn  is  tremendously  valuable  to  people  conducting  research  on  certain  companies  or  industries.    Data  can  also  be  used  as  a  starting  point  for  identifying  new  target  buyer  groups  around  whom  to  develop  new  products.    And  the  data  can  be  
  • 7. used  to  create  smaller  communities  of  members,  segmented  by  inter-­‐est.      • Ask  Yourself:  What  data  are  you  tracking?  Do  you  know  how  to  take  advantage  of  it?    Conclusion:  Ignorance  is  Not  Bliss    What  got  many  membership  organizations  to  their  current  level  success  is  no  longer  enough  to  keep  them  at  the  forefront  of  their  industries.    Savvy  companies  are  thinking  about  new  ways  to  meet  and  exceed  the  needs  of  their  members.    What  does  this  mean  for  today’s  leaders?    It  means  they  need  to  find  ways  to  step  away  from  “business  as  usual”  and  explore  ways  more  boldly  to  meet  customer  need.    Sometimes  it  can  be  hard  to  let  go  of  this  monkey  bar  to  reach  out  for  the  next  one,  or  even  to  think  about  what’s  around  the  next  curve.  Winning  companies  must  be  willing  to  rethink  their  business  model,  community  and  methods  of  pro-­‐viding  unique  value  to  their  customers.    The  Membership  Economy  offers  an  unprecedented  method  to  dramatically  enhance  customer  relation-­‐ships.    

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