Membership business model

Membership business models are a special sort of recurring income business model. And they come in all different shapes and sizes

How I do the membership business model

My New Business Ideas Collection, where I give people a whole bunch of ideas for new businesses every month is a membership model. People have to pay every month to get access to the ideas.

I’ve done it this way because people are going to take some time to think about their next business venture and I want them to have the opportunity to look at the ideas over and over again. Plus I’m always adding new ideas so I want to be able to tell people about the good new stuff I’ve been writing.

Think about the gym membership business model

The obvious example of a membership model is a gym membership. This probably gives the membership model a bad name. Because the gyms insist that you sign up for a year, and of course they rely on people only going and using the gym for a couple of months and then giving up on their new health regime.

But it doesn’t have to be like this, you don’t have to lock people in for a long period of time. Or maybe you want to…

How can you apply a membership model to your business?

The gym model is the obvious one, but there might be ways that you can build a membership element into your business too.

The car mechanic we talked about in the recurring income model blog might set up her tuneup and service as a membership, so people get billed every month.

A lower priced offer to build your tribe

If you run a cafe, you might have a membership of people to get discounts on their sandwiches. Or their sushi.

Moshimo restaurant in Brighton do this and charge an £18 annual fee for me to be able to go and get half-price food on a Monday. They’re so successful, I have to go at 6 pm to avoid the queues.

You might use a membership scheme as part of your marketing, by offering a subscription to people for regular updates or a monthly supply of training materials.

This doesn’t have to be a high priced offer. In fact, it’s good if this set at a lower rate to draw people in, and make them feel like they belong there.

There’s nothing like giving people exclusive content, a special area of the website or even just regular emails with priority booking for your new products.

This version of a membership model is not so much about making money from it, although I’m sure Moshimo enjoy their £18 fees. It’s actually a marketing tactic to make people feel special and therefore to make them feel loyal and part of a club.

A new product which is sold as a membership

The membership is a new way of selling software as a service. You probably use lots of things which are software as a service, such as Dropbox or Xero accounting software. You pay a monthly fee and you get to use the software. This most business model has been around since the end of the 20th century, and it’s probably due for a bit of an update now.

Instead of offering software as a service for a monthly fee, why not offer a membership subscription instead? With the membership, people pay their monthly fee, but they get the good things of being in a club rather than just paying for using the software. And then, they can choose what to buy or what to access within your product range.

It might look a bit like this:

People join your club and pay a low fee just for being part of the club. They’d have to get some benefits for doing this, of course, you’d need to give them some good stuff.

Once they’re in the club, you give them a range of different options to choose from. These options might be an enhanced membership where you get something particularly special. Perhaps even with some human interaction or curation, or you might just have different elements of things that you want to sell them.

People in the club then get exclusive offers. Maybe to beta test your new product and give feedback, or discount codes giving them 50% off something new when it launches. Be a bit careful with the discounts though…

And by selling it as a membership, you’ve gained permission to email them and tell them about good things that are coming up or stories about how people are using the different products to give them ideas.

Where Adobe get this so wrong

I recently started using an Adobe product called Typekit, to buy the fonts for my website. I pay them $49 every year to carry on using the fonts on the website and my lovely PDFs.

When I had to log into the site recently there was a special offer to buy some stock photos.

If I were advising Adobe, I tell them that they were doing this all wrong. I would tell them to move to a membership business model. I would sell membership to a “professional tools for making beautiful websites club”. Within that club, the customer would be offered the chance to buy lots of other cool things for their websites, such as matching fonts, PowerPoint templates, lead magnet templates and stock photos. Plus of course, the other fancy software that Adobe makes most of its money from.

If you’re the CEO of Adobe, then this business advice is on the house, and you can see my fee rates on this page for a follow-up session…

The crucial elements of membership business models

The most important parts of a membership business model are positioning it as an offer to become part of something. This might be to gain access to a club, a card that allows you to get priority treatment and to get something that other people can’t get unless they join the club.

I think this taps into a very basic human desire to belong to something. We all want that, so if you position your marketing correctly around this it can be very persuasive indeed.

How I help

My work is all about helping people with small businesses to build and develop bigger, stronger companies. It’s all about helping people to make more money, and have more fun.