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Not long ago my wife and I closed down a bank account
that we had not used in many years. I had tried to
persuade my wife for many years that we needed to
close the account because we just weren’t using it and I
didn’t want to keep paying fees. But she insisted that
we keep it open because she was a “charter member” of
the bank and didn’t want to lose her privileges.
My wife is very frugal yet she was willing to continue to
pay for membership in something that she received no
services or benefits from. It was then that I realized just
how powerful it is to “belong” to something. It satisfies
our deepest needs as human beings to be wanted, loved,
and appreciated.
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Does Your Company Need to Establish a Membership
Program?
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I am often asked by businesses if a membership
program would be “right” for their company. In response,
I offer the following “yes” or “no” membership qualification
test. Take the test and see if your company needs a
membership program.
Does your company…
- have to conserve its limited resources when providing
service to its customers?
- want to decrease customer turnover and dramatically
improve customer loyalty?
- need a constant, predictable stream of revenue?
- desire to sell its full suite of services with less effort?
- wish to get the more revenue out of its existing
customers?
- aspire to significantly improve its referral business?
If you answered yes to one or more of the above
questions, your company could benefit from establishing
a membership program. Okay, you’re probably saying,
“There isn’t a company in existence that wouldn’t say
yes to one of the above questions.” and that is exactly
my point. Every business can benefit from a
membership program and should establish some form of
membership marketing.
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Take a Closer Look at the Benefits
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Membership programs provide powerful benefits that will
improve your company’s performance. Let’s take a
closer look at the benefits that were just mentioned.
1. Conserves limited company resources
Resources are allocated according to the customers’
level of membership (i.e. lower membership level = less
resources, higher membership level = more resources).
2. Increases customer loyalty
Membership provides a sense of belonging to an
organization, which breeds loyalty.
3. Provides a predictable stream of revenue
Instead of sporadically selling products and services,
membership programs provide a steady stream of
customers providing a steady stream of cash flow.
4. Sells more services and products with less effort
Because slow moving or less desirable products and
services are included in membership packages people
are more likely to take advantage of them.
5. More revenue from existing customers
Multi-level membership programs incentivize customers
to spend more by moving up to higher levels of the
program.
6. Improves referral business
People like to tell their friends about a company to which
they feel a sense of loyalty.
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Types of Membership Programs
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When you think of being a “member” of a business most
people think of Sam’s Club or country clubs but
membership programs can take on many forms.
The following is an example of different types of
membership programs, which include a business selling,
(a) hard good products, (b) a company selling service,
and lastly, (c) a company selling knowledge.
Every business on the planet will fall under one of these
business categories so there is something to learn for
every businessperson from the following three
membership program examples:
Costco – Business and consumer supplies superstore.
Gold Star Membership - Allows consumers to
purchase products for personal use at any Costco
throughout the world.
Business Membership - Allows businesses to
purchase products for business, personal and resale*
use.
Executive Membership - Allows consumers and
businesses to save money by offering exclusive
services such as a 2% reward, business loans, and
credit card processing, larger gift certificates for
mortgage or real estate transactions, travel benefits
and lower prices on check printing.
Hertz – Car rental company
Hertz #1 Club – Private club number automatically fills
out your information form, this speeding the rental
process.
Hertz #1 Club Express – Available only to Hertz #1
Club members and provides an exclusive checkout
counter for express members only.
Hertz #1 Awards - Available only to Hertz #1 Club
members and allows you to earn points for every
qualifying dollar you spend on business and leisure
rentals that can be redeemed for prizes and air travel
mileage.
Kennedy Inner Circle, Inc. – Marketing consulting
services company
Silver Inner Circle – Receives monthly newsletter,
periodic free tele-consulting calls, invitations to
“marketing roundtables”, and discounts on information
products.
Gold – Includes Silver membership benefits plus
monthly taped interviews with marketing experts,
exclusive additions to monthly newsletter, longer call in
times, access to special member’s area of website
containing newsletter past issues and articles, and
receipt of three marketing books during the year.
Gold+ - Includes Silver and Gold membership benefits
plus one-on-one and group based tele-coaching,
printed materials, additional coaching call-in days, and
weekly success-stimulator faxes.
Gold + VIP – Includes Silver, Gold, and Gold+
membership benefits plus three “mastermind group
meetings” two days each with personal coaching.
Platinum – Includes Silver, Gold, Gold+, and Gold+
VIP membership benefits plus four mastermind group
meetings. This level is by invitation only.
The following are several elements from these examples
that are important to a successful membership program.
Each company provides different membership levels with
more offerings of service, discounts, speed, and
accessibility at each higher level.
1. In the case of Costco, programs are targeted toward
different demographic groups with an increasing number
of discount options.
2. In the case of Hertz, the express level increases
accessibility and thus, speeds the fulfillment process.
Also awards are given based on purchase volume
motivating buyers to purchase more.
3. In the case of Kennedy Inner Circle, each membership
program offers a higher level of accessibility to more in
depth information.
Not every membership program has to be multi-level like
those in the examples but they do need to provide an
exclusive set of benefits that aren’t available to regular
customers.
Let’s examine some membership benefit possibilities for
various small businesses.
Dry Cleaner
Basic Membership – 10 % discount on all cleaning
Premium Membership – 10 % discount plus express
counter service, pickup and delivery, free alterations
Certified Public Accountant
Basic Membership – Monthly tax saving teleconference
calls, free newsletter
Premium Membership – Teleconference calls and
newsletter plus express call-in question and answer
service, monthly one-on-one consulting, and monthly
mastermind networking meeting.
Oil and Lube Franchise
Basic Membership – Reminder email service, free
complete car cleaning, premium grade motor oil.
Premium Membership – Email service, car cleaning,
motor oil, plus free automatic transmission fluid
changing, engine cleaning, tire rotation, and one oil
change a month.
Movie Theatre
Basic Membership – 5 movies monthly for the price of
three.
Premium Membership – 8 movies monthly for the price
of five, monthly movie review newsletter, express
window, web-based ticket buying
In every business there are products and services that
you can package to provide as premium services in your
membership program. It just takes a little creativity. If
you only offer one service or product, create more
services and package them up to offer in a membership
program.
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Pricing of Membership Programs
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Membership programs have many pricing models and
must be tested to determine the right price for your
business and clientele. However, pricing your lower
membership levels inexpensively is a smart tactic.
Your goal should be to convert your customers into
members so that they’ll begin to feel an affinity to your
business.
After your customers have joined, then you can begin to
start the upsell process by providing tempting offers to
move up the membership ladder. Look at your first
membership level as a “loss-leader.”
For example, it only costs $10 a year to be a member of
Sam’s Club. It’s free to be a member of Hollywood Video
(video chain store). It costs $25 annually to be a
member of my local library.
The low membership fees serve to attract people into the
program, but because it’s not completely free, customers
will place a value on their membership and use it.
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Renewals: The Key to Membership Program Success
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It’s one thing to package your services into a
membership program and sell it, but sustaining your
subscribership by getting customers to renew is another.
If you don’t provide value and keep your promises during
your customer’s membership, it will be difficult to get
them to renew.
To be honest, even if you have kept your promise and
provided value it can be difficult to get people to renew.
Magazines consistently have this problem. In fact,
companies have been established with the sole purpose
to help other companies to maintain a high renewal rate.
The key to getting your members to renew is to provide
value beyond what was promised and to offer incentives
to renew. The incentives should have a low cost to you
and a high perceived value from your member.
For instance, suppose you offer a paid newsletter
service. Your renewal offer might include several free
teleseminars or a free discount coupons from a popular
vendor that advertises in your newsletter.
Another option to improve your renewal rate is to sell
renewals upfront by offering multiple period memberships
at a discounted price. For instance, when you offer a
one-year VIP membership at your restaurant, upsell the
offer with a second year at a 35% discount.
Locking your customers into multiple period membership
programs should be an important goal. Because your
customer was willing to buy the first period, they’ll be
inclined to consider multiple years…if the offer is right.
A powerful hidden benefit of locking your customer into a
long-term membership program is that you’ll also be
locking out your competition!
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Use Membership Cards
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Open you wallet right now and you’ll probably see several
membership cards. That’s how I came up with the
membership prices for Sam’s Club, Hollywood Video,
and the local library. I also have a membership card from
my local grocer, health club, and airlines (Continental
and Southwest).
Membership cards serve several purposes beyond just
holding my personal and transaction information. It serves
as a gentle reminder for your customer to take advantage
of their membership.
You can also use it as physical evidence for proof of
membership. In addition, you can use it to mark off
visits or purchases of specific product much like a
subway sandwich card.
You might even consider establishing your own charge
card. According to stats from GE Card Services, store
credit cardholders will spend at least 50% more each
year with that retailer than a customer not carrying the
retailer’s card. Offering a credit card also makes it easier
for your members to buy your products by providing
installment payments.
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Conclusion
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Membership programs help to properly allocated
company resources, increase customer loyalty, provide
predictable revenue streams, sells more products and
services, generates higher revenue per customer, and
improve referrals. Every business has products and
services they can package into a membership program.
Make it easy to enter your membership program and
once you have a good membership base, focus on
renewing your members to keep them in the program.
Use a physical membership indicator to not only improve
data tracking, but to remind your member to use their
privileges.
# # #
David Frey, President of Marketing Best Practices Inc., a
Houston-based small business marketing consulting
firm. and is the senior editor of the Marketing Best
Practices Newsletter featuring small business marketing
best practices.
http://www.MarketingBestPractices.com
mailto:David@MarketingBestPractices.com
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