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InContext / An inside look at the business of digital content

Interview with Robbie Kellman Baxter—author of The Membership Economy

July 20, 2015 | By DCN

A decade ago, DCN’s Editorial Director, Michelle Manafy, wrote an article about American Express’s campaigns around membership and how they used the concept of “membership” to create a clear value proposition. Having coined the business term “Membership Economy,” Robbie Kellman Baxter found a kindred spirit in Michelle. And, during a recent conversation, the two covered a broad range of topics, some of which we hope will be useful to the members of our community. Here are a few highlights from that discussion:

Please define “the membership economy” and describe how it differs from the sorts of subscription models used by the media for decades:

The Membership Economy is a massive new trend that is transforming virtually every major business sector, including media. It’s about access over ownership, relationships over transactions and community with multidirectional communication as more important than one-way push communication.

Subscriptions are a pricing decision; Membership is about the mindset of the organization.

Describe “the forever transaction” and “lifetime customer”:

7stepmembershipIn the Membership Economy, the transaction is the starting line, not the finish line, and it’s a forever transaction. What we mean by this is that at the moment a customer conducts the initial transaction with an organization, their plan is to stay forever, or at least until that organization no longer provides the promised value or that value is no longer needed. Organizations often focus on lifetime customer value, but they should be focusing on lifetime value to the customer, instead of just the lifetime value of the customer.

The question is, what is your promise to your customers? If they are looking to you as a source of news, for example, the promise is much bigger than “a daily newspaper”. It could be access to an event featuring a foreign correspondent, or a bundle for arts lovers that includes a subscription to Spotify, or the ability to share thoughts about specific trending topics with fellow readers. The idea is to focus on the mission as more important than the products.

With the “commoditization” of media, how can the concept of membership offer new insights/ models that media companies can apply to stand out, attract and retain customers?

In Membership businesses, specific products and services often become commoditized over time. Organizations need to expect this to happen and be prepared to continue to evolve to keep ahead. What can be protected today is tomorrow’s commodity. For example, professional associations have long provided directories as a key value. Today, LinkedIn makes nearly all professional directories commodities. Newspapers used to have access to the very expensive and relatively rare channel for distribution—printing presses and delivery guys. Now, with the internet, distribution is no longer the differentiator it once was. Organizations need to constantly re-evalute how to provide differentiated value to their members that can’t be accessed elsewhere.

For example, Pandora offers a unique experience for music discovery and enjoyment, but also invests in building a community among members, through its live town halls, logo-swag and culture committed to personalized responses to outreach by any member.

Where does “free” fit into the membership economy?

Not every organization should provide free stuff, but every organization should consider how free fits into their business model. Free can include both free trials, which are generally a “complete taste” of the offering for a finite period of time, as well as freemium, which is a free subscription, usually to a limited experience.

There are three reasons that free can make sense for an organization:

  1. When free drives awareness and trial (typically what media companies do—such as the New York Times’ free articles before hitting paywall)
  2. When there’s a network effect, meaning that each new free member drives value for each existing paying member (such as LinkedIn)
  3. When a viral effect, meaning free members become channels for new paying members (such as the situation in the early days of Hotmail, when free email users sent emails to people who later became paying subscribers)

There are some cases where none of these benefits accrue, so free isn’t always good, but it’s always worth considering.

Could you provide a couple of examples of “membership” strategies from other industries that could be applied to today’s digital media industry:

  • Expanding benefits to include access to unique events—Caesar’s Entertainment often invites their most profitable members to meet Celine Dion, Elton John and other stars as they prepare for their nightly shows.
  • Using segmentation and persona generation to identify pockets of customers that are pushing the envelope of their usage and willingness to pay, to inspire new offerings and subscription categories. For example, American Express continues to release different types of cards. All cards promise to “have your back” but after many years of moving upmarket, from green to gold to platinum to black, they are now introducing debit cards targeting the underbanked community.
  • Investing in building high value relationships among key members of the audience—relationships can never be commoditized. For example, “Million Dollar™ Consultant” Alan Weiss provides his subscribers with access to an online community in which members share stories and advice with one another. While this community is free to members, it serves an important function for Alan, keeping a large group of former clients active and engaged in his community, and willing to listen to new offers and promotions.

As with any industry, it is important to be aware of what your peers (or competition) are doing, but it is also important to keep an eye on what others are doing and how it can be applied to your business. Once, memberships were only for clubs or organizations like Digital Content Next, right? Today, the concept of membership can be applied to any number of industries or offerings to create genuine value to customers and profitable experiences across the board.

 


TheMembershipEconomyRobbie Kellman Baxter created the business term “Membership Economy” and recently published the book The Membership Economy: Find Your Superusers, Master the Forever Transaction and Build Recurring Revenue.

Baxter is the founder of Peninsula Strategies LLC, a strategy consulting firm. The Peninsula Strategies website is www.peninsulastrategies.com. Her clients have included large organizations like Netflix, SurveyMonkey and Yahoo!, as well as smaller venture-backed startups. Over the course of her career, Robbie has worked in or consulted to clients in more than twenty industries.

Before starting Peninsula Strategies in 2001, Robbie served as a New York City Urban Fellow, a consultant at Booz Allen & Hamilton, and a Silicon Valley product marketer. She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business.

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