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Membership-based business models: Capitalize on being in the club

As access becomes more important than assets to today's shoppers, brands are building tech-driven subscription services and entire businesses around this mindset.

Courtesy of Birchbox

February 15, 2016 by Ethan Whitehill — CEO, two west inc

As access becomes more important than assets to today’s shoppers, brands are building tech-driven subscription services and entire businesses around this mindset. According to The Membership Economy, by Robbie Kellman Baxter, the majority of shoppers seek to fulfill two basic needs: social connection and convenience. Subscription-based selling checks both of these boxes, making people feel like they’re part of an exclusive club while delivering goods directly to their door. That said, retailers offering membership programs benefit from targeted data, recurring revenues, scalable programs and enhanced customer relationships.

Put it on repeat

Perhaps the biggest perk of subscription-based business models is predictable and recurring revenues. When retailers are able to identify a consumable product shoppers need every month, the benefits are endless. One of the most successful examples of this is Dollar Shave Club, a service that guarantees members always get a perfect shave by delivering a monthly supply of high-quality razor blades. The brand, which recently launched a new men's skincare line, has made it their business to know everything about male grooming habits. As a retailer, you can do this too. John Warrillow, author of The Automatic Customer: Creating a Subscription Model in Any Industry, claims it takes just seven steps to put a model like this in action. Here's what he recommends.

Customize, customize, customize

With membership-based models, the transaction isn't the end of your interaction with customers — it's the beginning. This setup gives retailers continual opportunities to connect with and build lasting relationships with shoppers. Optimizing technology, you can develop vast communities, elevate customer experience and obtain meaningful feedback to guide future decision making. For instance, fashion-delivery services StitchFix and Keaton Row ask each customer to fill out a personal style assessment, then assign a stylist who caters to their needs. Tracking the shopper's likes and dislikes, that stylist is able to tailor future deliveries based on tastes, fit and more. Using data to analyze customer behavior enables you to offer a more customized and exclusive experience to all.

Get hire standards

According to Forbes, as retailers adopt membership models, they also must focus on customer experience and top talent. The membership model is built on trust with shoppers paying monthly fees for services that make them feel special, time and time again. Those members usually have access to online forums where they share experiences, so it's critical to hire the right employees to deliver the experience you want. Look for people who are problem solvers, not handbook followers; good communicators with upbeat personalities; thoughtful and positive thinkers; and those who stay calm under pressure.

Brands making membership the norm

1. Apple Music:The online music streaming service has managed to lure in more than 10 million paying subscribers since its launch in June 2015, as recently reportedby the Financial Times. That means in just six months, Apple has attracted as many users as it took Spotify six years to reach. Guess it's time to tune in.
2. BirchBox: The hugely successful subscription-based beauty retailer recently launched ARROW, its second in-house beauty brand. Targeting athleisure shoppers, it offers long-wearing and lightweight makeup, skincare and body products for use during physical activity. Bring on that natural glow!
3. Honest Company: Jessica Alba's family-focused consumer-products company offers monthly membership packages called Bundles. Diapers & Wipes at $79.95 per month is quite the deal. Valued as a $1.7 billion enterprise after just four years, it's clear they're doing something right.
4. Origin Access: Gaming giant EA is expanding its subscription services to PC users on a monthly basis. For $4.99, subscribers get 10 percent off origin purchases while gaining access to pre-release trials, as well as a collection of older games and third-party titles called The Vault. Game on.
5. Fair Folks & a Goat: This NYC-based coffee shop, with locations in Greenwich Village and the East Village, gives customers as many coffees, teas and lemonades as they can handle for $25 a month. Members also get invites to events, as well as discounts on art, clothing and home decor items sold in the stores. Never-ending caffeine supply? We'll take it.

About Ethan Whitehill

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