The rise of subscription-based businesses has been a major trend over the last decade or so, especially in the digital world but even extending into such tangible, ownership-grounded industries like cars. In The Membership Economy, consultant and author Robbie Baxter explains the development of this business model as well as how to apply it to your own business. On a deeper level, she delves into the psychology of why the membership economy works in the first place.
Baxter defines membership as “the state of being formally engaged with an organization or group on an ongoing basis.” This broad definition allows her to navigate the various different understandings of the umbrella term “membership economy.” In Baxter’s understanding, membership entails both the simple facts of subscription-based business models as well as the less tangible, but still very real feeling of community and belonging that comes with the membership economy.
The driving idea of the book is that the key to success in the membership economy is that companies must treat members as members, not merely as consumers or customers. Baxter grounds this in the psychology of Maslow’s hierarchy of needs. People need a sense of community and belonging.
Memberships give individuals this feeling of togetherness and ideally provide them with great value. Simultaneously, such business models ensure companies a steady stream of income. If you can win over a customer once and make them a loyal member, then you don’t have to invest much time or resources into continually convincing them to use your services.
The Membership Economy is a very practical and actionable book as well. It is filled with guides to making the transition to membership as well as the best practices for getting and retaining members. The book comes at it from a number of angles, from marketing to pricing. While the focus is primarily on tech companies especially in the selection of case studies, the advice certainly has broader application. This will become ever more true as the success of the membership economy in Silicon Valley carries over to other sectors of the economy.
Another key psychological element, is today’s emphasis on access versus ownership. Netflix is probably the most well known example. In lieu of the vast VHS and DVD collections of 20 years ago, people now subscribe to Netflix instead. They may not own any of the shows and movies they watch, but they do have direct access to a vast library of content. It feels like much better value, because in many ways it is.
Being able to provide consumers with very good value is combined with an emphasis on customer service (or customer success, as it is now sometimes called) to make members feel valued. To foster the sense of belonging and make the transition from customer to member, companies need to persuade potential members that they are individually valued and invested in as members, as part of the in-group, and not as simple numbers on a spreadsheet.
While this distinction is certainly meaningful from a marketing and customer service standpoint, it has some pitfalls. Facebook is constantly referenced in the book as an example of a free membership system. The price is of course all of users personal information. Given Facebook’s historic lack of transparency regarding what exactly they do with user data, the sense of membership and belonging can feel rather superficial.
This is on top of the fact that if the membership economy is grounded in a deeply human need for belonging and community, as Baxter argues, then it is almost laughably corporatist to assume that this need can be met by a subscription to Netflix or Amazon Prime.
All of which is to say that while access and membership may very well be the way of the future, it is not quite as rosy and uncomplicated as its advocates would have people believe. Nevertheless, with its practicality and wide applicability, The Membership Economy is an excellent guide to the past, present, and future of this new business model.
The Membership Economy is available for purchase here.