Subscription merchants looking to set themselves apart from the crowd might already be considering memberships, an effective way to create community and excitement around a brand. While some businesses operate solely under the membership model, there is also the possibility for subscription businesses to take advantage of memberships.
The subscription business model has many advantages, and when combined with membership models it can become an even more powerful way to attract and retain customers. Having membership options gives your customers an opportunity to buy into your business and what you stand for—creating brand loyalty that can help you grow and collect more recurring revenue.
Any successful subscription business relies on a subscription management platform to keep their subscriptions running smoothly for customers. Business owners looking to select the best subscription management solution for their online store should consider the different elements and features to make the right choice for their business needs. Recharge’s latest interactive guide can help brands evaluate their options and make the best decision for their store.
In this blog post, we’ll cover the ins and outs of the membership business model, how it differs from the traditional subscription model, and how merchants can incorporate memberships into their business plans. Not only do memberships offer benefits for your brand, but they can also be a great thing for your customers, too.
Key takeaways
- The membership business model can help brands create stronger customer relationships and reduce churn.
- Memberships can be paid or unpaid and offer customers special access to key benefits or features, keeping customers consistently engaged with your business.
- Creating unique membership benefits—like first access to new products and special discounts—will make your program more appealing to customers.
What is a membership-based business model?
Let’s start by defining membership models and their characteristics. At their core, memberships give customers access to something—whatever that is can be determined by the individual business. Memberships can be paid or free; the important thing is that they give members special access to products, services, discounts, or other benefits.
One type of membership that everyone is probably familiar with is a library card. With this free membership, all people have to do is sign up to receive a card that gives them access to all the library’s books (and usually online access, too).
Not every type of paid membership falls under the subscription business model. For example, you might pay a one-time fee for a lifetime membership to a co-op that provides you with exclusive benefits and discounts.
Some membership programs might offer a subscription and non-subscription option—for example, one membership that is free or involves a one-time fee, and another more premium version with extra benefits for a recurring fee. This premium version of membership acts as a subscription, since there’s a recurring payment made by the customer.
Subscription business model vs. membership model
So, what’s the real difference between these two types of business models? If a membership can also act as a subscription, how do you distinguish between subscription models and membership models? The answer has to do with recurring payments, and what you’re offering your customers.
The subscription business model means that businesses offer a product or service on a recurring basis. Memberships focus more on giving access—whether that’s to new products, online community spaces, special discounts, free shipping, or other bonuses that only members can receive. If that access requires a recurring fee, the membership falls under the umbrella of subscriptions.
Elements of the membership-based business model
Now that we’ve distinguished each type of business model, let’s talk about the elements of the membership model, especially as they relate to subscription merchants. Membership business models can be attractive for both online stores and their customers—offering increased customer retention and giving customers extra incentive to commit to your brand for life.
1. Benefits for members
Memberships are attractive to customers because they offer special access to benefits. Those online stores operating with a subscription business model could consider offering membership perks like:
- Free shipping
- Early access to new products
- Discounts
- Free gifts
- Online communities
When you create exclusivity around your membership, as we’ll talk about in the next point, customers will be enticed to go the extra mile and sign up for it. They’ll weigh the extra cost of these benefits, and if you provide enough of these perks, the scale will tip in favor of spending the extra money for membership access.
2. Value around the membership
Membership services were born out of the desire to offer a premium experience to a select group of individuals. A subscription-based business that utilizes memberships is no exception. Getting customers to spend the extra money on a membership and commit to recurring payments means that there has to be something premium, something better, about what you’re offering.
With subscriptions, this could mean subscribe-and-save discounts, or an added bonus like free shipping. Consider the benefits listed above—they help your online business create an experience that’s better than the average, one-time customer experience. What’s more: By keeping your customers consistently engaged, you create a relationship with them that can span months and hopefully years.
3. Access to exclusive spaces
Another important element to memberships—and a great perk that a subscription business can offer to their members—is access to more than just products or services. Creating an immersive experience, whether that’s in person or online, gives members another advantage over average shoppers.
Many membership subscription business models include an online space, whether it’s a community forum, customer portal, or other gated online community. This is helpful both for customers and for your subscription business. When customers are brought together around common interests or causes, they can find value in the connection. Plus, you can gain product ideas and see where your customers have questions through monitoring these online spaces.
How subscription business models can incorporate memberships
With rising customer acquisition costs, it’s no surprise that many businesses are offering subscriptions and memberships as a way to achieve recurring revenue and lower customer churn. When you charge an annual or monthly fee (or even bill customers at a cadence of their own choosing), you can focus more on customer retention and less on finding new customers.
For a membership to be effective in conjunction with your subscription offerings, the membership benefits have to outweigh the cost of the membership. In other words, you have to make this membership option enticing for customers to consider it. But, if you can do this effectively, you’ll have predictable revenue and a strong customer base.
Here are some ideas subscription businesses can offer their community members:
- Extra member benefits like free shipping and discounts
- Rewards when members reach milestones or spend a certain amount of money
- First access to new products or services
- A special membership site or other online space
When members pay for these special perks, whether they’re bundled with their subscription fee or come at an added cost, they’ll want access to these special membership benefits. By providing a top-notch customer experience for members, you’ll build stronger customer relationships while earning additional revenue (recurring revenue, in the case of most memberships).
Memberships & the subscription model: How you can elevate your subscription business
The subscription-based business model lends itself well to memberships, giving merchants the opportunity to connect with their customers on an even deeper level while still providing them with the subscription services they know and trust. When online stores harness the power of subscriptions and memberships together, they can create a loyal customer base with a mutually beneficial relationship between their business and their customers.
In order to create a smooth customer experience overall, brands should invest in the right subscription management solution. If you’re unsure which platform is best for your subscription business, check out our latest interactive guide to select the right subscription management solution for your unique needs.
Sources
[1] How to choose your subscription management solution (Recharge)
[2] Subscription business model (Recharge ecommerce glossary)
[3] How to add membership subscriptions to your subscription program (Recharge)
