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The Secrets of Subscription and Membership-Based Web Businesses, With Robbie Baxter

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Tips on Running Subscription Based BusinessesE-Commerce is a rapidly changing environment as digital technologies evolve the ways that individuals interact with brands, shop for products, and discover consumer goods.

Subscription models have recently been reinvigorated as a popular method of providing consumers with products and services over the last several years. There are a variety of subscription box services like Dollar Shave Club, digital memberships like Hulu, and various others that can be found all over the web.

For those looking to leverage a subscription service or membership-based model, Fanatics Media has an excellent and resourceful offering.

In our latest e-commerce interview, Justin Simon sits down with Robbie Kellman Baxter, a master of memberships, to understand the exact benefits, pitfalls, and nuances to such a business model.

Watch as Robbie shares her immense knowledge and extraordinary insights on the “forever transaction:”

Robbie Baxter is a keynote speaker, business consultant, and the Founder of Peninsula Strategies, a strategy consulting firm, where she helps to develop key systems and procedures for businesses to maximize efficiency and growth. Over the past two decades, her clients have ranged from major companies such as Netflix and Yahoo!, to a number of Silicon Valley SaaS subscription corporations. She is also the author of The Membership Economy, which was named by Inc.com as one of the top 5 marketing books of 2015.

Here are some of the most profound moments from this illuminating dialogue.

Question #1: What Does “The Membership Economy” Mean and How Does that Lead to a “Forever Transaction?” (0:24)

Robbie:

The membership economy is a term used to describe a transformational shift that has occurred across many industries. There is no one defining feature of it. It is truly a mindset.

“It’s about moving from a transactional mindset to a relational mindset. It’s about moving from a focus on ownership to a focus on access. It’s about going from one time to many times; recurring transactions, recurring revenue, ongoing relationships. And it’s about the way you communicate with customers, subscribers, and members.”

Companies must not simply talk to their customers, there must be a multidirectional approach that all falls within the umbrella of the organization. Amazon is one example of this as it has various forums, customer service representatives, social media channels, etc.. These are all ways to communicate with the company and it is always listening.

Question #2: What Are the Biggest Benefits of Launching a Product and Getting into the Membership Economy? (2:47)

Robbie:

“If you want to have a long term form of relationship with your customers, if that matters to you, and I think it matters to almost every organization, then you should be thinking about joining the membership economy.”

Joining the membership economy says that you are shifting your mindset from an anonymous transactional one to one that is long term. The best thing you can do before entering is to take a step back and ask what it is that your customers need from you. Spoiler: the answer is never your product. Ask what they really want and establish the best ways that you can deliver that. Also, think about how you will always be there to check in on the consumer and the market to determine if you could be offering something superior.

“I think too many organizations love their products more than they love their customers.”

This way of thinking limits companies and blinds them to possibilities.

Question #3: What Mistakes Are People Making When They Get Into This Model and Start a Subscription or Membership Program? (5:20)

Robbie:

“The biggest problem that I see is that people want to get into it without understanding what it entails.”

Many companies are simply looking for recurring revenue and a predictable cash flow so that they can invest more money into the business. This is something that Robbie has heard time and time again from various large corporations. But looking at a subscription or membership program from this perspective does nothing for the end consumer. Chances are, this approach will only produce products and services that people hate because they simply have to pay for the same thing each month that was originally a one-time purchase.

The second biggest issue is that if a company has already built a membership model and acquired members, they end up falling in love with those people and forget to think about the new members that they still need.

What happens then is a company will vehemently listen to their core members who have already gone through the customer journey and end up creating products or services that cater to this small group. The problem is that these new offerings don’t take into account what new people, non-members, actually want.

Question #4: When Someone is in Retail and a Membership Provider, How Do They Figure Out Pricing? (10:00)

Robbie:

There are two models right now that are very popular; one is the discovery box model. The value proposition for this configuration is that a box of new products that the consumer may not have otherwise discovered is sent to them. These people get to open the box and dig through consumables, like snacks or clothes, and it’s exciting and fun for them.

The other model is the replenishment model. This is where items that are regularly consumed, like razors or shaving cream, are replenished so that the consumer never runs out.

In both models it is important to identify what the provided value is. You first have to understand the value before you can structure your pricing. Discovery is much different than replenishment, so prices would ultimately differ. People may be willing to pay a premium for large items like bags of dog food to be delivered to their door, whereas they might expect a discount for committing to one brand in the replenishment model.

It is understandable that it can be scary to set prices; if they are set too low and have to be raised later, consumers will be angry and will voice their frustrations. If prices do need to be raised, however, be sure to be transparent with customers and let them know why the price tag is going up. Additionally, if at all possible, grandfather in your most loyal customers at the original price point. Another tactic is to add new services or offerings at the higher price. This will add more value to the service and helps to offset the price raise.

There are plenty more insights to be discovered in the full video. Robbie divulges whether launching a subscription model on big event days like Cyber Monday are profitable ventures or disastrous mistakes, if subscription companies actually have to manufacture their own products or can just sell what others have created, and what her favorite subscription businesses to study are.

Think you are ready to be apart of the membership economy? Give us a call at 760-262-4252 or send an email to info@fanaticsmedia.com and we can help you build a membership model that will amaze the masses. Or check out our Amazon Product Grader to see how your Amazon goods measure up.

 


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