Top reasons why the membership model is better than selling model

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Have you considered turning your traditional sales model into a membership model? One-off sales is the most straightforward business model out there. You have a product, the customer gives you money, you give them the product. Simple, right?

It’s not as simple as it might seem. In fact, in the long run, building a sustainable business on one-off sales is very difficult. But what is the alternative?

In the three years between 2014 and 2017, the number of people visiting websites employing a subscription based model grew by 800%

The reason for this incredible growth is that there are many benefits of utilising a membership model. While it won’t work for every business, there are plenty of reasons to consider it for yours. Here are six of our favourites:

1. Regular Income

The membership model might not guarantee more income, but it should stabilise it. This is a significant benefit for your business as it will help you make better predictions about future income. With greater certainty over future income, it’s easier to invest in growing your business.

2. Customer Retention

It will be advantageous four your members to consume your content instead of your competitors’. Plenty of people sign up to Netflix to watch Black Mirror. After they finish watching Black Mirror, they may have chosen to watch The Man in the High Castle, had all choices been equal. However, as they are Netflix subscribers, they instead chose to watch Stranger Things. Had they merely paid to see Black Mirror, they may well have rented their next series from Amazon Prime under a traditional rental model. Even with an option of a free trial to Amazon Prime, customers are minded to stick with the Netflix. They want to get as much value as possible from the money they invested in their subscription.

You can expect your members to ignore similar content on your competitors site if you can offer something roughly equivalent.

3. Upselling

Members have reasons for subscribing to your site. Those reasons might not cover every item you offer. Their continued exposure to other items may eventually prompt enough interest to lead to an additional sale. Imagine you shop at a supermarket for frozen goods, but buy your fruit and vegetables from the greengrocer. You just think the produce is fresher. However you routinely encounter the fruit and vegetables at the supermarket. Eventually you stop going to the greengrocer and buy apples at the supermarket. You’re a member of the supermarket’s membership scheme, earning cashback on goods bought. Being a member convinced you to buy a product you wouldn’t have otherwise bought.

4. Better businesses are rewarded

Not all of these benefits are exclusive to the business. The membership model also has benefits for the consumer. The traditional sales model is more open to scams or abuse. A poorly made product or service can be well marketed and the consumer hoodwinked. With the membership model, it’s harder to deceive the consumer. You might be able to convince a consumer to pay an initial month’s subscription for an inferior product. That customer isn’t likely to pay for the second month once they’ve had time to properly assess your offering though.

It’s not only the customer who benefits. Businesses who provide a good service will retain their customers and inherit customers from the businesses who don’t. Only picking up a month’s subscription from new customers isn’t enough to sustain a membership model. If you are doing good quality work for your members this can be even more of a competitive advantage than in other models.

5. Client Relationships

In the traditional model of selling, the exchange of goods or services occurs and the interaction is complete. The buyer is unlikely be seen again by the seller.

In the membership model, there is an ongoing relationship between the membership owner and member. The membership site owner gets to see the development of the member and interact with them on a regular basis. For many, seeing the progress of their members over time is a very rewarding experience. It gives them feedback on their work and validates what they do.

6. Deadlines

In the traditional sales model, to sell a product, you have to market it. This means well-planned product launches that capture the attention of your potential market. In the membership model, you have to ensure that you are regularly producing enough new content for your members to keep them satisfied. This means that products don’t have to be sold as full fledged courses, but can instead be released in installments. Your members will also be more forgiving of products that are not completely refined. They know you will continue working on the content. Customers in the traditional sales model however will expect immediate perfection.

These are just some of the benefits from using a membership model in your business. Whether you ultimately choose to employ a membership model will depend on you and your business.

What Should You Sell to Make the Recurring Revenue Model Work?

When it comes to recurring revenue, there are four types of products that you can sell via monthly or yearly subscription: content, software, physical products, and productized services.

1. Content

Content is probably the easiest way to get started with recurring revenue because it’s the cheapest type of product to produce. But don’t get me wrong, creating quality content will still cost a lot, either in terms of money or in terms of time.

In fact, if you can write, do a podcast, or create Youtube videos, then you can build a recurring revenue stream with little financial investment, provided you are willing to put a lot of time and energy into it.

Patreon is a platform that allows fans to support their favourite online creators through monthly donations.

Relying on donations might not seem like a sound business idea, but it can work very well if you build a large enough audience.

2. Software

Software products are much more expensive to create than content, but they also have the potential to generate a lot more money.

Plus, unlike with content which is usually tied to a personal brand, you can eventually sell a software business for a 20x-40x monthly revenue.

The most straightforward way to get started with SaaS (software-as-a-service) products is to bootstrap them, meaning create a product yourself without taking any outside investment.

3. Physical Products

Selling physical products for a monthly or yearly fee is the hardest to pull off out of all four types of products.

The margins are much, much lower compared to content and software because you need to manufacture the products, package them, store them, ship them, etc.

It also requires more startup capital because you can’t just create the products all by yourself.

However, building a physical product subscription business is definitely possible, so if you are interested in ecommerce you might want to consider this route.

4. Productized Services

You can use the productized services model to generate recurring revenue by selling a service.

One-Off Sales Are Easier Than Recurring Revenue

Keep in mind that it’s much easier to get someone to pay you, say, $10 once than get them to pay you $7 every month.

This means that if you were focusing on one-off sales before and decided to switch to a recurring revenue model then you might be in for quite an adjustment.

Once you are through that adjustment, you will find that while it’s harder to make sales in the short term, it’s easier to build a sustainable business in the long term.

Published in Business and trading

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