Building a Membership Model? Avoid These 3 Common Mistakes

Last fall, at the conclusion of my “Leading the Mindful Marketing Revolution” keynote, my husband and I escaped to a private resort near El Yunque National Forest.

Our intentions to disconnect and relax were quickly thwarted. Within a few hours of arriving at the spacious, secluded condo, the air conditioning failed. Our golf cart—our only means of transport within the expansive beach resort—broke down. The resort management cared little, so we sprang into action. At the risk of experiencing a trip from hell, we reserved a room at the Ritz-Carlton and evacuated the condo.

2014-10-25 12.59.11

Magnus makes friends with a visitor from El Yunque

Brunch, Ritz Carlton style

“Member” Brunch, Ritz Carlton style

As we sauntered into the lobby of the Ritz, a pleasant young woman bearing champagne said “Welcome to our resort family, Mr. and Mrs. Nirell.” I felt so special that I immediately joined the Ritz-Carlton Rewards program. I felt bonded to other travelers who appreciate extra pampering. I felt as if I belonged to a special club.

Marketing leaders who understand this power of belonging are on the vanguard of true customer connection and are defining an entirely new way of creating more loyal, profitable customer relationships. That is why the membership economy (often called the “subscription economy”) has blossomed in recent years.

CMOs can learn much from today’s successful membership models. They appear in many flavors: loyalty programs (Caesars Entertainment and Starbucks); professional and nonprofits (AARP and Sierra Club); mainstream (American Express and Verizon); and online communities (such as match.com, Pinterest and LinkedIn).

Unfortunately, several companies that have experimented with membership models ignored some key strategies and watched their membership models collapse. These are some common mistakes they share in common:

  1. Building a membership model based on old customer buying preferences. Netflix made a conscious decision to shift to streaming content because they anticipated the precipitous decline in DVD rentals. They were right—today, the number of Netflix DVD subscribers has fallen from 14 million in 2011 to less than 6 million at the end of 2014. The ubiquity of online access, coupled with the decline in storage costs, has given way to higher customer expectations. Blockbuster evaporated because it ignored this trend.
  1. Thinking tactically versus philosophically. Caesars Entertainment re-launched their TotalRewards program in 2012. Baxter notes that CMO David Norton wanted “to build its casino business into a relationship-driven star of the Membership Economy.” They never considered improving the system by investing in one area. They poured resources into sophisticated data analytics and tracking to segment their members, track pricing, and improve customer experience. Operations teams made decisions based on that feedback. They also tied employee rewards to metrics such as lift, retention, and engagement. As a result, their new member growth grew 20 percent within the first year and saw their purchase volumes double.
  1. Foolish funnels. If your marketing organization is designed to move a prospect through a metaphorical, cone-shaped funnel, you will fail in the Membership Economy. The funnel assumes that marketing’s job is complete when the customer/member makes a purchase. That is no longer true. Memorable customer experiences are about delivering on your brand promise as your products and services continue to evolve. Envision your customer relationship as an infinity image, not a one-way funnel with a revenue “end goal.”

This post was adapted from an article originally published on Forbes.com. You can read the full article here.

What are your plans to design and test a membership model for your organization? Share your thoughts below.

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