Monday, February 10, 2014

Business Thoughts: Memberships

I'm a thinker.
And an introvert.
I realized very recently how much like me my oldest son is. It hit me when we were on vacation. He would suddenly leave to go read by himself or "just go out" or go for a run. When I was his age, I did the same thing. In fact, sometimes I would drive, for hours and hours.

When they were babies, running was the only time I had by myself. I always made it work. It usually meant getting up at 4am to run, but I wouldn't have made it without my time.

What does this have to do with business?

I come up with a lot of ideas. It's one of my favorite things to do. It doesn't even have to be about my business. I love talking to people about their businesses and brainstorming ideas with them.

Sadly, I don't get to do this very often. I don't know many people who have their own businesses. I *know* of people who do, but they aren't friends. To brainstorm ideas, you have to really trust the person because you are sharing important pieces of something you love. You have to know that the person you are talking to has your best interest in mind.

I'm an idea person, with not anyone to really share my ideas I end up here.

The *thing* that has been on my mind lately has been "memberships". Have you heard of the new Beats Music membership plan?

It basically sounds like Napster (the paid version). When you think about it, Napster was WAY ahead of the game. I know one of the issues they had was that customers didn't like the fact that they were basically renting music. You don't own the music and couldn't burn it on to a cd.  Because back then, ripping cd's was huge. IPOD didn't even exist yet. SmartPhones didn't exist. We  had these little 512mb mp3 players.

I'm getting off track.

Over the years, I've had various memberships. Think about it. You have a netflix account (membership). You might have a gym membership. You might have a coffee of the month membership. You might have an organic monthly fruit membership. Hell, I don't know. At my company, our membership is that as a club member, you get discounts that no one else gets.

If it wasn't for the exclusivity of membership, Facebook wouldn't even exist.

You can become a member to just about anywhere. As business owners, memberships are a HUGE advantage.
1.) It creates incredible customer loyalty.
2.) Customers feel like they are "part of something" (exclusivity)
3.) It's a win-win for the customer (who feels they are getting something special) and for the company (revenue stream/customer loyalty).

I recently had a situation. I made a purchase from another small business. My order was on back order. I received an email stating that it would be another 30 days. No big deal. I was just happy that I was notified. Then, I received an email from the owner of the company apologizing profusely. (Keep in mind, I wasn't upset at all). The owner said that they were going to ship me an "additional" product for my inconvenience.
Of course, as a customer, I said, "Yes".

As a business owner, I couldn't figure out why they were so willing to give away free product. I think this is a mistake that many companies make: THEY GIVE AWAY TOO MUCH because they don't want to lose a sale or a customer.

When a business gives away too much, that means they lose out on revenue but they've incurred the cost. In the case of product, it's the cost of the goods. In the case of service, the cost is your very valuable knowledge and time.

This is where memberships come in.

This company that I made the purchase from, how many of those $70 items did they give away free? That is NOT a sustainable business practice. When something goes wrong, a business cannot just jump to giving away free stuff.

Customers are savvy. They are intelligent. They understand supply and demand. Triathletes (in the US for example) understand that if you buy a new tri kit in March, that it might be sold out, and you're going to pay a premium in order to have at the start of tri season.

Imagine if that had a membership program, they would already have my loyalty. They wouldn't have to give anything away free because I'm already getting some type of benefit.

As crazy as it sounds, it is very hard to get small businesses to understand this simple concept. There is a point where you give stuff away in order to pull people in. If you sell a product, you offer free shipping once in awhile to get new customers on board and get existing customers to make larger purchases.

If you offer a service (say you are a nutritionist), you offer just enough "free" information on your website to get people interested and to sign up with you. Once they sign up, they have access to all the GOOD STUFF.

How you structure your memberships....well, that's the fun part. You can do just about anything.

Don't believe me? Just ask me for some ideas.

I'll get back to you right after my run.