4장
The Art of Member Acquisition and Onboarding
Building an effective acquisition funnel requires starting at the bottom-ensuring your value proposition aligns perfectly with target members' needs before investing in awareness campaigns. Organizations must clearly identify their ideal members and be confident their offering would convert these prospects given adequate explanation. The funnel tracks individuals from brand awareness to membership, helping organizations understand how they win and lose potential members.
Many companies accept a wide funnel top and narrow bottom, creating waste. An alternative is the "chute"-equally wide at top and bottom-which maximizes conversion through each stage. American Express exemplifies this by creating multiple targeted chutes from a single funnel with various card offerings. Once the funnel is optimized, organizations should track conversion ratios between stages to identify any "holes" where prospects are being lost.
Membership organizations must verify that new members stay beyond initial sign-up, typically at least 30 days. Strong member/benefit alignment ensures retention, while misalignment leads to cancellations and negative word-of-mouth. The funnel can extend past acquisition into an "hourglass" shape that tracks post-membership behaviors like referrals and loyalty patterns, emphasizing how each new member drives increasing revenue after the initial transaction.
After developing a strong message, organizations must determine appropriate campaigns to reach prospects when they're receptive to joining. Timing and channel selection are crucial for effective outreach. Channels can typically be tested in small iterations, allowing for optimization without major investments. Options include freemium models to engage users, keyword advertising, or partner relationships.
Once members join, effective onboarding becomes critical for long-term success. A successful onboarding process involves three key repeating steps: removing friction that impedes engagement, delivering immediate value (like Netflix ensuring new members select five movies upfront), and rewarding behaviors that drive member success. These steps convert new members into loyal renewals and potentially into superusers-especially engaged members who spend significant time participating in the community.
Superusers exhibit seven key habits: checking in frequently, creating content, enforcing community norms, maintaining two-way relationships with the organization, helping other members, attracting new members, and aiding in onboarding newcomers. Though not necessarily the most profitable customers, superusers drive tremendous value by engaging, attracting, and recruiting new members. Organizations can identify potential superusers by tracking member activity and looking for those who check in, create content, or invite others more frequently than average.
5장
Strategic Pricing in the Membership Economy
Pricing in the Membership Economy is especially challenging because organizations must price ongoing experiences and perceived value rather than tangible products. Effective pricing is critical for creating predictable revenue streams, a key benefit of membership models. Organizations must ensure their value is clear and differentiated, adapt offerings to stay current, and maintain pricing transparency. Without ongoing benefits to justify recurring payments, the business model will fail.
While most membership businesses focus solely on subscription models, this is just one of seven potential revenue streams. Subscriptions naturally align with membership since they provide ongoing value. Many organizations offer three pricing tiers-research shows people prefer multiple choices and typically select the middle option. Tiers can be based on demographics (students, individuals, corporations) or usage patterns.
Beyond subscriptions, organizations can offer a la carte services for occasional needs, ancillary products that enhance the core experience, partnership streams through commissions from complementary services, aggregated analytics from member data, targeted advertising that provides value to members, and strategic use of free offerings to drive awareness and conversion.
Changing prices in membership models is challenging since members often assume dues will remain constant forever. To minimize backlash when raising prices, organizations can "grandfather" existing members at old rates while charging new members more, or add premium tiers with enhanced benefits rather than increasing base prices. When price increases are unavoidable, transparency about reasons is essential.
Common pricing mistakes include: offering discounts without considering long-term value; competing against loss leaders who provide minimal benefits at drastically reduced prices; pricing against illegal or unsustainable "enthusiastic mistakes" like Napster; starting with prices too low, making increases difficult; pricing too high at launch, permanently damaging brand perception; or offering too many pricing options that overwhelm customers. The key challenge is determining what members will pay initially and continue paying over time, while maintaining simplicity with optimal pricing options (typically three).
Free offerings have tremendous psychological power, particularly for membership organizations where fixed costs are high but variable costs approach zero. Many successful membership businesses use free offerings to drive awareness, build community, and create virtuous cycles of growth. However, "free" must be viewed as a marketing tactic that ultimately drives revenue-not as a standalone business model.
6장
Technology as the Membership Enabler
Technology serves as the fundamental backbone enabling the transformation to membership-based models, providing organizations with unprecedented insights into member behaviors, preferences, and needs. While technology is essential, it's important to note that it represents only about 10% of success - the remaining 90% comes from proper attitude, effective marketing strategies, and deep customer understanding. The democratization of software-as-a-service (SaaS) solutions has dramatically lowered barriers to entry, making robust membership platforms accessible to organizations of all sizes without requiring massive investments in proprietary systems. However, this accessibility has led to increased market competition, driving up customer acquisition costs and making member retention more critical than ever before.
The technology stack for successful membership organizations typically includes several key components. Marketing automation platforms like Marketo and Hubspot enable sophisticated tracking of prospect interactions and behavioral patterns across multiple channels. Customer relationship management (CRM) systems such as Act-On and Salesforce provide comprehensive views of customer interactions, enabling personalized engagement strategies. Subscription billing platforms, including Vindicia and Zuora, support complex pricing models with features like usage-based billing, tiered pricing, and flexible payment options. Community management tools like Jive and Lithium facilitate member engagement and peer-to-peer connections. Customer success software such as Gainsight and Preact monitors member engagement metrics and identifies potential churn risks. Loyalty program platforms like Belly and Punchcard help organizations recognize and reward their most valuable members.
The choice of billing system is particularly crucial as it can either constrain or enable an organization's pricing strategy. Modern subscription billing services offer unprecedented flexibility in pricing models, allowing organizations to experiment with different combinations of volume discounts, commitment periods, service levels, and feature access. As Zuora CEO Tien Tzuo emphasizes, membership businesses require technology that can support sophisticated pricing strategies while providing detailed analytics on member behavior and preferences. Additionally, advanced billing solutions offer crucial insights into member profitability by tracking the actual cost of serving each member - a metric that many subscription businesses struggle to measure accurately.
When it comes to building community features, organizations face a strategic choice between leveraging existing social platforms or developing their own solutions. While platforms like LinkedIn and Facebook offer immediate access to large user bases and robust features, they come with significant risks. Facebook's dramatic reduction in organic reach for brand pages from 16% to 1-2% serves as a cautionary tale, forcing organizations that had invested heavily in building Facebook communities to pay for visibility through sponsored posts. Organizations whose business models depend heavily on community engagement may find greater long-term value in developing and maintaining their own community platforms, despite the higher initial investment.
In the Membership Economy, every interaction with members becomes an opportunity to build loyalty and drive value. Unlike traditional customer support models that aim to minimize contact, modern customer success functions utilize sophisticated software to monitor and analyze member behavior across all touchpoints. This approach recognizes that member success directly correlates with revenue growth - as members derive more value from their membership, their loyalty and lifetime value increase. For CIOs and technology leaders, this evolution presents an opportunity to become strategic partners in business growth, using data-driven insights to inform service development and customer engagement strategies.
7장
The Art of Member Retention
Organizations in the Membership Economy know that reducing friction increases participation and loyalty. From churches offering "Ashes to Go" at train stations to companies streamlining payment processes, the easier you make engagement, the more likely members will participate. The best organizations build loyalty from the beginning, knowing the first 30 days are crucial for establishing habits.
The most successful organizations optimize a member's initial interactions for success, focusing on the critical first 30 days to build behaviors and habits. Special communication flows for new members highlight key benefits and encourage immediate engagement, helping members experience the breadth and depth of benefits as quickly as possible.
When members help others get up to speed, they become more loyal themselves. User groups leverage this principle by letting customers help one another, building relationships among members. Organizations can also increase engagement by asking for advice or help-fundraisers know volunteers are more likely to donate than non-volunteers. Inviting members to create content, like Burberry's "Art of the Trench" or Disney's "Vine Your Disney Side," also deepens connection.
The Membership Economy resembles a marriage, with the expectation that members will remain loyal forever. Both sides grow and change over time while staying true to shared expectations. Organizations seek a "forever transaction" where high-level benefits remain aligned with the mission even as tactics evolve. When members feel the organization isn't honoring its brand promise, separations can be bitter and emotional-unlike typical customer departures.
Effective loyalty-building includes: guiding inactive trial users while reminding them to cancel before automatic billing; optimizing sign-up flows based on cohort analysis; simplifying the member experience (even if it creates backend complexity); and personalizing experiences through explicit choices, implicit learning from behavior, or hybrid approaches. Companies like Marketo exemplify this by creating personalized connections and establishing credentialing programs that build community.
While some marketers make cancellation difficult, the easier it is to leave, the more likely members will return. Organizations should build "sticky" systems that make leaving a difficult decision through frequent engagement, status achievements, customization options, and personal relationships. When members still want to cancel, the process should be easy and handled by well-trained staff who can potentially remedy issues or highlight overlooked benefits. For those who leave, providing a free subscription option keeps them connected, and conducting brief exit surveys helps create targeted nurturing campaigns to bring them back when appropriate.
8장
Real-World Membership Success Stories
Digital native companies like SurveyMonkey integrate technology throughout their business models, using tiered subscriptions and constant iteration rather than flashy launches. SurveyMonkey strategically expanded its subscription model by adding higher-priced tiers ($300 and $800) while maintaining the original $200 price point for loyal customers. They increased monthly rates by 20% to encourage annual subscriptions, recognizing that annual subscribers showed greater loyalty. The company heavily invests in product innovation, surveying customers and analyzing data to exceed expectations.
Online community models represent the most radical Membership Economy organizations because they don't offer traditional "products"-instead, the community itself and its user-generated content constitute the product. Match.com began as a proof-of-concept for taking newspaper classifieds online but adopted a membership model instead of pay-per-ad pricing. This decision proved crucial to their success. The membership model provided exclusivity, created a destination, and aligned with their brand promise of being safe, anonymous, and fun. By 2013, Match.com had 2.38 million North American subscribers generating over $700 million in revenue.
LinkedIn grew from half a million users to over 300 million in nine years by leveraging the freemium model effectively. The platform provided immediate value to users through professional profiles online, even before the network effect kicked in. While most users never pay, the massive free network attracts premium subscribers-particularly recruiters, marketers and salespeople who need additional services.
Starbucks created a loyalty program aligned with its core pillars: great environment, consistent products, and consistent experience. Rather than just selling coffee, Starbucks aims to build a "third place" beyond home and work. Their program brilliantly uses gift cards as membership gateways, with personalized gold cards for frequent visitors. What sets them apart: aesthetically appealing cards, payment integration through the cards, and simple, generous rewards that are easy to redeem.
American Express has inextricably linked its brand with membership since 1958, referring to customers as "Card Members" to emphasize access to premium services. The company has evolved from exclusive high-end positioning to becoming more inclusive while maintaining premium tiers. They've created products like the Amex EveryDay Credit Card for multitaskers, especially busy mothers who previously didn't see themselves as the American Express type.
Small businesses can transform into Membership Economy businesses by offering monthly subscriptions with special perks. When Kepler's Books closed in 2005 due to competition from online retailers, local citizens rallied with demonstrations. Within weeks, the store reopened with community shareholders, a renegotiated lease, a new board, and a Literary Circle Membership Program. Under the Kepler's 2020 plan, the events program was transferred to a nonprofit called Peninsula Arts & Letters, funded by community members.
9장
Navigating Transformational Moments
Organizations typically embrace the Membership Economy at critical inflection points when financial situations could dramatically improve or worsen. These transformation moments may arise from competitive disruption or proactive decisions to address opportunities or challenges. Key inflection points include moving from idea to start-up, start-up to mature organization, offline to online, ownership to access, and business as usual to competitive disruption.
Start-ups in the Membership Economy face the challenge of needing critical mass before providing value to early members. Successful approaches include offering immediate value on day one or bringing in groups of members simultaneously. LinkedIn began with a clear vision of capturing relationships between professionals rather than just content. Founders Allen Blue, Reid Hoffman, and Jean-Luc Vaillant deliberately chose "members" over "users" to establish a long-term relationship rather than a transactional one. They focused on creating a "forever transaction" that could provide value throughout a 40-year career.
Fast-growing start-ups often need to transition from cool newcomers to established players. The challenge comes when they reach critical mass and can no longer rely on stealth or novelty. At this point, they need more organizational structure, a brand promise beyond being "the next new thing," strategies to stay relevant to members, and systems for innovation beyond the founder's initial idea. Pandora grew from the Music Genome Project, which began analyzing songs across hundreds of characteristics in 2000. Founder Tim Westergren deliberately avoided being "edgy," instead focusing on inclusivity: "We want to make room for everyone." Pandora treats every listener as a member, personally answering every email and hosting over 500 town hall meetings.
Moving from offline to online isn't just about having a website-it requires a fundamental shift in mindset about member engagement. Technology allows organizations to extend benefits beyond face-to-face limitations while creating new opportunities and lowering costs. Weight Watchers exemplifies a successful membership organization that has continually evolved to meet members' needs. When former CEO Dave Kirchhoff joined in 2000 from PepsiCo, he faced three major challenges: awareness (no one knew Weight Watchers had an online presence), pricing (ad-supported vs. subscription), and offering (online/offline hybrid or online only). Despite industry pressure to offer ad-supported services like competitors, Weight Watchers chose a subscription model, believing members needed "skin in the game."
The Membership Economy represents a fundamental shift from ownership to access. Adobe's transition from ownership to membership generated significant press attention-some negative, but ultimately successful. In May 2013, Adobe shifted from selling Creative Suite Software on physical disks to offering cloud-based subscriptions through Creative Cloud, which provided software access plus new sharing features. By November 2013, Adobe had attracted 1.44 million Creative Cloud customers, exceeding initial predictions and driving its stock to an all-time high.
Even membership organizations face disruption, often gradually due to automated recurring revenue models that mask changing consumer behavior. Organizations offering non-unique "bundled" benefits rather than focusing on what members truly want become vulnerable. LinkedIn represents a major disruptive force for professional associations. The Association of Personal Historians struggled to grow beyond 650 members since 2008, while its LinkedIn group grew from zero to 1,000 members in the same period. By 2014, 90-95% of professionals at industry events were on LinkedIn.
The best defense against disruption is staying close to your members. As former Intel CEO Andy Grove said, "Only the paranoid survive," while National Restaurant Association CEO Dawn Sweeney regularly asks her team, "If you wanted to put us out of business, what would you do?" Strong member loyalty combined with proactive evaluation of new technologies and business models can protect organizations from competitors regardless of new market entrants.
