The book offers valuable advice on transforming customer business interactions into meaningful long-term relationships. It provides insights and practical tips from experts on building sustainable subscription business models. The key ideas include:
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Focusing on member-centricity and lifetime customer value
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Leveraging the power of recurring revenue and retention
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Using the right metrics like churn rate to measure success
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Developing enduring bonds and turning customers into “fans.”
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Customizing offerings to meet customer needs over time
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Disruption-proofing organizations through customer loyalty
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Applying lessons from successful subscription companies like Amazon, Netflix, etc.
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Creating accessible playbooks and frameworks for membership strategies
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Shifting mindsets from one-off transactions to forever relationships
The book is praised as an essential guide and “North Star” for transitioning to membership models, leading authors and business executives recommend it highly.
Here are the key points from the introduction:
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The Membership Economy is the trend of organizations moving towards long-term, formal customer relationships through subscriptions and recurring payments. It involves treating customers like members and keeping a “forever promise” of value.
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The common attribute of Membership Economy organizations is establishing a “forever transaction” - an ongoing relationship where the customer trusts the organization will continue to evolve to deliver value, so they no longer consider alternatives.
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A “forever transaction” comes from a “forever promise” to deliver results, solve pain points, or achieve outcomes for members in exchange for their loyalty.
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To justify a forever transaction, organizations must rethink all elements of how they deliver value, not just pricing.
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This book describes transforming an organization to create forever transactions, moving from the “why” to the “how.”
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It is divided into three parts: Launch, Scale, and Lead, covering how to get started, grow, and sustain forever transactions.
The key is to take action while reading by applying principles to your business. The goal is to create marked up, well-used copies, focusing on the parts most relevant even if you still need to finish reading it all.
Here are the key points from the chapter:
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Subscriptions and memberships can drive valuable “forever transactions”, but the journey to building them is not simple. You need to make many decisions and assess your business’s readiness.
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Do a thorough self-assessment before jumping to solutions. Understand your organization’s constraints, objectives, and customers.
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Assess your specific business model - what would a “Netflix-like” model mean for you? Don’t just mimic others’ models.
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Identify your strategic objectives - growth, profitability, customer retention, etc. Be clear on what success looks like.
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Audit existing assets - content, technology, data, branding. Leverage what you have instead of starting from scratch.
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Analyze your customers - who are they, what do they value, what problems can you solve? Build your model around their needs.
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Recognize internal constraints - leadership support, permission to lose money, and team coordination. Address issues upfront.
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Take the time to thoroughly assess before deciding on your forever transaction model. Done right, it can drive loyalty, recurring revenue, and valuation.
Here are a few key takeaways on assessing readiness for implementing a forever transaction:
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Leadership support is critical - the CEO and board must fully commit to transitioning to a membership model and providing resources and support.
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A strategic team lead is essential to drive the vision and coordinate across the organization, avoiding siloed thinking.
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Establishing formal ongoing customer relationships is a prerequisite, moving away from one-off transactions.
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Identifying and focusing on your ideal target customers willing to make an ongoing commitment.
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Investing in the right technology infrastructure to support data collection, analytics, and personalization at scale.
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Fostering a customer-centric culture focused on lifetime value not short-term sales.
The key is holistically assessing where your organization stands across all these dimensions and being honest about gaps that must be addressed. Maturity in some areas but weakness in others will undermine the transition. Leadership support, strategic thinking and customer focus are the most critical elements.
Here are the critical points for defining the business case for a forever transaction:
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Articulate the benefits for customers - things like saving money, gaining flexibility, accessing exclusive perks, and feeling part of a community. Align your goals with what motivates members.
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Identify the benefits for your organization - recurring revenue, data insights, customer retention, upselling opportunities, etc. Focus on your primary objectives.
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Make a case for why a forever transaction model, centered on an ongoing relationship and subscription pricing, will achieve those goals better than a purely transactional model.
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Define success metrics upfront - how you’ll measure if the forever transaction achieves the intended benefits. Standard metrics are customer lifetime value, retention rate, and net promoter score.
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Acknowledge the operational changes required to deliver on the forever promise - things like technology, customer service, and communications.
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Get leadership buy-in on the business case before diving into tactics like pricing models and feature bundles. The why must come before the how.
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See the forever transaction as more than just subscription pricing - it’s a strategy to align your business around loyal, high-value customer relationships versus one-off transactions.
Here are the critical points on defining your forever promise:
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Articulate the core promises you make to customers through the forever transaction. This is the ongoing value you will provide.
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Define your specific target customer. Your promise will only serve some people - figure out your best customers.
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Outline your vision for the fully realized membership model and its value to your best customers and company. This is your North Star guiding future development.
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The forever promise is your commitment to customers to justify their ongoing payment and loyalty. It should be a significant, aspirational promise.
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The promise should focus on fulfilling unmet needs and improving customers’ lives. Solve frustrations and problems.
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Define the outcomes and transformation you will provide, not just features. Communicate the ongoing value.
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Make sure your promise aligns with your brand and strengths. Draw on existing assets and capabilities.
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Clarify who your best customer is for this promise. Outline their needs, problems, and goals. Focus benefits on them.
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With the promise and target customer transparent, envision the fully realized membership model in 3+ years. The vision is your guidepost for future development.
Here are a few possible approaches to designing a wine club as a forever transaction:
Exclusive Access: Promise access to rare, exclusive wines that can’t be found elsewhere. Cater to wine aficionados seeking bragging rights about hard-to-find vintages. The forever promise is ongoing access to exclusive, highly-rated wines.
Personalized Selections: Get to know members’ palates and preferences. Curate personalized shipments of wines tailored to each member’s tastes. The forever promise is a sommelier in your home, sending wines you’ll love based on your feedback.
Wine Education: Focus on educating members about wine. Send wines from different regions and grapes each month, along with tasting notes and background. Host virtual tastings and webinars. The forever promise is becoming a wine expert through guided exploration.
Sense of Community: Build a club around sharing wine experiences. Facilitate meetups, virtual tastings, and travel. Create a social network of fellow wine lovers. The forever promise is an inviting community of shared wine passion.
Flexible Options: Allow complete customization of wines, frequency, and quantity. Provide a vast selection and recommendations. The forever promise is to drink the wines you want when you want.
Local/Sustainable: Source wines from small, artisanal local producers. Promote sustainable practices. Offer farm tours and meet-the-winemaker events. The forever promise is ultra-fresh, eco-friendly wines that reflect regional terroir.
The possibilities are wide-ranging, but the key is picking a specific promise that resonates with your target wine lover and fulfills an ongoing need. The promise shapes the entire club experience.
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The best person to develop the vision and business case for a membership model may not be the best person to test and scale it.
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There are often three distinct phases with different leadership needs:
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Launch Phase - Develop vision and business case, and establish testing. Needs strategic thinking and subject matter expertise.
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Scale Phase - Operationalize and accelerate rollout. Needs change management leadership and a cross-functional implementation team.
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Marathon, not a sprint. Wait to cut the team and budget right after launch. Membership models have a learning curve.
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A case study of Hagerty’s three-phase approach to launching a membership model:
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Launch - Small team built a business case and testing plan
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Scale - Brought in outside experts for a sizeable cross-functional team for 2+ years
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Lead - Maintained focus on innovation and customer experience after launch
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The right leaders are needed for each phase to be successful. Take a planned, phased approach.
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Hagerty is an ideal candidate for a membership model for its strong brand affinity amongst classic car owners and its long-term focus as a privately-owned business.
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The membership initiative went through three phases, each led by a different person with the right skills:
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Launch Phase (Eric Okerstrom) - Defined the membership vision and strategy and gained buy-in.
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Scale Phase (Nancy Flowers) - Led design, development, and implementation and managed significant organizational change.
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Lead Phase (Eric Kurt) - Oversaw the launch and ongoing development of the membership program.
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Key lessons: Install leaders with the right skills for each phase; communicate consistently across the organization; recognize evolving needs at each phase.
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Critical challenges included technology changes, integrating with existing customers, and adjusting organizational processes to support the membership model.
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Consistent, persistent communication ensured understanding and participation across all levels.
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Start with small experiments to test your subscription model before fully committing. This allows you to learn and adjust your strategy.
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Break your long-term vision into smaller, testable steps. Make sure each step naturally builds on the prior one.
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Avoid too much scope too early. Use minimum viable product (MVP) concepts to identify the most miniature features that deliver features that deliver core value.
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Brainstorm all the membership features you’d like to have someday, but prioritize and select just 1 or 2 to test first.
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Link your small test back to your long-term vision. Make sure it moves you in the right strategic direction.
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Consider challenges like cannibalization fears, partner resistance, and resource constraints. Start small to prove the model before scaling up.
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Get customer feedback. Research prospects and test prototypes before the full launch. Adjust based on what you learn.
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Be entrepreneurial. Refrain from letting ambiguity or lack of direction hold you back. Take small steps forward and be ready to adapt.
Here are some critical points about FabFitFun’s journey to becoming a successful subscription business:
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Founded in 2010 by brothers Michael and Daniel Broukhim as a women’s newsletter featuring fashion, fitness, and wellness content.
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Launched its first subscription box in 2013 - a seasonal box containing full-size beauty, fashion, fitness, and wellness products tailored to the season.
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Proliferated between 2013-2015 by focusing on customer experience, strong branding, and influencer marketing and built a community and two-way conversations with subscribers.
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Raised $3.5 million in seed funding in 2015 to scale up operations and improve technology. This enabled faster growth.
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In 2016, launchedFabFitFunTV, an online video platform with original content. They have further invested in building their community.
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Raised $15.4 million in Series A funding in early 2017. This fueled more growth in subscribers, revenue, and employees.
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Expanded internationally to Canada in 2018, followed by the United Kingdom in 2019, and continued expanding product categories and offerings.
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Raised $80 million in Series A funding in late 2019. I was focused on acquiring new subscribers, enhancing technology, and expanding globally.
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Today, it has over 1 million active subscribers and ships to the U.S., Canada, the UK, and Ireland—an example of a successful data-driven subscription business focused on customer experience.
The key takeaways are: FabFitFun’s laser focus is on subscriber experience. Leveraging influencer marketing and social media. Building a solid community. Raising sufficient funding to scale operations and accelerate growth at critical moments. This enabled them to grow from a newsletter to an international subscription brand rapidly.
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Companies should start with a modest initial offering and incrementally add more value over time to work toward their “forever promise.” FabFitFun began with just a newsletter before expanding into other offerings.
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Companies should focus on learning and proving their model early on rather than doing everything at once. EA conducted small tests of subscription pricing to answer critical questions before fully pivoting its business model.
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Don’t abandon efforts too quickly based on perceived failures. Failures can often highlight communication, product, or execution issues to improve.
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The incubation and testing period will differ for each company. Some start in a single market or with limited features and build from there, like Amazon, beginning with only books.
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Nike took an “intrapreneurial” approach to test subscription models, using a Launch-Leverage-Lead model. Nike Adventure Club was incubated through the Advanced Innovation Team to prove the model before being integrated into the broader business.
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The key is to start small, learn quickly, and continue adding value over time to work toward the ideal “forever” vision. Try to do only some things at a time.
Here are the key points from the passage:
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EasyKicks (later rebranded as Nike Adventure Club) started as an experiment by Nike to offer a shoe subscription service.
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The team realized they had two main customer segments - convenience moms and proud moms. This led them to adjust their pricing model and offer different subscription tiers.
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After testing and pivoting its model, it rebranded as Nike Adventure Club in 2019 to leverage the power of the Nike brand and build relationships with kids.
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The motto became “recruit the mum, retain the kid” - acquire mothers as customers but retain kids through adventure activities.
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The membership model can potentially expand across Nike’s business globally, representing a major strategic shift.
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Scaling subscription models carries risks - losing momentum, moving too slowly, not differentiating, lacking vision. Nike has been disciplined about testing and iterating.
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Before launching an experiment, have a compelling vision for the future and plan how to retain focus and momentum. Think beyond the first steps to broader transformation.
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Scaling a business to a membership model requires managing emotional roadblocks from employees who may resist change. It’s important to empathize and understand their concerns.
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People may resist change for emotional reasons like fear of failure, loss of status, or having to learn new skills. These concerns often remain unspoken.
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Transforming a business model takes much longer than most companies estimate - 5-7 years for a large mature company vs one year for a smaller, handy one. Costs rise then fall in a “fish model.”
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Even when everyone knows change is needed, resistance can still be hidden. Symptoms include sales chasing one-time deals, managers seeing it as a “flavor of the month,” concerns about cannibalization, and prioritizing declining legacy customers over new ones.
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Resistance often starts at the top. The board and leadership must be committed for the long haul, be ready for short-term revenue declines, and be willing to lose some non-core customers.
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It’s critical to uncover emotional resistance early and address it through empathy, inspiration, and alignment of incentives. Burning the boats helps prevent reverting to old models.
Here are the key points from the passage:
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Ed healthcare devices’ board wanted the company to add services to smooth revenue and increase valuation. But this short-term focus was a red flag.
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The executive sponsor developed a solid membership strategy and roadmap. But the CEO wanted quick results to meet a KPI, so they did a small loyalty program instead.
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Many companies fail at subscriptions because they need to adopt a member mindset and focus only on revenue, damaging long-term relationships.
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Successful membership companies balance acquisition and retention metrics. They are genuinely customer-centric, not just claiming to be.
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Shifting to a member mindset requires changing culture, processes, and roles. Leadership must clearly and consistently support this.
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Having a shared vision and mission can motivate change. But executing culture change takes a lot of work and is often underestimated.
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Assess your culture honestly. Identify problems in structure or systems. Support from the C-suite is critical to drive change.
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Transforming an existing business into a membership model is challenging - it requires new skills, culture, technology, etc. Companies may be tempted to accelerate this transition through acquisitions.
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Acquisitions come with many challenges, including integrating different cultures, retaining talent, and avoiding the acquired company being bogged down by the parent company’s processes.
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Reasons to buy include immediately adding revenue, customers, expertise in billing and metrics, and culture. Challenges include complexity, unproductive competition between groups, and the need for more strategic fit.
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Building new membership capabilities internally allows leveraging of existing assets but can be hindered by divided focus and turf battles. Integrating new and legacy systems is like a massive renovation.
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Under Armour provides an example of using acquisitions to expand into digital/membership capabilities and customer relationships, acquiring companies like MapMyFitness and MyFitnessPal. This allows Under Armour to expand its mission of “making you better” beyond just apparel into the digital realm.
Here are some critical points for avoiding common setbacks when scaling a membership or subscription business:
Organizational and Skills Gaps
- Assess readiness across all departments - marketing, technology, product, customer service, etc. Identify gaps in skills and processes.
- Build playbooks mapping what each department needs to do differently. Don’t reinvent the wheel.
- Hire people with direct subscription experience or train existing staff.
Cannibalization Concerns
- Cannibalization is a risk, but ignoring market trends is riskier—Preempt competitors by launching your subscription offer.
- Target new customer segments to minimize cannibalization of existing business.
- Frame subscriptions as an additional option, not a replacement.
Unprofitable Customers
- Conduct cohort analyses to identify unprofitable customer segments.
- Tighten free trial, discount, and refund terms to weed out “smash and grab” users.
- Invest more in engaging your most loyal, high-value customers.
Conflicting Metrics
- Don’t expect subscription metrics like churn and LTV to match older sales metrics.
- Educate stakeholders on metrics like lifetime value that may seem counterintuitive.
- Establish clear subscription business goals and track progress separately.
Resource Constraints
- Make sure the subscription business has dedicated staff and budget, don’t just tack it on.
- Executives must prioritize resources for a subscription even if it cannibalizes other lines.
- Be patient - it takes time to build competencies and yield returns.
Unclear Value Proposition
- Conduct ongoing research into customers’ needs and evolving contexts.
- Test value propositions continuously; don’t assume you’ve nailed it.
- Communicate the “forever promise” and value of membership.
The key is anticipating challenges and planning to address them preemptively. With the proper preparation, organizations can successfully navigate the transition.
Here are the critical points about choosing technology to scale a membership or subscription business:
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Back-end systems are crucial for delivering a consistent customer experience and managing key processes like payments, personalization, shipping, and returns. This “back-end as the new front-end” is what separates successful subscription companies like StitchFix from those that struggle.
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Implementing the right technology is challenging due to the many vendor solutions, integration complexity, and the need to balance customization with speed to market.
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Important considerations in choosing technology include:
- Integrations between systems like CRM, billing, shipping, inventory, etc.
- Balancing customization to meet unique needs vs. configurable off-the-shelf systems
- Planning for future needs like international expansion or new business models
- Cloud-based solutions for speed and flexibility
- Minimizing custom software that slows progress
- Leveraging platforms designed for subscription/membership business models
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Companies should start simple with the minimum viable technology, focus on scaling one process at a time, and resist over-customizing before proving product-market fit.
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Expertise from staff or advisors who have built tech stacks for membership businesses can help avoid costly pitfalls.
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With the right technology foundation, companies can scale smoothly and deliver delightful experiences that retain customers for the long term.
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The technology options for subscription businesses have grown significantly, making it harder to choose the right solutions. Many vendors come from different backgrounds (billing, payments, publishing, etc) and have varying expertise.
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Inexperienced business owners now often lead technology purchases instead of technical analysts. They may need help understanding requirements or managing the process well. Vendors can take advantage of this.
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Unfamiliar requirements are a challenge as many companies have new subscription models. Essential metrics like customer lifetime value or optimal technology integration may be overlooked initially.
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Companies should reevaluate their technology stack annually as new solutions emerge. Stay focused on core launch requirements rather than unnecessary “nice-to-haves.”
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Business leaders should develop expertise in assessing technology needs and investments for their subscription models. Create user requirements documents to communicate needs.
In summary, the crowded technology field, inexperienced buyers, and unfamiliar requirements make selecting the right subscription technology difficult. Companies should develop rigorous processes to evaluate options and focus on core needs.
Here are a few tips for creating and fine-tuning your pricing strategy:
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Start simple - Offer just 1 or 2 straightforward pricing tiers. This makes it easier for customers to understand and choose. You can always add more complexity later.
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Test different price points - Try a few different price levels and see how it impacts conversions and retention. Increase or decrease pricing over time as needed.
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Consider value-based pricing - Price based on the value you deliver, not just costs. What is your product worth to customers?
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Offer annual plans - Annual subscriptions attract customers and provide more predictable revenue. Consider offering an annual plan at a discount.
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Segment pricing - Tailor pricing for different customer types if needed (student pricing, enterprise pricing, etc).
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Make it easy to upgrade - Allow customers to upgrade plans if they want more features seamlessly.
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Offer add-ons - Additional products/services beyond the core offering can increase revenue per customer.
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Consider metered or usage-based pricing - This makes more sense for some businesses than fixed price tiers.
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Communicate the value - Make sure customers understand the ongoing value they’ll receive to justify recurring payments.
The key is finding a pricing model aligned with your value proposition and testing to optimize. Pricing should be reevaluated continually as your business evolves.
Here are the critical points about pricing strategies from the passage:
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A transactional model can feel less risky than a subscription model when first launching an offer. But subscription models enjoy tremendous popularity once someone subscribes since payments are automatic until canceled.
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It’s essential to start pricing and leave room for flexibility. Set expectations early that launch pricing may change.
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As you grow, you should keep control of diagnosing customer needs and prescribing solutions, not let customers dictate pricing and packaging.
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If you offer anything for free, have a strategic rationale quantified. Free trials give a taste, while freemium models change behavior to get users engaged and realize they need the premium version.
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Influencers may get free subscriptions, but understand why you’re doing it since money is rarely the hurdle preventing B2B purchases. Focus on long-term engagement and growth.
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Consider incorporating “free” strategically, whether free trials, freemium models, or subscriptions for influencers. Ensure you get results from free offers and not just give away value.
Here are four critical strategies for pricing a subscription business model:
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Offer both subscription and perpetual license options. This allows customers flexibility in how they pay. The subscription can be priced at a premium to account for the all-you-can-eat model.
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Use tiered pricing plans based on usage levels or features. For example, an entry-level plan with basic features, a professional plan with more capabilities, and an enterprise plan with premium support/services. This accounts for different customer needs.
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Consider pricing for specific use cases rather than one-size-fits-all. Understand how different customers use your product and create pricing tailored to those patterns. Make sure to complete with enough options.
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Analyze engagement data to develop pricing extensions. Look at recency, frequency, and depth of usage. Light users may need a lower-priced option. Heavy users may merit a premium plan. This balances value across customer types.
The key is to balance flexibility with simplicity. Use data-driven insights on customer usage to develop pricing that maximizes the value exchange. But make pricing manageable. Keep the focus on supporting your overall business model and strategy.
Here are some critical points on essential metrics for long-term customer relationships:
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Focus on retention over acquisition. Keeping existing customers is more profitable than acquiring new ones. Track retention rate, churn rate, and customer lifetime value (CLV).
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Monitor engagement through metrics like active usage, feature adoption, and account logins. Declining engagement can predict churn.
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Understand cohort analysis - track metrics for groups of new customers over time to see how their behavior changes. This helps optimize acquisition and retention.
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Use net revenue retention rate to measure expansion or contraction of existing customers’ spending. Growth comes from upselling and cross-selling.
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Track customer acquisition cost (CAC) and pay close attention to the ratio of CAC to CLV. It takes time to recover acquisition costs.
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Follow recurring revenue metrics like monthly (MRR) and annual (ARR) to understand predictable future revenue.
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Use NPS or CSAT to measure customer satisfaction. These lead indicators help you understand the customer experience.
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Share metrics across teams - product, marketing, sales, etc. so everyone understands how their work impacts long-term relationships. Collaboration drives improvement.
The key is choosing a focused set of metrics tailored to your business that covers acquisition, engagement, retention, expansion, and satisfaction. Analyze trends over time and across cohorts to gain insights into managing lifelong customer relationships profitably.
Here are the key points:
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Customer acquisition cost (CAC) is what a company spends to acquire new customers. Compare CAC to customer lifetime value (CLV) to understand ROI.
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CLV is the total revenue from a customer over time. Know CLV to understand which customers are most valuable.
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The CLV/CAC ratio predicts ROI. A ratio of 3:1 is attractive - acquiring customers at 1/3 of their lifetime value.
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Net Promoter Score (NPS) measures customer satisfaction and loyalty. Subtract the percentage of detractors from the percentage of promoters.
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Monitor churn rate and churn drivers. Address drivers like product issues, communication, and passive churn like expired cards.
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Average revenue per user (ARPU) tracks spending changes over time. Monthly/annual recurring revenue (MRR/ARR) helps track growth.
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Optimize trial conversion rate by providing just enough value to convert subscribers.
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Calculate freemium ROI to ensure free users ultimately become paying.
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Use acquisition, engagement, and retention metrics to evaluate subscription business health. Focusing on only one can be misleading.
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Consider your unique business model before comparing your metrics to industry benchmarks. Know what metrics make your specific business profitable.
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Educate investors on how you use metrics to demonstrate success. Help them understand the metrics in the context of your business model.
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Track trends and benchmarks, not just metrics. Look at how metrics change over time to spot issues.
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Avoid “growth hacking” tactics that optimize short-term metrics but hurt long-term strategy and customer satisfaction.
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Measure the ROI of freemium models based on conversion rates, network effects, or customer referrals. More than high freemium user counts are required to indicate success.
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Regularly reevaluate your subscription pricing and packaging based on metrics. Make changes to improve business performance.
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Don’t make knee-jerk reactions to single-period fluctuations. Focus on longer-term trends and patterns.
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It can be tempting for subscription businesses to take shortcuts to hit short-term revenue goals, but this goes against the “forever promise” of building long-term customer relationships.
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One problematic shortcut is overly aggressive “growth hacking” focused solely on acquiring new customers regardless of long-term value. This can mislead customers and attract the wrong types of subscribers.
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Another shortcut is extracting too much value from existing customers through price hikes or reducing benefits. This “manufactured scarcity” erodes trust in the brand promise.
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These tactics may temporarily boost revenue but damage the customer experience and lifetime value. The forever transaction depends on keeping customers happy over the long haul.
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Shortcuts often happen due to executive pressure to hit quarterly goals or make the business attractive for sale. But true subscription leaders make decisions as if they’ll never sell the company.
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The key is to focus on metrics like customer lifetime value and retention rather than short-term revenue and acquisition at all costs. Building an enduring company means avoiding the growth of hacker culture if it conflicts with strategy.
In summary, the forever transaction requires a long-term mindset. Shortcuts may temporarily boost revenue but undermine customer relationships essential to success. Leaders should align incentives and culture around serving customers for the long haul.
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It can be tempting for businesses to find clever ways to charge premium prices, but this risks damaging long-term customer relationships. Sudden price hikes without notice, complex pricing tiers, and hidden fees frustrate customers.
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“Cash cowing” a business by harvesting revenue without investing in growth might boost short-term metrics but kills the golden goose in the long run. Loyal customers will leave.
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Organizations make these short-term decisions because they underestimate the value of relationships, want to take advantage of trusting customers, or are focused on short-term goals like an impending exit.
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The subscription business model depends on earning long-term trust and loyalty. Clever pricing tactics that optimize short-term revenue can undermine this.
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Companies should focus on building lifelong relationships, not short-term gains. Resist the temptation to drastically raise prices or add misleading fees, even if customers seem loyal now.
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Guiding principles of transparency, fair pricing, and investing in customers’ long-term experience creates true loyalty that lasts through ups and downs.
Here are a few critical points on continuing to iterate products and services to uphold a company’s forever promise:
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A forever promise must stay relevant and compelling as contexts change. Companies may need to evolve their delivery, offerings, and messaging while returning to the original promise.
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Weight Watchers rebranded as WW to expand from a weight loss focus to the broader concept of “wellness that works.” This evolution aims to attract new demographics and address rising competition in the wellness space.
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Use product-market fit (PMF) assessment as an ongoing way to refine and improve. Analyze usage data to see if the market wants and needs what you offer. Segment users to see differences. Survey users directly on needs.
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Iterate continually based on PMF insights. Make minor constant improvements rather than significant, infrequent changes. Be data-driven but also listen to users.
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Bring real user voices into strategy discussions. Make the customer feel present in meetings through quotes, videos, user-submitted ideas, and customer advisory boards.
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For services, regularly review pricing and service levels. Adjust based on value delivered and market benchmarks. Consider adding or removing features.
The key is to keep improving and adjusting the show while staying faithful to the original why - the forever promise. Continued iteration sustains relevance to users and business growth over the long term.
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Assess growth by tracking new revenue, expansion revenue from existing customers, and contraction revenue from lost business. Understand if lost revenue is from churn or decreased spending.
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Analyze customer cohorts from acquisition through departure to understand lifetime value, retention, and revenue retention. This is better than averaging all customers together.
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Evaluate the distribution of product usage - median, top quintile, etc, rather than just averages. This shows who your most engaged and valuable customers are.
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Companies with the most muscular product-market fit have recurring or highly predictable revenue. Usage and revenue retention persist over time.
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Avoid feature bloat by retiring outdated features and products. Too many features can confuse customers.
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Continuously assess the competitive landscape, including companies solving the broader customer problem.
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Regularly challenge yourself to better deliver on your company’s core promise in light of market changes. Be willing to evolve products, processes, and teams.
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Many membership organizations cater too much to current members and must attract new, younger ones. This causes them to become outdated and irrelevant over time.
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Loyal, longtime members often hold advisory/governance roles, so their voices dominate. Employees also age along with members, needing more diversity.
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Organizations enjoy success with a loyal cohort but stop innovating and listening to tomorrow’s members. They optimize for current members rather than prospects.
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Religious organizations often need help attracting younger members as programming is geared toward older congregants. Longtime elderly members lead governance.
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An aging membership signals that the organization has stopped marketing to new prospects or is not delivering value for younger cohorts optimally.
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Leaders must balance serving current loyal members with attracting new, younger members by innovating offerings and governance.
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Prospects have more options now and behave like consumers. Organizations must evolve with members’ changing needs over time.
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Refresh offerings for new members’ needs but stay true to the overall mission. Ensure the front door stays welcoming to newcomers.
Here are a few key points on how to protect members from subscription fatigue:
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Subscription fatigue is real, with consumers feeling overwhelmed by too many subscriptions and struggling to justify the costs. Organizations need to be aware of this issue.
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Solutions include communicating the ongoing value of your subscription, making it easy to understand what’s included, and providing flexibility around subscription plans and pricing.
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Avoid manipulative tactics like forced renewals or making it difficult to cancel. Build trust through transparency.
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Consider offering occasional “subscription holidays” where members can pause their subscriptions.
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Bundle subscriptions or offer tiered plans so members can choose the level of access that fits their needs and budget.
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Surprise and delight members with unexpected perks and extras to reinforce the value.
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Make it frictionless to manage the subscription through clear communication, reminders, and easy cancellation if they decide to leave.
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Monitor engagement data to identify at-risk members and proactively address issues before they cancel.
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Focus on delivering ongoing value, not just recurring revenue. Protecting members from fatigue builds loyalty.
In summary, being aware of subscription fatigue and crafting your offerings carefully to provide flexibility, transparency, and sustained value is critical to avoiding backlash. The goal is happy, loyal subscribers.
Here are the key points from the passage:
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Consumers are facing subscription fatigue as they manage increasing subscriptions. Companies need to ensure their offerings provide continuous value.
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More subscription options with complex pricing can overwhelm customers. Companies should keep pricing simple and transparent.
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Making it difficult to cancel subscriptions erodes customer trust. The cancellation process should be straightforward.
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Companies can bundle multiple benefits into a single subscription to avoid subscription fatigue.
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Retaining customers by hiding the cancellation option damages customer relationships over time. Companies should not rely on this tactic.
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Giving customers an easy way to cancel can lead to opportunities to save the relationship, learn why they want to leave, and potentially win them back.
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Subscription business models are becoming popular globally, with companies like Netflix, Amazon, Spotify, and Tencent leading the way—however, cultural and legal differences mean strategies should be tailored for each market.
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Innovation is coming from everywhere - Spotify from Sweden competes with Apple Music globally. US companies like Netflix face challenges rolling out consistent pricing and content worldwide.
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Before expanding globally, work out kinks domestically first. Consider legal issues, tax codes, shipping complexities, and personal data/privacy regulations, which vary tremendously.
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Global transparency means customers everywhere can see your pricing and policies. Make sure decisions are logical and communicated clearly.
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Going global can mean managing dozens or hundreds of unique products and distribution channels. Interim steps like partners or adjusted regional strategies may help while working toward consistent global offerings.
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The forever transaction principles of retention, reinvention, and relationships can work globally, but localization is critical. Relationships may manifest differently but are universally valuable.
In summary, subscription models are going global, providing opportunities and complexities. Thoughtful localization is critical to build lasting relationships with customers worldwide.
Here are the key points from the passage:
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The membership economy is expanding from digital to physical goods and services. Companies like consumer packaged goods brands, retailers, and transportation providers are finding creative ways to build ongoing customer relationships.
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Mature, established businesses are learning from startup subscription companies and adopting membership models themselves. They realize they must evolve to stay relevant and embrace customer lifetime value metrics.
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Companies that have yet to adapt, like Sears, have struggled. Sears was once an early example of the membership economy but couldn’t compete as consumer expectations changed.
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Many businesses are shifting from simple loyalty programs to premium membership models that provide more benefits, like Amazon Prime.
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Healthcare is slowly transitioning to more patient-focused care models that resemble membership.
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The “Membership of Things” is emerging based on connected devices and the Internet. Memberships can be built around intelligent home devices, cars, and more.
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These trends create opportunities for disruption as businesses consider adopting membership models and forever transaction relationships with customers.
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Companies are moving towards subscription models and recurring revenue streams through memberships and loyalty programs. Examples include Amazon Prime, Dollar Shave Club, Sephora, and more.
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Loyalty programs are transitioning from simple points and discounts to premium memberships that offer exclusive benefits, experiences, and emotional rewards. This deepens customer relationships.
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Healthcare has historically lacked patient-centric incentives, focusing more on the volume of services over health outcomes. That is slowly changing through value-based care models and “consumer-driven” efforts to build patient loyalty.
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Trends in healthcare include insurers offering their networks of providers, healthcare systems starting insurance plans, and payers reimbursing based on patient health versus services provided. The goal is preventing illness over treating illness.
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Overall, companies across industries are moving toward subscription models, memberships, and incentives aligned with customer lifetime value versus one-time transactions. Healthcare, in particular, has a long way to go in becoming more patient-centric.
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The ACA, often called “Obamacare,” was passed in 2010 to expand access to affordable health insurance coverage.
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Key provisions of the ACA include:
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Required most Americans to have health insurance or pay a penalty. This “individual mandate” was eliminated in 2019.
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Created health insurance exchanges/marketplaces where individuals and small businesses can purchase coverage. Subsidies and tax credits are available to make coverage more affordable.
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Expanded Medicaid eligibility in states that opted to do so.
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Allowed young adults up to age 26 to remain on their parent’s health plans.
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Prohibited insurers from denying coverage or charging more due to pre-existing conditions.
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Required insurers to cover certain essential health benefits in plans sold on the exchanges.
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Eliminated annual and lifetime limits on insurers’ dollar value of coverage.
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Implemented reforms around premium rates, health plan transparency, and review of “unreasonable” rate hikes.
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Funded incentives and grants to improve the quality of care and test new healthcare delivery models.
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The law has resulted in millions more Americans gaining health insurance, though issues remain around affordability and rising healthcare costs.
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The ACA has faced ongoing legal and political challenges. The law remains controversial, and efforts to repeal or replace it have failed.
Here are the key points from the glossary:
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Acquisition Funnel - The customer’s journey from awareness to becoming a customer. They are used to track marketing effectiveness.
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Best Customer - The most desirable target customer segment with high lifetime value.
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Business Case Team - Internal team that develops the argument for a membership model.
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Change Management - The process of guiding organizational transformation.
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Churn Rate - The percentage of customers that leave in a period. Compounds over time.
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CLV (Customer Lifetime Value) - The total net profit from a customer over the life of the relationship.
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Engagement - Interacting with an organization’s products/services. Can predict future behavior.
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Evangelists - Customers who freely promote products and services to others.
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Forever Promise - The long-term commitment that justifies a forever transaction.
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Forever Transaction - When a customer commits to an ongoing relationship without future shopping.
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Free Trial - A free sampling of entire product/service benefits for a limited time.
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Freemium - Free ongoing value + paid premium options.
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Friction - Anything is slowing engagement, like complicated signup.
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Gamification - Using game mechanics to encourage desired behaviors.
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Growth Hacking - Data-driven marketing tactics focused on growth.
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Hourglass Funnel - Customer journey, including referrals and repurchases after signup.
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Loyalty Program - Drives purchase frequency/depth, often with points or rewards.
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Membership - Fostering ongoing belonging with customers.
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Membership Economy - Organizations using a membership mindset for long-term customer relationships.
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MVP (Minimum Viable Product) - A most straightforward product that meets goals to test concepts.
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Need States - Segmenting by customer objectives rather than demographics.
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Net Promoter System - Approach based on likelihood to recommend.
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Network Effect - Each new member increases value for all.
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Onboarding - Getting new members engaged in the membership.
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Opt-In/Opt-Out - Requiring explicit consent vs. automatic signup.
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Over The Top (OTT) - Content delivered via Internet vs cable/satellite.
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Paywall - Requiring payment to access premium features/content.
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Pricing Tiers - Different subscription prices based on features/value.
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Product-Market Fit - Being a good product for your target market.
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Recurring Revenue - Regular expected future payments.
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Retention Rate - Customers staying over time. The opposite of churn.
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Sharing Economy - Peers sharing assets vs. traditional ownership.
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SaaS - Software licensed on a subscription basis, centrally hosted.
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Stickiness - Making an online experience engaging so users stay longer is critical for retention.
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Subscription - Customers pay periodic fees for access to services/content, contrasting ownership.
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Subscription Natives - Businesses built on subscriptions from the start.
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Superusers - Highly engaged community members who actively participate.
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Switching Costs - Costs customers incur changing from one solution to another.
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Transactional Business - Payments are made for each transaction, with no ongoing obligation.
The summary defines key subscription business concepts like stickiness, superusers, switching costs, and contrasting subscription models with transactional businesses. It highlights building in stickiness and leveraging superusers as retention tactics. It summarizes the core ideas around successfully transitioning to or building subscription businesses.
Here are some of the key topics covered in The Forever Transaction:
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The Forever Transaction - An ongoing relationship between a business and a customer based on mutual value and trust, with no predetermined end date. The key to recurring revenue.
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Product to Service Shift - Businesses are transitioning from selling products to selling services and ongoing access, building durable customer relationships.
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Member Lifecycle - The stages a member goes through in their relationship with an organization - acquisition, onboarding, engagement, retention, expansion.
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Value Ladders - Strategies to increase a member’s perceived value and price over time through upsells, cross-sells, or enhanced benefits.
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Churn - Customer attrition or cancellations. Reducing churn is key to the forever transaction.
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Subscription Fatigue - Customers tiring of accumulating too many ongoing subscriptions and canceling services. Businesses need to combat this.
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Global Expansion - Taking a forever transaction model globally requires localization and building trust across cultures.
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Healthcare Trends - Healthcare systems are moving to subscription models, on-demand services, and taking on insurance risk.
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The Membership Economy is a reaction to the social trend identified by Robert Putnam of people becoming less connected to traditional communities like family, friends, neighbors, and civic organizations.
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People crave membership and connection. This is seen in things like neighborhoods designed to foster community over privacy.
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Membership is an attitude and emotion, while a subscription is a financial arrangement. Many membership organizations have subscription models.
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The Membership Economy is enabled by ubiquitous online access and declining data storage/processing costs. This allows ongoing digital connections between members and organizations.
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It ties into the human need for belonging and connection.
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It impacts many industries as many organizations can incorporate membership principles.
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Eventually, it becomes part of the new standard business practice.
In summary, the Membership Economy involves organizations using digital connections to foster membership communities and ongoing relationships, meeting people’s need for belonging. This trend is transforming many industries.
Here are the key points from the passage:
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The Membership Economy is a business model based on ongoing relationships and belonging between companies and customers. It satisfies deep human needs for connection.
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Technology like the Internet and mobile devices enables new virtual communities and relationships not limited by physical proximity. Social media facilitates connections between people.
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Examples demonstrate how membership models transform industries by incorporating subscription services, building communities, and focusing on customer relationships beyond just sales.
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The Membership Economy differs from the sharing economy, which focuses on individuals sharing underutilized assets peer-to-peer rather than access to assets owned by a company. However, sharing economy businesses depend on membership infrastructure for trust.
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Massive social trends and new technology have enabled the growth of the Membership Economy by changing human lives while basic human needs remain constant.
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About Matheus Puppe