Membership plans are instrumental in the financial success of many small businesses, lets take a look at how can a small business sell and market the right membership plans for their business.
Secrets to increase membership revealed by small businesses
I have been meeting a few small business owners who are toying with the idea of putting in place a membership program. They were inspired by some their business owner friends who found success through offering memberships to customers.
Intrigued by this, I asked for a few opportunities to meet these business owners who found success in driving membership sales. Some of the insights I got from them below my mind and I thought of penning this article down to share what I learned.
Membership marketing techniques to add new members
As i spoke to these business owners, i discovered that they had tried several ways to market their membership plans and after a couple of years of testing, they found success in a few ways of marketing their memberships.
Some of these tactics needed time, a few patronising customers and a very good understand of the target customer base. These techniques also required a good understanding of customer psychology to make the techniques effective.
- Referrals driven membership is by-far the most successful way to increase sales of memberships
- Creating a fear of missing out via exclusive member only events – Option for a spot-sign up
- Joint memberships by partnering with local businesses
Referrals driven memberships program
This is a membership marketing technique that plays on customer psychology and the inherent need to belong to a certain strata of society. One of the business owners shared that he works hard to build great relationships with customers who are socially well connected.
This initial step involves investment of time and resources to woo such customers and to get them to become patrons. These customers are then given some incentives (non-monetary) to bring in their close friends to the membership programs. The main selling point here is the “exclusivity club” image and feeling of being with your “crowd”.
A referral program needs to be implemented well and the following factors needs to be kept in mind before starting off.
- Business objectives : Establish clear business objectives for your referral membership program, like increasing membership numbers, boosting customer engagement or enhancing loyalty.
- Rewards: Finalise on the incentives for the referrer and the referred. This could be via discounts, free months of membership, exclusive content, or other non monetary perks
- Eligibility Criteria: Specify who can become a member (e.g., all members, only certain tiers) and any conditions they must meet to build a feeling of exclusivity
Once you have these steps in place, your referral based membership program is ready to be implemented
Membership plans that help increase revenue for a small business
The other learning i had was that, business owners had a solid understanding of how these membership plans will help increase revenue for the business. They just did not look at it from the point of view of getting the membership transaction done, but from the lifetime value the customer would provide.
Each business owner, had an ideal member journey mapped out, with respect to the additional new members each member may be able to bring and the average ticket size of purchase that each member would do.
Another learning was that, on average, each member would bring in over 3-5 additional memberships in the following 6 months of his/her membership. Based on some of these data points, each business owner had a specific criteria to craft membership plans for their businesses.
The membership plans that helped to increase revenue of the businesses are
- Tiered membership plans : A tiered membership plan is where a business offers different levels of membership, each with its own set of benefits and pricing. This structure is made to cater to a diverse range of customer preferences, allowing members to choose the level of service or features that best suits them
- Time based membership : A time-based membership plan is a membership structure where access to products, services, or benefits is granted for a specific duration of time. This model is typically used in various sectors including digital services, fitness centers, and subscription businesses. One of the most successful variant of this is the short duration membership with unlimited access to the product with a slightly higher fee structure. Most money was made via renewal purchase of these plans.
- Individual vs group membership : Typically used for either family consumption or for a business group, these are usually tailored to meet the requirements of a group of people. The cost of such a membership is typically attractive if the group membership is chosen by the member. Typically, any service oriented business would benefit from having such membership in place.
In addition to these practices, i would encourage you read my article on strategies to boost sales for small businesses to understand how memberships can be combined with other sales strategies to increase sales.
Tactics used by small businesses to boost membership
Some of the tactics used by small businesses to boost their membership sales are rooted in human psychology. The more successful tactics rely on appealing to core human emotions. The below tactics are where small business owners find success frequently
- Social proof is powerful : Social proof can be particularly effective in the context of memberships and subscription-based services. It influences potential customers’ perceptions and decisions by demonstrating the value and popularity of the membership through the experiences and actions of others. Most successful member programs use social proof as a factor to increase sales and small businesses would do well to adopt to it
- Targeted marketing : To build a power of exclusivity, many targeted marketing of membership programs use events or meet-ups to drive membership sales. Small businesses who target a specific audience with a specific solution would benefit with increased sales from such an approach of creating exclusivity
- Regular engagement : A truly successful membership program is where members are engaged continuously with the business. Any small business that creates meaningful opportunities for members to connect with the company and with other members will see increased benefits in terms of sales, repeat business and overall customer loyalty.
What can we learn from Gym membership sales?
The classic textbook example of a membership business is that of the local gym. This member model has been emulated by countless other local fitness chains that offer a lot more than just a regular gym.
There are some tricks that can be learnt from the gym membership model, which could be adapted to any other business. There are also a lot of factors that may not be friendly to customers and can be seen as a “rip off” which could impact repeat business. Lets look at both of them.
Here are some things that we can learn from gym memberships, that almost any small business can use in their sales and marketing plans.
- Take advantage of Peak sign-up seasons – for most gyms, most of their new sign ups in the year happen in the month of January. Look for seasons which are emotionally connected to your customers to build a membership marketing strategy
- High lifetime value from customers – According to the US labor statistics survey, on average Americans spend about $50 every month on fitness, which translates to upwards of $30,000 over an active life of 50 years. Devise a membership program where the economics are such that customers get and give a high value over their active lifetime.
- Sense of community – Gym memberships are the classic case of building a local community of customers where customers not only use the services, but also come over to hang out and spend time. Your business should try and offer a space for like minded customers who are members to build their own community, either in person or digitally. One of the small business owners i spoke to gave me a secret that an online community of highly active users has a retention rate upwards of 65% which is something that established SaaS giants would die to get.
Lets also take a look at some of the tactics that we can learn from Gym membership programs which we ideally should not want to have in our own businesses.
- Poor usage rate – Many surveys indicate that almost 65% of gym membership subscribers do not visit the gym after the first 2 sessions (i am guilty of it myself). This will leave a negative emotion with the customer for no fault of the business and would significantly lower the chances of renewal sales.
- Difficult to cancel membership – Many gyms receive a bad rep because they have membership clauses which makes it difficult for the customer to cancel and get a partial refund. This is bad. don’t do it, period. No customer likes to be ripped off. Have an open and transparent cancellation policy that gives back to the customer what they did not use.
Why is a membership strategy a must have for any business?
As a business owner, you will find many benefits of having a membership strategy in place. Most of them directly impact your sales and help in improve the effectiveness of your marketing. Some of the specific benefits that membership strategies give small businesses are
- Increase recurring or repeat revenue
- Helps build detailed personas of customers with data
- Creates a sense of loyalty among customers
- Builds trust and expands word of mouth
- Helps in building a community which improves customer lifetime value
- Opens doors for multiple upselling and cross-selling opportunities
With these many benefits, its a no-brainer for any small business to give memberships a serious thought.
How members boost sales as existing customers for a company
One of the immediate results a business can see with a member program is that it begins to have a positive impact on sales. While it is useful in driving sales from new customers, the most powerful aspect of any membership is its ability to drive repeat sales in a business.
A membership program is a secret weapon for a small business to increase sales from existing customers. There are other strategies to get customer retention which i have outlined here, but membership does most of the heavy lifting.
Here are three ways in which member customers help in boosting sales from existing customers.
- Reward points for purchases which customers can use as a discount for next purchases
- Increased engagement leading to successful upselling and cross-selling
- Exclusive member only products or services drive both product sales as well as membership sales
There are other ways in which sales can increase from member customers, but the above three tend to have the best results for small businesses.
How to get customers to buy memberships to boost sales?
This is a challenge that many small business owner and larger companies face. As a business, we can spend time and resources to build a membership program, but if it does not take off, it would be a wasteful exercise. Some of the following points help look at the key ways in which small businesses have been successful in selling membership plans.
- Clearly define and communicate the benefits and value upfront – The most important factor
- Let potential customers try it out for a short time period to assess benefits
- Double down on social proof with powerful testimonials
- Sell the benefits of belonging to the community
- Design flexible payment terms and transparent and fair refund policies
These are the basics that every small business need to get right for them to see traction in their membership plan sales.
Differences between a subscription business strategy and a membership strategy
I have tried to summary the differences between a membership strategy vs a subscription plan in a table so that its easy to consume. Both these strategies are distinct and businesses can adopt one or the other and sometimes even both to varying degree of success.
| Parameters of difference | Memberships Strategy | Subscriptions Strategy |
| Nature of the offering | Felling of exclusivity, becoming a part of a group | Completing a payment grants access, no exclusive feeling |
| Exclusivity to customers | Exclusive offering to members | All subscribers get the similar offering |
| Level of Engagement with the customer | Promotes active participation | Customers can be passive users |
| Payment terms for customers | Usually annual or a one time payment | Typically monthly subscription (can vary) |
| Customisation levels | Multiple tiers, customised | Product feature level customisation |
| Primary Purpose of the strategy | Community building | Repeat customers |
Importance of membership selling for local businesses
One type of small business, which should definitely look at driving memberships are the those businesses that operate locally. Having a membership plan can almost always help in building a community of engaged customers who will drive repeat revenue.
With time, such a community will also become sizable enough to become a minimum viable audience, which is the size of the market whom you should serve to sustainably run your business.
WIth such an important role that a membership plan has on local businesses, let look at some ways in which local businesses can build and sell membership plans.
- Offer localised services that provide value to local customers (example a cafe with a co-working space, a meeting room and a conference room accessible only to members) on a membership basis
- Partner with other local businesses and co-create a membership plan where all participating businesses offer benefits to all member customers (Example, a bakery, cafe, grocery store and the local library have a joint membership for products and book rentals)
- Have a google business listing and promote local marketing of your business and your membership plans
- Guarantee exceptional customer service to all members
Local businesses have amazing potential to increase sales and get better output from their marketing if they have a well define membership plan.
Driving online membership sales for small businesses locally
Online memberships for small businesses is something that is not talked about often but has a huge potential to increase sales and drive business growth. To start with you will need to have a business membership site with a good hosting.
There are two aspects of building an online membership site, (i) The technical infastructure and (ii) the marketing and community building exercise.
Both of these are projects in itself, however, i would say that getting the membership site up and running with the relevant tech infrastructure is relatively easier. There are multiple tools available in the market to help local businesses build a membership site.
Some of the factors that a small business must look at while building a membership site with respect to the technical infra set up are
- Website platform to host the membership site
- Hosting services
- Content management system
- Payment collection platform
- Software to manage the memberships
- Security management software
- Backend database management of customer data
- Integrated marketing tools for communications management
- Analytics and reporting tools to gauge user behaviour
Once the infrastructure piece is out of the way, the marketing initiatives needs to come to fore to really drive traffic and the sales of the membership plans. Here are some of the things to be kept in mind while building an online membership as a small business
- Understanding your target audience
- Content strategy for organic traffic
- SEO best practices
- Social media channels to build social proof
- Marketing channels that you will use
- The amount of budget you have to spend on paid ads
- Your expected RoI on your spends
- Community building efforts needed and onboarding promoters to help you in it
Once you have these figured out, jump right in and get it done.
Building and scaling a membership plan does not happen overnight. It requires consistent execution of a well thought out plan and it needs good team members for it to go the distance. Wishing you all the best in your journey to build an amazing membership plan for your business!