Understanding Membership Programs in Ten Minutes – Part 1

Posted by Heather Villa, CMA, MBA, MSM on November 19, 2010 in: Business - Plain & Simple, Business Marketing, Tips in 10

While a lot of my Tips In Ten article are “standalone” issues where I discuss just one topic, I’ve been lately enjoying a couple of these Tips In Ten “series” where I take ten minutes of your time each week for a couple of weeks to give you a really good base of information and guidance about a particular topic. As I’ve mentioned before, some Tips In Ten are meant to help you do something better in just ten minutes while other Tips In Ten (including these series) are meant to take ten minutes of your time and give you some helpful ideas for growing your business.

In this article of Tips In Ten, and in a couple article that follow, I’m going to talk about membership programs. In this article I’ll talk about why membership programs are a powerful way to grow your business. In the next article I’ll talk about what you can turn into a membership program. In the third issue, I’ll discuss some technologies you can use to create a membership program.

Membership programs are those programs you often see offered where a business expert will invite people to pay so much money each month in order to get access to information or expertise or content. Some examples that I’ve seen recently include:

  • Pay $9.95/month to get access to an exclusive forum of content by other people who are just like you.
  • Pay $19.95/month to get access to Private Label Rights (PLR) content.
  • Pay $39.95/month to get access to videos of panel discussions where leading business experts talk about a particular situation.
  • Pay $49.95/month to get access to exclusive interviews with other business experts.
  • Pay $99.95/month to get access to group coaching led by a business expert.
  • Pay $499.95/month to get access to super-exclusive webinars and group telephone coaching.

… you get the idea. You’ve seen these before. You might even include Software as a Service (SaaS) as a type of membership program, too. I won’t speak specifically to SaaS in this series because it usually requires a lot of up-front investment on your part. It’s a lot easier for you to get started with a membership site filled with access to content instead of access to software. If you want to offer a membership to SaaS, a lot of what I’m writing about here will apply. However, just be aware that you’ll need to make a significant effort up-front.

One of the first things I want to talk about is “why”. Why a membership program? Why should you consider including one in your business?

Most membership programs are monthly (although I have seen some quarterly or annually). The customer pays regularly to get access to whatever it is that the membership program is offering. The business owner who set up the membership program makes that money each and every month, and they make it from a large and growing pool of people. So the “why” is simple:

  • On the customer side, they willingly buy into membership programs because the access to the content is going to offer them a significant benefit at a lower cost than if they got the information exclusively.
  • On the business owners side (and this is important for you, so take note!) you get recurring revenue. Recurring revenue is magical. Each and every month, money arrives in your bank account. It helps to smooth out the ups and downs of business income while reducing the amount that you work.

Membership programs allow you to leverage your time. Rather than serving a pre-determined number of clients in a day (pre-determined because there are only so many hours in the day), you are able to serve so many more. It’s a simple equation of spending “X” amount of time on one client or that same amount of time on many.

Let’s do some math for an example: We’ll compare the work of two different coaches – a coach who charges $100 per hour to the work of a coach who charges $100 per hour PLUS has a membership program:

Coach #1 charges $100 per hour, they work 40 hours a week but between administration and marketing and research, they take on 5 1-hour sessions each weekday to earn ($500 per day x 5 days) $2,500 per week. In a 4 week month they make $10,000. Not bad.

Coach #2 charges $100 per hour, they work 40 hours a week but only take on 4 1-hour sessions each day. They also have a monthly membership program with 200 subscribers at $25 per month. So they earn $2,000 per week from coaching ($400 per day x 5 days) for a subtotal of $8,000 in a 4 week month, plus they earn an additional $5,000 per month from their membership program… for a grand total of $13,000 per month. Added to that additional amount of money is the fact that they are doing substantially less hourly coaching work – only 20 hours per week instead of 25 hours per week like the first coach. In a month, that’s a total of 20 extra hours that won’t be spent on coaching! Instead, some of it can be spent on adding value to the membership program and some of it can be spent building the business and some of it can be spent with family and friends.

The other reason that Coach #2 has a better model is this: Over time, Coach #1 may be able to slightly increase their rate but rarely will they be able to increase the number of sessions they can take on. On the other hand, Coach #2 can grow the membership to more people without spending any more time each week. In fact, in the example above, every 4 clients is equivalent to an hour of coaching for coach #2!

Convinced? I hope so. Of course, you won’t automatically get a big pile of subscribers on day one. It takes time. But it happens as long as you spend some time to build good quality content and you spend some more time marketing it. Eventually, you might find – as other entrepreneurs have – that they got out of their “hourly” work entirely and became just membership program marketers.

So far, I’ve just talked about a very simple membership program: One offering for one monthly rate. But membership programs are exciting for another reason: You can easily create tiers of service, depending on your clientele. You might consider an entry-level program, a slightly more expensive “intermediate” program, a slightly more expensive “advanced” program, and very expensive “ultra-exclusive” program. You’ll find that some people will enter one program and stay there but others, especially those who benefit from the value you give, will advance to additional programs. So you might have an entry level membership program for $19.95 but you might have some advanced programs for hundreds of dollars per month.

I’m mentioning this now as a way to sweeten the deal but I don’t want you to worry too much right now about what you’ll offer at different tiers. If you start out with one, standard membership program, you can grow that one and eventually introduce a slightly more advanced version and grow that and then introduce an even more advanced version later. In other words, you don’t have to sink a lot of time and effort into a massive multi-tier membership program right now. Start small and build it over time.

Heather Recommends:

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