Tuesday, December 23, 2008

10 Compelling Reasons to Own a Membership Business

There is a growing number of information marketers who are realizing the power of owning a membership business due to its residual income nature compared to a traditional ebook sales model. You see, traditional sales model is based on a transactional model. This means, unless you have another product to sell to your customer, they are no longer paying you money. This means as a marketer, you have to charge a high upfront cost for people to get access to your information. By operating a membership website, you can make your product a lot more affordable to more people. In other words, if you charge $99 for your product, you might want to consider charging only $14.99 per month for people to access your portal instead. This way, within 7 months, you will have broken even and the rest is pure profit.

Credit for some of these points goes to Jay and Sterling from Internet Business Marketing podcast.

Here are the 10 compelling reasons you might want to consider:

1) It's a business in a box.
It's like owning your own cash machine. Especially if you set your site up right to encourage user generated content, your users will create content while you benefit from the membership fees. Your users would appreciate you for putting together the space for them to network with each other.

You can set it up to also have volunteer/user moderated content to ensure proper standards are met. Your moderators will receive special benefits from you, like priority access to other content or being able to attend special events hosted by you for free.

With the proper marketing and membership site infrastructure, you could even make your site grow on its own by encouraging members to refer other members to your site, and paying commissions for those referrals. This cuts down marketing costs and increases your profits, as well as putting your business on autopilot.

2) Residual Income
With your users paying you month after month for the benefits of being a member, you will receive a residual income from your membership business. This changes your business from being strictly transactional to one which focuses on bringing ongoing value and developing a deepening relationship with your clients.

What does this mean?
  • It Breaks the Customer Churn.
    Instead of spending money chasing new customers month after month, you can focus on servicing the clients you currently have. It is easier to sell to people who have already opened their wallet to you than to someone brand new. Remember, people buy from those they know, like and trust. Selling to your existing customers is easier because they already know, trust and hopefully like you. Of course, you will want to bring more people into your network through marketing, but this will give you a base of dependable income.

  • It Breaks the Product Creation Cycle.
    Instead of producing product launches month after month to push to your clients and encouraging them to “get the latest product” or the latest product upgrade, you can focus on adding value to your members and network. This also means you do not have to “sell” constantly.

  • It Breaks the Event Churn.
    Some businesses promote seminar events, day in, day out. This is extremely taxing and involves extensive traveling. By bringing people into your private social network you can not only create residual income for your business, but enables you to launch mega events. Thus you can bring in a lot more people and may only need to hold these events once or twice a year.

  • It Breaks the “Pitch Fest”
    Instead of constantly promoting products and inducing “social fatigue” to your list, you can reserve promotions for only the very important or more profitable opportunities. People don’t like to be constantly “pitched”. Having a residual income business model allows you to earn a healthy living without “cheapening your brand” through constant joint venture marketing.
What this ultimately means is that you can now focus on delivering good products and continually adding it to your membership site. The people who stay inside your club can benefit from your ongoing product creation. You no longer need to "re-sell" products to them.

Stop for a minute and ponder on the beauty of this model. Everyone wins. You win, your clients win and your affiliates win (they love getting paid on residuals too).

3) Residual Commissions for Your Affiliates
Let me ask you this. Would you rather be paid one time upfront for your referal or month after month? Most people would rather be paid month after month because it is less work and more money in the end.

If you can provide a residual stream of income for your affiliates, they will love you. They will be more inclined to cross promote your products to their people. In fact, if you can say "look, I've been paying Bob $10,000 a month for the last 3 months because he sent a broadcast to his list for my program." You are going to get people's attention.

4) It Strengthens Your Brand
Listen, fans need a place to hang out. Whether you are in the internet marketing space, knitting, coin collecting, you want to hang out with other people in your special niche. People like to network, share ideas, get feedback, help others and be helped. It's human nature.

By creating a space for people to talk about your product/brand/company, you strengthen your brand, and customer loyalty. Especially when you show good customer service and have a good product that you stand by. Invariably, in any business, you are going to encounter the occational bad apple. Should that person complain about you in your membership area...others will likely come to your defense...without you having to lift a finger. That's powerful.

5) Deliver Value to More People
If you operate your business on a consulting basis, you are trading time for money. You might even charge $10,000 per hour....but as soon as you stop working, the money stops flowing. By operating a membership site, and systematizing your information, your clients can help themselves. This way, when they want to talk to you, you can charge a lot more for your time.

Operating a membership site also establishes you as an expert/authority on the subject matter.

6) Easy to Create a System
There are literally millions of things that needs attention when operating a business. Whereever you can automate and systematize your business, you can save time and money. By putting your information and process onto one place, it is a lot easier to "McDonald-lize" your operation.

Create operational procedures and manuals so you can pass on mundane maintenance tasks to volunteers, assistants or secretaries. This frees you time to do other more important tasks, including time with your family.

7) Multiply Your Value Proposition
When your clients come to your social network/membership site, they have the opportunity to network with people local to them, share common interest as they do, be able to get advice, tips, and ideas from other members...this gives your network tremendous value.

As I mentioned in an earlier blog: 10 Secrets to a Successful Membership Site, people join your membership site for the content BUT THEY STAY FOR THE COMMUNITY. This is a critical factor in fighting membership attrition.

Your members can find mastermind partners, joint venture partners, accountability partners from your network. They can find clients, investors, business partners from your network. All these things they previously can not get from just buying your product.

8) Product Research
Want to launch another product but not sure if it's going to work or not? Ask your social membership site. Ask them to participate in the creation process so that the product launched will be exactly what they want.

Pay attention to their frustrations. What's not working for them? What's that "magic wand" that will make their pain go away. Without tapping into a community, it's a lot harder to find out what your people like and don't like.

Perhaps there's a feature of your product your clients don't like. How would you know about it without having a place for them to voice their complaints? This is your opportunity to continually improve your products and offerings.

9) Leverage Social Proof
In an age of decreasing trust, people want proof of success. By having your social network/membership site, you can highlight and showcase success stories from your members. You can ask for testimonials from your members a lot easier than if they were a one time buyer.

Especially if your membership site has some sort of a free membership or a free trial, your new members can experience the benefits of membership...thus easing them into a relationship with you and with your community.

10) Survival
If you don't do this, then your competitors will. This is your opportunity to re-engineer your business and leap frog your competitors. Be an industry leader. Take advantage of the first mover advantage. Once you are branded as "the industry's leading club (within your niche)"...it's hard for others to follow.

This is classic evolve or die. The social networking movement has changed the way people communicate. The businesses that change and take advantage of this will thrive. Those that resist, won't.

This is an excerpt from my book: The Social Marketing Manifesto. This book will retail for $29.95 and will be released early 2009. As a special offer, just sign up for my A-List newsletter, and I will send you a copy for free. Being a subscriber, you will also recieve pressing industry news. And, no, I will not spam you. I practice what I preach.



  1. George,

    These are excellent thoughts on membership sites. They have been a profitable model for quite some time, but it is definitely coming into its own even more with the social media age.

    The transactional launch model can be very profitable, but it has its limits. You made a great point about how having a membership site helps overcome the need to constantly launch.

  2. Thanks Jason!

    Love your show. I follow it religiously. Great update on industry news.


  3. Hi George, Brad here...

    Your quote "People join your membership site for the content BUT THEY STAY FOR THE COMMUNITY" is now pasted on the wall next to my monitor.

    We've learned first-hand that the "Power of Compounding" is the secret ingredient in the success recipe for a subscription site.

    Solving the attrition problem turns a modest number (25) of modest fee ($12.95) subscribers a week into $100K within the first 12 months. Wow, how easy is that?!

    With a powerful engine like this in their business it's no surprise that AOL was able to be the tail that wagged the dog when they bought Time Warner. They had the cashflow to accomplish anything they set their minds to.

    You've been a blessing to us in our endeavors to build our subscriber base. Your strategies and tactics have enabled us to change our first year income goal from $100K to $1M. Thank you for your inspiration and rock solid advice. We couldn't have done it without you.

    For the record we're having a celebration party in Malibu in October. Mark your calendar. You're invited!

    Best regards,