Robbie Baxter Author of The Membership Economy on Membership Site Pricing and Trials
Robbie Baxter is the OG evangelist of the membership model. Her book, The Membership Economy, predicted the rise of subscription services like Netflix. And, was literally our membership bible for growing our first membership site into a million dollar membership.
In today’s episode we dive deep into when and where you should use free trials, pricing your membership, and we discuss her new book, The Forever Transaction. We are going to talk about all things memberships with the person who literally wrote the book on the membership model.
What You’ll Learn:
- What the Membership Economy is all about
- The difference in headline benefits and engagement benefits
- “The Acquisition Schute”
- Why the free trial can help or hurt you
- Why friction is key to attracting quality members
- The Forever Transaction
- How to evolve your offerings
- The Membership Economy
- How to engage and retain your members
Show Notes
Back in 2012, my wife Jocelyn and I started our journey to entrepreneurship. We had some really bad stuff happen to us at work and we decided to start our own online business. We started out with digital courses, PDFs, all kinds of stuff to download with a one time purchase.
A couple years later we noticed some issues with stability. We putting a ton of work in, had to start back at zero every single month. We didn’t really know what we were doing.
We went to a conference in the Philippines, hosted by Chris Ducker, called Tropical Think Tank. We went just to get around other entrepreneurs and see what they were doing. We were sitting at a table one day with James Schramko, and starting telling him about what were selling, how it was going good, but was so high energy. He flat out told us it was a membership, all we needed to do was sell it once and have people pay you forever. He told us to read The Membership Economy by Robbie Kellman Baxter on our way home.
So, of course, I read the whole thing on our way back to the Philippines. And, read it all in one sitting. I knew when we closed the book that we had to do what this book said, as soon as possible.
And, then in June of 2015, as soon as we got home, we implemented the membership model into each and every one of our four businesses.
Within 30 days of opening our membership, we had over 1,000 members, paying an average of $49 to $99 a month, and it’s been that way ever since. Now, we’ve helped over 3,000 people do the same thing in the last 5 years.
All of that literally came from us reading The Membership Economy by Robbie Kellman Baxter.
The Membership Economy
Robbie’s book, The Membership Economy came out in 2015, which meant most of the writing was done in 2014. However, she began making notes for the book a decade before, back in 2004.
Robbie had been working with Netflix back in 2002 and 2003, where she fell in love with their business model. She was taking notes like:
- “Should every business have a free trial?”
- “Should every business 100% membership or 100% not?
She would meditate on those questions.
At the same time, Silicon Valley was falling in love with Netflix’s business model too. She began getting calls from companies wanting Robbie’s help in setting up a similar business model, so she began helping them too. She realized there were things that were different about each of the organizations, but several principles are the same. For the next 10 years she worked with these businesses, using these principles. In that time, she was trying to put together a framework.
Basically, she would try and explain to people that there was a way to get recurring revenue, subscriptions, memberships, digital community, that works in every business and industry, no matter what the size.
It was hard to explain it, so she wrote it all down in her book. Essentially, she says her book became her 1 lb. business card. The book had an immense success.
Robbie truly feels that when it is done in the right way, this is truly the best model for companies and consumers, alike.
What we realized when we read the book was that the whole world is a monthly membership. Your car payment, phone bill, TV bill, house payment, everything! You also don’t switch companies you’re with, except very rarely.
Headline benefits and engagement benefits
Robbie explains that headline benefits are:
- The reasons that someone signs up. Ex. “I’ll sign up for this thing and get my September leaning plans.” In their head, they are thinking “I’m going to cancel after my first month, after I’ve gotten my plans for September.”
Then, the hook benefits, the engagements benefits kick in.
- This might be that you already have the next month ready for them. Or, the community giving them advice and supporting them.
When you’re designing your business model, Robbie says you wan to think about both. Think as much about how to get people in, as much as what is going to get them to stay.
“The Acquisition Schute”
Awareness, Trial, Sign-up, Loyalty.
Robbie says you always want to start with where your product fits in the market.
- First, you have to who your market is and design your marketing around it.
This is important because if you bring in the wrong people they are not going to stay. Which in turn means you will lose money. Your cost of acquisition is going to be higher than the lifetime value of the customer.
When ultimately, you can want the lifetime value of your customer to be 3x or more what your cost of acquisition is.
Ex. If your customer’s lifetime value is $300, you want to spend $100 or less to get that member.
- Look at your cohort analysis. Robbie says to think about your subscribers in segments. Look at:
- Source: what ad or campaign got them there? These can also be referrals.
- Offer: what was the offer? Did you offer them something for free? Did you offer them a discounted rate?
- Time: what month did they join?
Have a list of hypothesis. What do you think is going on? Which customers are better and why?
The free trial
We had a member that was pharmacist. We helped her with a membership to help other pharmacists make more money.
We told her to try a free trial because it was working so well for us.
She tried it and it bombed. It was a total waste.
So, we simply had her do a $99 trial, instead of her normal rate at $197. It was amazing, it took off!
Why is that? Robbie says it goes back to the psychology of pricing. She says free trials are good for two things:
- People don’t understand what you’re saying.
- people don’t believe what you’re saying.
If those are your problems, utilize the free trial.
However, this is not always the best for business. This is especially true when the biggest investment is not the money, but the time or risk.
So, back to the pharmacist story. Pharmacists time is worth way more than the $99 or $197. When they see a free trial they think that that membership is not going to have as much value as their time. They also are not going to trust you, because if you are giving something away that means they want perceived credibility.
Friction
Robbie says when you ask for a credit card or some kind of payment, people think twice and say ‘hey, do I really want this?’
Typically, Robbie tells people to remove friction anywhere they can. However, sometimes friction can be useful.
Ex. If you run a weight loss club, you don’t want to tell people it’s easy. What you do want to do is be honest and say it won’t be easy, but, you if follow the simple steps we have laid out, you will lose weight.
The ones who want an easy fix will leave, but the ones that are willing to put in the work will stay. And, that’s what we want with recurring members.
The Forever Transaction
Going from customer to member. Robbie says one of the first things she had to do was differentiate between a membership and a subscription.
- A subscription is a pricing decision. It is a tactic, not a strategy.
- A membership is the way an organization feels about the people they serve. Ex. You help people for as long as they are starting a business, you help them through the membership. You are helping them as long as they want to build, grow, and evolve that membership.
It’s much more than the value proposition. A value proposition is for a moment in time. But a forever promise, is for the rest of your life.
You want your membership to be something that has a lifelong value and life-long longevity.
Ex. As Robbie said, LinkedIn started as a dating site, before they became centered on careers. On a dating site, the average length of time people stay is 6 months. You don’t want people staying on your site, as a dating site, after they’ve met someone. But, your career has a much longer longevity.
Evolve your offerings
Continue to evolve your offerings for all your members. Keep everyone engaged, keep everyone learning.
When you focus on the edge of what you’re offering, not only does this keep your members growing, but keeps you sharp as well
We know this first hand. OBack in 2012, we started out journey to entrepreneurship. We had some really bad stuff happen to us at work and we decided to start our own online business. We started out with digital courses, PDFs, all kinds of stuff to download with a one time purchase.
A couple years later we noticed some issues with stability. We putting a ton of work in, had to start back at zero every single month. We didn’t really know what we were doing.
We went to a conference in the Philippines, hosted by Chris Ducker, called Tropical Think Tank. We went just to get around other entrepreneurs and see what they were doing. We were sitting at a table one day with James Schramko, and starting telling him about what were selling, how it was going good, but was so high energy. He flat out told us it was a membership, all we needed to do was sell it once and have people pay you forever. He told us to read The Membership Economy by Robbie Kellman Baxter on our way home.
So, of course, I read the whole thing on our way back to the Philippines. And, read it all in one sitting. I knew when we closed the book that we had to do what this book said, as soon as possible.
And, then in June of 2015, as soon as we got home, we implemented the membership model into each and every one of our four businesses.
Within 30 days of opening our membership, we had over 1,000 members, paying an average of $49 to $99 a month, and it’s been that way ever since. Now, we’ve helped over 3,000 people do the same thing in the last 5 years.
All of that literally came from us reading The Membership Economy by Robbie Kellman Baxter.
Engage and Retain
The goal of your membership is to engage with your audience, they become a member, and you keep them.
This is where Robbie says a lot of businesses get into trouble. A lot of businesses want to do subscription revenue, but they don’t engage their members.
Let’s take Robbie’s example of selling a car. You sell someone the car. When that person drives it out of the lot it is theirs. You have the money. The transaction is over.
The membership model is loved because of the recurring passive and predictable income. To earn that you have to have an on-going value. The way you can tell if you have on-going value, according to Robbie, is staying ahead of churn.
If people aren’t showing up to member calls, reading your emails, watching webinars, they are slowing starting to disengage, which is where the danger of canceling their membership comes into play.
Robbie says, “if you want a vibrant membership model, you have to align your goals with the goals of the people you serve.”
For us, our member calls are one of our favorite things on the planet. Because, we know when we get off that call we are making a huge difference in someone’s life. When we help someone with a breakthrough, there just is no better feeling!
You can connect with Robbie on her website, robbiekellmanbaxter.com/audience.
Remember to subscribe to the Membership Masters Podcast on Apple Podcasts here: https://podcasts.apple.com/us/podcast/membership-masters-podcast/id1519253634?i=1000478678101
Or, listen to the full episode here on Spotify: https://open.spotify.com/episode/5CwSFWl6LgHET3LxJl9v1D?si=0xOWfUHqQMixk-cMCdehuA
