Newfangled #30: What if customers don't want to be intimate?
Membership subscriptions are the new cold bucket of sick
Welcome back! We have had a little hiatus but I’m back both from trekking in Nepal and from launching a podcast.
A podcast? Do tell.
The podcast is called ‘The Innovation Crowd with Helen Dawson’ and can be found on Spotify. By the time you read this newsletter, it should have replicated to the other major podcasting platforms and you can binge the first three episodes, with more to follow after the Christmas break.
Each episode is an interview with a guest with insights on how to fast-track corporate innovation. We have tech leaders, corporate venture builders, futurists, academics and ecosystem builders in the first season. I hope you enjoy it and let me know the questions you would like answered.
Back to the Newfangled Stuff…
Back to the topic in hand for today’s newsletter. Customer intimacy is a big management buzzword right now. But what if customers don’t want to be intimate with your business?
It seems like every business wants to become ‘customer intimate’ but that feels vague, impossible to action and in itself, it’s not a strategy. And worse, it is feeding enthusiasm for loyalty and membership programmes.
In the last months, I’ve received invitations from several small businesses to become a member and pay an annual fee of between £200 and £300 for the privilege.
The first is a campsite (a very posh 5-star campsite that we have stayed at once). Their membership option gives early access to bookings - 6 months before non-members - and discounts on food and drinks both on their site and at local restaurants and attractions. But £2000 per year is a lot to spend on snacks to break even. And your members aren’t going to come from your occasional visitors.
The second is an adventure travel company that has an active Facebook community of around 7000 people. Their membership gives access to a trip discount and small group webinars to help customers prepare for their treks. However, most of the information can already be gained (for free) in the existing Facebook group, contributed by other members.
From the business perspective, I am sure this has been done with the best of intentions - to try and monetise their most valuable customers. From my work with businesses looking to be more innovative, stakeholders in those businesses always seem to love the idea of membership and subscriptions. However, testing with customers has never yielded a fraction of the same enthusiasm.
Why do I think that is?
We all accept that certain purchases like software are on a subscription basis. Netflix, utility bills and the gym are all paid monthly. But the extension of ‘servitisation’ needs to address some sort of customer pain point if it’s going to succeed.
Both of the examples I mention don’t seem to be addressing a clear business need. The campsite can monetise demand for busy times by raising prices for those months. The adventure travel company could monetise its active Facebook community through new customer referrals and repeat bookings from its enthusiastic base.
Don’t get me wrong, I can see the business logic of why it would be great if customers wanted to pay for these services. I just don’t believe they are compelling enough.
Most decisions, including in business, are emotionally driven first and then justified by logic later.
Membership assumes a level of intimacy and commitment. It’s a question of identity. People are happy to pay for the identity of being someone getting fit by joining a gym, even if they rarely go. They also have a genuine pain point that the membership addresses - namely, they want to get fit or lose weight. Customer acquisition cost and customer lifetime value might be interesting places to start understanding if customers have a relationship with your brand in the first place. Finding more customers like your most valuable ones could be more interesting than trying to extract a few extra dollars from the customers you already have.
Subscription fatigue - how many regular payments does someone really want to commit themselves to? Yesterday, I heard a radio advert from a bank that suggested cancelling regular payments was the first place to start trimming back household spending.
Frequency of customer purchase is another important factor. Movies, gym visits, using software, using a grocery delivery service: these are all activities happening on, say, a weekly basis. Compare that with holidays that are only going to happen a couple of times a year, or perhaps once a year. Does subscription, even if it generates a logical saving, really match that pattern of spending?
Where in the existing customer journey does it fit? Should you subscribe to the adventure travel membership before you book? No, probably after, but how will you know you need it? Should you subscribe to the campsite membership after you can’t book your desired dates this year, to plan ahead for next year? That doesn’t feel compelling but if you haven’t experienced the pain, why would you understand the benefit?
What is the value proposition for non-members? Are you alienating 7000 members of your community in favour of income from a tiny membership revenue stream?
What do you think? Are you a membership fan? Or do you think the world has gone mad?
The Round-Up
What we’ve been reading?
I loved this blog about the potential demise of Twitter: What if failure is the plan?
This week’s homework (!)
Listen to my podcast 😉
Couldn't agree more that membership sites are over rated and mainly just way to liberate people of their money and potentially bring little value compared to the membership spend.
I note that there are memberships that teach you how to do memberships (for a bargain monthly fee of $65 or a cheaper annual fee of $590).
Have even seen a personality driven membership site marketing themselves by stating things may be economically hard right now but by joining my membership/course/webinar I will tell you how to easily make money and be financially independent etc.
So 100% aligned with you that all of this kind of stuff is indeed one massive cold bucket of sick!