Digital shopping, loyalty programs, and subscriptions are key necessities for ecommerce brands. However, the online market is crowded with these marketing strategies! Given that, it is imperative to fundamentally understand and smartly implement the retention and wallet share strategies you adopt for your ecommerce business.
Just as ecommerce subscriptions have become popular, memberships, too, are gaining momentum. All kinds of businesses are exploring membership models to get an edge in the rapidly and constantly evolving ecommerce industry. Customers, too, are taking to memberships and expecting their favorite brands to offer valuable loyalty and membership programs.
In this lesson, we’ll help you understand the basics of memberships, and how you can set up a membership model with the right kind of perks for your Shopify store.
In this lesson, you’ll learn:
- What is ecommerce membership?
- How are memberships different from subscriptions?
- Key elements of memberships
- How to identify and offer the right membership perks, that suit your customers?
What is E-Commerce membership?
An eCommerce membership model is where customers who become members of a store or business get access to exclusive services, offers, discounts, and other perks.
Some of the most common perks that brands offer are:
- Gift vouchers
- Birthday surprise
- Special member discounts
- Exclusive sneak peak and previews
- Priority access to new collections
- Members-only savings
One of the best and most common examples of ecommerce memberships, is Amazon Prime – a paid membership program that gives members access to benefits such as two-day delivery, free streaming, gaming and music, and exclusive access to top deals, among others, for a monthly or annual fee.
Membership programs provide many benefits to retailers as well as to customers. For retailers, it can increase customer loyalty, improve retention rate, increase opportunities to engage with customers, improve relationship management and increase customer wallet share and lifetime value. Paid memberships also mean recurring income at predictable intervals! For customers, memberships offer enhanced experiences, benefits and perks, exclusive deals, a community experience, and long-term engagement with their favorite brands.
E-Commerce memberships and subscriptions – The difference
Subscription: In subscriptions, customers pay a recurring price for products/ services for a defined period of time. Customers are delivered the products/ services on a recurring basis at a predefined period. There are different types of subscription models such as replenishment, curated box, access subscription, fixed, unlimited, pay as you go subscriptions, etc.
Membership: Memberships give customers perks such as special discounts, services, and other exclusive benefits. For example, first access to a sale, exclusive special events for members, etc. The perks in memberships depend on what the brand offers. In short, memberships give customers access to the value the brand creates. Memberships could be paid or free. They build a sense of community that customers can be part of.
It might seem at a high level, that memberships are somewhat similar to loyalty programs, but memberships are different from loyalty programs. Some loyalty programs might offer the same perks offered through memberships, but what loyalty or rewards programs fail to offer, is a sense of community (with other customers) and connection (with the brand).
Key elements of a membership
The main offering of memberships are the perks. The hardest part about memberships is offering enough value so that customers sign up as members. And one of the key reasons why some businesses’ membership models fail, is because they fail to understand what ‘creating value’ means.
Among the most common perks offered by brands are discounts on products and services, freebies, gifts, exclusive events for members, first access to new collections, etc.
Perks can be personalized based on customers’ needs. Every brand can offer targeted perks and get as innovative as they want based on their customers’ needs. Brands could also have tiered membership plans, and custom the associated perks for each tier, based on the corresponding member profiles!
However, it is important to continually evaluate whether the perks offered meet customers’ needs. This helps businesses adapt and enhance the membership plans.
Perks broadly fall under the below four categories:
1. Connection: Through memberships, retailers can provide improved engagement opportunities to customers. This builds greater connections between brands and customers.
2. Customization/ personalization: In continuation with connection, comes personalization – one of the key factors to engage customers. Brands can come up with innovative ways to bring in personalization.
3. Community: Customers like to be a part of a retailer community that offers tangible benefits. Memberships enable customers to connect with other like-minded customers.
4. Exclusivity: When customers become members to receive special perks, they feel a sense of exclusivity. Access to exclusive members-only benefits, special members-only events, etc., brings the feeling of exclusiveness.
The duration of the membership plan can differ from brand to brand. Some brands have a yearly membership plan for a renewal fee that is to be paid annually. Some brands offer lifetime membership. Others offer free memberships. The validity of membership is an important factor as it impacts customers’ lifetime value and loyalty.
Setting up a good membership model – How to offer perks that matter to customers?
Ecommerce subscriptions are all about products. You’re required to find the right products to create the right subscription model around them. But in memberships, the requirement is to find perks. Here are some steps to help you figure out how to offer perks that matter to customers.
Step #1: Identify customer segments
When creating a membership plan, one of the first things to do would be to find and create groups/ segments of your customers who have common traits.
How does customer segmentation help in memberships?
First, there are different types of customers whose needs might differ from the other customers. When you know your customer segments, you will be able to offer valuable perks that are relevant to the different segments.
Second, by understanding the different customer segments’ purchase behavior and preferences, you can decide the different pricing models. (Some of the most common pricing models for memberships are: completely free, free trial period, monthly fee, annual membership, lifetime membership, etc.)
Customer segmentation can be done by following certain parameters.
Demographics: Demographics include age, gender, ethnicity, marital status, income, education, employment, etc.
Purchase/ behavior tracking: Customers’ past purchase behavior can help provide insights that can be utilized for segmentation. With rules and regulations restricting the access and use of third-party data, first-party data will be highly important for retailers/ marketers. For the process of customer segmentation, this provides a direct line of sight into the key audiences of brands.
Key takeaway: Segmentation helps you gain an understanding of the value you offer to different customers. It helps identify opportunities. When you know your customer, you can offer them what they want.
Step #2: Find out what motivates customers to make purchases
According to a study by Accenture, these are the aspects that motivate customers to prefer one brand to another:
- Ease and convenience
- Service and personal care
- Trust and reputation
- Product origin
- Health and safety
Many of the above factors can be ‘perks’ offered through memberships. To understand what perks would matter most to your customers, an effective method would be to ask customers themselves!
You could receive valuable customer feedback through the following ways:
Ask for feedback
Ask for feedback at every critical touch point of the customer journey. For example, some key junctures of customer journey are after customers make purchases, when an order gets delivered, when you launch a new collection, when in-demand goods are back in stock, etc. The key would be to ask the right, targeted questions. This would enable you to collect relevant feedback.
Conduct online surveys
Online surveys are one of the easiest ways to collect detailed insights on specific topics. When customers care to respond to surveys, it means that they are interested in the brand, and are willing to take the time to reply and engage. This is also a tremendous opportunity for brands to collect authentic responses from genuine customers.
Listen to your customers
There are many ways in which brands can listen to customers. Listen to what they talk about during offline events, note their queries over live chat and customer care chats, listen to them on social media on organic posts and comments, and observe how they engage to your announcements and posts. Other sharper ways to listen to your customers, are by analyzing their usage (which products do they linger on, which features are they eagerly using), and receiving feedback during cancellation. AppstleSM is one of the few subscriptions and memberships apps that provides this coveted functionality, to innovatively collect feedback when there is a customer cancellation.
Key takeaway: A combination of offering the right perks, a variety of valuable experiences, and keeping engagement levels high, can make customers choose one brand over competitor brands.
Step #3: Define membership validity and longevity (how long customers would like to be members)!
One of the most common challenges businesses face is low membership renewal rate. Customers may forget or lose interest in the membership plan. Or, they might not see enough value in the plan.
Memberships may be paid or unpaid. The validity of memberships may differ from brand to brand. Some membership models have a validity for a year and Members renew their membership annually. Some models offer lifetime membership. Members pay once or sign up once and enjoy the perks for lifetime.
Here’s where businesses have to do some digging, work out numbers and decide the best validity and recurrence period for their memberships.
Here are some typical membership validities:
- Monthly membership
- Annual membership
- Lifetime membership
Businesses can also offer different levels/ tiers of memberships. In this case, members might upgrade or downgrade their membership plans. For example, free membership, premium membership, silver, gold, platinum membership, etc.
Key takeaway: The validity of the membership may directly affect how long customers would remain members, how often you’d have to engage them to renew their membership, customer churn periods, and for how long you can earn revenue from current members.
Step #4: Conduct competitor analysis
The best way to stay ahead of your competitors is to keep an eye on them! Look into what kind of membership programs they offer, what are the perks they offer, what is their validity period, what are their customers saying about their membership plan, etc.
Here’s how competitor analysis helps in memberships:
- To identify your business strengths and weaknesses
- To understand the market
- To spot trends in memberships and loyalty programs
- To set benchmarks for future growth
Competitive analysis can be done when you are planning to set up a membership model or when you want to periodically revisit your membership model to enhance it.
When you make competitor analysis a recurring activity for your memberships, you can maintain a competitive advantage over other brands in the industry.
Here’s how you can go about competitor analysis:
- Identify your competitors in the industry
- Create a competitor matrix that you will use to conduct your research and add the findings
- Profile your competitor’s target customers
- Gather information about what your competitors are offering – products, price, perks, etc.
- Analyze yours and your competitor’s strengths and weaknesses
Key takeaway: Competitor analysis is important before you plan and launch your memberships model, but it is important even after you’ve successfully onboarded members. That way you can keep evolving and enhancing your plan.
Step #5: Validate the demand on those member perks
Before finally launching the membership program, it’s a must for businesses to make sure that customers like and are willing to pay for what you’re offering. In short, validate the demand on the perks you’re offering.
Validating perks will help you predict whether or not and how many customers would sign up for your membership plan.
To begin with, find out what your customers want and if the perks you’re offering are something that they’d value.
Price your memberships correctly. Is the price of the membership something that customers would be willing to pay? Does the price match the value the membership would be bringing to customers?
Key takeaway: Validating can help you gain an understanding of the right combination of perks and pricing that will earn you your first members.
For those retailers who have the motivation to gain returns from memberships, there’s plenty of room for creative perks, and winning customers’ hearts. Perks are key in memberships and that’s where you should be spending a lot of time and focus. However, creating enough value in your membership plans is also incredibly difficult. It requires experimentation, research, resources, and resilience. So you’ll have to keep evolving your membership plan. Next, comes the price of the membership plan. We’ll cover all about membership pricing in the next lesson.
AppstleSM builds end-to-end membership solutions that help businesses increase customer loyalty and profitably scale business.
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