A man in an apron stands behind a checkout counter and holds up a white card. In the foreground, the customer, a woman with dark hair, stands on the other side of the checkout counter, facing away from the camera. On the checkout counter are various groceries, including a bunch of bananas, several oranges, and a bag of nuts.
Many grocery stores offer membership programs that give customers access to pricing discounts and free samples. — Getty Images/Antonio_Diaz

Memberships and subscriptions for consumers are often discussed in the same breath and used interchangeably. For instance, do you subscribe to your favorite meal kit delivery service, have a subscription for fresh razors to be delivered to your home monthly or even subscribe to a curated fashion service? Or do you consider yourself a member of Blue Apron, Dollar Shave Club or Stitch Fix, respectively?

Most consumers would probably be evenly divided on whether they perceive these services as subscriptions or memberships. But, in fact, there are many types of companies that offer memberships without a monthly subscription. Think of your local gym, yoga studio or even some big-box wholesale clubs.

As a business owner, whether you decide to view your customers as “subscribers” or “members” relates to your branding and commitment to building a sense of community. There are many benefits to creating a membership around your subscription. But it’s also important to remember that these are two different concepts.

Similarly, loyalty programs also curate “members.” Some of these programs are free but others carry a fee in exchange for the vast benefits available to members. While free loyalty programs can build brand evangelists, paid memberships can be attractive upsells that can build loyalty and increase sales while increasing revenue.

With all the different types of membership possibilities in mind, let’s explore some of the most common membership business pricing models.

Paid membership to use the service or buy the product

When you think of a health and fitness club or a wholesale club, you are most likely thinking of a paid membership that gives members access to the service or product. This is a straightforward membership program, and it’s one of the most common types.

[Read more: 3 Ways the Fitness Industry Permanently Changed and What That Means for Businesses]

The benefit to this type of membership pricing model is that your company collects money whether or not people use your service. This creates a consistent stream of revenue and makes financial forecasting easy.

Even medical offices are using this type of membership program, where patients pay a monthly flat fee to receive many of the physician’s services, including unlimited access to primary care services. Additional costs, such as some medications or diagnostic tests, may be billed as an additional fee or paid for by insurance.

Curated subscription services, such as clothing e-tailers, also use this form of membership service. You must be a member and pay a monthly fee, sometimes called a styling fee, to receive your curated clothing selections. Then, you pay an additional fee for each item you decide to keep.

You may be able to apply this type of paid membership to any kind of business if your prices and selection are enticing enough. People like to feel as if they are part of an exclusive club. If you have items people can’t get elsewhere—or at prices they can’t find any lower from other retailers—you can charge a membership fee for people to shop with you.

When you’re thinking about the perks you can offer, consider more than just discounts.

Paid membership to receive special pricing and added benefits

If you’d like to open your business to the world at large but want to offer members lower prices and other perks, having a paid membership with added benefits could be the right business model for you. Wholesale club Costco has this business model. Anyone can shop in their wholesale clubs, but nonmembers pay an additional 5% for their purchases. Barnes & Noble also offers a paid membership, where their loyalty members save 10% on most purchases.

If your offerings aren’t exclusive or unique enough to charge people to shop with you—or you’d like to maintain an expanded customer base—consider offering a paid membership where only your members receive discounts and other benefits.

When you’re thinking about the perks you can offer, consider more than just discounts. Think about unique experiences, such as exclusive early access to sales and even special events. You want to find ways to create an emotional connection with your customers, not just deliver deals to members.

[Read more: Customer Loyalty: What’s Love Got to Do With It? A Lot]

Tiered membership plans

Of course, not every membership plan has to be so straightforward. Many businesses—from health clubs to organizations—offer tiered membership plans. Prices can range from “freemium” offerings, where organizations build loyalty through a basic membership, up to a premium membership that delivers all the perks, discounts and rewards available.

Membership tiers may also relate to the different services available to members at various levels. To use the example of a health club, an entry-level membership may only allow access to the gym during certain hours and one fitness class per week. The second tier of membership may allow open access to the gym and two classes per week. A premium membership might include open access to the gym, unlimited fitness classes per week and the option to bring a friend to work out on select days.

You can use your creativity, along with customer research and analytics, to determine which perks would entice customers to upgrade their membership. Tiered discounts, “bring-a-friend days,” free parking and even free merchandise after each year of membership are all popular upgrades to tiered membership programs in many industries, from health clubs and spas to theme parks.

Again, focus on creating a unique experience for top-tier members that others won’t receive. It will help you build loyalty and generate “fear of missing out” for members purchasing the less expensive level.

[Read more: Social Commerce Drives Sales for Brands Across Consumer Sectors]

Would your business benefit from a membership program?

If you’re looking to build customer loyalty, a membership program can help in virtually any business. Make sure to deliver value to your members and provide incentives for them to get their friends to sign on, and you’ll create brand evangelists that can drive revenue and help your business grow.

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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Published November 04, 2021