Robbie Kellman-Baxter is a best-selling author, sought-after speaker, and industry expert on the Membership Economy, a rapidly accelerating business sector built upon establishing ongoing, formal relationships over time. Her company, Peninsula Strategies, helps teams grow new businesses and reposition existing businesses in light of these changing market conditions.
Not surprisingly, I first connected with Robbie digitally and soon thereafter was swapping ideas on the Membership Economy, why it continues to grow, the new age of the customer and what companies need to do take advantage today.
Those conversations provided the groundwork for questions and answers on why customers are embracing the Membership Economy and what it means to your business.
Parker Trewin: Your consulting practice has been thriving for the past 10 years, amidst a very dynamic time. For your clients, name one thing that’s changed and one thing that has surprisingly remained the same.
Robbie Kellman Baxter: What has changed is the way technology has expanded the infrastructure that enables trust. Always on devices, the declining cost of storage, the ease with which nearly anyone can create and distribute text, audio or video content are all enabling new kinds of human relationships, even when face-to-face live connection is unlikely to ever occur. We want to connect and now we have new ways. Maslov’s hierarchy needs still persists: we all need mitigate risk, feel like we belong and are known, and be held in high regard by our peers. We are joiners by nature. We have more options than ever before. And while people some say that “Millennials aren’t joiners” Millennials are better able to evaluate and compare different options they have for connecting. As such, many of the more traditional membership models are losing out to the disruptors of the Membership Economy.
PT: What is the Membership Economy?
RKB: The Membership Economy is a term I coined to describe a massive transformation in every kind of organization, from nonprofits and associations to the most profitable of companies. It’s about a move from ownership to access, from anonymous transactions to known, formal relationships and from one way messaging to two-way communications between the organization and its members, but also conversations among the members themselves, under the umbrella of the organization.
PT: How is that different from Subscriptions?
A subscription is a pricing decision. It’s a tactic. The Membership Economy is about a mindset, in which organizations are working to build long-term, formal relationships with their customers. Some organizations charge their members a subscription fee. But others might be free for most, like LinkedIn or Pinterest. The Membership Economy gets organizations off the hamster wheel of constantly releasing more stuff to win their members’ attention and wallet share.
PT: How do companies benefit?
RKB: The benefits are huge. Companies that have joined the Membership Economy enjoy more predictable and smooth cash flow, and greater loyalty. But the relationship structure also allows from greater learning, which allows the companies to evolve their offering and stay ahead of the competition. Customers, even Millennials want to be recognized as unique, and treated as such. They also want to be acknowledged for their contributions and accomplishments.
PT: How does the Membership Economy differ for B2C and B2B organizations?
RKB: There’s actually more in common between B2B and B2C organizations than you might think. People prefer organizations that “solve the problem” as opposed to organizations that just sell stuff. Behind every “B” in B2B, there’s a “C” for Consumer and or an “H” for humans. So, just as the Membership Economy is at play in consumer businesses like CrossFit, Facebook or AARP, it is also in effect among people acting in their professional roles. For example, look at Salesforce.com (SFDC). They are on a $10B annual run rate with 20-30% growth and were among the first businesses to popularize the “software as a service” subscription model.
In 2014 SFDC was named by Forbes as the world’s most innovative company for a record 4th year. Why? Because they treat their B2B customers like people, and build membership around the customer experience. They understand that when they bring a new corporate customer onboard, they are really bringing individual people onboard, and those people need to be successful, engaged and belong from day one. The company has invested heavily in developing community and open conversation among customers.
Their MVP program was created to recognize standouts in the SFDC community for their leadership, expertise and ongoing contributions.
Salesforce users love the solution, but also feel connected to the brand, and help their peers be successful through online forums, formal presentations at events, and informal connections. They give feedback to the company as well. The ones who demonstrate the greatest commitment to Salesforce are given the status of Salesforce MVP. And the prize for being recognized as an MVP? They get to do more! More speaking at SFDC events, more access to SFDC execs and special opportunities to connect with other MVPs (and lots of logowear, too!) In other words, their rewards, while coveted and appreciated, also reinforce the behaviors that will generate more MVPs. Pretty smart, and worth emulating!
They’re going beyond selling stuff to winning hearts and minds. Salesforce.com MVPs don’t have time to be part of other associations anymore because they’re spending time (and getting value from) the Salesforce community.
PT: Outside of car clubs and gaming sites, what industries are changing their business model to take advantage of the Membership Economy?
RKB: Actually, we are seeing examples across virtually every industry. For example, software companies are selling software-as-a-service (SaaS), media companies from music to text to video are moving to membership models, and even consumer products companies are experimenting with automatic, direct-to-consumer replenishment boxes and subscriptions. Pretty much any business that depends on repeat business from customers who have other options (free market) can benefit from joining the Membership Economy.
PT: You’ve done a lot of consulting work, for such companies as Netflix, Yahoo!, Oracle and eBay. How are they taking advantage of the Membership Economy?
RKB: They are leveraging technologies, which are providing new infrastructure for extending trust. Historically companies couldn’t build trusted relationships with customers (or enable the customers to build relationships with one another) but there are now dozens, if not hundreds, of tools that organizations can use to create a sense of belonging and connection. For example, Netflix was among the first organizations to develop a recommendation engine, leveraging the behavioral data they were collecting. And eBay was one of the first companies to create an online marketplace to connect buyers and sellers, serving as a trusted middleman. Videos and auctions weren’t new, but in these cases, the delivery and pricing was new. Netflix was able to take advantage of a new way of communicating directly with video lovers that didn’t require physical stores and could be profitable without the dreaded late fees. eBay brought the power of auctions to individual consumers, making it easier to connect buyers and sellers. Each organization was able to remove the middlemen from their transactions, and expand the relationship with the customer.
PT: What’s your biggest learning from working with these organizations?
RKB: It’s simple and bold as the core mission of the customer is more important than any product, or even the core mission of the organization. Too many organizations love their products more than they love their customers and their customer’s mission. Or they focus on their own, internal mission to “be the best in their industry” instead of “to help the customer achieve their goals”. Organizations that continue to evolve the products that they offer while increasing the value they provide, are going to be the winners of the Membership Economy. These winners stand to enjoy continued growth and profitability, which is ultimately what the corporations want, both near term and longer term.