The membership economy is growing faster than before. How can you ride this wave and build your own system?
In this episode, my guest Robbie Baxter shows you how to build your own membership model.
Robbie is the bestselling author of The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue, a book that’s been named a Top Five Marketing Book of the year by Inc. She’s working with industry leaders like Netflix, Electronic Arts, The Wall Street Journal, Asics to name a few.
Our definitive expert takes a deep dive into the idea of the membership model so you can build not only your membership economy but also a tribe of super fans.
Listen to the podcast here:
Building Your Membership Model, Loyalty, And Recurring Revenue With Robbie Baxter [Podcast 246]
Have you ever struggled with the idea of, “I’d love to have more recurring revenue,” or the thought of, “It would be awesome if I could have passive revenue or how great would it be if I could build up a membership base of people who are ordering what I have to offer month after month on a subscription?” What would that do for you? Would it build potentially a brand loyalty to you, a viral growth? Would it create recurring revenue that you could have a more stable and sustainable business? If any of those intrigue you at all, you are going to love this interview and session. We have a definitive expert on this model and we’re going to focus on the idea of the membership model and how you can go out and build your membership economy.
She’s the bestselling author of The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue, a book that’s been named a Top Five Marketing Book of the Year by Inc. She’s also been coined with the popular business term, “The membership economy.” How excited would you be if you could build your own sustainable, ongoing and recurring membership economy? Maybe you’ve tried it. I want to speak to the elephant in the room. You might go, “Dan, I’ve tried this before but it hasn’t worked.” What if one idea that she will share with you can help flip the switch? You could build your own Netflix, Salesforce and many other subscription-type models in your own business. More importantly, build the tribe of people who are not fans but are super fans. Our guest is Robbie Baxter. You have many credentials, I don’t even know where to start. She’s working with industry leaders like Netflix, Electronic Arts, The Wall Street Journal, ASICS to name a few. Robbie, welcome to the show.
Thank you very much for having me, Dan.
You’ve coined this term, the membership economy. Let’s start there. What is the membership economy and why do we need one?
The membership economy is this massive transformation that I first started noticing when I was working with Netflix and this goes back many years. I started to see more and more organizations because the time and environment are right for a new kind of business. It’s about going from ownership to access, from anonymous transactions to known relationships, from one big payment in a very lumpy model to many smaller payments forever. It’s about going from one person yelling out the message and everybody can either listen or not listen, but those are their only choices to creating a tribe under your brand. It’s a community, a multi-directional communication under the brand umbrella. When you put those things together, you have a beautiful painter’s palette with which to design a new business model that is for many big and small organizations that are much more attractive than what they were able to do in the past.
Speaking of that, I want to speak to the elephant in the room. Let’s say someone is reading and they’re brand new. As a company goes about, “I’m going to create this product and I’m going to create this membership model. I’m going to create a leadership website with great content. I can bring the best in the world and it’s going to be $39 to $59 a month.” That’s their primary premier product and program. What are some of the biggest mistakes you see companies are making as they go about the idea of the membership economy?
The biggest mistake that they make is that the subscription pricing does not match the forever promise. Here’s an example. I talked to a solopreneur and she had a potty-training business. I don’t know how many parents are reading but potty training is very painful. It can be hard and you can feel alone, but she wanted people to subscribe forever. Potty training is not a forever transaction. Maybe there’s a six-week period where you’re intensely engaged in that learning curve of, “How do I work this out with my child?” It’s stressful. She was wondering why people weren’t staying and why people were only doing the free trial and then leaving. When you take a step back, it’s because her offering isn’t a forever promise. It’s a very short-term promise.People are attracted to the idea of recurring revenue, but they don't think about what that means for the customer. - Robbie Baxter Click To Tweet
Another example would be Netflix. Let’s say that I had a membership offering to access all of the Harry Potter movies. There are eight movies. How many times can you watch them? Expecting someone to subscribe forever when there’s limited content is also tough and a lot of organizations do that. What I see in a nutshell is that people are attracted to the idea of recurring revenue, but they don’t think about what that means for the customer. Why would the customer be excited about paying every month or every year on a recurring basis? You want to focus on a long-term goal and then build your offering around that.
Speaking of the long-term goal, you brought up this term that I love, which is the forever promise. That’s fascinating. It sounds like if you’re going to build a membership economy and your recurring model that’s having a forever sustainable promise that’s ongoing, in my world, I’ve framed this as the mini-series model. That’s what I see what Netflix does. It’s a series of mini-series. It’s not one episodic thing. It’s an ongoing series, then there are hundreds of thousands of mini-series that are listed. It’s a mini-series idea or this forever promise. What are some good forever promises you’ve seen as examples that a small business entrepreneur and a couple of million dollars a year who wants to move into a membership model could emulate for their business?
It’s like what you do, I’m going to help entrepreneurs continue to increase their impact on the world while decreasing their labor intensity. That would be a forever promise. Is that relevant on day-one when I’m hanging out my shingle? Yeah. Is that relevant when I’m making $3 million and working fourteen hours a day? Yeah. Is that relevant when I’m working six hours a day? Yeah. You can start to see that maybe the day that you start with that promise or when you started your business, you might have had a smaller set of features that you could offer to that person to deliver on that forever promise. Probably in your mind, you had a whole universe of offerings, which you’ve layered in overtime. Probably some of the features from the early days might have retired because they’re either not as useful, they’re not as differentiated, they’re not as relevant while you’ve added other features. The subscription or the promise is not, “You get my videos.” The promise is you get what you need at that moment to decrease your labor intensity and increase your impact.
Why are you doing this? Most people have a backstory of why they’re pursuing the world we’re all in. Tell us a little bit about you. Why are you so committed to the membership economy? You literally coined the phrase the membership economy. Why is this your journey? Why is this your path to help others?
It’s two parts. Why am I a solopreneur? Why am I focused on this particular area when there are many ways to build a business on your own? The first one, I was laid off when I was on maternity leave with my second child. I was in product marketing. I live in Silicon Valley. I’m from a business school. I was working in venture-backed companies. I realized I am going to be dependent on what my manager thinks I’m capable of and it’s not about what I’m delivering in terms of value. It’s about how they want it packaged. I said, “I need to have control over that. I’m going to be independent. I’m going to consult. I’m going to provide my advice directly to the client and they can pay for it or not. It’s a much more direct and clean relationship.” That’s how I got into independent consulting. I’d been at Booz Allen. I’d been at a big firm consulting and done strategy work for a long time. I knew how to do strategy.
The second piece is if you want to be successful as a consultant, you have to have an area of expertise and focus. It’s very hard. Somebody called me. She’s a solopreneur and she went to the same business school as me. I agreed to talk to her, mentor her and give her advice. She said, “I thought maybe you could refer some business to me. I’m a generalist.” I said, “I don’t know you and you don’t have any particular expertise. It would be very hard for me to refer to you.” Whereas if she had said, “I am the world’s leading expert on outbound call centers or the nail manicure salons,” or whatever, then I would remember it first of all and second of all, it would be more credible. I was looking for something to be a specialist in and Netflix was about my third or fourth client when I hung out my shingle. I loved it. I loved the business model. I loved that they had an area for focus groups right in their little building. I loved that they had clear metrics. I loved that there wasn’t a lot of emotion there.
There was a lot of like, “Go try it. If it works, we’ll do it. If it doesn’t work, that’s okay. The only thing we ask is that you keep trying things.” I’d never worked in that environment and I was like, “This is great.” People started calling and said, “We heard you worked with Netflix and we want to do that in our business.” For a while, it was organic and then I said, “I think this is it. This is something that nobody else is looking at and I’m in a good position to do it.” I’m seeing similarities and starting to be able to map out a framework of how to do this.
Robbie, a couple of things that jump out, I want to speak to the elephant in the room. If someone’s going, “How does this apply to me? I don’t have investor money to try a bunch of stuff like Netflix and the idea of getting high-paying clients and/or I could start a membership model. How am I going to sustain my overhead and subscription?” What would you say to that type of thinking with somebody who might be reading right now?
No business is too small to participate in the membership economy. We talked about a solopreneur, somebody that is a subject matter expert. You can think of it as, “I can sell you products, a book, a training, a consulting project,” or I can say, “Join me and I am going to help you achieve your goals,” which is to make the biggest impact in the most leveraged way. Let’s say that you own a small business like a nail salon. I have my nails done for work to look professional. I don’t want a manicure. I want my nails to look good.
If I go and get a manicure and then fifteen minutes later, I break a nail, I want it fixed. I don’t want to wait until the next manicure. I don’t want all my nails redone. I would love to have that with consistent pricing. Maybe they’ll say, “You paid this much per month and your nails will always look good. You can come at any time during quieter hours and we’ll either do a new manicure or we’ll touch it up.” That’s more aligned with my goal as the customer. In any business, you step back and say, “What’s our best customer’s goal and how do we repackage our value to solve that problem for them more fully forever?”
The example is such a good example of a brick and mortar thing that most people wouldn’t even think about like a nail salon and getting nails done. What are some other examples of businesses that most people wouldn’t think about, that you’ve seen or you would recommend people to look at this way to build into a membership economy?
What’s been interesting is since The Membership Economy book came a few years ago, people are calling. They say, “We’re interested in what you’re doing for our business.” I have been shocked by the range of things that have caught things. People have called about their businesses. I’ve worked with insurance companies, restaurant chains, amusement parks, software companies, B2B software, dental pain management, the companies that make the different painkillers before the dentist does the drilling. Any business where there is competition and the customer has alternatives, there’s potential to build a membership model.
Uber is experimenting with subscription right now. We were talking about Disneyland, amusement parks, theme parks, movie pass, streaming newspapers, I could go on and on. Heavy equipment is an interesting one. You think of Caterpillar, the big yellow machines. They use sensors now to collect and share data with the operator and the manager of the business that’s using it, the construction company or the agriculture business. That data is more valuable in many cases than the value of the machine itself. They’ve said publicly that they’re moving toward a model where potentially they could be making their money from the services rather than from the sales.
What’s an example that you would say is a fascinating use of a membership economy you’ve seen and the success story around it?No business is too small to participate in the membership economy. - Robbie Baxter Click To Tweet
The Caterpillar one is fascinating. Peloton is also in that space. I have a Peloton, I was riding it. This is a stationary bike with a computer tablet attached to it where you can stream rides and classes with different instructors and all the other people who are riding at the same time. If they’re your friend, you can video chat with them while the ride is happening. You can compete against everybody anonymously on the leaderboard or you can have a ride with your pal who’s riding the same ride and compete with them or see how well they’re doing. What they’ve done that’s interesting is they’ve taken a piece of hardware, which is a bike. We talked about forever promise. They’ve made it smart and they’ve created a way to have me achieve my goal, which is I want to be motivated to do fitness and to do it the most efficient way possible with cost certainty. Instead of having to go to the gym, I used to belong to Equinox, now I go to my garage and I can still ride with other people or I can ride out with my husband who is less social and I’m more social. We both love it. We pay $40 a month, plus we bought the bike so we’re paying a lot.
Another great model is CrossFit or some people call it Church of the Holy CrossFit, where they say, “You’re going to do your exercise and we’re all going to do the same workout. By the way, you’re going to cheer on the rest of the people until everybody’s successful because the goal here is for all of us to get healthier. It’s not for you to get your workout in.” There are lots of interesting models. Carwashes have moved to the subscription field. This is interesting. I spoke at the International Carwash Association. They’re talking about, first of all, getting people to subscribe to car washes. For the cost of three carwashes, you can have unlimited carwashes every month. What I think is interesting is we don’t want to go to the carwash. We want to have a clean car. There’s a company out here that comes in the night and fills your gas tank and washes your car. They can come in the wee hours. You leave it unlocked and you wake up and it’s like the fairies took care of it. I was telling them, “That’s what people want. That’s the forever promise.” Nobody wants it to take nine minutes instead of eleve minutes to go to the carwash. You want to take zero minutes. Those are a few, but everywhere you look, you’ll start to see subscription, premium membership and loyalty programs. It’s everywhere.
As you’re reading this, I hope you’re taking this in. What would happen for you by putting this mindset in place in building your membership economy? What would have to happen for you to get it done? The sky’s the limit. What if you had 20, 50, 100, 200 or if you have bigger visions, thousands of people in your membership economy month after month enjoying the benefits of what it is with your life problems? What is the problem you solve that you could make your lifetime promise? Know what’s Robbie’s perspective on how simple it is to tune into what they want, not what product you’re selling, not your service but the problem you solve and speaking to solving it.
It’s their journey. Let’s say you’re talking about an entrepreneur that you’re trying to help to be successful. You have to think about what the points along their journey are where they need something and how can I be there at the points when they need me? How does that fit in with their daily life? A lot of times you think of your customer in terms of how they interact with your product, but you don’t think how does that product fit within their day? Is it something they’re trying to squeeze in? Is it the focal point? Is it a heavily considered thing? Is it something that they are like, “I don’t ever want to have to think about this once I make a decision. I’ve checked the box and I never want to worry about it again.” That’s also important.
Robbie, what would be 1 to 3 steps that somebody could take to put the membership economy in place or the next first steps to get things set up properly?
If you’re a growing concern or if you already have a business, you want to take a step back and understand the difference between your best customers and your not best customers. Your best customers in most cases have the highest lifetime value, meaning that the amount that they spend with you minus the amount it costs to serve them is the highest. They’re easy and pleasant, I’ll add that. As entrepreneurs, sometimes there’s no amount of money. You want to compare those with the people who aren’t the best customers and start to understand the differences. You want to see the best ones, “What could I do to solve better the forever promise that brought them here in the first place?”
It’s a very different way of thinking because often people are product-centric. If I run a restaurant, I might think of it in terms of food, but people go to certain restaurants for celebrations and to other places for convenience. If it’s a celebration place, what else can I do to sell it? If 90% of the people come here every year for all their birthdays, what else can I do to help them celebrate? What else can they celebrate? That might mean you have to get a band who sings Happy Birthday. Think of a little gift or maybe have a gift shop in the lobby so that if they’re coming to celebrate someone’s birthday, they can grab it and grab a card because they forgot.
It’s thinking that way. Instead of saying, “What I’m going to do in addition to having this kind of steak is I’m going to have this other kind of steak. I’m going to add a new dish.” The new dish is not going to bring more people in. You always want to think about when you’re adding a feature, what is going to attract somebody? In other words, there are some features where people are like, “I didn’t go there before but now that they offer this, I’m interested.” The other side is what will retain them? There’s a trigger that gets somebody to join or start engaging with you and you need those, then what are the hooks that are going to get them to stay? If you think about those three or four things, think about what’s your forever promise? Who’s your best customer? What is that promise? What additional features can you add to your model to justify a forever transaction? On the trigger side, to bring in the right people and to signal to the right people that you’re the right place for them. The hooks to get them to that point where they’re like, “I am no longer looking for alternatives because you solved my problem.”
If people want to get more of you and learn more about how you can help them get access to the amazing resources you have available, where can they go?
They can get the book, The Membership Economy. They can find me on LinkedIn, on Twitter @RobbieBax and MembershipEconomy.com. I’m not hard to find at all. Those would probably be the best places to find me. If you’re seriously building out a membership model and you’d like to apply to join my membership lab, shoot me an email.
I will encourage you to go to MembershipEconomy.com if you’re looking for a way to build more recurring revenue via viralocity, if you’re looking for the ability to build loyalty and build a sustainable member base of not just fans. Go beyond the fan base, go to superfans. What would that be worth to your business, to your model, to what you do and how you do it? It’s creating a business that requires less of you and creates more growth but less stress. It’s more freedom and less you in the business on a regular basis. That’s what this can do. Go to that website and check out what Robbie is doing with her membership lab. It can help. Robbie, what would be something I should have asked you that I didn’t ask you?
You did a good job. I don’t know if there’s anything that you should have asked me. I don’t think there’s anything that you missed. I think you’re good.
What would be 1 to 3 action steps that you would hope our audience would take as a result of our time?
The most important thing is to focus on what’s the best customer’s interest? What is the long-term problem they are trying to solve that you’re helping with? How can you solve a bigger part of that problem? How can you build a member relationship with your customer where they take off their consumer hat, where they’re considering alternatives and they put on a member hat and they stop considering other options? They say, “You’re the guy.” We all have that feeling about certain stores, certain companies, certain people where you’re like, “I don’t even look anywhere else. This is where I go and I trust them.” That’s what we’re going for. That’s what our customers want. They want one less thing to have to shop for and worry about.A lot of times you think of your customer in terms of how they interact with your product, but not how your product fits within their day. - Robbie Baxter Click To Tweet
Think about that. What would that be worth to you? If you could have your clients, your customers, your advocates are going, “You’re the only choice for me. I’m going to stop looking at other places. You have the ability to do that.” Check out MembershipEconomy.com. Check out Robbie’s lab. I like to pivot into a couple of personal things. What were you known for in high school?
I was super involved. I was the class treasurer. I was involved in every activity, I was social, I was rah-rah and I was a good student. I was pretty tightly wound, but I was fully engaged and I loved high school. I live across the street from the high school I attended. I’m still involved.
What is something most people don’t know about you that you’re willing to share?
I’m a talker, so most people know most things about me. I’m an open book, but a lot of people don’t know that I grew up playing the harp. That was something I was known for. I’m a Girl Scout leader and I know a huge amount about baseball.
Tell us more about that. I’m a huge baseball fan.
I have a very narrow and very deep area of expertise, which is my husband we’ve been in a relationship since we were in college, played Minor League Baseball for a few years and I traveled with him. I’ve been to literally hundreds and hundreds of Minor League Baseball games, all up and down the Midwest, the East Coast, Canada, the Dominican Republic, Mexico, lots of different places where baseball is played.
I played semi-pro ball, I coached in college summer all-star team, I played college ball and all that stuff. I had injuries and in reality, I wasn’t good enough to be able to sustain the Major League lifestyle at the end of the day. That is awesome. You have probably a lot of amazing stories about the Minor League.
I know a lot about baseball wives too.
One of my favorite movies about baseball that I personally feel is very accurate in a lot of ways is Bull Durham.
It got a lot of things right. The quirkiness of it and being thrown together with these people that you have nothing in common with, except you have everything in common with them because you’re all gunning for the same job and they’re your best friends. You wouldn’t be friends with them at all for the rest of your life. It was such a great time for us. The people we met and the relationships, it’s like a family because you’re in this town where you don’t know anybody except your teammates. You spend every waking hour with these people, with the players and their wives. We were all living in the same apartments. There would be four people. It was a fun time.
How did you and your husband meet?
We lived in the same freshman dorm.
You built your own membership economy and it started at home.
Part of the reason that I ended up in this business is I’m a connector and a community builder. That’s what I’ve always been. If you want not to be my friend, be exclusive. People will say, “Let’s not include her because she’s a little awkward or we don’t know her as well.” I’ve always been that person who wants to bring people together and then maintain the relationship. If you want to be on my good side, be welcoming and inclusive.The most important thing is to focus on the customer's best interest. - Robbie Baxter Click To Tweet
When you were younger, can you remember back to some of your early influences? If you had to pick one or two of the most valuable influences you have that you think have led to where you are now, what would that one or two most important be?
I have to say it’s my parents. I grew up in a house where my parents had complete faith in me. I look back now as a parent, I have a 21-year-old, 18-year-old and a 15-year-old. I look at how my parents were, they never criticized. They always are like, “You’re great. You can do anything. You’re smart, you’re talented, the world is your oyster.” I grew up with that tremendous support. I think that probably was the biggest influence on me. That sense of I can do whatever I want.
As a parent with three kids, if you were to advise a parent who’s also an entrepreneur, what would you give them on raising healthy, independent, success-oriented kids?
I think one of them is believing in them, not in an unrealistic way but their potential. It doesn’t mean that you unrealistically say that their achievements are world-class. My husband and I often joke that if you ask a baseball team of families, nobody thinks that their kid is not good or has too much playing time. Everybody thinks their kid deserves more. That’s not what I’m saying. What I am saying is, “You can do it. Here’s how.” The other thing that’s been challenging for me, but I’m always working on it, especially as a consultant, is it’s very easy to coach your kids and they don’t always need coaching. Sometimes they just need you to support them and not tell them what to do next or how to do it better, but say, “I’m a fan.”
That is such great advice. You brought up your husband and you’ve got three kids. If you were to turn to your husband and you were to thank him for the way he showed up to support you, to allow you to be this influencer, this connector, this community builder. What would you say to your husband as you gave him gratitude or thanks for how he has supported you that way?
I could not be luckier in terms of finding somebody when I was eighteen years old, who’s been my best friend and biggest cheerleader. He’s in my corner all the time and he always sees my best self when he looks at me. If I’m struggling or not feeling confident, he sees me at my best all the time. I was complaining one time to somebody. I was saying, “The other night, I was up in the middle of the night and I tried to get Bob. I was telling, ‘Bob, I’m worried about this.’ It was 3:00 in the morning and he didn’t wake up. He goes, ‘Close your eyes and go back to sleep.”’ She’s like, “What? You wake up your husband at 3:00 in the morning to tell him your problems and he doesn’t punch you in the nose?” If I tell him, “I don’t think I can do this or I’m worried or I’m never going to hit this deadline,” or whatever. He’ll say to me, “I know you can do it. You’ve done it before. You’re great. I believe in you.” It’s comforting to have somebody who sees that.
What a gift and now’s a gift. I have a question as you’re reading, what are you going to do with this gift? Are you going to go out and build your membership economy? If you already have a version, are you going to make it even better? Robbie can help you. You can go check out her resources and lab at MembershipEconomy.com, her site. You can reach out to her, connect with her, find out how she can help you have a bigger influence, a bigger impact, a bigger reach and a whole lot more. We covered a lot in a short period of time. To summarize, we talked about focusing on what your clients are interested in and solving their problems. How can you be a bigger part of the problem?
How can you connect to them to make them want to join you, not to be a client or a customer, but join you in something that’s a movement bigger than you and they stop considering other options? What would that do for your business if you were able to tune-in on those handfuls of things? If you want to know how to be able to do that even better, she laid out the blueprint for you to be able to do that. If you never want to miss an episode, you can go to GrowthToFreedom.com/subscribe. Seize the day. Make it a great week and we’ll see you next time.
Resources mentioned in this episode:
- The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue
- LinkedIn – Robbie Baxter
- @RobbieBax – Twitter
About Robbie Baxter
Robbie Kellman Baxter is the founder of Peninsula Strategies LLC, a management consulting firm. Robbie is also the author of The Membership Economy: Find Your Superusers, Master the Forever Transaction and Build Recurring Revenue, a book that has been named a top-five Marketing Book of the Year on Inc.com.