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105. Subscriptions and Membership Programs: A Behavioral Economics Perspective

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Today, we are going to be talking about subscription models and membership groups. I have been thinking about an episode on this for a long time. As many of you know, if you’ve been listening and following The Brainy Business for a while, I launched a membership group at the beginning of 2020. It’s called the BE Thoughtful Revolution, and I’ll use examples from my experience of setting that up (as well as others) throughout the episode.  At the center of any really strong business is finding the experience people want (the biggest benefit to them) and showcasing the value in a way that makes it easy for them to say yes.  Even if you are thinking about creating a subscription or membership now because you think it will benefit your business, solid customer experience has to come first in the design and final decision. You need to think of the people you are creating this for, what they want and what they will be excited to pay for.  In this episode I’ll talk about the behavioral science concepts behind subscriptions and memberships, how to consider if they are a fit for your business, and then I’ll do a Q&A with the actual questions listeners like you posted to me on social media. If you don’t yet follow The Brainy Business, you can find me as @thebrainybiz on Facebook, Twitter and Instagram. Links to all the socials below!

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Show Notes:

  • [01:35] The environment is going to be changing constantly over the coming months (and possibly years) as we all adjust to the impact of coronavirus.
  • [02:24] What we can do is take a look at our businesses and industries to determine how to reinvigorate the offerings we are putting out there, and provide them in a way people want to do business with us instead of what was convenient for us to set up in the past.
  • [04:03] At the center of any really strong business model (subscriptions and memberships included) is finding the experience people want, the biggest benefit to them, and showcasing the value in a way that makes it easy for them to say yes. 
  • [05:43] Being inside a business or industry, it is far too easy to get hung up on the specifics of what you do or offer. The problem is then you lose the big picture and in many ways don’t see how you are becoming obsolete.
  • [07:23] I remember my professor saying, “People don’t want a drill, they want a hole.” Such a simple shift, but it completely changed my brain and approach to business at that moment.
  • [09:15] Melina shares a story about Henry Ford from Harvard Business Review. 
  • [11:47] Ford put customers first. He found a price where the masses could buy a car and then figured out how to build a business to make it happen.
  • [14:13] Thinking about customer experience is always a great place to start.
  • [15:31] Any business model takes work to create value and be something people want.
  • [17:41] It is important to think through what you will be offering and how it compares to what you do now.
  • [18:04] A subscription is something that people pay for on an ongoing basis and they get access to a product or service.
  • [19:52] Another model for subscriptions that has become very popular is the “free version” and “paid version” models.
  • [21:05] The difference with a membership model is that you are typically paying for the right to have access to things, but you don’t necessarily have to take advantage of everything included.
  • [23:24] With a membership, you still have the benefits of a subscription type model, that you can plan for payments to be coming in regularly, and the people who sign up get more for less than what they would pay for single-use or to buy all the things themselves.
  • [25:05] If you are on retainer, someone is prepaying for access to you for a certain number of hours.
  • [26:24] Is a membership or subscription right for you? Walking through a “writing club/coach” example. 
  • [28:36] You will need to do the upfront work to set everything up, but eventually, you could hire someone to manage most of the group stuff, so it doesn’t take up too much of your time, which frees you up for more time at your $200 an hour rate.
  • [29:54] Taking the risk out makes it an easy yes for people.  
  • [31:40] If you do set up a membership group or subscription, consider launching at a discounted price for a very limited time to help set up a foundation of participants.
  • [32:32] People pay for all kinds of things and are happy to do so when they know what the value is.
  • [34:01] The value proposition is clear because there is an established “other option” that is more expensive. 
  • [35:07] If you don’t consider and establish the comparison point and point it out with the proper high anchor, your selling conversations will be a lot more difficult.
  • [37:06] Framing, anchoring, relativity, and knowing your value are very important in the way you communicate any opportunity.
  • [39:13] Instead of creating an offering that seems like the best fit and offer for your business and then finding a way to sell it to people, start with what they want and find how that can be done by your business and if it is actually a fit for you.
  • [39:38] Trial periods are really helpful in letting people see the value of the offering, so they can be useful.
  • [42:18] I tell clients all the time that not everyone is your customer.
  • [43:36] Narrowing down your scope makes it easier for people to find you, know you are a fit for them and have confidence in your offer.
  • [44:57] The first step is to know what you want to nudge people toward, what the best offer is for your business.
  • [46:49] There are lots of different ways to frame the message and help it to showcase what is the best fit for your business. Try to think outside the box. 
  • [47:52] You can do whichever makes sense for your business so there is no “only” way to price. You should go with two options max. 
  • [48:37] When it is a monthly payment, you are able to get the value as those payments are made, in smaller doses, versus needing to help the conscious brain justify a large amount once a year, where you could lose people.
  • [52:49] It is definitely easier to sell things when you have a solid email list.
  • [54:40] Once you have done some of this prep work to find what your niche will want, just go for it. Build it, pick a model, choose your pricing, and sell it.
Speaking of membership groups, now is a great time to join the BE Thoughtful Revolution – use code BRAINY to save 10% Thanks for listening. Don’t forget to subscribe on Apple Podcasts or Android. If you like what you heard, please leave a review on iTunes and share what you liked about the show.

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