How a Membership Mindset Can Help Reduce Churn

It was the early 2000s, and Robbie Kellman Baxter knew that one of her clients was onto something big. That client, Netflix, was pioneering a new use of the subscription model. Robbie —  a former Silicon Valley product marketer — saw the recurring revenue, predictable cash flow, and ongoing collection of customer data, and knew that it added up to an enviable business model. 

As Netflix took the world by storm, other businesses started to approach Robbie to ask her how they could become the Netflix of their respective spaces. “Whether that was news, or music, or bicycles, or dental pain management products, or clothes, there was a lot of interest in what it was that Netflix was doing,” Robbie recalls.

“So I started trying to create frameworks, trying to say, what are they doing? Which parts are applicable to other businesses, and which parts are just unique to that group of people solving that particular problem?”

Robbie is a consultant, keynote speaker, and author of The Membership Economy. She’s advised many of the world’s leading subscription-based companies, including serving on the advisory board of Strava. 

Her most recent book, The Forever Transaction, is a deep dive into everything consumer subscription. 

On an episode of The Sub Club Podcast, Robbie discussed with us the foundational frameworks of subscription services and the underpinnings of customer loyalty. 

Subscriptions, Membership, and the Customer Relationship

Businesses that use the subscription model may view subscriber acquisition as the end goal. And, in a way, that’s correct. After all, the customer’s decision to subscribe is an expression of their trust — their belief that their needs will be sufficiently met to the point that they won’t need to investigate alternatives. 

Charging for a monthly or annual subscription is a retention tactic, a right the organization earns from the trust of its customers. However, getting a customer to subscribe isn’t the same as earning that customer’s loyalty. That’s what the ongoing relationship is about, and that’s why it’s important to view customers through the lens of membership and what’s in it for them in terms of ongoing benefits.

Getting a new subscriber isn’t akin to crossing the finish line. It’s actually the starting line when it comes to understanding their needs and making sure they stick around.

“The first thing I always do with my clients: I say, Let’s focus on whom you’re making the promise to,” Robbie says. “What is the promise you’re making, and whom are you making it to? … And then we map out the journey. What is it? What is the goal that they have that is ongoing or the problem that they have that is ongoing? And what are the moments on their journey where you might be able to intervene and help?”

Also Read: How to Create App Paywalls that Maximize Revenue

Cultivating “Super Users” to Grow Your Membership 

As American Express was fond of telling us in the 1990s, membership has its privileges. If you’re in the club, you benefit. 

Membership isn’t beneficial only to members, though. Businesses that build and nurture a community of members also stand to gain, particularly from passionate members that Robbie calls “super users.”

Super users are incredibly powerful allies for businesses that use subscription-membership models. They identify, refer, and help onboard new members, giving them guidance on how to easily navigate and use the service or product. 

“These are evangelists who bring in other members,” Robbie explains. “These are people who give you feedback on your products and services — which sometimes doesn’t feel like a gift but always is a gift.”

Subscription Fatigue Is Real — Here’s Why Consumers Don’t Subscribe 

Subscription services are far more ubiquitous today than they were back in the early days of Netflix, and they add up fast! This has contributed to wariness due to “subscription fatigue.” 

Robbie traces subscription fatigue back to three root causes:

1. Bad Product-Market Fit (“Why Am I Subscribing to This?”) – Does the service being provided justify subscription pricing? If it’s something the customer is unlikely to use frequently, they will view being asked to pay a recurring fee for the service as unfair. In such situations, the use case doesn’t justify the investment.
2. Subscription Guilt – The more features and benefits packed into a service, the better, right?  It may seem counterintuitive, but offering a customer far more than what they intend to use can make them feel as though they’re paying for more than they need. Imagine a growing stack of unread magazines on the nightstand. The customer is paying for all of that content but hardly reading any of it. That makes the customer feel like they’re just throwing money away, which makes them feel bad about themselves, Robbie explains.
3. It’s a Trap! – We probably have gyms to thank for this one: The customer is promised the ability to cancel anytime, but the hoops they must jump through to do it say otherwise. If a customer can’t quickly figure out how to cancel a subscription on their time and their terms, they’re far less likely to commit to it. 

Why Customers Cancel (Hint: It’s Probably Not Due to Price)

When a product or service isn’t selling as well as hoped, the first impulse of a business is to look at lowering the price. But making a subscription cheaper means nothing if the subscriber isn’t deriving any value from it.

In reality, unless the price is completely out of line with the value of the subscription, people will be happy to pay for something they use often. Robbie points to the value she gets from her Amazon Prime membership: She’s not exactly sure what it costs per year, but she uses it often enough that she doesn’t really care how much she’s paying for it. 

The problem for a given subscription service could be a lack of awareness of what problem the service purports to solve. Instead, it could be that subscribers can’t figure out how to use the service to solve their problems, which stems from a poor user experience or poor onboarding process. Maybe the customer has run out of content they find interesting (product assortment) or the service isn’t working as intended (operational issues). 

“If I’m not using it, it doesn’t matter if it’s a dollar or a hundred dollars,” Robbie says. 

Also Read: How Subscriptions Revolutionized Darkroom’s App Business

At the End of the Day, It’s All About Value 

See subscribers as people, not just data sets — that’s an essential step to reduce churn. 

It’s not solely about making the sale — it’s also about keeping the customer. Doing that requires a keen understanding of users’ wants and needs. 

Before a business can claim a customer’s loyalty, it must first bring value. And to bring value, a business needs to know its customer base.

By understanding its members, businesses can build customer relationships that endure.

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This article is based on an episode of our podcast, Sub Club, which explores best practices and insider secrets for scaling your app. Subscribe via Apple, Google, Spotify or wherever you get your podcasts.