Considering a Membership Program for Your Ecommerce Store? What You Need to Know
What did we do before we had Amazon Prime? For online shoppers, the feeling of being an “insider” and the perks that come with it such as discounted products, fast shipping, and easy returns are hard to beat. And this model has paved the way for other big brands to begin membership programs of their own.
Many business owners are under the impression that a monthly membership only seems fitting for consumable products that would lend themselves to some sort of subscription. This could include food, supplements, makeup, skincare, pet supplies, and the like. But that’s not the case!
Now that consumers are conditioned to understand and appreciate the perks of a paid membership, it’s becoming possible for a variety of businesses to launch a membership program—even if they don’t fit the traditional model. Depending on your product offering, this could create a major opportunity for your business.
In this post, we’ll discuss the benefits of membership programs, what member perks could look like, what types of brands this works best for, and four key decisions needed for launching a successful membership program.
Benefits of Membership Programs
Membership programs benefit both the brand and the customer. On the business owner’s side, it encourages monthly recurring revenue, which is a golden metric every brand should be trying to increase for stability and growth. It also increases the lifetime value of customers by increasing repeat purchases and even average order value. This creates stronger customer loyalty as well. All of these metrics are extremely important for building a long-lasting, stable, and healthy ecommerce business.
On the customer side, the benefits that members receive are up to you, but they must have massive perceived valuable. We’ll get into a few examples of what this could look like next.
Common Perks Associated with Membership Programs
Here are a few of the most common perks that membership programs offer their customers:
Special shipping rates
This could be free shipping or discounted express shipping. Typically customers will need to order a certain amount to qualify for the free shipping option.
Returns are not convenient for the business or the consumer, but it is just something that comes with the ecommerce shopping and selling experience. Rather than offering free returns to everyone just to stay competitive, what if you made this a members-only perk? This way, the cost of membership can help offset the costs you have from processing returns.
Early access perks
Another great option for membership programs is to offer members early access to new products and promotions, or exclusive access to valuable content. This VIP treatment adds to that “insider” feel, generates excitement, and feels valuable for customers who love your brand.
If you have adequate product margins for this, you could also offer special discounts for your customers. This could either be secret sales for members only, or it could be a steeper discount than regular customers get during promotions.
What Types of Businesses or Products Are Good for Membership Programs?
When assessing whether a membership program is right for your business, it’s important to consider your product line and your customers’ purchase behavior.
If your brand offers a single product, or products that don’t have a need for repeat purchases, there really isn’t a need for a membership program. But if you find yourself here, we strongly recommend investing in research and development for your product line. Offering new products and acquiring repeat customers are critical to move out of the survival stage of business and into the health stage.
If your product line does provide opportunity for customers to buy somewhat regularly, offering a membership program could be a great test— even if you’re not a consumable or subscription-based brand!
Here are a few types of businesses that we see membership programs doing well for:
- Consumable products such as food or supplements
- Replaceable products such as skincare and makeup
- Apparel and accessories brands (Not many fashion brands offer a membership program, but think about it— there is no real limit on how many products customers could purchase from you. Offering a membership is a great way to pull customers into your ecosystem and encourage purchases every month or every quarter)
- Magazines, books, or digital content
- Brands with products that have a software element or that benefit from regularly released content
4 Key Decisions to Make When Launching Your Membership Program
If you’ve decided to start a membership program, there are four key decisions you’ll need to make in order to have a successful launch.
1. What is the value of your program?
We’ve discussed above the ways a membership program can benefit the customer and the common perks offered: shipping, discounts, exclusive access, and/or support. Whether you choose to offer one or all of these, the goal is to create a program that has high value to your customer and is easy to deliver.
2. What will membership cost?
The membership fee ultimately depends on the price of your product, how much value customers will receive (or money they will save) by being a member, and how much revenue it generates for your business.
If you’re looking to do an Amazon Prime-style membership, you will likely need to have a very minimal fee and rely on the increased customer lifetime value for the financial win. You may find yourself at break even (or possibly a loss) if you solely look at program fees vs. the cost of delivering the perks. But that’s not necessarily a bad thing if the program increases repeat purchases and customer lifetime value.
For comparison, here are a few costs associated with popular membership programs from various business types. The benefits of each of these brands’ programs vary, but most fall into the four categories mentioned: shipping, discounts, exclusive access, and support.
- Costco and Sam’s Club both charge anywhere from $60 to $120 per year
- Amazon Prime is $139 per year
- Walmart Plus is $98 per year
- REI is $20 for life
- BeautyCounter is $29 per year
- Bed, Bath & Beyond: $29 per year
- Credit cards range from $30 all the way up to $700 per year, depending on the company and the perks involved.
3. How will you implement it?
The next step is to determine how you will set up the program logistically. There are a few components to think about here:
Email automations: Make sure customers who sign up for membership are tagged accordingly and then set up necessary automated email flows for them. These include welcoming the customer to the program, outlining their perks, and then reminding them when their membership renews.
Regular email communication: When developing email content, speak to your members differently, as if they are VIPs. If early access to sales or new product launches are a part of the program, create separate emails for your members around these events.
Customer support: If elevated customer assistance is a part of your program (it should be), make sure your customer service and fulfillment teams are equipped to help.
4. How will you pitch and launch the program?
Lastly, you’ll need an action plan for launching your program and pitching it to your customers. For any new program, we typically recommend beta testing first with a small group. Identify your top customers, reach out to that segment and offer the membership at a discounted rate for a limited time. Starting with this smaller group will allow you to test the logistics of the program before rolling it out on a larger scale. It’ll also be a great opportunity to collect feedback from those customers.
If beta testing goes smoothly and customers are happy, begin marketing the membership program on your website for all customers. Send emails about it outlining the value of the program, and add an email about it to your post-purchase sequence for first-time customers. You can also market the perks of membership on the product page or the checkout (for example, highlighting savings or shipping costs for members).
How to Measure the Results of Your Ecommerce Store’s Membership Program
Wondering how you will know if your membership program is successful? The goal is getting customer investment which in turn delivers repeat purchases. To assess how well you’re achieving that goal, there are a few metrics to consider.
The first lens to view success is looking at revenue and customer orders. More specifically, you can track your store’s repeat purchase rate and cutstomer lifetime value. Both of these should be increasing if your membership program is going well.
The other important way to look at this is from a business efficiency standpoint. Consider the return rate for members and non-members, as well as the cost of shipping for each. Most importantly, look at the profitability of your business with the membership program and without. Ultimately, net revenue must be better with the program in place than without. If the economics of it don’t work, you’ll quickly go out of business.
Is a Membership Program a Worthwhile Investment for Your Brand?
Offering a membership program gives you a chance to deliver massive value and a better brand experience for your customers in exchange for a small investment on their part. It also creates brand loyalty, which gives you a leg up on your competition and can increase monthly recurring revenue. If your product line makes sense for this and your business model allows you to do it profitably, both you and your customer can win!