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Review: The Membership Economy by Robbie Kellman Baxter

membershipThis review first ran in the Aug. 17th edition of The Hamilton Spectator.

The Membership Economy: Find Your Superusers, Master the Forever Transaction and Build Recurring Revenue

By Robbie Kellman Baxter

McGraw Hill

$33.95

My wife and I had a perfect meal the other weekend.

We went to Culantro Peruvian Cookery on King William Street in downtown Hamilton.  From the house-made purple corn juice and chicken and beef empanadas to the shrimp ceviche and stir-fried skirt steak, chef Juan Castillo cooked an outstanding dinner that didn’t break the bank.

We both thought Culantro had just opened its doors. Turns out it’s been around a while.

So here’s a business opportunity for an entrepreneurial Hamiltonian.

Tell me where to eat. Introduce me to new restaurants and hidden gems like Culantro. Profile the owners and chefs who serve up family recipes and authentic dishes free of deconstruction and infusion. Connect me with an online community that isn’t overrun with follow-the-crowd gastronauts and Instagramming hipsters.  And send me a special offer every month.

In return, you can bill my credit card 12 times a year and I’ll encourage everyone I know to sign up for a subscription and pay their dues.

“Membership is the Holy Grail of business because recurring revenue is predictable and smooth,” says Robbie Kellman Baxter, author of The Membership Economy and consultant to Silicon Valley companies. “Smooth revenue makes it easier to manage a business, to justify additional investment, and to plan for the future.

Instead of customers, you have members. And rather than one-off sales, you have what Baxter calls forever transactions.

“An organization able to build relationships with members – as opposed to plain customers – has a powerful competitive advantage. I’m convinced that the membership economy will have as profound an effect on society as the Industrial Revolution or the spread of the automobile.”

Build a membership organization and you may find yourself blessed with highly loyal and lucrative superusers who will help grow your business. “Superusers engage, attract and actively recruit new members,” says Baxter. “An organization achieves cultlike status when there is a small group of very devoted supporters who care about the organization very much – some might say too much.”

A few big trends are fuelling the membership economy. Technology is making it easier than ever to run loyalty programs, subscriptions and online communities.

Baxter says we’re also moving along the continuum from ownership to access. “As individuals grow frustrated with the burdens of owning, caring for, and storing too much stuff, they are looking for ways to minimize that stress. They are also experiencing a need for meaningful connection and community.”

Netflix is one of the membership economy poster children profiled by Baxter. Netflix killed the video store and wiped out DVD aisles at big box retailers with a better value proposition. Subscribe to Netflix and you can stream an unlimited number of shows and movies to your TVs, tablets and phones for a nominal monthly fee.  As an added bonus, Netflix delivers original content like House of Cards, Orange is the New Black and Wet Hot American Summer. Membership has its privileges.

Bricks and mortar businesses are also joining the membership economy. Kepler’s Books in California briefly closed its doors in 2005. Customers rallied to raise new capital, renegotiated a better lease and launched a literacy circle membership program. Membership dues funded award-winning events and community activities that brought in new customers. The store’s events were then spun off into a new arts and letters non-profit. “Today, Kepler’s Books has become a role model for independent bookstores from all over the world, many of whom are turning to their communities for more formal support in competing against online retailers and major chains,” says Baxter. “Kepler’s has gone beyond the typical loyalty program that many retailers use and built membership into its whole model.”

If you’re looking to join the membership economy, start by reading Baxter’s book. It’s well-researched and offers practical advice. She also walks through all the strategies and tactics required to build a successful membership organization from the ground up. The first strategy is the most important.

“If you want your organization to truly be part of the membership economy, start with the team and the culture,” says Baxter. “You need to have the right people and prioritize the right values.”

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