Taking a Page from DTCs with Membership Programs

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Taking a Page from DTCs with Membership Programs

By Rob Ristagno - 05/01/2020

During the coronavirus health crisis, many retailers have closed their brick-and-mortar locations, meaning consumer goods brands have lost distribution through that channel. Sadly, many of these outlets will never reopen. As consumer goods brands, we need to take stock of how to best reach our end consumer in this new environment.

Even before the pandemic, we’d seen a dramatic uptick in membership programs across all industries. From fashion-focused companies like Rent the Runway, to personal grooming DTCs like Ipsy and Harry’s, to meal kit brands like Blue Apron, suddenly memberships are everywhere.

That’s left many brands curious about direct-to-consumer membership programs: Why do they work so well, and is it time to establish one? And now, without the option of in-person selling, memberships look even more appealing.

Let’s take a closer look at the consumer behaviors and mindsets that are driving the shift toward memberships, and how you can use your data to assess whether or not a membership program is the right fit for you.

Consumers Are Thinking Differently These Days

For decades, consumers bought things with a focus on ownership. Whether it was a new car, a new couch, or a new pair of shoes, the intent was to buy the item and keep it for as long as it lasted or was useful.

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However, a recent report from Zuora indicates that there’s been a big change in consumer mindset over the past few years. Their surveys showed that 68% of adults now say that owning things is no longer a status symbol. Rather than looking to accumulate things, consumers now seek access to experiences.

Consumers still want to use the most up-to-date products, but they don’t want to commit to them forever. They’d much rather be able to trade them in for the next, newest object to come along in the future, rather than make a long-term commitment to owning the current model.

Memberships aren’t for Everyone. Check Your Data First

Even though numerous brands have built membership programs that work well for them, it’s important to remember that they might not be the right fit for your brand. It’s never a good idea to change your business strategy simply because of a current trend in your industry. Instead, it’s best to start with data and research.

Begin by identifying your highest-value consumer segments. This starts with tapping into data you have on existing customers. From there, build a Value Matrix, with consumer segments on one axis and customer lifetime value on the other. Focus on the consumers who land in the highest-value cells in the matrix.

Then reach out directly to those consumers for input. Invite some to sit down for an interview where you can learn more about what they love about your brand and what they’d like to see more of from you. 

Finally, validate these qualitative findings by surveying a broader swath of your top-tier consumers.

Once you’ve collected your data, analyze your findings. Does the data indicate that a membership could serve consumers best? If so, create away!

But if there’s another way for you to serve your brand’s biggest fans more effectively, don’t build out a membership program just so you can say you have one.

If you do decide to create a membership, continue to lean into your data. Take a look at how consumers react to your offerings, and tweak your program along the way to provide the best possible experience. When you’re guided by data, you can craft a membership program that offers consumers a best-in-class experience.

Rob Ristagno is CEO of Sterling Woods Group and author of A Member Is Worth a Thousand Visitors.

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