Case Study: A Thriving Membership Organization

One of the membership organizations that I like to follow is Costco. It is a good example to show to people who argue that membership is no longer a viable go to market strategy.

Costco has enjoyed exceptional membership growth over the years. The chart below from their 2010 annual report shows membership at the end of their fiscal year in August 2010. They reported 22.5 million Gold Star Members and 5.7 million Business Members.

As of the end of August 2011, Costco reported 25.0 million Gold Star Members and 6.3 million Business Members. That means Gold Star Membership has seen a five year growth rate of 44 percent and Business Members have grown by almost 21 percent.

A piece by Forbes about Costco that came out yesterday reports, “The renewal rates are approximately at the 89-plus percent range in the U.S. and Canada and 86% worldwide. Costco is also experiencing increasing penetration in the executive membership.” Forbes added that “in Q4 2011, the new member sign-ups witnessed an increase of 22% as compared to a year ago.”

Interestingly, Costco is upping membership fees by 10 percent on November 1. Prices will go from $50 to $55 for Gold Star members and $100 to $110 for Executive Members.  We will have to see if this impacts their membership numbers going forward. 

Obviously, every membership organization cannot be like Costco. However, it is a good reminder that when you deliver good value and market effectively, there are many millions of individuals who are ready and willing to sign up as members to participate in an organization.

4 comments:

Vinay Kumar said...

Great post Tony. It truly is about delivering value/experience.

In the case of COSTCO, rather then try to be all things to all people, my sense is they are very clear about who they serve best and what they stand for.

In other words, they never lose sight of their mission and from that clarity emerges their decisiosn and actions. Rest as they say is history.

Tony Rossell said...

Vinay -- Thanks for the comment. Good point. What I find interesting about Costco is how they have embraced the membership model. Membership includes a magazine, a member card, and member savings. Tony

Vinay Kumar said...

Tony,

To build on your excellent point, a key point that "emerges" is that for COSTO membership is a means to an end. In other words, their goal are sales and profits (desired impact) and membership (to drive loyalty...) is a means to that desired end.

In associations, my experience is that we talk more about membership numbers as if that was one of the primary objectives in itself, rather then just a means.

Perhaps associations would be better served if they more effectively made the connection between membership and impact, and not just talk in-terms of activities such as produced x number of conferences, publications, etc. but real impact on members and the profession and industry.

Of course, I realize identifying and measuring such impact in the association context is challenging. If done more effectively though, I believe it'll lead to stronger membership.

Vinay

Tony Rossell said...

Vinay -- Good point. I do think that more associations are using additional measures these days. Much of our client research includes questions that help us define the indispensability of membership. We also use NPS scores. These can be built into association performance goals to provide quantitative measures beyond member counts and dollars. Tony