If membership as a way to connect with your community and
customers is a dead or dying concept, why are so many for-profit companies
running to embrace it?
There are lots of success stories around membership. Here are some key statistics from one
for-profit organization that focuses on membership, Costco. From new member input, to growing the top
membership tier, to maintaining a high renewal rate, Costco’s numbers are enviable.
New Member Input
-- Costco continues to see a growth in the addition of members. They added 2.3 million members in 2009, more
than 4 million in 2011, and over 1.6 million new members joined Costco during
the first two quarters of fiscal 2013.
Tiered Membership
– Costco offers a higher tier of membership called “Executive” membership for $110
compared to the typical $55 rate. Today
that higher tier of membership represents one-third of Costco’s overall members
and is rising.
Membership Renewal
– The membership renewal rate for Costco has made incremental improvements over
the past year. It now stands at 89.9% and
Costco even had a fee increase of 10% late in 2011[1].
Why has Costco been so successful with their membership
program? I think there are four main
ingredients that have contributed to their success.
1.
Market Size – One advantage that Costco has over
most membership organizations is the enormous market potential that they
enjoy. They are a global brand and there
are a lot of consumers. But there is
also fierce competition for the dollars of these consumers.
2.
Product Value – Membership’s high renewal rate
demonstrates that consumers are receiving value for their membership
dollar. The price and quality of goods
are excellent.
3.
Promotion – Membership allows Costco to focus
its marketing efforts on a core group of customers instead of having to
broadcast messages to the general public.
This targeting is much more economical.
4.
Economics – Membership allows Costco to deliver
goods almost at cost to its members and instead make its profits from membership
fees. Those fees make up only 2% of its total sales revenue, but 77% of
its operating income [2].
Costco is only one example of both for-profit and non-profit
organizations that have built successful enterprises around membership programs. So if you are in doubt of the benefits of a
membership program, don’t raise the white flag.
There is hope.
I will be sharing some of this hope on August 4th at
the ASAE Annual Meeting in Atlanta, where I will present a session titled, Diagnose and Solve Your Membership Marketing
Challenges. If you are at the meeting, I hope you can
attend the session and then stop by and say “hello.”
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