User Operation: How to correctly design a paid membership system?

In the past month, I have had some exchanges and communications with relevant industry insiders and discussed more about the paid membership system, which I would like to share with my readers here.

1. Is iQiyi membership the correct way to pay for membership?

On August 20, iQiyi released its unaudited financial report for the second quarter ending June 30, 2019. The financial report shows that iQiyi's revenue in the second quarter of 2019 reached 7.1 billion yuan, a year-on-year increase of 15%. Among them, membership service revenue was 3.4 billion yuan, a year-on-year increase of 38%. By the end of the second quarter, its membership subscriptions exceeded 100 million people, and the scale of subscription members increased by 50% year-on-year.

It is obvious from the financial report that the revenue from membership subscriptions has exceeded online advertising and accounts for 48% of the total revenue.

iQiyi also made its membership reaching over 100 million a key public relations event, sparking discussions about who among Tencent Video and Youku Tudou would be the next member of the 100 million+ club.

It makes no difference.

For a long time, online advertising revenue has been an important source of income for video websites. In iQiyi's second quarter financial report, online advertising revenue was shown to be RMB 2.2 billion. Not only did it not grow, but it actually fell 16% year-on-year.

To put this situation in the most direct terms, iQiyi has converted the revenue that should have come from advertising into content subscription revenue. Moving money from the left pocket to the right pocket does not break the overall revenue model.

Can the content subscription model support the future of video websites like iQiyi?

The once popular American MoviePass website shut down its discount ticketing service on September 14.

MoviePass was once hailed as an innovator that disrupted the movie box office business. It launched a membership service that costs $9.95 per month and allows you to watch one movie a day. If you are "diligent" enough, you can watch 30 movies a month. After only one year of use, this model had 3 million members, overturning the monopoly of cinema giant AMC in the United States. The company was hailed as a reformer that disrupted the movie box office business. MoviePass founder Mitch Lowe said that number will rise to 5 million in 2019.

——But the end of the story is that MoviePass did not survive 2019.

There are basically three reasons for MoviePass's closure:

1. Continuous content investment

The reason why content subscription members pay is because they want to watch the latest content constantly and watch it at "extremely favorable" prices, which forces MoviePass to continue to subsidize content and continue to lose money;

2. Low-price competition among peers

After MoviePass's successful membership growth, AMC, the largest cinema chain in the United States, quickly launched its own membership subscription service - AMC Stub A-List, which allows users to watch 3 movies per week and enjoy all AMC membership services, and it costs only $19.95 per month. Although the price is twice as expensive as MoviePass, AMC relies on its strong information support. It allows seat selection online in advance and supports all movies including IMAX 3D. The package also comes with many discount information, including free upgrades to popcorn and drinks, and has gained the support of a large number of fans.

Another major cinema chain, Cinemark, has also launched similar products to AMC.

The fatal blow came from Sinemia, another player in the monthly movie subscription market: it launched segmented packages such as 3 movies for $14.99 per month and 2 movies for $9.99 per month, with no restrictions on theaters or time periods, and also including IMAX and 3D film types.

3. Value-added sales are sluggish

MoviePass's original closed loop was to develop and lock in users through content losses, and then sell profitable value-added services to users. For example, on iQiyi’s VIP membership channel, you can already see coupons for sale from various e-commerce companies.

However, MoviePass's expansion into this area was very disappointing, and ultimately resulted in continued losses. The company ran out of money and had to go bankrupt.

Now, if we replace MoviePass with iQiyi, we can probably see the same story in the future:

When membership income increases, advertising income decreases;

If the loss of content decreases, the number of member users will decrease;

When business models innovate, peers will copy them.

Dead loop.

2. Is Ali 88 membership the correct way of paid membership?

On August 8, 2018, Alibaba launched Ali 88 Membership, a service worth 2,000 yuan, sold for 88 yuan. It received rave reviews immediately.

On August 8, 2019, Alibaba further upgraded the benefits coverage of 88 members, and the number of brands offering 95% discount increased from 88 to 388.

According to Alibaba's promotional materials, 38 out of 100 88VIP members converted to Youku members, 32 opened Ele.me memberships, and 27 were Taopiaopiao members. The average order value of 88VIP users on Ele.me was also about 30% higher than that of ordinary users.

Compared with other paid memberships on the market, the price of 88VIP is not high, but it is the only paid membership with a threshold. Only those with a naughty value of 1,000 are eligible to join for 88 yuan; if the naughty value is less than 1,000, you can join for 888 yuan, or pay the IQ tax at the promotional price of 288 yuan. This also roughly outlines the user portrait of 88VIP: high activity and high purchasing power, which is obviously the new middle-class group that merchants love most.

But, but, but,

Alibaba, which loves to brag and tell stories, refused to say how many membership cards it had issued (sold) regarding the 88VIP incident.

The core of 88VIP is to be used for “ attracting new users ”, that is, to direct traffic between users on different platforms. According to official announcement, for every 100 membership cards, 38 new Youku members are created, or 32 new Ele.me members are created. So if we look at the dismal Youku membership data and the Ele.me data which is far suppressed by Meituan, we can understand the actual data volume of 88VIP.

The essence of the 88VIP membership card is just a “list of useless businesses”, which still follows the logic of Master Jack Ma who collects IQ tax through grand narratives.

An old friend of mine, Sui, once said that piling 100 pieces of shit together will only form a bigger piece of shit.

3. How to correctly design a paid membership system?

I am in "VIP for All: Why do we need a paid membership system? How to implement paid membership? 》 As mentioned in the article, an incorrect membership system design will turn paying members into "new members" (such as 88VIP) or "income" (such as iQiyi).

Amazon, which launched the Prime membership system as early as 2005, has been steadily increasing tangible membership benefits while silently bearing the pressure of cost growth brought by the membership system. Amazon only focuses on two points for Prime members: repurchase frequency and renewal rate.

Looking at the domestic situation, the design of paid membership system is almost uniformly limited to "price discounts" and "service priority". Under the pressure of "attracting new customers" and "generating revenue", it is easy to form a "useless accumulation" and eventually become a formality.

The core design essence of the paid membership system is to always pay attention to what scenarios and pain points of users have not been met yet, form a community of interests with members through the membership system, and then jointly research solutions.

The entire design mindset, product design, and service project origin should always focus on whether the user experience can be improved.

The principle of membership pricing is: what is the money that customers don’t want to pay in their hearts? In order to help customers save this expenditure, we mobilize customers to pay in advance in exchange for a more lasting free service.

—Free is the most expensive, isn’t it?

Author: Zhang Dongwei

Source: Zhang Dongwei (dushibuluo)