How to build your user membership system?

Do you need a membership system?

The membership system refers to distinguishing user types, dividing ordinary users into member users, and then providing different products and services or differences in discounts for ordinary users and member users. By managing users through a membership system, we can more effectively strengthen the sense of belonging of these users and even obtain more user data/information, thereby understanding their interests and consumption habits and exploring their intended needs.

The membership system can effectively reduce traffic costs. Taking Yunji’s 2018 data as an example, the average consumption of Yunji members was 16.7 orders/2,471 yuan, which is much higher than the annual consumption level of 3 orders/446 yuan for non-member users. The average number of orders per member has clearly surpassed JD.com (8.3 orders) and Vipshop (7.2 orders). The corresponding maintenance fee for a single member also dropped from RMB 217.7 in 2017 to RMB 112.8, and the overall marketing cost rate dropped from 11% in 2017 to 7.3%.

This means that Yunji has achieved two goals by transforming its membership system:

(1) Explore the value of top users and maximize their value;

(2) Reduce secondary marketing costs;

The membership system seems pretty good!

However, not all products are suitable for building a membership system.

The membership system is essentially just a means of managing users. In some scenarios, there are more effective user management methods than the membership system.

If any of the following points is met, you may need to be more cautious before building a membership system.

(1) There is no need to increase user switching costs through a membership system;

(2) There is no need to further increase stickiness for top users;

(3) Currently lacks the ability to operate traffic in a refined manner;

(4) When building member benefits, the cost cannot be further reduced in terms of profit;

(5) If a membership system is established, it is just icing on the cake, not essential;

(6) It is unable to provide member users with services that are more advantageous than existing services. The barriers that Costoc builds through its members come from the continuous optimization of the supply chain and a cost structure that is steadily lower than that of its competitors.

(7) The product is in its early stages and has not yet established a foundation of user trust, which means that top users are temporarily missing and the membership system is not a high-priority need at this stage;

Of course, just as there are inappropriate situations, there are also appropriate situations.

The following situations can be judged as suitable for building a membership system:

(1) Users already have a certain level of knowledge about the product and have a certain base of high-value top users. The membership system is based on a certain level of user retention. If user retention is very poor, it is definitely not because the user lacks a membership. Members can only reduce the chance of user loss through their membership on the basis of a certain retention rate.

(2) The product or service has a high-frequency demand feature. For example, vegetables, rice, oil and salt are necessities of life, and users will be happy to obtain membership to obtain price discounts or better service quality. But if it is home furnishings, a direct pricing strategy may be more effective in converting users than building a membership system. After all, users themselves don’t know when they will visit again.

(3) It can build membership benefits that are attractive to users, whether it is price discounts or service privileges. This service can be differentiated based on the existing foundation, or it can provide more advantageous services in the industry.

(4) Possessing the ability to carry out refined operations on users. Member users = high-value users, who will have more output than ordinary users. On the basis of encouraging more users to become members, it is also necessary to carry out refined operations on users who are already members, thereby increasing the switching costs of some users.

Top-down membership system

The creation and implementation of a paid membership rights system requires the concerted efforts of the entire enterprise. Generally speaking, when promoting the construction of a membership system, the driving force behind it is obvious. This top-down construction of execution goals is conducive to the effective use of invested resources. From the perspective of corporate strategy, it is conducive to activating internal corporate resources, maximizing the value of existing businesses, and forming synergy effects.

The main business + corporate strategy are differentiated to create corresponding rights and interests content. In terms of rights and interests, it is necessary to accurately hit the user's pain points and promote the construction of the membership system from top to bottom. The attractiveness of products and rights and interests is closely related to consumers' desire to pay and willingness to renew.

When designing business models and products, companies can consider whether to implement a membership system and even what type of membership system to adopt.

Secondly, companies need to decide what benefits they can provide to paying members based on their main business, and set the business that the company excels in and its main business as the main membership benefits, which should become the primary factor in attracting users to pay. At the same time, companies should coordinate internal resources and integrate businesses that can increase user stickiness into the benefits system. In addition, appropriate means, such as cross-border cooperation, may be able to achieve the linkage effect of paid members and realize the effect of traffic interconnection and brand endorsement.

If only one person or one department does it, their energy is limited and the expected results cannot be achieved.

Especially when the benefits of membership systems on various platforms are highly similar and differentiation becomes more difficult.

What type of membership? What kind of rights are given?

The following are the common types of membership:

(1) Undifferentiated membership : Undifferentiated membership can also be called universal membership. Users can obtain membership by providing relevant information, and there is no difference in membership rights and interests.

(2) Membership levels : Members are divided into different levels based on user behavior data, and members of different levels enjoy different rights and interests.

(3) Paid members : Paid users are given special rights and benefits. Paid members need to pay separately for their membership before purchasing any product.

In a product, several types of members can appear separately or at the same time, depending on the extent to which users need to be grouped in order to maximize benefits.

For example, JD.com’s membership system and Taobao’s membership system both implement a “dual track system”, meaning that paid members and non-paying members exist at the same time. Among them, non-paying members are divided into membership levels based on "points value".

Non-paying members often have the following business forms:

Taobao’s non-paying membership classification standard: Taobao value. The size of the Taobao Points determines the rights and interests enjoyed by non-paying members, and also determines the discounts that can be enjoyed when purchasing 88VIP.

JD.com’s non-paying membership grading standard, JD Enjoyment Value. The size of the Jingxiang value determines the rights and interests enjoyed by non-paying members. The more you shop and the more you spend, the more Jingdou you will get back. The higher your Jingxiang value, the higher your membership level will be, and you will enjoy more membership benefits.

Paid memberships often have the following business forms:

Threshold type: Club model, membership is a shopping "ticket" and user levels are not divided according to consumption. Exclusive membership is based on the necessity of "exclusive" shopping and is currently only used by membership-based warehouse supermarkets. The exclusive system focuses on groups with relatively consistent needs, and uses the cost of expanding new users and new categories to continuously improve operational efficiency in the original fields, forming a deep low-cost barrier. A typical example is Costco.

Ecological type: includes retail and non-retail (media and other cross-industry rights) benefits, suitable for Internet companies whose main business is retail and have a cross-industry full ecological layout, with the purpose of cultivating relatively weak businesses within the system. Ecological companies stand on a higher position and consider user stickiness and monetization from a system perspective. The rights and interests transferred to members in the main retail business will be recovered through various monetization channels such as advertising and content. Typical representatives include Amazon and Taobao.

Tier membership is usually based on a points system:

Points system: Member levels are differentiated based on accumulated consumption, and there is no clear causal relationship between membership and whether or not a member has paid. Retail companies still make profits from the difference between purchase and sales of goods. The points system breaks down the value of irreplaceable services into the repeated consumption of general products, stimulating the sales of disadvantaged products. A typical example is Sephora in the United States.

Division of Member Rights

Common membership benefits in e-commerce can be divided into the following three categories: price discount membership benefits, service membership benefits, and extended membership benefits . Among them, price discount is the most common membership benefit. For example, JD.com offers certain discounts on branded goods and high-profit clothing. Secondly, member-priced goods and coupons issued every month are all price discounts.

Price discount membership benefits:

(1) Product discounts

(2) Points Rebate

(3) Coupons

(4) Member Day Special Offer

(5) Member-Priced Products

All price-discount membership benefits are "hard costs", and the benefits transferred to members need to be "balanced" with the membership fees or the additional costs after users become members.

Service Member Benefits:

(1) Logistics services

(2) After-sales service

(3) Customer service

Providing a higher level of service above the existing standards for ordinary users requires more cost investment.

Extended membership benefits:

(1) E-reader

(2) Video websites

(3) Offline discounts

Membership metrics:

Ideally, the following three indicators are generally used to measure the effectiveness of the membership system: penetration rate, conversion rate, and renewal rate.

(1) Penetration rate refers to the proportion of all users currently served by the enterprise who have become paying members or high-level members;

(2) Conversion rate refers to the proportion of users who are converted from non-paying users to paying members after the company has targeted and guided certain specific users to pay within a period of time;

(3) The renewal rate is the key to determining the user life cycle and is the core indicator of concern for companies developing paid membership. The renewal rate represents the proportion of paid members who continue to pay to extend their membership when their membership expires; the corresponding one is the paid member churn rate. Generally speaking, companies hope to increase the renewal rate and reduce the churn rate, which means that paid members have higher stickiness and that the company's rights and interests are attractive to paid members.

Some of the Jingdong membership benefits intercepted:

It can be seen that JD.com’s main membership benefits are still concentrated on price discounts, supplemented by service-oriented membership benefits, and some expanded membership benefits have been expanded through cross-industry cooperation.

Summarize

Judging from the existing membership operation cases in China, the barriers to emulation of the membership system itself are not high. There is even a high degree of convergence in the rights and interests of members of various companies. When developing a membership system, companies are more focused on fully mobilizing and leveraging their own resource endowments, and effectively reducing secondary marketing costs through the high repurchase and high activity of members, which adds icing on the cake to the existing main business and drives corporate revenue growth.

To establish a more competitive membership system, it is still necessary to provide differentiated products and services and build cost and efficiency advantages in the supply chain.

Author: Jiang Lailai

Source: Jiang Lailai