How to build a membership system from 0 to 1?

In the era of private domain traffic, how to build a membership system ? This article will teach you how to learn the membership system from Costco Supermarket, JD.com, Zhihu, MissFresh, Mima Life, Mengzhua Doctor, Fragrance Selection, Budeng Food Research Institute, Qia Qia, Lufu Restaurant, and Le Chun Yogurt.

The hottest word in 2019 is private domain traffic. Today I will introduce to you how to build your own membership system based on private domain traffic (this article covers brand membership system cases such as: Costco Supermarket, JD.com, Zhihu, MissFresh, Mima Life, Mengzhua Doctor, Fragrance Selection, Budeng Food Research Institute, Qia Qia, Lu Fu Restaurant, and Le Chun Yogurt).

This topic originally came from the case of Lu Fu Restaurant, which is a regional mid-to-high-end chain restaurant with 8 branches currently. They launched a membership welfare model in 2017 and have accumulated more than 80,000 members to date. However, all local restaurants basically refer to its model to create their own brand membership system, with greater benefits than theirs. Lu Fu Restaurant is facing unprecedented competitive pressure .

From the above picture, we can see that the membership system they set up in 2017 is mainly composed of three modules: member birthday discounts, member privileges and member consumption points redemption, which constitutes the most basic membership system of Lufu Restaurant, but it is not perfect. There is a lack of the sense of identity and honor that comes from the growth of consumer levels, the sense of membership is not strong, and the perception of privilege only remains on price and gifts. Consumers feel quite distant from the Lufu Restaurant brand, and in 2019, they urgently need to upgrade their membership system.

I have three suggestions:

1. It is based on the level division of existing VIP customers, and corresponding different discount levels.
2. Create an exclusive membership day for Lu Fu Restaurant/a fixed day every month to offer big price discounts or benefits other than dishes.
3. A charity club is incubated for their super VIP members (generally middle- to high-end people). After each customer's consumption, Lu Fu Restaurant will donate a certain number of points to this fund pool. Every month, Lu Fu Restaurant sets an exclusive charity activity day for super VIP customers to participate. After each charity event, photos of the staff interacting with consumers are taken as the brand assets of Lu Fu Restaurant. This also enhances the brand reputation of Lu Fu Restaurant and brings it closer to consumers. The Lu Fu Restaurant brand is no longer just about the dishes that come into contact with customers, but also a close charity partner.

The above three steps can solve the current situation where the previous version of Lufu Restaurant’s membership system simply gave benefits through discounts, encourage loyal consumers to participate in brand building, and enhance brand reputation and local influence. At the practical business operation level, there is actually a framework methodology to follow in building a membership system, which will be discussed next.

Before talking about how to systematically build a membership system, we must understand that the essence of the membership system is to enhance the strong relationship chain with customers (a tool for building private domain traffic), which is crucial to improving customer retention and repurchase rates .

From a data perspective, the cost for a company to win a new customer is 7 to 10 times that of retaining an old customer. Setting up a membership system can greatly improve a company's profit efficiency, so it is very necessary for brands to attach great importance to the construction of a membership system.

01 The Originator of Membership System - Costco Membership Store

When talking about membership, we must talk about the American Costco membership store. Xiaomi CEO Lei Jun once said that the examples of three companies had a profound influence on his founding of Xiaomi. One is Tongrentang, one is Haidilao, and the third is Costco.

Thanks to its membership system, Costco has become the largest chain of membership warehouse shopping malls in North America and the second largest retail supermarket giant in the world. By the end of 2018, Costco had 768 stores worldwide, with more than 500 stores in 44 states and Puerto Rico in the United States, and 100 stores in Canada.

Part 1: Rating System

Costco's membership card is valid worldwide. The membership fee of Costco in the United States is $60/year for ordinary members (Gold Star) and $120/year for senior members (Gold Star Executive). Additional benefits of senior members include additional discounts on some services, and 2% cash back each year on purchases at Costco and Costco Travel.

Part 2 Welfare System

The following are 13 membership privileges given by Costco, covering all areas of food, clothing, housing and transportation:

1) Credit card cashback

The Costco Anywhere Visa credit card, a collaboration between Costco and Citi, has no annual fee, no foreign transaction fees, a 24-month extended warranty benefit on purchases, 4% cash back on gas, 3% cash back on dining and travel, 2% cash back on purchases at Costco or Costco.com (calculated separately from the 2% cash back for premium members), and 1% cash back on all other purchases.

2) Electronic product technical support

After purchasing any electronic products at Costco, you can get free remote technical support, and customer service will help you solve technical problems over the phone.

3) Discounted gift cards

You can buy a variety of discounted gift cards at Costco, usually priced at $79.99 for $100, including movie theaters, restaurants, event rides and more.

4) Convenient car purchase

When buying a car in the United States, you basically have to bargain back and forth with the salesperson every time. However, Costco's auto department has partnerships with more than 3,000 car dealerships across the United States. If you want to buy a new or used car (including motorcycles/snowmobiles), you might as well choose from the Costco Auto program. They have communicated with car dealers to present the best prices to customers.

5) Travel discounts

Travel is also one of Costco’s main discounts. In addition to amazing travel deals, there are also discounts on lazy people's favorite vacation destinations, theme parks, airline tickets, car rentals, and cruises. Before traveling, you might want to go to Costco to compare prices and save a lot of money in minutes.

6) Exclusive prescription drug discounts

No health insurance? Or what if your health insurance doesn't cover the medicine you want? Then you can try Costco's prescription drug program. Members can join the program for free and purchase medicines at discounted prices when insurance does not cover the medicines. The vaccine prices at Costco Pharmacy are clearly marked. In addition to being reimbursed by insurance, it is also cost-effective to get vaccinated here if you do not have medical insurance.

7) Better dental insurance

Going to the dentist in the United States is also a considerable expense. If you don’t have dental insurance yet, you might consider the DeltaCare USA dental insurance provided by Delta Dental exclusively for Costco members. Annual fees start at $80.99, with no annual deductible, no annual maximum reimbursement limit, and a fixed copay so you know exactly what you're spending.

8) Free hearing test

Instead of paying Co-Pay at the audiologist, Costco members can go to Costco's Hearing Aid Centers, which provide members with free hearing exams and no charges for instrument cleanings and exams or follow-up appointments.

9) Checkbooks are cheaper

In the United States, you often have to write checks, and a checkbook will be used up quickly. Buying a new checkbook is a considerable expense. In fact, Costco also provides services for printing personal checks or business checks, and the price is only half of that of a bank. Senior members can get an additional 20% discount!

10) Make drinking water easier

Costco offers water delivery service. You can choose purified water, mineral water or artesian water and have it delivered directly to your door or office for only $6 a bucket! Or you can rent a water dispenser every month, which costs about $1-$3 per month, depending on your membership level.

11) Preferential mortgage application fees

Costco is partnering with First Choice to offer members mortgage discounts. Friends who have applied for a mortgage know that when choosing a mortgage, in addition to considering the interest rate, you also have to consider the handling fees charged by the bank, which is also a large additional expense. Costco's mortgage program promises to give members low interest and low handling fees. If you are planning to buy a house, you might as well compare prices there.

12) Discounted car and home insurance

Costco and Ameriprise Insurance have partnered to provide members with more affordable auto insurance and home insurance, and senior members can also enjoy more preferential insurance terms.

13) It’s cheaper to rent a car when moving

Do you need a large truck for DIY moving? Costco members can rent a truck that suits their needs (up to 26 feet) from Budget and enjoy a 25% discount, as well as benefits such as 24/7 roadside assistance and free additional driver fees.

——Costco official website, compiled by North American Express

From the above you can see that in addition to the discounts within the supermarket, its membership system also has alliances with multiple industries, basically achieving the ideal state of having one card in hand and living an easy and worry-free life across the United States.

This is a more complex membership model , and it is also based on the fact that Costco itself is an offline lifestyle hypermarket. Its business is highly intensive and complex, and it has enough suppliers, with more than 4,000 product SKUs alone.

02 Membership System Model

From the case of Costco, the originator of the membership system, and the relatively mature brands with membership models in the current market, such as JD.com, Zhihu, MissFresh, Mima Life, Mengzhua Doctor, Fragrance Selection, and Budeng Food Research Institute, we have distilled a simple and easy-to-operate membership system model for marketers to learn from.

The membership system model covers the following five modules:

1. Set membership level
2. Set up member benefits
3. Create Member Day
4. Create an experience officer
5. Points redemption

Part 1: Setting Membership Level

Before talking about membership level settings, we need to mention the RFM model in marketing. The RFM model is an important tool for measuring user value and user's ability to generate profits. The model estimates the value of a user based on the user's most recent consumption interval (Recency), consumption frequency (Frequency), and consumption amount (Monetary).

R（Recency）：

The time interval between the customer's most recent transaction. The larger the R value is, the longer ago the customer transaction occurred, and vice versa, the closer the customer transaction occurred.

F（Frequency）：

The number of transactions the client has made in the recent period. The larger the F value, the more frequent the customer's transactions, and vice versa, it means that the customer's transactions are not active enough.

M（Monetary）：

The amount of transactions made by the client in the recent period. The larger the M value, the higher the customer value, and vice versa.

Customer value is segmented into 8 categories based on the distance of their most recent transaction date, their activity level and their contribution to the transaction amount. As shown in the figure below, "high" means greater than the mean, and "low" means less than the mean.

8 types of customers under the RRM model

So how to use the RFM model? For example:

If you are the owner of a fast food restaurant, your sales method is delivery, and your sales channels are platforms such as Meituan and Dianping. Sales have declined recently, and analysis shows that this is due to the loss of old customers. You plan to win back old users by sending SMS notifications and giving away special side dishes. Because the store is small and the profit is thin, you hope to get the most profit with limited expenditure.

To achieve low expenditure and maximum profit, we must find those old customers who are easiest to successfully win back , so we should choose users with high consumption amounts and high consumption frequency before loss , because these two high data show that users recognize us, but for some unknown reason, have not come to buy recently. The specific operation method is as follows:

First, we define lost old customers as those who have made at least one purchase in their life cycle but have not made any purchases in the past 30 days . Then, we calculate the average consumption frequency and average total consumption amount of consumers in the past 60 days. Finally, we select customers who have no consumption records in the past 30 days and whose F and M are greater than the average as promotion targets and send promotion activities.

The above is a simple use of the RFM model. When it comes to the division of membership levels, we usually directly use the M (consumption amount) in the RFM model for analysis.

For example, the e-commerce platform "Aroma Selection" of the well-known self-media "A Woman with a Fragrant Soul" divides its members into three levels: primary fragrant honey, silver fragrant honey, and gold fragrant honey. Each level of membership has a threshold condition based on the consumption amount: a cumulative consumption of 20,000 for primary fragrant honey, 50,000 for silver fragrant honey, and 100,000 for gold fragrant honey . Costco divides its membership into two levels: ordinary membership (Gold Star) $60/year, senior membership (Gold Star Executive) $120/year.

There are generally two ways for consumers to become members in the industry:

The first is a free membership system , which upgrades your membership level according to your cumulative consumption behavior (accumulated number of orders, accumulated amount, etc.). Different levels correspond to different rights and interests. Some of them can only be upgraded but not downgraded, and some will be downgraded within a certain period of time. For example, the "Aroma Selection" mentioned above adopts this model. Only when the cumulative consumption is 20,000 can you be considered to have successfully joined the membership system;

The second type is a paid membership system , which means that you first pay to activate the membership service, and then enjoy specific rights and interests. For example, Costco, China's MissFresh, JD.com, iQiyi and other video sites use the form of paid membership cards (consumers must pay a certain additional fee to become members).

It is usually more appropriate to set 3-4 customer levels . Too many levels will make users lack motivation, and too many levels will make it difficult to distinguish the differences. At the same time, we should pay attention to appropriately widening the differences in membership levels , and differentiate the corresponding rights and interests, so that high-value active users have room and motivation for growth, and make the level a symbol of honor for customers.

Part 2 Setting up member benefits

Member benefits are mainly designed to enhance users’ sense of value and user experience. It reflects the differences between members and non-members, and members at all levels, and allows members to see them in prominent positions on the official website and stores to enhance their sense of membership privilege . Common benefits include the following dimensions:

• Product category: new product priority experience, free trial, limited purchase
• Service: Priority is given to after-sales refunds, and free shipping for returns
• Activities: Member price, member day, member birthday benefits
• Welfare: discounts, super coupons, double points, gift exchange, instant cash back for invitations
• Cross-industry alliance: enjoy products/services of other alliances

The core membership benefits of "Aroma Selection" are 9.9% off for primary fragrant honey, 9.8% off for platinum fragrant honey, and 9.5% off for gold fragrant honey. (Welfare)

The Internet platform "Mengzhua Doctor", which focuses on solving pet medical consultations, divides membership levels into ordinary members (349 yuan/year), super members (399 yuan/year), and ordinary members (199 yuan/3 months).

We provide nine privileges including appointment consultation (service), message consultation (service), pet courses (product), shopping discounts (benefits), annual cat litter package (product), limited-time purchase (product), new products from internet celebrities (product), 80 yuan instant rebate for invitation (benefits), and e-commerce rebates (benefits).

The online brand Bu Deng Food Research Institute, which sells gourmet seafood, has set up super VIP customers (U-VIP, annual fee is 299 yuan), allowing these customers to enjoy eight major privileges.

It should be noted here that the total value of the privileges is usually converted into cash , for example, "Open U-VIP and save you at least 2,198 yuan a year", so that consumers' perceived value of the privileges is enhanced through quantifiable amount data .

In terms of cross-industry alliances, careful online shoppers should have discovered that JD.com has launched plus membership, which only costs 198 yuan per year. In addition to enjoying discounts on JD.com products, you can also get the paid annual membership service provided by Zhihu and iQiyi for free, which also draws on Costco's alliance model.

In addition to receiving services within Zhihu, Zhihu's paid Yanxuan members can also enjoy various privileges and benefits at the offline Yanjiyou Bookstore.

The reason behind the cross-industry alliance is the accurate grasp of user portraits . Zhihu users are all young people who love knowledge, and cultural and creative bookstores happen to be the places where they consume on a daily basis. The setting of such membership privileges can create additional value for fans and enhance the value of Yanxuan members in the minds of consumers (even if they do not go to Yanyouji often, having privileges is also a sense of value that comes from control).

If you were in the bookseller business, would you consider cooperating with Fan Deng Reading Club when setting up membership?

Part 3: Create Member Day

Regularly hold member day events. Membership Day means that the activities on that day are exclusive to members. Ordinary users are not eligible to participate. This allows customers to truly experience the benefits and treatment of being a member. Fixed dates can also allow users to develop the habit of regular participation .

The content of the membership day can be varied. "Aroma Selection" holds a powder festival on the 10th of each month, which provides promotions specifically for members.

The regional supermarket Guangyuan E-Shopping designates the third week of each month as Membership Week, and opens a member-only event, namely a member discount zone, during Membership Week, where it puts on the shelves some products with high sales volume and suitable for daily use, such as toilet paper, tissue paper and other daily necessities.

MissFresh, a fresh food e-commerce platform that focuses on delivering food to members within one hour, sets one weekend of every month as Super Member Day, and during the event, it will set up a super low-price area for flash sales.

In addition to some product or service discounts , as in the case of Lu Fu Restaurant mentioned above, Membership Day can be set as a charity day , giving members the opportunity to participate in charity activities led by Lu Fu Restaurant.

If you are a merchant selling red wine, you can consider setting up the content of the Membership Day as an offline wine tasting salon to share knowledge related to red wine, such as how to judge the quality of red wine, the application scenarios of different varieties of red wine, and socializing with friends over wine.

Part 4: Create an Experience Officer

Inviting core members to serve as "experience officers" to experience new products can not only give members a sense of ceremony, but also allow them to get closer to users and understand their needs.

"Experience Officer" comes from lean entrepreneurship. Anyone who has heard of "Lean Startup" knows the concept of Minimal Viable Product (MVP) - that is, testing the market's reaction through a minimal product that can meet core needs . In order to bring a project to market, developing a product yourself is not the first requirement. Before you turn your idea into an automated service, what you should do is first determine whether your idea is feasible through manual means, that is, to find Product-Market-Fit .

When talking about experience officers, we must mention Le Chun, a company that critics call the Google of the food industry. It has also received high praise from Zeng Ming, chief of staff of Alibaba Group, who has seen business innovation cases all over China. Relying on the model of thousands of experience officers, it has grown from a yogurt store in Sanlitun to an Internet celebrity brand .

During the preparation period of Le Chun Yogurt, Le Chun first told them what they wanted to do, which attracted 3,000 fans to become Le Chun’s first batch of product experience officers . Then they started MVP (minimum viable product), which was that they made 100 boxes every day. After they were finished, they immediately invited some fans to eat it. After eating it, they immediately improved the next day’s 100 boxes based on the fans’ feedback data.

When developing durian flavored yogurt, Le Chun found the most well-known bloggers and answerers on durian-related topics on Weibo and Zhihu, and asked them to form a super experience group to assist in the development of durian flavor . Finally, the formula of durian flavored yogurt was determined. These durian experts participated in the development of Le Chun durian flavored yogurt. They are also KOLs in this field and can easily help promote new products.

These experience officers who are deeply involved in the testing of Le Chun’s new products have become Le Chun’s most loyal fans.

The "Experience Officer Model" is an effective way to increase customer stickiness to a brand. Implanting it into the membership system can activate core customers.

Part 5: Set up points redemption

Member points are generally converted according to a pre-set fixed ratio based on the member's historical consumption amount, interaction frequency, consumption frequency , etc. Points can be built on a points mall, and customers can redeem points for gifts or cash , giving customers extra surprises.

Mima Life is a one-stop online lifestyle service consumer goods platform that sells household items, health foods, clothing and bags, etc. It understands the user's behavior path, and can accumulate a certain number of points from following WeChat, shopping, signing in, forwarding new products to Moments, and participating in daily activities. Consumers can redeem the points for exquisite cultural and creative products of the Mima Life brand (note that the selection of points gifts should be based on user portraits. For young people, it is recommended to select niche brand products, exclusive sales, and high value; if it is for people like mothers, some health care or daily necessities can be selected as redemption gifts)

The Qia Qia micro mall, which was just launched yesterday, adopts the simplest method of exchanging 2 points for every 1 yuan spent (lacks fun and needs to be iterated). As long as you pay 88 yuan to become a member, you can enjoy any product in the points mall, and the products that can be redeemed are mainly daily gadgets.

The incentive of exchanging points for cash is suitable for price-sensitive customers. If you want to cater to both price-sensitive and price-insensitive customers, you can use redemption gifts or cash at the same time to give customers multiple choices.

The point redemption setting is not about the form, but whether the benefits finally redeemed can improve customer retention and stimulate repeat purchases (you can find out the redemption benefit method and redemption gifts that best suit your users through continuous online iterative testing. For example, if Qia Qia finds that the redemption rate of U-shaped pillows is high, you can choose to increase the types of U-shaped pillows on the shelves in the points mall).

03 Conclusion

This article discusses how building a membership system through Costco, the originator of the membership system, can effectively enhance the stickiness between consumers and brands, improve customer retention and repurchase rates, and through several successful cases of brand membership systems, it sorts out the five modules for building an exclusive brand membership system that you can learn and use immediately, to achieve the construction of a private domain traffic-membership system.

Remember, marketing requires constant testing and optimization to find the best solution.

The above is my opinion on how to build a membership system for your brand. You are welcome to leave a message to share your views or introduce the membership system planned for your brand.

illustrate

1. The pictures in this article are from the Internet and are not for commercial use;

2. References for this article:

【1】Marketing Management

【2】36 Strategies for Refined Operation of Social E-Commerce

【3】Costco official website

【4】MiMa Life Micro Mall

【5】Aroma Selection Micro Mall

【6】Mengzhua Doctor Micro Mall

【7】QiaQia Micro Mall

【8】Bedeng Food Research Institute Micro Mall

【8】Zhihu Member Page

【9】JD.com Member Page

【10】Daily Fresh Member Page

Author: Uncle Seven

Source: 007 in the marketing world (beastmkt007)