In-depth analysis of the paid membership system in the e-commerce industry

Why are you a member of Dismantling the E-commerce Industry? First, it has been developed for a long time and is more mature than other industries. JD started to serve members in 2015 and had 20 million members in 2020. Second, it is ultimately directly oriented towards orders and GMV. The ultimate core of all industries is GMV, and e-commerce is very representative.

1. What is the membership system?

What is the membership system? The membership system is actually a product strategy for user stratification. It stratifies users based on their comprehensive behaviors (activity, purchases, consumption amounts, etc.), adopts different operating strategies for users of different levels, and ultimately enables users to achieve positive growth.

(From the Internet)

We often go to the supermarket to buy things, and the cashier will ask if you have a membership card? Membership in this sense is actually a growth-accumulating membership, which increases the user's purchase frequency by giving rebates based on a certain points redemption ratio based on the user's purchase behavior . JD.com’s Jingdou actually belongs to this type of product. Because of Jingdou and the existence of points system for supermarket membership, when you are shopping, you may think about which supermarket has xx membership and whether you should continue to buy there to accumulate points and exchange them for something at the end of the year.

In the membership system of e-commerce, there are generally two different membership systems :

One, which I call the free membership system, includes growth-level memberships, point currency memberships, etc. The core is to give users certain growth values ​​and points based on their behaviors (such as activity, purchases, consumption amounts, etc.). Behind these are some seemingly useful rights and interests. Through these rights and interests, the user's switching cost is increased, thereby increasing the user's activity.

Because the growth membership system is a free membership system, it can only exist as an operational strategy to subsidize users, and it is difficult to achieve high-frequency and high-value services.

JD.com also has such a free membership system, called JD Enjoy Value. The score of JD Enjoy Value can be improved through active interactions (including logging in, opening a brand membership, evaluating products, posting orders, answering questions, etc.). At the same time, the Jingxiang value score corresponds to user rights, such as shipping benefits, travel, health privileges, birthday privileges, etc. However, these rights and interests are preferential rights and interests, and users still need to pay certain costs behind them. Compared with JD.com’s PLUS membership rights and interests, these rights and interests inevitably seem useless.

The other type, which I call paid membership, requires users to pay to purchase membership in order to enjoy the corresponding rights and interests . The payment itself is a threshold that strictly screens users.

Currently, there are two different ways of playing for paid memberships. One is the money-saving card represented by Pinduoduo . The slogan is "guarantee compensation if you don't get your money back". In essence, it is a collection of coupon packages in order to retain low-value users and increase the frequency of repurchase among low-value users.

The other type is high-value membership, represented by JD.com’s PIUS members , which are essentially membership services provided to high-value users in order to promote consumption of high-value members and provide better services to high-value members. Why Taobao's 88 membership is not represented here? First, Taobao's 88 membership is not affordable for ordinary people. It is a collection of memberships of multiple products and the predecessor of the now increasing number of joint memberships. Second, Taobao's 88 membership has relatively fewer rights and interests with respect to Taobao and Tmall platforms. After all, it is not self-operated and does not have as much control as JD.com.

Sometimes, these two membership systems coexist in one product. JD’s Jingdou and Jingxiangzhi growth membership belong to the free membership system, while PLUS membership and Shengsheng Card belong to the paid membership system, but there are certain differences in the users they target.

In summary, from the changes in paid memberships, we can see that people buy memberships essentially to "get a bargain". When the value of benefits is greater than the membership fee, users will feel that they have gotten a bargain and can bring themselves more discounts, so this core point remains unchanged, and this is also the key to how to build a membership system when we talk about it later.

2. How to build a membership system?

How to build a membership system from 0 to 1? The focus here is on the paid membership system. The growth membership system is regarded as a supplement and initial attempt to membership payment. It itself can bring limited impact to the product. After all, there is no income and it relies purely on subsidies. It is difficult to provide very valuable rights and interests.

1. Start from the end and build a membership system

The membership system is essentially designed to make users feel like they are getting a good deal. Therefore, in response to users' pain points, we can use a membership system to solve some of the problems and save users money, time and effort .

Before building a membership system, we need to clarify 3 issues:

First, who might our member users be?

Second, what pain points will they have?

Third, what solutions can be provided for users’ pain points?

Paid membership is generally a product provided for high-value users. So what pain points might high-value users have? The products are not discounted enough, you need to pay for shipping, the rebate is too small, and there are taxes and fees on the overseas shopping platform, etc.

If users want cheaper products, that’s okay, we can offer member prices and coupons for all categories. Users don’t want to pay for shipping separately when buying things. After all, they would rather buy a product worth 300 yuan than pay a shipping fee of 10 yuan. It doesn’t matter. Shipping coupons can help users solve the problem. The rebate is too little. Member users can enjoy higher rebates, 10 times or 20 times the rebate.

In the membership system of e-commerce companies, users' benefits are mainly reflected in shopping discounts, cash back on consumption, additional services, etc. The interests of enterprises are mainly reflected in increasing the total transaction volume.

Membership price and instant discount coupons are a commonly used combination of benefits in the paid membership system . The membership price also needs to depend on whether it is sufficiently preferential and stimulating, and whether this anchor value can really impress users? Under what circumstances will a user definitely become a member? That is, when a user is buying a product, if the price of purchasing a membership is similar to the price of buying a single product, the anchor point value is large enough that the user will definitely choose it without much thought.

And here, there is also the issue of ROI calculation. What is the cost of the rights and interests? What is the final cost for users to use the rights and interests? Can the costs be recovered? These are also things that need to be considered when building a membership system.

With a certain number of member users, there will be more room for premium and seeking cooperation, and naturally, traffic can be exchanged for more valuable rights and interests.

2. Design a membership system using existing resources

Paid memberships did not exist right away, but gradually evolved from growth-level memberships and points memberships .

Test users’ preference and usage of benefits through growth-level membership and points membership. JD’s growth-level memberships also have similar rights and benefits to PLUS members, except that PLUS members have magnified these rights and benefits, from the original preferential rights and benefits to free rights and benefits, and from the original single rights and benefits to N rights and benefits.

3. How to build a full-link operation strategy for attracting new members, retaining members, and renewing members

After the membership product is established, the AARRR model of the membership product will be involved. It is necessary to convert users from a large traffic pool into member users, and at the same time, it is also necessary to do a good job in retaining and renewing member users.

If the user becomes a member for the first time because of trial and operation means, then if the user becomes a member again, it must be because the user has felt the real usefulness of the membership product and has obtained benefits from the membership product that far exceed the membership price.

In other words, for users, the membership product itself is an investment. If they can get their money back, they will be happy to renew their membership again. For example, after becoming a member of JD.com, I found that I could enjoy PLUS prices when buying many self-operated products. At the same time, I could also enjoy the PLUS DAY membership day promotion every month. Here, I felt that I made more money by becoming a member, so I would naturally renew my membership later.

1. How to attract new members?

For paid membership products of e-commerce, it is crucial to make users feel that they are getting a good deal, that is, the preferential price > the purchase cost, that is, the equity value > the membership fee . This is why we can see PLUS prices in the purchase scenarios of many products.

Once users become members and are able to enjoy more member discounts, their purchasing psychology will be reversed, from the original mentality of spending money to the mentality of saving money. They become members in order to save more money. On the other hand, users are more afraid of losing than gaining, afraid of losing the membership price, afraid of losing such a cheap and favorable price.

Once users can enjoy more member discounts by becoming members, they will be more inclined to become members. This is the method we often use to attract new members. We provide users with two different options: one is to become a member and enjoy the member price, but they need to pay a certain membership fee; the other is to purchase directly, but they cannot enjoy the membership discounts. When users perceive that the preferential price (including a combination of various benefits) is greater than the membership fee, they will be more inclined to purchase a membership.

Another commonly used method is membership trial .

A product will go through a process from unfamiliar to familiar, from trial to use. For membership products that require payment, trial is also a good way to attract new members. By allowing users to try out the products, they can enjoy the convenience brought by membership benefits. Then, membership trial + automatic renewal is a tried-and-tested operational method for attracting new members.

JD’s PLUS members will have a 30-day trial period for the Jingdian Card for new users. The 30-day trial does not include all the benefits of PLUS membership, but the core benefits are still retained, such as PLUS prices for products, shipping coupons, PLUS DAY and other core benefits. In addition, the trial does not mean that users can try it for free. It is a free trial + automatic renewal. After the trial ends, the user will automatically renew to become a PLUS member. If the renewal rate is around 30%, this is also a good way to acquire new users.

Like the 3/7-day free trial for 1 yuan/cent that we see every day, the trial means signing an automatic renewal agreement, which perfectly combines membership trial and usage.

Of course, there is another very important means of attracting new members, which is to create exclusive membership days for members . Firstly, it can bring more benefits to old users, and secondly, this large-scale membership day can also be a good means of attracting new members.

2. How to retain member users?

Why do we need to retain member users? Retention is only an intermediate process, and the ultimate goal of retention is to increase users' use of benefits and ultimately prepare for renewal. Only by using rights and interests can users truly appreciate the benefits and value brought by rights and interests. Generally speaking, the more frequently a user uses their benefits, the greater the likelihood that they will eventually renew their subscription.

Therefore, improving user retention essentially means increasing the frequency of user usage, so that users who originally only used the app once a month can become members who use the app three times a month.

In this regard, the most commonly used method is to combine it with the point task system . Many gamified products we see are actually a kind of point task system in essence. By completing certain tasks, you can obtain a certain amount of energy, and the energy can eventually be converted into physical products.

3. How to renew membership?

1) Loss Aversion Effect

People are more afraid of losing than gaining, afraid of losing privileges, afraid of losing preferential rights. We can grasp this psychology of users very well and renew membership.

We encourage user renewal by providing feedback on past member savings, exclusive renewal red packets, card opening gifts, etc.

4. How to build a membership marketing system

A membership product is essentially still a product. Therefore, in this process, marketing has also become a very critical part, using marketing activities to enhance members' sense of honor and uniqueness. JD.com has done a very good job in this regard.

The monthly PLUS DAY continuously expands the rights and interests of member users in the form of activities. For B-end merchants, JD.com uses the large traffic of PLUS DAY as a gimmick to require merchants to give more favorable discounts. With the discounts from B-end merchants, JD.com continuously expands the rights and interests of C-end users through marketing methods, allowing member users to enjoy real rights and interests, and also allowing non-member users to see the real benefits of membership. In this way, a complete closed loop is formed in which users can intuitively see the PLUS membership benefits - open a PLUS membership - and use the PLUS membership benefits.

Membership Day is a powerful means to create membership marketing. Another is the now very popular buy one get many free joint membership gameplay.

Different types of product memberships are packaged into a whole, and you can buy a collection of N multiple memberships for only one price. For example, if you buy JD.com’s PLUS membership, you can get membership of products such as iQiyi Video and Ele.me. It feels like a price war, some people are buying one and getting one free, while others are buying one and getting more free. However, if you want to play the game for a long time, you still need to make a profit.

The above are some thoughts and analysis about e-commerce paid membership. I hope you can gain something from it. Thank you for reading the full article.

Author: Operation Wang Diary

Source: Operation Wang's Growth Diary