How to build a membership system from 0 to 1?

Looking back at the decades of development of the Internet, the business model has generally gone through four models. Each model is accompanied by the birth of giants and changes in the industry layout. Under the paid model, Microsoft has dominated the market to date with its software revenue; under the advertising model, Google dominates the market; under the commission model, Amazon and Alibaba have become new industry leaders.

In the new era, membership economy has become the most popular business model. Many companies have applied it and achieved great success. The membership system has become one of the industry's most concerned growth engines. Costco, which is sought after by the industry, had membership fee revenue of US$3.142 billion in 2018. With a gross profit margin of 11%, Costco's profits all come from membership fees.

Amazon Prime members spend an average of $1,400, while non-members spend $600. The renewal rate is 91%, and member transactions account for more than 50%.

On the other side of the ocean, in China, as users develop the habit of paying, membership has quietly taken over every aspect of our lives.

From e-commerce, food delivery, travel to content and online videos, looking around, the membership economy has already blossomed everywhere.

JD.com transformed its membership system in 2013 and is said to have successfully increased its user retention rate by 19%.

iQiyi’s membership revenue has exceeded advertising revenue for six consecutive quarters, becoming its largest source of revenue.

Among Meituan’s monthly active takeaway members, members’ purchase frequency is more than three times that of ordinary users.

…..

On the last day of 2018, Wu Xiaobo mentioned this in his speech “Foreseeing 2019”. “In 2019, membership will become the most popular consumer relationship model.”

What is the reason for the widespread development of membership economy? Are all products suitable for the membership system? How to design an effective membership system? How to maintain the continuous growth of membership?

1. The underlying logic of the membership system

1. Theoretical basis of the membership system

The membership system is essentially a form of price discrimination.

To understand the underlying logic behind the birth of the membership system, we need to introduce two economic concepts: consumer surplus and price discrimination.

(1) Consumer Surplus

The difference between the maximum price a consumer is willing to pay for a product and the actual price they pay is consumer surplus. Due to the difference in consumers' psychological prices, companies will use price discrimination to maximize consumer surplus in order to maximize profits.

(2) Price discrimination

In order to pursue consumer surplus, companies charge different prices to different consumers. According to the degree of price difference, price discrimination can be divided into three levels:

First-degree price discrimination: pricing is based on individuals, and different prices are applied to each consumer.

Second-degree price discrimination: pricing by quantity, determining different prices based on different purchase quantities, such as a 30% discount on two items in a shopping mall or supermarket.

Third-degree price discrimination: Pricing by group. Different pricing is implemented according to different market groups. For example, the price of mineral water in a scenic area is definitely more expensive than the mineral water downstairs in your house.

The membership system formulates different services and pricing strategies for different consumer groups. Users who spend more money can enjoy higher discounts and better services. Its core purpose is for enterprises to maximize consumer surplus. Therefore, the membership system is essentially a price discrimination strategy adopted by enterprises in pursuit of maximizing consumer surplus .

2. The practical significance of the membership system

A business model that is bound to emerge in the era of inventory.

With the rapid development of China's economy, especially the Internet industry in the past 10 years, the explosive growth of the membership economy also has practical significance.

Hierarchical consumption structure: With the massive growth in user scale, the user structure has begun to become hierarchical. The growing middle class has higher and higher requirements for quality, and standardized services can no longer meet their consumption demands. This is what we often refer to as consumption upgrading.

The competition landscape has become a red ocean: the growth dividend has brought about a large influx of suppliers, the market has turned from a blue ocean to a red ocean, and the competition landscape has intensified.

On the one hand, there are too many people and too little resources, and the cost of acquiring incremental markets is getting higher and higher. Instead of paying huge costs to acquire new customers, companies should optimize the efficiency of existing customers and increase existing profit margins.

On the other hand, as consumer choices increase, user loyalty decreases. If differentiated services are not provided, it will be difficult to retain existing users.

In order to consolidate their moat, companies will inevitably pay more attention to existing users, especially high-value users. As a membership model to enhance loyalty, its application in enterprises is a natural outcome.

On the one hand, companies are shifting from product thinking to user thinking. Based on user preferences and demands, companies will not only continuously improve product experience, but also provide differentiated services to cater to users. The membership system explicitly differentiates users, allowing companies to better identify and provide targeted value-added services, engage in price discrimination, maximize user value, and make business growth more efficient.

On the one hand, companies have shifted their focus from short-term value to long-term value, paying more attention to the long-term life cycle value of users, from a one-time transaction to a lifetime transaction. By managing members, we can not only improve user loyalty, but also extend the user life cycle, allowing the company's revenue to grow continuously.

3. Is membership the panacea for growth?

My answer is no! Since the membership system has been successful in so many products, will membership become a panacea for growth?

Success is always a minority. In fact, the membership system of most products has either become a tool to exploit users and is criticized by them, or has become a dispensable and forgotten system.

This is a concrete application of Internet companies' "embracing change" and also the current state of the membership model.

Membership is definitely not a panacea for growth; it also has its scope and limitations.

First, and most importantly, the foundation of all growth depends on the value and experience of the product. If the user churn rate is high due to poor experience, and the company attempts to use a membership model to improve retention, this will actually harm the users and accelerate user churn.

Secondly, the membership model also has business type limitations, and its purpose is to maximize the user's lifetime value. However, for low-frequency businesses with a short life cycle, which are only used 1 or 2 times in a lifetime, the role that members can play is minimal, such as in the real estate, wedding and other industries.

Finally, the membership model cannot become a tool for cutting leeks. For the sake of short-term revenue growth, a few coupons and some insignificant rights are prepared, packaged as memberships, and then sold for 19/99/199 yuan. This is not only an insult to the user's IQ, but also a waste of the company's credit, which is not worth the loss.

Therefore, the membership system is suitable for relatively high-frequency products with at least passing experience, and the goal should be to maximize the user's lifetime value. In order for the membership model to maximize its value, companies need to be sincere in designing their benefits.

4. Type of membership model?

Paid Membership VS Tiered Membership

There are currently two membership models: paid membership and level membership

The core logic of the two is the same, and both require setting certain thresholds to distinguish users so that some users can enjoy benefits.

The difference between the two lies in the threshold for obtaining benefits. Paid members need to purchase a membership card a second time. Level members need to accumulate growth points and upgrade to a higher level before they can enjoy higher level benefits.

How should you choose between these two membership models?

Comprehensive evaluation based on two standards: First, whether the 80/20 rule of user value structure is obvious. Second, what is the gross profit of the business. The 80/20 rule represents the value of top users, and the gross profit margin represents the proportion of equity costs that can be covered.

Category 1: The 80/20 rule is obvious and the gross profit margin is strong, so choose a tiered membership. The top users of this type of business are almost the ones who provide them with food and clothing, so even if the company provides subsidies, it is still important to focus on maintaining them. In addition, the high profits brought by top users are sufficient to subsidize equity costs.

The second category: The 80/20 rule is obvious, but the gross profit margin is low. Priority membership is recommended for the same reasons as above. However, if the low gross profit margin really cannot cover the equity, then choose a paid model, give up part of the gross profit margin, subsidize membership costs, thereby lowering membership pricing, and maintain the relationship with top users at a relatively reasonable membership price.

The third category: The 80/20 rule is not obvious and the gross profit is low, so paid membership is recommended. Low gross profit margin means that the equity cost cannot be covered, and the company also hopes to increase profits through membership. The value-added paid services for members are very suitable for increasing profit margins.

The fourth category: The 80/20 rule is not obvious, but the gross profit margin is high. This type of industry is not particularly suitable for building a membership system and will not be discussed.

In real life, competition is relatively fierce when it comes to consumer behavior related to food, clothing, housing and transportation, and gross profit margins are relatively low. Paid membership has basically become standard in supermarkets, e-commerce, food delivery, videos and other fields. However, business models where the 28 effect is very obvious, such as staying in hotels and taking flights, basically adopt a tiered membership system.

However, more and more companies are choosing the dual-track system, where the payment model and tiered membership coexist. The threshold for tiered membership is higher and is suitable for maintaining top users. For the larger number of mid-level users with high quality requirements, if they also want to enjoy the rights and interests of top users, they only need to pay for it. In this way, the company not only satisfies both top and mid-level users, but can also increase revenue through paid memberships, killing two birds with one stone.

2. Design a set of "attractive" membership rules

To design a complete membership system, you generally need to follow at least three processes: user stratification -> rights design -> rule making.

• User stratification: Define the standards for user stratification and use them to stratify users, which is more suitable for graded members.
• Design rights and interests: Design a complete set of rights and interests based on the demands of stratified users.
• Establish rules: If it is a tiered membership, you need to design promotion and demotion rules; if it is a paid membership, you need to develop a pricing strategy.

1. User stratification

Tier membership: define standards and make reasonable stratification

User stratification is a very important step in designing a hierarchical membership system. Without this foundation, nothing else in the membership strategy will work. Nowadays, the membership system is developing rapidly and has various forms. The stratification may not necessarily follow the same standards, so we need to apply it selectively.

Step 1: Define tiering criteria

Operating high-value users among existing users is the core logic of membership. To identify high-value users through stratification, we must first confirm the standards and evaluate the value of users. Most of the profit value of Internet products comes from the exchange of users' investment of money or time. Therefore, transaction flow or usage time can be used as the standard of user value.

Of course, flow and duration can be directly used as stratification criteria, but in order to obtain a clearer basis for segmentation, sometimes we also need to break down the flow or duration.

User investment flow = customer unit price * purchase quantity;

User investment time = frequency * single time duration.

Generally speaking, for some categories, the average order value and single time duration are relatively stable, while the variance and range of purchase quantity and frequency are larger, and are more suitable as stratification criteria. In the hierarchical membership system, we must also consider the simplicity of the stratification standards, try to reduce the user's conversion costs, and facilitate users to upgrade more clearly.

Here are some examples:

• For platform products like Taobao and JD.com, there are abundant SKUs, a huge number of users, and large variances and ranges in average order value and purchase quantity. It is relatively simple to choose turnover as the criterion for stratification.
• For Didi, both the user value standard and the stratification standard can be cash flow, but in order to better stratify and segment, frequency or distance can also be used as a stratification standard.
• For pay-per-use products, it is more appropriate to use frequency as the value and tiering criterion.

The standards for each product stratification are not unified and need to be applied according to specific circumstances, as long as they can better segment users.

Step 2: User Segmentation

Based on the determined stratification standards, the next step is to segment all users, divide all users into small segments, and calculate the number and proportion of users in each small segment, as well as the value and proportion of user contributions.

The segmentation is relatively simple when the purchase quantity and frequency are used as the stratification criteria. According to the natural number of the cumulative quantity or frequency, from 1 to the maximum value, each quantity is calculated in turn, and the corresponding users and user value distribution are calculated.

If transaction volume or online time is used as the stratification standard, the user distribution in each segment can be calculated based on the average order value or single time length as the minimum segment unit, and natural numbers from 1 to the maximum value can be used as multiples, increasing in sequence.

For example, the average customer price of a travel service is 50 yuan, and the user segmentation range can be set to 0-50 yuan, 1-100 yuan, 100-150 yuan, 150-200 yuan, and so on.

Step 3: Merge segments

After deconstructing the segments, the next step is to merge the segments. The merging of segments can follow a principle: 20% of users contribute 80% of the value. Based on the 80/20 rule, the top users should be screened first.

When merging, you can look at the share of user value based on the top 20% of users, or vice versa, and initially screen out the approximate user segments based on users who account for 80% of the value.

After filtering out the top users, you can continue to filter out mid-level or other levels of users from top to bottom according to the 80/20 rule.

The conventional hierarchical membership system usually has 4-5 levels. Too many levels are not convenient for users to understand, while too few levels are not conducive to focusing on top users.

Step 4: User Insights

After the levels are divided, we can then analyze the users. The main purpose of the analysis is to understand the attributes, pain points, demands, usage or consumption behaviors of users at each level, especially the top users. With this foundation, the subsequent rights and interests design will have a basis to rely on, and you will be more confident in the effectiveness of the rights and interests.

The conventional user insight process is to first conduct cluster analysis to pull out various feature data, behavioral data, and consumption data of users, and then perform cluster analysis to obtain some correlation conclusions; then field research is needed, such as user visits or seminars, to verify the conclusions of the cluster analysis and gain insights into the reasons behind these conclusions, especially the user's pain points and demands, the psychological state when using the product, the reasons for user activity or possible churn, etc.

2. Equity Design

Design to attract people's interests and achieve great results with little effort.

The success of a membership system depends on the design of rights and interests. Some membership systems are like chicken ribs and feel dispensable to use. The most important reason is the failure of rights and interests design.

To design a set of "attractive" benefits, whether it is to attract users to buy or promote user upgrades, you can plan and disassemble it according to a formula:

Customer satisfaction = product value - cost

In the user's mind, his/her satisfaction with a product is equal to the value provided by the product minus the cost he/she pays. If the gap value is larger, the user is more satisfied. Otherwise, the user is more dissatisfied and may even complain. When breaking it down, the higher the value of the product, the lower the cost. In simple terms, this is the price-performance ratio.

(1) Rights to enhance product value

The prerequisite is to find the value that users need, and then continue to add to it on this basis to make the value of the rights and interests stronger.

To position user value, you can refer to Maslow's hierarchy of needs theory: physiological needs, emotional and social needs, and self-actualization, which correspond to the use value, social value, and growth value provided by the product respectively.

Based on the increase in use value, the performance of rights and interests usually involves providing additional functions, such as value-added functions and exclusive services.

Social value is usually manifested in identity symbols and a sense of belonging to a community, and is mostly manifested in medals, grade marks, high-end membership communities, etc.

Growth value represents self-realization. In terms of rights and interests, we can adopt public welfare naming and provide growth opportunities, etc.

The vast majority of products are designed to address the needs of food, clothing, housing, transportation, emotional and social interaction. The design of rights and interests should also focus on increasing use value and social value. The more basic the value provided by a product is, the more it should add value around its use value, and the more attractive it will be to users.

(2) Benefits of reducing costs

The cost paid by users is usually expressed in terms of money, time, and physical and mental investment.

In the design of benefits, means of reducing monetary costs are very common and users have a high degree of acceptance. Discount coupons, exclusive offers, etc. are relatively common means. Providing members with super-value discounts is direct and effective, but if the discounts are not significant or the threshold for the discounts is high, it may cause negative effects and affect word of mouth.

Time is another important cost. In the design of rights and interests, reducing time costs means saving time, usually in the form of no waiting, priority access, early access, etc., such as priority logistics on e-commerce websites and ad-free on video websites.

Reduce the user's physical and mental involvement and make them worry-free. In terms of rights and interests, it usually means providing high-quality after-sales guarantee services and exclusive representative follow-up, so that users can worry less or not, and reduce anxiety.

(3) Principles of equity design

1) Prioritize benchmarking with the highest level demands

Since the membership system itself is to satisfy high-value users, the design of rights and interests should start with top users. Compared with non-head users, top users have higher demands, product understanding, and are more picky. Satisfying the rights and interests of head users will verify the success of the rights and interests design.

2) Design benefits around core actions

The so-called core action is the action that users take to obtain product value, and it is also the action that companies most want users to complete. The core action of trading products is placing an order, and the core action of online content is watching content. Whether adding value or reducing costs, design equity must always be aimed at promoting the occurrence of core actions. For example, e-commerce discounts and no-questions-asked returns are all designed to make it easier for users to place orders, while e-commerce companies can earn more revenue.

3) Reasonably control equity costs

The higher the equity cost, the more attractive the equity value is generally. Generally, hard equity requires a higher cost. But if the equity is too high, members’ profits will be reduced. Therefore, when doing equity budgeting, you usually face two problems:

1. Whether the existing budget can meet the membership growth;
2. What is the ROI of equity?

Based on my previous experience, for the first question, I would evaluate the budget according to the logic of the subsidy rate, starting from the user's ARPU value, calculate the gross profit margin of each customer, extract a certain proportion of the gross profit and invest it in equity, and then summarize and evaluate the overall budget. Even if the user scale increases dramatically in the future, no unexpected losses will occur.

ROI evaluation is difficult. There is an approximate evaluation method. When the benefits are launched, A/B tests are conducted through operational activities to evaluate the ROI of the activities and obtain the approximate ROI of the benefits.

In order to share the cost, some membership systems will introduce some BD rights. My view is that if some valuable rights can be brought in, it will indeed be a benefit for users, and the sense of value of the rights will be stronger. However, most BD rights of Internet products are useless, and the main rights are not strong enough, which leads to putting the cart before the horse and makes users disgusted.

4) Simple and direct, not too fancy

Generally, a membership system will be effective if it has one hard benefit. In order to make it easier for users to understand and remember, generally speaking, there should not be too many benefits. It is enough to focus on 1-2 hard benefits, and add some additional benefits moderately. Later, when doing mental education for members, users can perceive the value of membership more focusedly, serving to attract new members and increase member loyalty.

5) Rights and interests should be differentiated

There is no harm without comparison. Comparison will intensify the sense of value. Members' comparison of rights and interests at different levels will also affect the sense of value. In a paid membership system, if there is not much difference between paid and free, users will not purchase. When designing benefits, we try to maximize the sense of difference, provide exclusive benefits at higher levels, and highlight the sense of value of members, especially high-level members.

(4) Formulate promotion and relegation rules

Applicable to Tier Members

(5) Defining Growth Value

In the hierarchical membership system, the promotion and demotion of members is defined based on the changes in the member's growth value within a period. Only when the growth value reaches a certain standard can the member be upgraded, otherwise he will be downgraded. JD’s Jingxiang Value and Taobao’s Naughty Value are all growth values.

Growth value is a set of user-oriented value measurement standards, which not only needs to measure important business actions, but also needs to be easy for users to understand.

Take JD.com’s membership level as an example:

To improve JD.com's value, JD.com's standards are consumption, activity, account, Xiaobai credit and reputation. Consumption is the core action of e-commerce. The higher the user's consumption, the greater the value and the higher the growth value. Although active and account actions are not direct business actions, they directly or indirectly trigger more consumption actions, such as posting orders and reviews, which are beneficial to other users' consumption decisions. Account authentication is conducive to account activity. Credit and Noob represent the risk of account control, which is also indirectly related to consumption.

Growth value can be a measure of all business actions, not just consumption. In addition, growth value is not consumable and should not be confused with points.

(6) Quantitative growth value

For GMV-oriented businesses, the value unit is the monetary unit. If a user spends 1 yuan more, the value increases by 1 yuan. In order to define all consumption actions or non-consumption actions, a conversion logic is needed to evaluate all actions and define the value. Therefore, the growth value and value unit need to be converted.

Growth value = value unit * coefficient

For most growth values, the coefficient is generally 1, that is, a user spends 1 yuan and gets 1 growth value. Some are 10 or 100. The reason for this setting is mainly to facilitate user understanding. If the cost of understanding is high and it is difficult for users to convert, they will not know how to improve and will easily give up upgrading.

(7) Growth value acquisition

The sources of growth points can generally be divided into two categories: main rules and member tasks.

The main rules serve the main business process of users and guide users to grow spontaneously. In addition, the growth value will also cover related actions of new users, indirect business-critical actions, etc. Taking e-commerce as an example, consumption is the most direct action to obtain growth value. In addition, completing account information, authentication, posting orders, binding payment accounts, and evaluation are also means of obtaining user growth.

In addition to selecting the range of growth value, you also need to set a weight score for each action.

The key action for new users has a higher score. The goal is to guide new users to complete their first order and give them a good experience. Each user can only enjoy it once in their life cycle, so it is relatively easy to obtain.

The weight of indirect key actions needs to be based on the value of the action and the difficulty and frequency of acquisition. The growth value score is set after comprehensive analysis. The higher the acquisition cost, the greater the value, and the lower the frequency of the action, the higher the growth value, and vice versa.

Member tasks are generally operational services that promote user activity through various activities. The specific setting standards can be judged based on activity rules and budget.

(8) Relegation cycle

According to the frequency of user usage, the maintenance cycle is divided into historical accumulation, annual accumulation and monthly accumulation. Currently, annual and monthly accumulations are more common. The business party can choose the corresponding maintenance period according to the range of product frequency.

The hotel, travel and airline companies generally accumulate annually, and Ctrip, Taobao and JD.com also accumulate annually. For commuter travel businesses like Didi, because the frequency of taking taxis is high, the revenue is accumulated on a monthly basis.

For changes in user upgrades and downgrades, strong reminders and strong perception are necessary. Nowadays, a member generally has several types of membership, and not every user will pay attention to product changes frequently. If members have weak perception or are even unaware of it, membership upgrades and downgrades will not only fail to stimulate user activation, but may also lead to user complaints.

To enjoy the rights and benefits of Taobao’s level membership, users need to make actions to receive them.

Ladder slide: A buffer strategy launched by level members to protect top high-value members. It is relatively easy to understand. The value contributed by users in the previous cycle was very high, which means that the users’ own needs and values ​​are very high. The reason for the downgrade is probably that they turned to competing products. At this point, sliding down the ladder or even maintaining a level becomes a good user recall action. After all, in an era of increasingly high customer acquisition costs, the value of retaining a high-value user may be incomparable to the value of acquiring many new users.

Due to the impact of the epidemic, the frequency of many businesses has decreased. In order to protect the rights and interests of members, many products have also launched corresponding relegation strategies to extend the membership period. While protecting the interests of members, it can also retain users, gain word of mouth, and lay a solid foundation for re-activation when the epidemic subsides.

3. Develop a pricing strategy

For paid members

(1) Equity cost

The level of equity cost directly determines the level of pricing. Generally, the level of equity cost is also affected by two factors: supply capacity and marginal cost.

Rights and interests with limited supply capacity are generally very rigid, resources are relatively scarce, and costs are relatively high, such as exclusive seat selection for airline members and priority dispatch for taxi orders.

On the contrary, for rights with extremely low or even zero marginal costs, and strong supply capabilities, or even unlimited supply, pricing should be based mainly on market strategies and should not be too high. For example, on video websites, the cost of opening a new membership to view member content is almost zero, so most video memberships are around 20 yuan.

(2) Recycling cycle

The so-called recovery period refers to the length of time it takes for a member to recover costs or even make a profit from the rights and interests he pays.

The frequency of the product itself determines how long the cost recovery cycle is. For products that are used frequently enough every day, the costs can be recovered through a higher payment frequency than non-members. For example, in the areas of food, clothing, housing and transportation, takeout and retail are basically based on monthly cards.

In addition, the monthly card has low trial and error costs, low prices, high user acceptance, and a higher probability of converting users.

However, for medium and low-frequency products, the recovery period of equity costs is lengthened, and annual cards are more suitable. For example, JD.com and Taobao both have annual card membership systems.

(3) Price Anchor

For high-frequency products, in addition to promoting monthly cards and cheaper continuous monthly packages, we will also launch quarterly cards or annual cards to lock in users' consumption for a longer period of time.

Most products will use price anchors, allowing users to choose the cycle with the greatest value through price comparison.

Continuous annual package < continuous half-year package = continuous quarterly package < continuous monthly package < ordinary annual package < ordinary quarterly package < ordinary monthly package.

Generally speaking, in order to encourage users to purchase quarterly or annual passes, quarterly or annual passes will be cheaper than continuous purchases, or quarterly and annual passes will have value-added services.

But some products use the opposite strategy, with monthly cards being cheaper than quarterly and annual cards. Why?

First, data shows that the vast majority of monthly card members stop paying in the third or fourth month, and even fewer users are still renewing their memberships after one year. It is very difficult to get users to purchase longer-term annual or quarterly cards.

Second, at a time when the membership scale has not yet reached a bottleneck, it is more practical to attract more new monthly card members instead of spending a lot of energy to convert users to purchase long-term memberships.

(4) Profitability

For products with a certain degree of profitability, moderate subsidies are recommended to attract and retain more high-value users.

This is a compound interest logic, where a portion of the profits is extracted to subsidize members, either making membership prices cheaper or making membership benefits more attractive, thereby bringing in more loyal users. The increase in loyal users will increase the ARPU value of overall users, giving the company more profit space, and more profits can ultimately be used to subsidize members more.

(5) Competition landscape

Next, we may need to correct a point of view. Membership is not only a revenue strategy, but also a very important market competition strategy. Currently, the market is vying for high-value users, especially those highly loyal paying users, who are important stock assets of products. Many companies will subsidize membership programs so that existing users do not fall into the hands of competitors and maintain a stable foundation.

It is said that Xiuxun, the person in charge of Alibaba's 88VIP membership project, once said that Alibaba needs to put money into this membership.

What’s amazing is that since the launch of 88VIP, the annual fee of JD PLUS has dropped from 198 yuan to 99 yuan.

(6) Associate Members

Joint membership is also one of the most popular cooperation and pricing strategies at present. Based on the scale of both parties, there are three models in the industry.

(7) Platform Ecosystem Model

It is suitable for platform-type enterprise groups with a certain ecology. The goal is to allow high-value users within the platform to circulate, so that the wealth will not flow to outsiders. This type of model needs to be implemented from top to bottom at the group level, while coordinating the resources of various internal ecosystems. The number and value of membership benefits in the ecological model are very high, and the pricing is often much cheaper than the aggregation of single membership. This type of membership requires not only subsidies at the group level, but also investment from various departments within the ecosystem.

A typical example is Ali 88 Membership, which integrates multiple membership identities into one “one-card pass” that covers all of Alibaba’s core services and combines a series of compound rights and interests provided by major domestic and foreign brands on the Ali platform. As long as users buy an 88 membership, they can enjoy multiple memberships of Taobao, Ele.me, Youku, Xiami, and Taopiaopiao. From the user's perspective, the value of the membership is greatly enhanced; from Alibaba's perspective, all high-value users can be locked within the Alibaba ecosystem as much as possible, and the development of relatively weak businesses such as Xiami and Taopiaopiao can be driven, killing three birds with one stone.

(8) Dual-headed joint member

Dual-headed co-branded membership refers to a joint membership launched by two products of similar size and level. There are two main purposes for this type of launch: first, the two companies work together to enhance the value of rights and interests and attract more members; second, the products direct traffic to each other and attract high-value paying members.

In terms of pricing, the two platforms will subsidize each other. The price of purchasing this joint membership will be lower than the price of purchasing two memberships, which will attract more users to purchase.

The price of the joint membership of "Zhai E Block" launched by Ele.me and Bilibili is 25 yuan/month and 198 yuan/year, while the original price is 40 yuan/month and 413 yuan/year, with an annual discount of up to 48%; the price of the joint membership of Himalaya and Tencent Video is 25 yuan/month and 198 yuan/year, while the original price is 40 yuan/month and 436 yuan/year, with an annual discount of up to 45%;

iQiyi and JD.com members started the "joint membership" cooperation in April 2018. One week after the rights and interests were connected, the two parties had accumulated more than one million new members.

(9) Joint membership for one adult and one child

The "one large and one small" joint membership model refers to a product joint membership cooperation model between two scale levels, one large and one small. The cooperation logic of this type of membership is that large platforms hope to introduce more rights and interests, consolidate and strengthen the retention of existing members. However, for small businesses, it is difficult to find user growth channels, let alone attract high-value paying users. Through joint membership, high-value users can be attracted at a lower cost. Under this model, small products will use the cost of attracting new customers to pay for membership subsidies.

With the prevalence of the joint membership model, a new ecological gameplay has been formed in the industry. Large platforms seem to want to turn this gameplay into a new business model. By uniting small and medium-sized enterprises, they can not only make their rights and interests more numerous and stronger and consolidate existing stock users, but also absorb more long-tail traffic and, more importantly, do B traffic business.

At the beginning of this year, JD launched the "JDP Plan" based on PLUS membership, which is to jointly create a paid membership ecosystem through joint platforms, brands and offline merchants, so as to achieve full-scene coverage of rights and interests. At the same time, JD.com provides its partners with exclusive marketing tools and traffic support.

3. Establish a continuous membership growth system

Regardless of whether it is a paid member or a tiered member, the growth framework of the membership system can be broken down and divided into attracting new members, promoting activation, and retaining members. The following will describe the growth models of paid and tiered memberships respectively.

1. Paid Membership Growth Model

Paid member GMV = (new member acquisition + old member renewal number) * ARPU

Based on the GMV growth formula, the work of membership growth is divided into four parts: attracting new members, activeness, retention, and external cooperation, which serve the goals of acquiring new members, increasing ARPU, and member renewal respectively. External cooperation assists in achieving growth goals.

(1) Membership acquisition

1) Member acquisition: scenario and channel exploration

The first step to acquire new members is to find the right scenarios and channels, find scenarios for converting free users from internal traffic, and find the right channels for expansion or cooperation from the outside.

Internal traffic conversion: Free user conversion scenarios can be broken down from the user's usage path, and conversion operations can be attempted in each process. It should be noted that when setting operation strategies, the main process of users should not be disturbed too much. Common free-to-paid conversion strategies include: inviting new users to try free membership after their first login,

, value-added service reminders when browsing products, after-sales service reminders when purchasing goods, price discount reminders when paying orders, etc.

External channel expansion: Cross-border cooperation has become the mainstream nowadays, and joint memberships and joint activities between different industries are also common in membership marketing.

2) Member acquisition: perception of member value

The focus of this step is how to maximize users' perception of membership value and thus achieve paid purchases.

First, attract users’ attention and give members sufficient marketing exposure within the product. In terms of form, it can be a text or picture entrance, or it can hold membership marketing activities. Based on the scenario and channel, the entrance can be interspersed in the process and assisted by content that can present the value of members, allowing users to pay attention to members from time to time. Member marketing can quickly concentrate on advertising member value in the short term.

Secondly, arouse users' desires and maximize their perception of the value of membership to them. Copywriting is of course a very direct way, but in order to make users feel stronger, e-commerce, a money-saving calculator will be used to tell free users how much money they can save in a year to join a membership. In this way, it will more directly convey the value of e-commerce members saving money.

Finally, stimulate users to take action. Clear the psychological barriers for users to purchase members and let users take action at a lower cost. Free trial and use first and then buy are more common ways.

3) Member acquisition: Social fission

Fission is still a way to acquire users. Especially for businesses with wide users and low prices in the sinking market, they can still adopt the fission model of group buying and membership introduction, set up the causes and forms of fission, and then reach new members through social relationships.

(2) Members are active

According to the members' subjective wishes, the active operating mechanism of members can be divided into active active mechanisms and passive active mechanisms.

1) Member active: Active active mechanism

The active activity mechanism refers to a long-term fixed activation incentive mechanism. The active activity mechanism is part of the product, the entrance will be presented for a long time, and the tasks and feedback strategies will be automatically completed in the background without manual participation. Once the mechanism is established, it will give users clear expectations. As long as the rules are followed, users will be stimulated by interests and actively increase their frequency or activity.

More common active mechanisms: points system, medal system, member tasks, member activity center, etc. Two principles are required to follow when designing active activities: 1. The interest stimulus is attractive; 2. The rules are clear and simple, so that the effect of promoting activity can be achieved.

2) Member active: passive active mechanism

The passive active mechanism is a short-term or short-term promotional activity planned by product operations in order to improve activity, and users passively accept these strategies and then complete active actions according to the process set by the operation.

Fine operation strategies (issuance of coupons, pushing) and short-term marketing activities launched based on RFM are the more common passive active mechanisms. Generally speaking, as long as the operation is properly carried out, the passive active mechanism will cause effects in the short term, but after the action is completed, some users may return to their previous state.

The active activity mechanism and the passive activity mechanism are not two separate strategies. In order to improve operational effectiveness, they are generally combined with each other, such as member tasks combined with marketing activities to attract more members to do tasks, and targeted reminders from users during the refined operation process will also be combined with targeted reminders from users.

(3) Member retention

Member retention actions: operation throughout the life cycle, member renewal management and reasonable use sunk costs.

1) Member retention: Life cycle operation

To improve the retention of members, only actions are taken when members are about to lose. This is definitely not enough. Any retention operation must run through the entire life cycle. Of course, a healthy retention rate is based on the product experience.

Use new member guidelines to let users fully understand the rights and interests included; use the regular claim mechanism of rights and interests to deepen the user's impression based on costs; prompt users to moderately remind them of rights and interests, and then cultivate habits; establish a warning mechanism for loss, and when members are declining, or if members have poor experiences, take action to save them in a timely manner; when members are truly lost, recall them moderately.

2) Member retention: Member renewal management

Member renewal management is the basis for member retention. Most products now launch automatic renewal, using a slightly lower subscription price to attract users to purchase. Because the price is lower, members who buy automatic renewal have become the mainstream. Similarly, to stop renewal, users have to pay an additional operating cost, and some users may forget and continue to pay.

When members are about to expire, users will be moderately reminded to renew with certain discounts or some activity incentives, so the possibility of renewal will be even higher.

Of course, if the member activity is very high, you might as well try to convert users to purchase longer cycles; on the contrary, if the user activity decreases and there is a risk of churn, when it is about to expire, users can be retained with lower cost or shorter membership cycles to prevent user churn as much as possible.

3) Member retention: usage sunk cost

In ways to increase retention, using sunk costs is also a common practice. Increase precipitation during member use and increase switching costs; use human loss aversion to enhance explicit mechanisms to allow users to perceive the loss of costs and make users feel cherished.

Precipitate user usage data, habits and functions superimpose, and improve user switching thresholds. Nowadays, users are getting used to becoming more and more "lazy". When switching new products, the cost of resetting various operations is too high, and users are likely to give up. As more and more precipitation, the switching cost is getting bigger and bigger, so that they are almost locked in the end.

In cloud services, the cost of switching data is too high, which will allow users to continue to use their original members. In social media, the more users' social or emotional experiences are accumulated, the lower the risk of user loss.

We are afraid of losing the psychological effect, which is often stronger than gain. More and more member systems are taking advantage of people's loss-lossing and aversion to turn rights and interests from unlimited use within the cycle to limited use. On the one hand, it is for the cost, and on the other hand, it is also for users to cherish the rights and interests in their hands and use them as soon as possible. Only by using more members’ rights and interests will it be easier to develop members’ habits and the possibility of subsequent retention will be stronger.

(4) External cooperation

External cooperation is usually undertaken by the BD department, which is responsible for the purchase of joint members, member rights, or member activities and cooperation, etc. I won't go into details about this part.

2. Level member growth model

Level member GMV = (number of upgraded members + old members retained) *ARPU

The core logic of level members is the rule of 28, and the focus of operation is on medium and high-level members, especially high-level members. If the middle and high school member pool is regarded as a user pool, then recruiting new members is to upgrade members, and retention is the same as the paid model. The level member growth framework is member upgrade, member activity, member retention and member cooperation.

(1) Member upgrade: high potential scenario/user

To find potential high-value users, you need to break out of the product framework and evaluate it from the summary of this type of demand. If the user has not yet shown "high value", it is likely that he is currently a swing user and some of his consumption behavior is in the competitors.

Identifying implicit high-potent users. My usual practice is: first analyze existing high-value users, obtain the identity or behavioral characteristics of high-value users, then try to cluster high-frequency scenarios of high-potent users, and finally to the channel strategy and existing user pool.

In addition, if a user is in the middle of two levels, because the upgrade cost is low, it is more likely to promote the upgrade through certain operational actions.

(2) Member upgrade: conversion action

The conversion of member upgrades is similar to that of paid members, and is based on the logic of perception-desire-action.

• Perception: The first step is to continuously promote the value of members within the product, especially the high-value member rights, so that users can constantly notice it and then understand it in the next step.
• Desire: The most effective way is to let users try out higher-level rights in advance. Generally speaking, once we experience something better, we will become more picky about the experience we were used to before, and thus yearn for a more advanced experience. This is what the trial strategy of the membership system means.
• Action: Lower the upgrade threshold. In paid products, reasonable issuance of coupons can stimulate price-sensitive users to become more active, thereby improving the level.

(3) Member upgrade: Member communication

Unlike paid members, users of level members, especially those with high customer orders, care more about the vanity identity represented by the level.

In terms of member communication strategies, the first thing is to meet a certain tone and open up the communication link so that users can "show off" from time to time.

Secondly, birds of a feather flock together, and the social relationships of high-value users are often high-potential users of the product. Based on the social mechanisms in reality, such as emotional care, social etiquette, etc., design some fission mechanisms to obtain new high-potential members. However, the threshold for high-value users to communicate is extremely high. Once the fission strategy does not meet their tone, or the product advertising nature is too strong, it can basically not be able to forward, let alone attract new ones.

Active, retention and cooperation are similar to the operating logic of paid members, so I won’t go into details.

Author: Teacher Shen

Source: What to operate