Is a Membership Program Right for YOUR Business

By , The Entrepreneurial Guru for Women

Solo-E Certified Solo Entrepreneur Expert

Ali Brown - The Entrepreneurial Guru for Women

These days, you can find membership/continuity programs everywhere. The trend started years ago with book-of-the-month clubs, and today it’s the most popular way to sell products ranging from wine to flowers, and services ranging from massages to coaching.

Here’s how it works for you as a business owner: Jane or Joe joins your monthly membership or widget-of-the-month club, and that one purchase gives YOU recurring income. You will now get “automatic” sales from ONE purchase transaction instead of going back and trying to get folks to buy from you again and again.

But, here are three things that most people in growth stages DON’T realize about continuity programs:

1. A continuity program is a revolving door that you must manage all the time. In order to combat what we call “ attrition”—the gradual and natural reduction of members—you must continually market your program and constantly recruit a high number of members.

2. You’ll likely need to hire a customer service rep to handle your growing number of orders. You won’t think of this at all at first, until you start getting a few hundred people in your program. Suddenly, there will be credit card declines and people losing their passwords and having questions. They didn’t get their product or they want to change their address. You don’t think this will be a big deal, but it’s going to turn into you likely needing a dedicated team member for these types of issues, and it will probably be a full-time position. It is a business unto itself when you start growing the numbers that you need for your program to be profitable.

3.  You will need a high number of members to actually make a profit off your program. Here’s an example: Let’s say that Suzie Coach has a list of 5,000 people. She just heard about continuity and thinks, “ I’m going to start a continuity program. I’m so excited! I’m going to do this monthly telecoaching thing.” She has a list of 5,000 people and sends out invitations and promotions for her programs. Let’s say that 10% actually click in the link in the email to learn more. That’s 500 people. They go read the sales letter. Let’s say 5% of them sign up (which is actually an extremely good conversion rate). That’s 25 members.

Let’s say her program is $47 a month. 25 x $47 = $1,175 a month. Now she’ll need a virtual assistant (VA) or staff member to run the program. Let’s say that’s 20 hours a month at $30 per hour. That’s $600, so once you deduct that, Suzie Coach is only netting $575 a month and is ready to run away screaming.

AND this example doesn’t even take attrition into account. Suzie Coach and/or her VA also has to be continually marketing her program in order to keep bringing folks in on a regular basis.

( The even bigger PROBLEM I see is a lot of business owners starting these programs, getting sucked into them, and then starting to neglect the higher-profit areas of their business. They’re pulling their hair out trying to make this continuity thing work. Then it migrates from being a financial issue to an ego issue. They don’t want to let it go, and they don’t want others to see that it “failed”.)

But, there ARE three situations when it’s a smart move to launch a continuity program for your business:

1. You can rightfully charge a high fee for it. To do so, your information needs to be specialized. Let’s say that you have special information to help dentists market their practice. You could charge several hundred dollars a month for that, and many people in the industry easily earn that. Why? Because they offer specialized information for a niche market.

2. Your objective is to use that lower level to give people a taste of what you have, so you can quickly move them up the ladder to your higher offerings. That’s called an “ ascension model.” In that case, your lower-level tier may be what we call a “ loss leader.” You don’t make much money. You may even lose money on it. But, it’s designed to bring people into your world and get them to sample what you have.

(My current Success ClubTM is a perfect example of that. At only $9.97 a month, it’s not a big revenue generator for me, but it’s an ideal way for people to get a taste of what I have to offer, so they learn more about me, my programs, and courses.)

3. You are a serious traffic magnet. This is if you know how to get serious nonstop traffic. It’s your full-time job, or you have a whole team working for you to get heavy traffic to your website on a specific niche topic. For example, let’s say you have a membership program on a specific type of stock trading. You’re getting thousands of new members a month. That’s a full-time business. Even if you’re only charging $47 a month for this, if you have 1,000 members, that’s $47,000 a month. Now we’re talking!

Ali Brown is fast becoming regarded as the voice for women in business and success. After launching her first business from her tiny New York City studio apartment in 1999, she has grown it into what is today Ali International, a multimillion-dollar enterprise with 50,000 members that ranked in 2009’s Inc. 500 list of fastest growing private companies in the nation. Forbes.com recently ranked Ali as #1 Woman for Entrepreneurs to Follow on Twitter. Ali is dedicated to helping women start and grow their own businesses via her coaching and publishing company the Millionaire Protégé Club; her female-centric Ali Magazine; her online Ali Boutique; and Shine, her annual fall conference where Ali delivers the best in business-building strategies for entrepreneurs of all levels. www.AliBrown.com.

© Copyright 2011 Ali Brown

Leave a Reply

Search
Generic filters
Match phrase exactly
Search in title
Search in content
Filter by Custom Post Type
Posts
Articles
Self-Studies
Free Templates