How would you like to make money from the same customer not once, not twice, but over and over again?
Smart businesses understand that this model is a much better way to feed their balance sheets and keep their budgets overflowing. The idea is to get a customer to give them money on a recurring basis rather than just once. This is called continuity or recurring revenue and is practiced on the Web via a membership program.
The reason membership programs are so valuable is that they can give you an almost guaranteed stream of revenue month to month. If you’ve ever worked on the financial aspects of a business, or worked with a venture capitalist, you know that recurring revenue is one of the most important objectives to achieve. It’s simple. Your business is significantly more valuable to you and to potential investors if you can show consistent revenue over time—hopefully on an upward scale, too.
Fact: It’s better to have a customer pay you repeatedly as opposed to only once. That’s why so many Web entrepreneurs and regular offline businesses have begun to implement membership programs. It’s also exactly the reason why you need to do it, and do it soon. To give you an idea of what types of membership programs you could create, let’s look at several successful programs, analyze why they work and discuss their earning potential.
Aaron Wall was already the number-one do-it-yourself search engine optimization (SEO) resource on the Internet when his wife convinced him to take it up a notch and offer a monthly member training program at SEOBook.com. The following excerpt is from his Web site:
Launched in 2003, we have one of the oldest standing SEO sites that is still regularly updated. The site originally was designed as a blog that offered DIY SEO tips and helped sell the leading SEO ebook, which had sold well over $1,000,000 in volume. My wife Giovanna found me by being a customer of my ebook. After having been scammed by a shoddy SEO firm for over $5,000, she saw that my $79 ebook delivered far more value than what other people were charging many thousands of dollars for. In 2006 we hit it off, she started ranking #1 for her most valuable keyword, and she pushed me to build an online training program to help other small businesses compete online.
The SEOBook online training program initially launched at a price point of $100 a month and has since been raised to $300 a month. So what do you get for that monthly fee?
Our ebook customers wanted more interaction with us, but we needed a way to facilitate the additional interaction. We stopped taking on many new traditional SEO clients and shifted toward building the #1 online SEO training program consisting of…
- Over 100 custom training modules;
- A private support community that is simply unmatched by any other SEO conference or SEO forum;
- Exclusive premium tools; and
- Monthly newsletters, members only videos, process flowcharts and custom SEO spreadsheets, and more.
That’s quite a bit of information for a low monthly fee. As you can see with Wall’s program, if you want to charge premium prices, you’re going to need to deliver significant value in return. SEOBook offers more than just articles about how to perform quality SEO. Instead, it offers access to a vibrant community, training modules and premium tools.
Nobody knows for sure exactly how many members are in the SEOBook.com training program, and Wall isn’t ready to say just now, but let’s run a few numbers to see how profitable something like this can be.
Let’s assume he consistently has 1,000 subscribers each month: 1,000 members x $300 = $300,000 a month, or a yearly revenue total of $3,600,000.
Even half of that monthly total is $150,000 a month, which means SEOBook would bring in $1,800,000 per year. How would you like to bring in a paycheck like that? The best part is, it’s entirely possible and it doesn’t have to be done by hiring 100 employees. In theory, you could run a program like this with a skeleton crew of employees and virtual assistants.
What you will also discover when running a membership program is that many choose the “set it and forget it” plan. Those people will join your program, log in once, or maybe never, and still continue to pay your monthly fee over and over. (Ever have a gym membership?) Some continuity experts suggest this can be anywhere from five to 15 percent of your members. That’s a lot revenue pouring into your wallet every month for doing nothing. The “set it and forget it” people seem to think the concept of just buying access to the program will magically help them find success.
However, once they realize that accomplishing their goal involves more work than they anticipated, they become disenchanted with the concept. Then, they either continue the membership in the hopes that they will one day use it, or they are too embarrassed to quit or unsubscribe to the member program because it would lead to admitting failure on their part.
You can create a member program for just about anything. If you’re a software company, you can let consumers subscribe to use your service. Assuming you have a product or service that helps people and provides value beyond the one-time purchase and need, you have the potential to reap significant rewards using the Web. The following are a few examples of Web-based software member programs.
Companies like Prfessor.com offer consumers the ability to create their very own online university, academy or training center for only $49.97 per month. Wordtracker.com offers businesses the ability to do keyword research on the most searched for words and phrases online—allowing them to shoot for higher search engine rankings—all for $59 per month.
Ever use Netflix.com? Netflix revolutionized the movie rental business by understanding that people didn’t enjoy having to leave the house in order to rent a video. For the small monthly fee of $8.99, Netflix allows you to select a movie online and have it delivered to your home via regular U.S. mail. Then, when you’re done, you ship it back and receive another movie. How can Netflix make money at such a low price point? One million subscribers at the $8.99 monthly price point will bring in $8.9 million per month alone, and the $8.99 price point is only their lowest package. The best part is they have no retail stores, which means no rent and no unhappy teenage employees.
Even Microsoft gets into the continuity action through their Xbox LIVE product. For $7.95 per month, millions of gamers have the opportunity to connect with other players or add game add-ons like new songs, levels and characters. The power of the community is what really drives this program. You’re probably not paying $7.95 per month because you want some extra add-ons. Instead, you’re paying $7.95 per month to be entertained and connect with a vibrant community of other like-minded gamers.
Zappos is the king of customer service and one of the true e-commerce beasts on the Web. I once visited their offices in Las Vegas for a tour and was shown their daily sales numbers, which averaged approximately $3 to $4 million per day. This company knows how to make money online—in fact, they’re currently on track to do a billion dollars per year regularly. They also know how to build a brand and deliver excellent customer service, having been written up in countless publications as the example of how to do things right.
And all that positive press has paid off. Since their brand and the “Zappos way” have become legendary in the media, they have elevated themselves to rock star status, meaning they had major demand from other businesses wanting to know the secrets to their success. So, they created a program called Zappos Insights, a subscription video service that lets companies ask questions about the Zappos way and get answers from actual Zappos employees. The fee to subscribe every month is $39.95. The service, said CEO Tony Hsieh, is targeted at the “fortune one million” looking to build their businesses.
“There are management consulting firms that charge really high rates,” Hsieh said. “We wanted to come up with something that’s accessible to almost any business.”
How many other businesses do you think want to learn how Zappos makes a billion dollars per year? One-hundred thousand? One million? Ten million? All of them! Now, if you’re one of those businesses, are you going to balk at spending $39.95 per month for the possibility of learning how? Of course not— it’s a no-brainer.
To add a continuity program on top of your existing business, you must first decide what type of program to put in place and how to get it done. If you need help or would like additional information on this topic, please feel free to contact me.