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The Pros and Cons of a Member-Based Business Model

You’ll have a steady customer base as long as you treat them right—and that can prove tricky.
July 20, 2015

There’s nothing quite like a closed door and a “members only” sign to make us crave what’s on the other side. When faced with the desire for something—or even the thought attached to the desire for that something—closed doors can be a powerful motivator to get an audience plugged in and ready to play. But what about when you ask them to pay to come through the door?

With paid membership sites becoming more commonplace, you might be considering adopting the same model. Before you take the leap to make your website one that has paid-only access, consider these pros and cons that come with a paid membership business model:

Pro: Recurring revenue. Most paid membership sites use recurring charges. This means when customers sign up, they’ll be automatically charged a membership fee each month. Paid membership models keep the money coming in to one channel of your business, even during seasonal or unexpected lean months.

Con: Giving your customers their money’s worth. If you’re going to charge a customer like clockwork every month, you’d best be ready to deliver a consistent experience and product each month as well. Paid membership models fail—and fast—when your audience can get what you’re making them pay for elsewhere (and for less or for free). Before launching a paid membership model, be sure to clearly delineate the differences between what paid and unpaid members will receive. Online content marketing firm Copyblogger does an excellent job with this when showing the difference between its regular, unpaid membership and its Authority (paid) membership.

Pro: Building a highly qualified and attentive email list. Level with me, kiddo—you pay a little more attention when you’re paying for something, don’t you? Sure you do. We all do. Paid membership models help businesses build an email list of prospects and customers who chomp at the bit to open emails when they’re sent out. This makes your email marketing efforts, and even your other content distribution efforts like blogs and newsletters, mean more to the lucky recipients. And higher open rates mean higher clickthrough rates mean higher potential conversion rates and—if you’re in the selling game—more sales.

Con: Never being able to get lazy with your email list. The average blogger can have a meh column every now and then. Maybe even take a few weeks off without writing. When you go paid, baby, there’s no lazy and there’s no rest. Your paying clients are expecting a consistent experience whether you have the flu or writer’s block. Going to a paid model means you'd best have a rock solid editorial schedule and strategy in place. You have to keep your eye on the ball at all times: Plan way ahead, edit to the gills, then do it again next week.

Pro: Your referrals create revenue. When your paid members rave to folks they know about how valuable they find your community, their referrals bring more revenue in your door. A shared blog post is swell, but a paying client bringing you more paying clients? Super swell. Many paid membership sites even create affiliate programs to reward members who consistently bring in new paying members. Whether or not you choose to offer one is up to you, but be sure to find a way to thank your members for getting their friends on board.

Con: It’s no longer just your reputation on the line. When a paying customer brings you a friend, guess who’s in the front line of fire when your brand doesn’t live up to snuff for this new member? You guessed it—the person who referred them. When you create a paid membership site, any paying customer who brings you a new customer is putting their reputation on the line right next to your brand promise. Paid membership models must be conscious of the weight a referral carries and be fiercely protective of the referring customer’s reputation. The best way to do this is to deliver a consistently great experience for your paid membership, without excuses or fail, and when the opportunity presents itself, exceed all expectations.

So will you pursue a paid membership model? The pros are plenty, but each comes with a little reminder that there are strings attached. With regular recurring revenue comes great responsibility. Brands must be willing to clearly state what members receive for their money and then fiercely deliver on that promise, knowing that money makes everything just a bit more complicated.

When executed properly, the complexity of a paid model can create happy, paying customers who send you more happy, paying customers. And that’s a win with every business model.

Read more articles on online marketing.

This article was originally published on July 17, 2014.

Photo: iStockphoto