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Making The Case For Memberships

Take a cue from Costco and move from transactional “wow” to relationship “wow.”

Photo by Scott Olson/Getty Images

Imagine walking into a Costco to grab a few last minute items for dinner. You park, run in —flashing your membership card to the greeter at the front door — and finish your shopping quickly. Now imagine the same trip, but this time you don’t have a Costco membership. You can’t just grab a few items really quickly. Costco doesn’t do transactions, they do memberships. Should our businesses follow suit?

Costco doesn’t have a free tier. It’s strictly pay for play. Why? What’s so compelling about stores like Costco or Amazon Prime? Is it low prices? I don’t recall ever leaving a Costco for less than $100. There are sticky factors way beyond low prices that attract me in. Is it the $1.50 hot-dog-and-soda combo? Maybe. They also seem to magically understand what I’ll need depending on the time of year and have mastered the art of encouraging impulse buying. (Sure, I’m running low on shop towels, might as well buy a 50 lb. bag. Only $19!) At the end of the day, we pay for the memberships first and foremost because of convenience. We love the ability to order something and have it magically appear a few hours later or being able to buy in bulk. Convenience is something we’ll pay for even if it means sacrificing quality.

In the same vein as other membership programs, Costco has figured out how to make their memberships indispensable. I’m guessing if I asked you to cut up your Costco card, you’d probably say something like “from my cold dead fingers.” They’ve successfully woven together several factors that mean high engagement and low attrition for them. Costco claims retention percentages in the high 80’s whilst Amazon Prime boasts rates north of 90 percent.

Also by Henry Clifford: Sharpening Your Edges: What I Learned From Walking The Aisles of Best Buy

What can we learn from Costco and Amazon? When we deliver a “wow” experience to a client, they get hooked and tell their friends. The “wow” becomes a way of improving their own image. It feels good to be the first one to tell a friend about a new exciting service or product. We get to bask in the glory that comes from making someone’s life easier.

Our industry does a great job of delivering transactional “wow.” However, relationship “wow” is our largest area of opportunity. By delivering a service that is perceived as an ongoing necessity, we crossover from transaction to relationship. What are those “must-have” services in our industry? There are a couple of key areas where it makes sense to begin our efforts: security monitoring and service plans.

Also by Henry Clifford: Care, Water, and Feed Your Company

Security Monitoring
This one’s easy and already a part of the family budget. By offering security monitoring to your clients, you’re essentially creating a membership program and leveraging a monthly spend that doesn’t need much debate. You’ll build your recurring monthly revenue while beginning your journey of relationship “wow.” Many of the security platforms available today, including dealer-friendly, offer amazing options around video analytics, smart HVAC controls, and easy management of multiple properties.

Service Plans
Whether it’s an annual plan offering to dust the rack and update firmware, next business day service calls, or a monthly subscription offering 24/7 remote support (full disclosure: I’m a co-founder of Parasol), service plans deliver relationship “wow” by catering to customer pain points around feeling helpless and needing someone immediately. Once you have customers who’ve used your service plan even one time during a tech meltdown, they’re hooked for life. They’ll never again want to go it alone after hours and will brag to their friends about the amazing service they received from your company.

Am I suggesting you begin only offering services to paying members? Just like anything else, implementations tend to have a lot of devils hiding in the details. We’re not planning on turning non-member clients away anytime soon, but will keep making our membership options more and more appealing. Don’t get me wrong — this isn’t easy. Nothing ventured, nothing gained.

Stay frosty, and see you in the field.

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