Tuesday, 12 April 2016

Book Review: The Membership Economy:

by Oliver Clark

The Membership Economy, by Robbie Baxter, is a very well structured and researched book, detailing both the strengths and potential stumbles associated with a member based business model. From the opening line of 'Belonging matters', I was hooked. 'When you treat your customers like members, you invest in them. It's the only way they will invest in you' is Baxters overriding argument, and I certainly share her views with one gaping exception. She uses a wide range of examples, from Starbucks to Pandora to Netflix to American Express to various NGOs, each with differentiated types of Membership Economies, helping demonstrates how members can be found in a wide range of sectors.

Early into the book, Baxter explores her past job at Netflix before its surge in popularity and the tips she received from past mentors (the advice of her mentors is something that she frequently alludes to, emphasising the necessity of guardians in the business world). Initially targeting the psychological aspects of membership, linking back to Mazlows pyramid of needs, she explains why it is in the best interests of us all to be a part of some form of membership economy, simply to be 'one of the crowd'. This book certainly explores the details in which people not only become attracted to these businesses, but also how they become almost unwittingly unwilling to separate due to being treated as members, more than mere subscribers, and so the 'forever transaction' is implemented until cancellation. She also states that 'membership is an attitude, an emotion. A subscription is a financial arrangement'.

She goes on to describe the stages of becoming an ideal membership economy, putting the customer at the heart of the business model instead of the product or service and the idea of starting at the bottom of a 'chute' model instead of following the conventional funnel, where you essentially ensure that the people who you first approach about the product have the potential to commit when it comes to payment. 'Freemium' is also analysed and explained, with Baxter explaining how it differs from your basic free trial period, the most obvious successes to this being Spotify and LinkedIn, who offer their services for no charge but then make consumers pay to access the full range of available features. Both the simplicity of an attractive Starbucks card and the more complex ideas of technology are ways to further enhance a membership economy in Baxter's eyes. Interviews from a number of company executives and owners ranging back to the 1990s help to demonstrate the arc of the membership economy story, with examples of great successes such as Netflix, where Baxter worked years prior to writing the book, and failures, most notably Napster, which caused a massive speedbump in the progress of online music downloads, and other firms who succumbed to the super (evil) users, who's demands were detrimental to the overall product that was being offered.

One thing that I feel she neglects to appreciate in her book is the importance of ownership that is still key to many people. Although the membership economies of Netflix and Spotify are rapidly decreasing the demand for DVDs and CDs respectively, I believe that the significance of possession and ownership is more prominent in today's society than she gives credit to (she states that 'the whole idea of owning things is going to change.'). Although membership may effectively be the new ownership, the monthly subscription being more important than the physical items, I still believe that possession is undervalued by her, as in a number of industries, most obviously housing, the car market and other personal items as simple as books and CDs. She talks of the hassle of maintaining (a membership economy 'minimises the stress of caring for and storing all our stuff, while offering us new ways to feel part of a community) and looking after assets, whereas a membership tries to look after you. I disagree to an extent, in that I feel the maintaining and care of assets in fact adds to the personal satisfaction of the user and the link between themselves and the product. Who would not choose a neatly laid out and ordered bookshelf tailored to your own personal needs and desires that has taken years to collect and maintain, in favour of a portable electronic kindle? I would also argue that the membership economy model falls short in appealing to the natural instinct of human pride, where people take joy in the fact that they own something individual and unique instead of being just one of an ever growing community. She gives an email to contact her, mainly for those intending to set up businesses and gain advice from her, but I have contacted her since reading the book, questioning whether she believes that membership will eventually replace ownership fully in the future.

In conclusion, a highly enjoyable read that covers a wide number of examples in great detail. Only time will tell whether this type of business strategy will continue to thrive as technology continues to improve. Baxter frequently eludes to the fact that even momentary lapses of innovation and regeneration may lead to competitors sweeping into the market, and yet also warns of how being the next hip thing also has its eventual limitations. My personal view is that we as a society, with our at times unreasonable and uncompromisable demands, will force the fixed costs of membership economies up further and further as we demand more from them, leading to a more monopolised market as new companies struggle to gain the capital needed to operate on the same level of your well established corporations, let alone innovate at a level surpassing them. This may result in a less efficient work ethic, where the sheer vastness of the number of members and the lack of major firms serving them leads to a poorer quality of service for all, leading to the idea of 'subscribers' that Baxter wishes to avoid at all costs.

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