Dollar Shave Club took off! The world is shaving. Dollar Shave Club offers a range of shaving products starting with razors (be careful around those razors).
And they did it a membership. With a monthly subscription, customers receive:
- Regular deliveries
- Significant discounts (and)
- Free shipping
The recurring revenue stream enables Dollar Shave Club to focus on delivering excellent customer service. Dollar Shave Club also built a loyal customer base by fostering exclusivity among its members. These products include items such as limited-edition razors.
Why learn about membership models:
- Determine Your Most Effective Business Model: Understanding the benefits of a membership business model will help you determine whether you'll be more effective with one
- Stay Competitive: As online marketplaces become increasingly competitive, stay updated on the latest trends
- Offer Personalized Experiences: You can use a membership business model to provide your customers with personalized experiences.
BarkBox is another excellent example of an online membership marketplace, popular among dog owners for its subscription-based service. You'll get monthly deliveries of toys, treats, and grooming products (I mean, your dog will unless you're in for that kind of thing).
The membership model works for BarkBox - predictable recurring revenue streams, allowing the company to invest strategically in product lines.
The membership model works for BarkBox - predictable recurring revenue streams, allowing the company to invest strategically in product lines.
BarkBox's membership program offers an exclusive online community. Members can do things such as:
- Interact with other dog owners
- Share tips
- Participate in special events and promotions.
- Build a sense of community
Enough examples! Let's dive into three reasons you may want to consider a membership/subscription model for your online marketplace.
Create Your Own Marketplace Fast
- Launch your own marketplace niche fast
- Easily connect your own domain name
- Create your own categories quickly
- Create custom fields specific to your requirements
Memberships Provide Predictable Revenue for Your Online Marketplace
One of the top reasons to choose a membership model is predictable revenue! Do you hear retirement? Waves lapping at your feet on white sand beaches?
One of the top reasons to choose a membership model is predictable revenue! Do you hear retirement? Waves lapping at your feet on white sand beaches?
Let's not get carried away too quickly. But, a predictable revenue stream can help marketplace operators manage cash flow. Critical for maintaining and growing the platform's operations.
Further, predictable revenue also allows marketplace operators to plan for potential challenges (platform goes wonky, employees leave to start a competitor, yikes).
A membership model may provide you with a sense of financial security. You'll enjoy knowing you'll have similar revenues next month (you might also potentially be basking in the sun somewhere too).
A membership model may provide you with a sense of financial security. You'll enjoy knowing you'll have similar revenues next month (you might also potentially be basking in the sun somewhere too).
Memberships can be rewarding. The sight of sales numbers steadily going up. The sound notifications of a new membership. Knowing there is money in the big bank account - all effects of creating a membership system that works.
Are you still wondering? How do I sell this to my team? How can I convince them to change the business model?
A membership revenue stream is like a bridge connecting the online marketplace and its customers. It provides a strong foundation for both parties.
A membership revenue stream is like a bridge connecting the online marketplace and its customers. It provides a strong foundation for both parties.
The recurring revenue "bridge" (or platform) is well-maintained and can support the weight of the 
marketplace's growth. The operator can focus on expanding and improving the platform (bridge).
Still, want to know why you might consider a recurring revenue model?
- 53% of senior finance executives surveyed by CFO say at least 40% of their organizations' revenues are recurring (CFO)
- 30% to 50% annually is the average growth of the average subscription billing vendor (The Paypers)
- 55% is how much Adobe's stocks increased in 2013 when the company shifted its Creative Cloud Suite to a subscription-based model in May of that year (Zuora)
Adobe switched its Creative Suite to a subscription-based model to:
- Combat piracy
- Provide a more stable revenue stream
- Offer more frequent software updates
Before the switch, Adobe software was a one-time license. Creating pirated copies was easy.
By switching to a subscription-based model, Adobe was able to offer more affordable software while reducing the incidence of piracy.
The subscription-based model has also enabled Adobe to provide more frequent updates and improvements to their software.
The subscription model provides a more predictable and stable revenue stream for the company. Adobe can now invest in new products and services and expand its offerings to new markets.
While Adobe isn't a marketplace per se, overall, switching to a subscription-based model has been a successful strategy for Adobe:
- Enabling Adobe to combat piracy
- Enabling Adobe to provide more affordable way software, and
- Enabling frequent updates
Want to use an online subscription in your marketplace?
- Layout the benefits offered to subscribers (sell it!)
- Create a pricing structure
- Determine the frequency of payments (usually monthly)
- Develop a marketing strategy
- Monitor subscriber numbers
- Monitor churn rates (churn will limit your growth)
Sell Exclusivity with an Online Subscription Marketplace Model
A membership business model gives you the:
- Ability to offer exclusive perks (and)
- Ability to provide an incentive-based system
These perks can include anything from:
- Free shipping
- Discounts on products or services
- Access to exclusive content
- Community forums
- Events
You can differentiate your online marketplace from your competitors by offering exclusive benefits.
Offering subscription members exclusive benefits can also help build:
- Customer loyalty
- Drive repeat business.
Feel excited as you offer your users exclusive virtual events, such as meetings with industry leaders. You might hear the buzz of your online community as members engage in lively discussions. You'll have the opportunity to meet with passionate, like-minded individuals.
Feel excited as you offer your users exclusive virtual events, such as meetings with industry leaders. You might hear the buzz of your online community as members engage in lively discussions. You'll have the opportunity to meet with passionate, like-minded individuals.
Well, maybe you are thinking:
- What have I to offer for exclusive benefits?
- We just provide an online marketplace!
- What would users possibly want from our online marketplace?
Well, you often have more to offer than you think!
Some ideas:
- Partner with other industry leaders to host webinars (like marketing webinars)
- Connect with other individuals to put together a package of free offerings
For users, joining an "exclusive" online marketplace can be like finding a key to a hidden treasure trove of perks.
Just like a key unlocks a treasure trove filled with valuable treasures, the subscription unlocks a world of exclusive benefits, discounts, and early product access.
The subscription is less like paying for a service and more like an exclusive club.
So yes, how do you get users to subscribe? You're right; it can be a challenge for some.
- 63% of research publishers consider converting their audience into paying subscribers a significant challenge when developing subscription-based products. (Digiday)
There are ways to get individuals to sign up, that being said. For example, promotions are a great way to get people to commit:
- 45% of the 4,100 recent newspaper subscribers surveyed in the Media Insight Project stated that a promotion or a free trial drove them to subscribe (American Press Institute)
One of the most successful online marketplaces that applied a subscription model to its platform is Amazon via Amazon Prime. 
Amazon loaded their Prime subscription with benefits:
- Free and fast shipping on millions of products
- Exclusive shopping deals
- Entertainment value (streaming of movies, shows, and music)
- Unlimited photo storage
Want to create more exclusivity in your subscriptions?
- Design your subscriptions to offer the highest value
- Implement a platform that allows you to automate the subscription process
- Promote your subscription model.
Use Personalization to Create an Amazing Online Marketplace Experience
You may want to choose a membership business model to offer personalized experiences for your users.
By collecting data on customers' behaviors your online marketplaces can provide:
- Tailored recommendations
- Personalized content
- New product offerings
Feel excitement on your user's faces as they interact with personalized offerings (plus, you'll feel less "user rage" by not sending the dog promo to the cat owner!)
Personalized offerings can feel like custom-tailored suits - they fit perfectly and make you feel like a million bucks!
And personalization works:
- 90% of top marketers believe personalization is significant in driving business profitability. (Google)
- 40% of marketers use machine-learning personalization to present tailored recommendations to audience members dynamically. (Evergage)
- 66% of users anticipate that brands will have an understanding of their personal needs. (Salesforce)
Some companies implementing personalization are subscription-based fashion services like Stitch Fix and Trunk Club. Stich and Trunk use customer data to create personalized recommendations for clothing and accessories.
Stitch Fix asks customers to fill out a survey about their:
- Size
- Style
- Budget
By considering customers' sizes, styles, and preferences, Stich Fix offers curated boxes that are more likely to meet each customer's needs.
Want to offer personalized experiences in your online marketplace?
- Collect and analyze customer data to gain insights into behaviors
- Develop a personalized recommendation system
- Offer items such as personalized packaging or custom messaging
- Continuously iterate
Closing Summary
Using a subscription business model for your online marketplace has several advantages. You can:
- Incentivize customers by offering exclusive benefits
- Offer personalized experiences to create a loyal customer base
- Gather valuable customer data to tailor your subscriptions further
How about you?
- How many subscription services do you use?
- What would make services more valuable to you?
- What's the most unique membership business model you have heard of?
