Companies failing to harness benefits of the membership economy
Most companies seem to be aware that building a strong subscription base with customers is the key to future commercial success, yet a new report claims few are harnessing the potential of the membership economy.
The report, from management consultant, Manifesto Growth Architects found that, while 70 per cent of businesses believe that membership and subscription models hold the key to their future success, very few are harnessing its potential.
Disney, FT, Unilever taking membership seriously
Manifesto points to companies such as Disney, which recently announced details of its new streaming service to rival Netflix, the Financial Times reporting one million paying readers a year ahead of plan and Unilever pushing into healthy snack subscriptions with acquisition of Graze, the last few weeks as examples of membership models fast becoming a hot topic on the UK business scene.
Manifesto surveyed 504 senior business leaders across sectors spanning retail, finance, leisure, automotive and utilities, but found that only a quarter (24 per cent) are currently implementing subscription models, with less than one in ten (seven per cent) generating significant revenue via membership.
A quarter of business leaders (24 per cent) said they were trialling membership models but weren’t sure how they would evolve and a similar number (22 per cent) said membership products had definite potential, but they were unsure how to approach them.
Protecting market share
Manifesto, which also conducted in depth interviews with over 40 executives with subscription offerings as part of the research, said both its own findings and wider market trends show companies need to seriously consider investing in their direct to consumer offering to protect market share, boost revenues, and develop sustainable long-term customer relationships, or risk losing out.
Whilst subscription fees often define the membership model for many, Manifesto said transactional, advertising and affiliate income can hold equal if not greater revenue potential – but harnessing this for some companies can mean a bold departure from ‘business as usual’.
The business, which specialises in developing growth strategies for major international household names including Merlin, Disney, News Corp, Purina, Pay.UK and Coty, said the research should be a wake-up call to business leaders and encourage more to explore new customer propositions in the wake of evolving technology and behaviour shifts linked to the membership economy.
The findings feature in ‘How to Make Money from the Membership Economy’ - a new report from Manifesto which shows the leisure and entertainment, retail and media sectors recognised as having the most potential for membership, reflecting the success of proven subscriber models including the Wall Street Journal, The Times and Netflix.
Utilities and the automotive sectors were thought by business leaders to have the least potential – an assumption challenged by Manifesto in its analysis.
“Netflix is the pioneer of the membership economy so it’s no surprise to see Disney and Apple following suit and announcing a streaming platform as a way of increasing long-term customer relationships and generating ongoing revenue”, said Manifesto Executive Vice President, Sam Jordan, who is also a specialist in membership proposition development.
“Our research and report shows just how much of an opportunity there is for businesses looking to take that plunge and develop a subscription model for their customers.
“The success of a membership or subscription models ultimately begins and ends with the consumer, and in line with this, evolving the associated consumer proposition and experience.
“It’s important for businesses to recognise the potential subscription holds for capturing and retaining fresh revenue streams – but equally it’s got to be done right.
“Our report is the first of its kind. It not only shows the revenue potential of a well-executed subscription or membership model, but also identifies the core capabilities a business needs to master to be successful. It’s never a case of one size fits all.”
The company plans to launch the findings at an event exploring membership models and their benefits on Tuesday, April 30 from 8:00-10:00am at h Club London, 24 Endell Street, London, WC2H 9HQ, featuring speakers from The Times, Revolut and Tortoise.