Episode 254

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We all have experienced the membership economy. Disney+, Dollar Shave Club, and a wide variety of meal prep kits delivered to your door. But, does it work in the B2B or service delivery worlds? When we talk about the membership economy, we are talking about something much deeper than the transactional value of memberships and subscriptions we pay for each month. It’s about how we are treated and cared for by the businesses whose programs we join. As we think about how to strategically guide our clients – this is a concept we need to understand.

Robbie Baxter is an author and one of the foremost experts on the membership economy. She has written two books including The Forever Transaction and her earlier book, The Membership Economy. In this episode of Build a Better Agency, Robbie explains how the membership mentality benefits a business and its clients, and she walks us through some of the challenges as well.

Is it a viable option for your agency or some of your clients? I think the answer might just surprise you!

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.

Membership Economy | Looping your agency into the membership economy

What You Will Learn in This Episode:

  • The framework of Robbie’s books and teachings
  • How the membership economy has changed the way we look at our business model
  • Why the subscription religion is taking over all industries
  • How the membership model translates in the B2B space
  • Why membership is still a viable option if you are an artisanal bakery
  • How to get your clients on board with a membership model if it makes sense for them
  • The common obstacles we may run into while trying to roll out a subscription service within a client’s organization

The Golden Nuggets:

“If you focus on the long-term well-being of your customers—if you optimize your offering and your organization around that—it completely transforms your business model.” @robbiebax Click To Tweet “Greater engagement, greater loyalty, and recurring revenue is the holy grail for all business owners. But it requires change across your entire organization.” @robbiebax Click To Tweet “From a technical perspective, it is easier than ever to adopt a subscription model. So, everybody is getting in the game.” @robbiebax Click To Tweet “Businesses are used to buying subscriptions. So, if you’re an agency and you’re thinking about moving to a subscription pricing model, it’s nothing new to your clients.” @robbiebax Click To Tweet “Nobody likes to be pitched on something that they don’t think is in their best interest. Everybody loves to be pitched on what they need.” @robbiebax Click To Tweet

Ways to contact Robbie Baxter:

Speaker 1:

If you’re going to take the risk of running an agency, shouldn’t you get the benefits too? Welcome to Agency Management Institute’s Build a Better Agency Podcast presented by White Label IQ. tune in every week for insights on how small to midsize agencies are surviving and thriving in today’s market. We’ll show you how to make more money and keep more of what you make. We want to help you build an agency that is sustainable, scalable, and if you want down the road, sellable. With 25 plus years of experience, as both an agency owner and agency consultant, please welcome your host Drew McLellan.

Drew McLellan:

Hey, everybody. Drew McLellan here from Agency Management Institute. Welcome to another episode of Build a Better Agency. Thanks for listening. I know that you are crazy busy right now, just like you always are, and I am always grateful that you take the time to listen to the podcast. So, in this episode, I want to talk about sort of a philosophical shift. I want to talk about how we think about our customers. I think we’ve all experienced what it feels like to be an insider, what it feels like to feel like you have access to something that makes you special in some ways.

As many of you know, I travel quite a bit. Not right now, of course, because I’m recording this while we’re still on lockdown for COVID, but normally, I’m on about 220 planes a year, and I spent a lot of time in various Marriotts across the globe. Because I have chosen United and Marriott as my airline and hotel of choice, they treat me incredibly well. So, I often feel like I am in a very elite group of people who are privileged to get special perks because of the volume of time I spend with them, the volume of money I spend with them, and they make me feel, not like a customer, but they make me feel like an insider.

So, I have access to lounges and check in times that are different and upgrades, and things like that, that the average traveler simply doesn’t have. What that does is that makes me all the happier to give them my money, and it makes me eliminate all of the other airlines and hotel chains as options, because I am treated so differently. I feel so valued by United and by Marriott, which I know is not everyone’s experience, but for me, they are a great example of how you can make a member or a frequent customer feel really special.

There’s something about this membership mentality. It’s not just about that you get your BarkBox every month, or you get your razors every quarter, or whatever it is. It’s not just about transactionally what we get for our membership, but more importantly, it’s about how we are treated and how we are cared for by the business that we are the member of. I think there’s something there for us to be thinking about. I think as we are looking at our businesses differently, and as we are starting to reimagine what our business will be like when things go back to post-COVID normal, whenever that may be, I think this is a great opportunity for us to ask ourselves, is there a way for us to …

For our own agencies and our clients, is there a way for us to wrap our arms around this idea, this membership mentality, and bring it to our business? Today’s guest is an author and an expert on this whole idea of membership and the membership economy. Robbie Kellman Baxter has written two books. The first one was, The Membership Economy, and the second one that has just come out is called, The Forever Transaction. The Forever Transaction, and both of them are about how you build a membership mentality, and maybe even a membership model inside your business, and how does that benefit you?

Absolutely is recurring revenue. Absolutely, it is rabid fans who keep talking about your business and are a great marketing tool to bring more folks to you. There’s a lot of advantages to [inaudible 00:04:38] without a doubt, but also there are probably, I suspect, some challenges, and that’s what I want to ask Robbie about. I want you to stay open-minded. When I first read the first book and I started applying it to my agency, it’s different when I apply it to Agency Management Institute, because of course, we are a membership model. But when I applied it to my agency, I struggled a little bit to figure out how I could wrap my head around creating a membership model for an agency where everything we do for our clients is custom.

But the more I read her books and the more I thought about it, the more I began to see the possibility. What I’m asking for you to do is to stay open-minded. As you listen to our conversation, just ponder what’s possible inside your agency, and at the same time, so I want to half of your brain thinking about your agency, and I want the other half of your brain thinking about your client’s business, and is this a model that you could help bring to them? One of the things I want to ask Robbie about is, how do we, as agencies serve this up to our clients and how can we help deliver this for our clients?

Without further ado, let me introduce you to Robbie, and let’s get going on the conversation. Without further ado, Robbie, welcome to the podcast. Thanks for joining us.

Robbie Kellman Baxter:

Yeah. Thanks for having me, Drew.

Drew McLellan:

Tell the listeners a little bit about your background and sort of your philosophy and thinking around, really what we’re talking about is recurring revenue, but through in kind of air quotes, membership model. So, give everybody just sort of a lay of the land of your background and sort of what you teach and what your books are.

Robbie Kellman Baxter:

Great. About 15 years ago, and more than that, 17 years ago, I was on maternity leave, I got laid off. I know, and it’s legal. I said I’m going to be an independent consultant and I’m going to do … I know marketing, I know product. I’m going to be at the intersection of marketing product strategy. I was a generalist. Then I worked with Netflix and I fell in love with their business model. This is a long time ago. This is pretty early on. They were just starting to go across the country. They were mostly on the East and West Coast, and I fell in love with their business model.

I loved how focused they were on doing one thing for their customers and being willing to evolve their offering to continue to lever on what I call a forever promise, which is, in their case, professionally created video content delivered with cost certainty in the most efficient way possible. 15 years ago, three DVDs out at a time. Today, it’s streaming their own content. But as I was falling in love with the model, other people were too, and I started getting calls from people who were like, I want to be the Netflix of SaaS, I want to be the Netflix of bicycles, or pain management products, or music, or news, or whatever.

I started to see patterns. I got really excited that this is a new way of thinking about your business. It’s a new kind of business model. It’s not just subscription pricing or recurring revenue. It’s this membership mindset. If you focus on the long-term well-being of your customers and you optimize your offering around that, and you optimize your support and your messaging around that long-term relationship, and everyone in the organization is focused on that, it completely transforms your business model.

You get greater loyalty, greater engagement, recurring revenue, which is the holy grail for all business owners, but it requires changing across the organization. I was getting really excited, and people were not getting what I was saying. So, I thought, well, I’m going to write this down. I’m going to explain the frameworks. This is going to be my one pound business card, and then, hopefully the people that get it will want to work with me, and the ones who don’t, I don’t have to waste my breath on them.

I really didn’t think that the book was going to sell beyond kind of in my own little world. Lo and behold, it’s been an accidental bestseller, and people are getting the subscription religion. Five years later, everybody wants to do subscription.

Drew McLellan:

You can buy anything in a monthly box now, right?

Robbie Kellman Baxter:

Oh yeah. Well, there’s subscription boxes. There’s subject matter expert memberships, there’s fan clubs completely reinvented. You can subscribe to your music, your news, the Caterpillar, the heavy equipment manufacturer has said publicly that they’re planning to move away from selling their equipment and toward a service model where you can only subscribe to access their equipment. So, everybody’s got the subscription bug. It’s crazy.

Drew McLellan:

Why do you think that is?

Robbie Kellman Baxter:

Because recurring revenue is the holy grail for business owners, and it’s more profitable, it’s obviously more predictable. It allows you to gather more data about your customers, which allows you to stay in front of the curve on your innovation. If you want to sell your business, you’re going to get a five to seven X multiple relative to transactional lumpy businesses. That’s what everybody wants, and it’s easier than ever to move to subscription. There are software products for billing, for CRM, for customer success, for solopreneurs who want to build a content driven membership. It’s easier than ever from a technical perspective, so everybody’s kind of getting in the game.

Drew McLellan:

Yeah.

Robbie Kellman Baxter:

I wrote this book, Forever Transaction, just this past year.

Drew McLellan:

This is your next book, your most recent one?

Robbie Kellman Baxter:

Yeah, this is my second book. I wrote The Membership Economy to say, look, guys, membership is a massive trend. Everybody’s doing it. It applies to almost any industry, big companies, small companies, family owned businesses, nonprofits, bootstrapped venture backed, old time traditional businesses. Everybody can enjoy these benefits by focusing on the long-term relationship with the customer as your guiding star. Five years later, I don’t have to explain that to anybody. I’m sure that everyone listening is like, yeah, we get it, subscription is great. We wish we had recurring revenue, or we’ve tried that and it didn’t work very well, or we’re thinking of doing, or fill in the blank, but it’s hard, and we don’t know why it’s not working for us. I tried to break it down in this book and make it easy to actually do it.

Drew McLellan:

I think when we think of subscription models, we think of Netflix, we think of Sling, we think of barber tools in a box, or pet toys in a box. We tend to think of the consumer side of it. Everybody listening is a B2B business owner. They sell to businesses. In most cases, a lot of them serve B2B customers. So, is this as viable a model on the B2B side as it is on the B2C side?

Robbie Kellman Baxter:

Yeah, absolutely. The whole SaaS explosion, software as a service is all B2B. Businesses are used to buying subscriptions. If you’re an agency and you’re thinking of moving to a subscription pricing model, that’s not new. That’s something that, from a corporate perspective, they’re willing to take. Also, if you think about the core principles of membership, it’s about having alignment with the organizations that you work with where you’re both optimizing around the same goal, and so they can have a long-term relationship with you.

I think most agencies enjoy long-term relationships with their best customer already. All I’m suggesting here is to use this as a lens to create a more aligned model, to make sure that your offerings and your way of engaging with your best customers, your best clients is actually optimized around their long-term well-being.

Drew McLellan:

But I think for a lot of agency owners, as they’re listening to us, they’re thinking, totally get it for people who have cookie cutter products, where everybody gets the same thing. I can see, from like a tax guy, I can totally see how a CPA would be able to do a membership model because it means you get four quarterly meetings and you get two tax returns and whatever, right? But I, the agency, everything we do for our customers is custom, and we don’t do the same thing for anybody.

And I’m channeling them, right? Therefore, I can’t apply this philosophy to my business. What would you say to them if they said that to you, as I just did?

Robbie Kellman Baxter:

First of all, I would want to say that membership is very flexible. That’s the first thing. Membership’s flexible. It doesn’t have to be cookie cutter products. Second thing that I would say is that there’s probably more that you’re doing for many of your clients that is consistent than you think. I would take a look at that. You might have, so for example, Bain & Company, the consulting firm, they’re kind of the poster children for custom work, right? They do these big strategy projects, seven figures just to get in the door.

They have the Bain NPS Loyalty Forum, the Bain Net Promoter Score Loyalty Forum. It’s a group of the senior person at each of their client companies, or many of their client companies, who has a customer facing role. So, the head of retail or the head of support, and that group pays a premium to gather, once every six weeks, for learning and comparing of notes, getting access to Bain’s emerging leadership content that is separate from the lumpy project work.

You still have to pay for it, but it’s not the seven figures. It’s much cheaper as a way to build ongoing relationships, even between those huge products, right? You can think about what happens here. First of all, those customers, those clients want to have … They want to stay smart, they want to stay on the cutting edge, they want to hear what’s new.

Drew McLellan:

They want access, right?

Robbie Kellman Baxter:

They want access to the expertise of their advisor. They’re like, well, gosh, when we were working on that project, it was … Yeah, it was great that the project was getting done, but it was also great because this partner was flying in twice a week, and I could just chat with them about kind of the state of the world, what are my competitors doing? What’s emerging? What should I be reading? There’s that piece, the access. Then there’s also the connection with other people doing the same thing. If you’re the agency, I’m interested in like, well, what’s everybody else doing? What are they doing? What are they thinking about? What campaigns are working for them?

What designs are working? How are they thinking about social media? What’s changed for them in times of COVID. So, being an umbrella to bring people together is really valuable as well. Then in terms of the benefits, if you had an ongoing relationship, I mean, one of the ways to think about this is, what is the best that you can offer. If I came in and I said, give me little works. I’m in. You’re my agency, I’m with you, I want a really good deal because I’m in for the rest of my life. All I want is, and here’s the forever promise that I want from you, I want to communicate with my customers and prospective customers in a way that is current and authentic and effective, and I want you to just do the work and I want you to bill me.

Drew McLellan:

You just made all the listeners cry with joy, like they’d kill for that conversation. Right?

Robbie Kellman Baxter:

Right. The reason that they don’t get that conversation, I think, is because their clients don’t believe that they can deliver on it. But if you just said, okay, what would I deliver if that was the request? How would I think about that customer? Because probably these agency owners are saying, well, I would actually like, they’d be my favorite client, I would be thinking all the time, I would be super creative, I would be really taking good care of them because I wouldn’t want to lose them. I would be innovating. I would be the proactive one instead of the reactive one.

I wouldn’t be sitting here twiddling my thumbs waiting for them to call and say, “Hey, we want to do this new thing.” Think about that and then think about what you do for them, and then think about, how can you change how you offer your services? A place to start, if you’re not quite ready to say, well, I’m going to do a fixed price subscription, start by just having that membership mindset and saying, look, we don’t take that many clients behaving as if that’s what you do. Turn away clients that aren’t, don’t have that mindset. Track who your best clients are and what makes them different from your not best clients, and then market to get more of those, and be willing to say no to the ones that you can’t serve that well, that you’re never going to be able to serve that well.

Drew McLellan:

In a membership model, so when we think about Netflix, or you were describing the heavy machinery, a company that was saying, look, we’re not going to sell you a tractor anymore, but you can be a member and have access to our equipment. Is there a model where I’m thinking again, from an agency owner’s perspective, is there a model where I could have this kind of all you can eat buffet membership, where I’m gathering up these best customers, once a quarter we’re talking about best practice, whatever I’m delivering to them at the membership model?

But I also have what I would go regular customers, transactional customers who are not interested in that kind of relationship or that kind of a spend. Can a company be a hybrid of both?

Robbie Kellman Baxter:

Yeah, you can, and there’s tons of examples of that in almost every industry. Bain, which I just mentioned, they have the Loyalty Forum, but they also do project work. By the way, they make all their money from their project work, not from their Loyalty Forum, but the Loyalty Forum actually serves a marketing role for them more than anything, I would think. That’s a way of attracting, giving a taste to people who maybe haven’t done a big project with them, and staying connected between projects to kind of stay front of mind. So, it’s definitely possible.

Unilever, very traditional consumer products company, they own Dollar Shave Club, right? That’s a subscription. They do both. A lot of software companies have software as a service and then they have enterprise premises-based software, because some companies still don’t want SaaS. Financial services firms are like, no, we want security, we want control, we want privacy, we want to keep it where we can look at it. So, there’s lots of examples. The challenges, there’s a couple of challenges, one of them is, it’s just a lot of work to run two businesses simultaneously.

Drew McLellan:

Because that’s what it’s like, right? Two businesses. Yeah.

Robbie Kellman Baxter:

Yeah. That’s the first thing. The second thing is that those two businesses have very different cultures, very different targets, and so your team is not going to develop a culture of membership. If I had an agency owner in front of me, and they said, “Robbie, where would I start if I wanted to just even explore this?” I would say, “Okay, first of all, think about what you want membership to do. Do you want it ultimately to be, we have members, we take care of our members, they pay us in annual fee and it’s all fixed and that’s all we do? Or do you say, no, we want to use it as a membership thing off to the side that builds … It’s a marketing tool for us that builds relationships, maybe a little bit of revenue, and maybe over time we moved there, but we’re going to be more cautious.”

Let’s say they said they’re the latter. So, I would say, “Okay, who is it that you want engage and retain? Who are your best members today?” And really get clear about best members, not best members, because that can be completely like light bulb moment. Then for those best members, what is the promise that they are wishing you would make to them? What is it that they’re trying … I work with this agency because I’m trying to do X, Y, and Z. What is that bigger promise and how can you solve a bigger part of that promise?

I’m trying to stay front of mind with my clients so I use this agency. Okay. If I were just saying to you, I’m in the business of helping people stay front of mind with clients, what would you have them do? It might go well beyond what the agency does because they’re like, well, I’m an agency. I provide agency products. But what would I do if I was in the staying in front of customer’s business? I might think about my job very differently.

That by itself is going to get you started at thinking of, what is it that I would put into this new membership option? Like, okay, we have all these customers, they buy transactionally, but some of them are in our membership program, and that allows them to get more goodies from us and build deeper relationships. Put a