Business Strategy Smackdown: Membership Sites Vs. Virtual One-Offs

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In the last two posts in this business strategy series, we’ve talked about the monthly membership business model and the innovating-without-a-net business strategy as they play out in the offline world. In this final post in the series, we’re taking names, busting more myths and moving these business strategies online.

Some of you caught on to what I was really doing in the last two posts…

In our conversation about the monthly membership business model, I took what is often held up at the ultimate low-risk, cash-flow positive, set it and forget it business strategy and showed how it often creates a false sense of stability that lures you into complacency, leading to a slow, insipid decline.

Then, I took one of the most fear-inducing business models—innovate-hustle-pray—and showed how, done really well, it can be game-changing, highly-profitable, and far exceed the potential of the set-it-and-forget-it model.

But, truth is neither model is without it’s risks and challenges.

Both business strategies can be executed in ways that make them either powerful or pitiful.

It’s all about what you bring to them that makes either work or not work.

Fact is, the monthly membership business strategy can make it a whole lot easier to sleep at night AND build a tremendous business IF you keep your eye constantly on theinnovation ball and proactively work to avoid the complacency trap.

And, the innovating-without-a-net business strategy can be disastrous and lead to non-stop stress IF your business is built largely around a commodity service or item that doesn’t rely all that much on innovation (though, if that’s the case, you’ll inevitably end up in a margin-killing price war at some point anyway). Or, if the thought of constantly coming up with ways to blow peoples’ minds doesn’t sound fun to you.

So, let’s bring the conversation and the business strategies online now.

And, look at a few examples of online monthly membership models, see what new challenges arise in addition to complacency, take a deeper look at a few that actually work well and explore how.

After that, we’ll move over to the “innovating without a net” side and look at how that often unfolds online. And, we’ll explore a new platform that’s allowing pretty much anyone to set up an a la carte menu of courses that can be taken either standalone or as part of a certification or other credential.

And, maybe, just maybe, we’ll end up somewhere in the middle…

Online monthly membership websites: the good, the bad, the truth

When we move the monthly membership model online, the innovation/engagement challenges remain, but are expressed differently.

New challenges include:

  • Technology integration,
  • Forum moderation/constant engagement,
  • Feeding the content/feature beast,
  • Opportunity for access often creates an expectation of access that’s unrealistic
  • Easier to duplicate/rip off than offline models because price of entry so low.

But, along with those challenges come new opportunities vs the brick and mortar membership biz:

  • No physical space to maintain,
  • System wide upgrades all the time,
  • Opportunity to expand market reach globally
  • Ability to scale in a fraction of the time
  • Ability to scale with a fraction of the cost
  • Substantially lower fixed costs/overhead.
  • Low up-front investment
  • Lower risk of loss

In the world of online membership sites, there are two major divisions:

  • Education and
  • Services/technology solutions

On the education side…

Every year, thousands of people launch membership sites promising to deliver constantly-updating training materials within a particular niche. The vast majority of these sites quickly fizzle under the unexpectedly massive burden of content creation and member engagement.

It’s very easy to underestimate what it takes to feed the content and engagement beasts.

The people I know who’ve seemed to really figure it out have moved away from indefinite commitment based sites and:

  • Capped the membership period to a fixed term – instead of offering a perpetual membership experience, they offer an X month course. From a psychology of persuasion standpoint, this makes sense, since people are generally more willing to commit to something with a defined start and end point. Plus, it makes the content delivery and engagement burdens easier to identify and keep up with on the owner side of the equation.
  • Switched to a library & syllabus model – While most of those folks started with monthly billing, time-released content delivery and ongoing forum moderation, many have now switched to a library & syllabus style of content delivery. They offer access to a library of content upfront and provide a syllabus to help navigate the content, while preserving ongoing support and engagement in the linked forums. The downside of this used to be that someone could download the content from the full course in the first week, then stop paying. And, that is a risk you take, which is one of the reasons most who use this model also…
  • Switched to a one-time up-front payment – Many have switched from a monthly subscription payment model to a one-time up-front payment…which probably says something about retention when payments were monthly, too.

Great examples of content-driven, fixed-term membership sites that work (read “make a boatload of money” are

  • Teaching Sells – Teaching sells literally teaches you how to build a business around what Brian calls interactive learning environments.
  • SEO Book – SEO Book teaches you how to drive a lot more traffic to your website via organic search.

The content libraries are updated regularly and interaction is provided continuously. And, both now operate on a one-time (or limited installment) fee structure.

In fact, I’m having trouble thinking of more traditional online membership sites that have:

  • Stuck with the monthly content delivery and pay structure,
  • Endured for extended periods of time with fresh, high-value content (more than 1 year), and
  • Aren’t scammy get rich quick sites.

I’d offer up the example of ThirdTribe.com, but even though I am really enjoying and finding value in that community, it’s too early in the game to fit the above criteria.

If you guys know of some that satisfy the above 3 criteria, feel free to share links in the comments (but don’t outright spam if they’re not really qualified).

On the service/solution side of the monthly-subscription business strategy…

Moving away from pure educational content as the basis of online membership sites, technology solutions are tailor made for this type of business strategy. You can allow people access to a hosted solution that allows 24/7 access from any browser. And, this format actually facilitates innovation, because you can constantly improve the solution without having to worry about compatability and tech issues that can be major drags with traditional “installed” software upgrades.

37Signals is a great example of this. A number of you brought up the example of 37Signals and their highly-successful monthly-billing business strategy in the comments. 37Signals created a set of online productivity and collaboration tools that have gotten rave reviews. I’ve used some of them myself. And, they’ve also become known for consistent, envelope-pushing innovation and features, while always keeping their user interfaces super clean and easy to work with.

Thing is, when you move over to the solution side, we aren’t really talking about “membership” sites any more, we’re just talking about subscription billing.

It’s a subtle difference, but one that signifies a very real shift in the burdens involved. Because, when you remove the content delivery and engagement burdens of more traditional “educational” membership sites, that allows for a lot more time to be spent on internal innovation that often facilitates the introduction of additional or enhanced solution features.

What about innovating without a net online?

There are a million ways to sell one-off products and services online without monthly-billing. That conversation is way too big. So, let’s stick to the high-value educational content side of the equation, so we can make a more apples to apples contrast.

The alternative to membership sites for high-value/educational content has largely been:

  • Paid ebooks,
  • Fee-based webinars and teleseminars,
  • One-time pay, single or multi-session trainings.

And, a lot of people make a lot of money with them. But, it is becoming increasingly difficult, because so many people now give away those same offerings as part of a lead generation funnel for larger products, like membership sites, services, events or fuller courses.

In the early days, much of the free stuff was garbage (and that still holds true today), but increasingly, companies are giving away very high-value content as a way of proving value, building credibility and priming the reciprocity pump in anticipation of paid offers.

A great example of this is ClickEquations.com, a paid search marketing firm that gives away some really high value information and training videos on PPC marketing in anticipation of then selling you the good stuff.

So, these days, to really shine with one-off online content, it’s got to be extremely well positioned, provide extraordinary value and preferably be launched into a large, existing community.

ArtoOfNonconformity.com blogger, Chris Guillebeau, has ton a tremendous job of this over the last two years. He’s built a hyper-loyal community, then served up a series of what he calls Unconventional Guides, which are a blend of high-value/low-priced ebooks and mixed-media courses that solve very specific problems.

Examples include:

  • Frequent Flyer Master – a ebook-based course that teaches you how to score a treasure-trove of airmiles, often without setting foot on a plane
  • Art and Money – a mixed-media course that teaches you how to earn a real living as an artist, and
  • $100 Business Forum – a 28-day private forum based course that teaches you how to launch a small business on a shoestring budget

If you’re not following how Chris is building an empire…start now. You’ll learn tons.

On the “playing big” side, there’s also Institute For Integrative Nutrition.

Started as a live training and certification program in NYC for health counselors with a focus on nutrition, demand for the school’s programming exploded. This led them to launch a highly-innovative distance learning variation that blended mixed media courses with scheduled online discussions and forums. Doing this expanded their reach dramatically, opening up their training and certification program to a 24/7 worldwide audience.

And, here’s a secret, I am now in the process of developing some very cool new training to be announced very soon. At first, I was looking at online membership sites as a prime business strategy.

But, there a new kid on the distance learning block you may want to know about that can make presenting your paid content easier.

Prfessor.com, launched in 2009, boasts a turnkey distance learning platform that any content creator (that’s you) can use to host, register, manage and deliver online courses for a fixed monthly fee ($49.97 as of March 2010). And, it’s pretty slick, because it let’s you not only roll out individual courses with a variety of content formats, it also lets you set up what can essentially become an online institute or certification program with a complete listing of courses. Or, as they call it…an instant academy.

I’m very tempted to use this platform for my next adventure, so stay tuned.

Wrapping up…

In the end, what I’ve hoped to convey in this 3 part series on business strategy contrasting the membership/subscription versus one-off models is:

  • There is no one perfect model for every venture
  • With every seemingly perfect model, there’s always an underbelly. If you can’t see it, look harder. Be sure you know and are willing to dance with the challenges before you build a business around it
  • Think seriously about whether you’re comfortable spending your time on consistent innovation, content creation, member/client engagement and solution evolution. Different models shift the burdens between these elements.
  • Either way, it’s getting harder and harder to justify the investment, risk, market limitations and oversight needed to operate a brick and mortar business IF there is an online analogue available.

Stay tuned for some upcoming series’ on small business, persuasion, marketing, copywriting, launch strategies, sales and more.

And, if you missed the first two part of this series, you can find them here:

As always, would love to learn from your thoughts and questions in the comments below…

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34 responses

34 responses to “Business Strategy Smackdown: Membership Sites Vs. Virtual One-Offs”

  1. Jam-packed post as always Jonathan. I love the compare/contrast plus new ways of thinking about delivering value. Am forwarding this to several of my clients right now!

  2. Lolly Daskal says:

    Jonathan, As always a great post! Your content always inspires me to think in new ways. Thanks a whole bunch!-

  3. You’ve described exactly what I’ve seen in more than one online subscription based model.

    The funny thing about membership/continuity programs is that it doesn’t appeal to any of the traditional marketing incentives: scarcity, limited time, etc. It was a ‘bright shiny’ that, I think the ship has sailed on.

    In my own business, I’ve watched that same ebb and flow and while our continuity model is still working for us, we’ve had to do a lot of work on the back end to give it the percieved value that retains clients – almost to a breaking point.

    Going forward, we are looking at other ways to stabilize cash flow – and keep innovating. In fact, is almost feel like you’ve let the cat out of the bag on this post because I thought I was doing something remarkable. *sigh*

    Guess that’s why we keep innovating, huh? 🙂

    Another faboo post!

  4. Julie says:

    Jonathan, You’ve packed a lot of great content into this post, which means I’m going to have to read it through a few times to absorb it all. I didn’t know of many of these offerings, so thank you for sharing them. In the end, its all about what works for my particular nook on the net. It feels like the ‘good stuff’ has found its place through the natural selection process. I really love how you provide so much value in everything you do. Thank you.

  5. Amy says:

    herbmentor.com is a great content rich, monthly membersite that’s been around for a couple years. They teach people how to use herbs, have built a community and have a teaching style that works (featuring one herb a month with videos, quizzes and content.)But it’s very community oriented and that may be why it works.

    I’ve just switched my monthly membersite to a one-off payment with access to curriculum and content, for all the reasons you mentioned above. For anyone who wants to use WordPress in a secure environment,DigitalAccessPass.com integrates well with WordPress.

    Thanks for the great posts. Good food for thought.

    • Jonathan Fields says:

      Thanks for the link, Amy. Yeah, I think you touched on something important, at tightly bounded, engaged community or tribe can add a lot value

  6. Hey Jonathan,

    I’ve really enjoyed this series and also received huge value from it – I’m in the process of transmuting an offline consulting/coaching biz into an online “course” format.

    I think your struggle to find non-scammy, never-ending membersites speaks volumes for that particular variety of the model.

    The great thing about a membership site with a start and finish date is that, as a customer, you know you’re getting the good stuff. You also know, once the course is over, that you’ve “got” it

    You know that it’s now up to you to make something big happen.

    The thing that really “grinds my gears” about never ending membership sites is the inherent presupposition that “you still need to learn more (and more!) before you can go out there and DO.”

    … As content creators, I think we need to value pushing people towards real world action. Otherwise (constant, never ending) “learning” becomes another form of procrastination for our customers.

    – Pete

  7. Tad Wolfe says:

    Great job at explaining some of the different online business models. I personally enjoy the one payment life time access over the month to month. With all the programs out there I feel I do not have time to benefit fully from the month to month.

  8. I created a membership site with a continuous payment model and while it was supposed to go on for certain time period, PayPal kept renewing the subscriptions! Seems the membership software (Amember) didn’t “talk” well to PayPal.

    I’m now using WishList member for member sites and charging one-time fees for immediate and permanent access. It works much better. Customers feel safer about it.

    The way you continue to make money off of these same customers is to have multiple levels of membership (basic, silver, gold, etc., whatever you want to call them). This gives people a next step. It works with YOUR schedule and it’s non-sleazy.

    Another way to do this is to just create new courses which are “sequels” or add-ons to a previous course. For example, my free course on getting more blog traffic will have a paid level added to it on writing headlines, which is a new and related course. I’m sure plenty of people will choose to buy it. It will also be a one-time fee with immediate access to all content (dictating someone else’s learning pace is not a good idea).

    The best thing about this strategy is that you springboard off of previous courses and feedback so you know the next course will be on the money.

    • I like the secondary, follow-up course strategy that springboards from the best.

      When this is done well, the follow-up should be based on the best questions and challenges that the original course raised. Polling the customers and then delivering what they want and need.

      Great tactic Michael!

    • Jonathan Fields says:

      I like that model better, too, but I guess the question is, at that point is it really even still a membership site, since one of the essential features that most people to the membership site model in the beginning was the ability to automatically roll-over payments.

      In my mind, what most people are calling memberships sites now have really become more of a paid distance learning course with a fixed term and no roll-over.

      Not a bad model, but it kills the auto-bill premise that led so many to membership sites in the first place

  9. Kimmoy says:

    Now there is a hybrid of the two that is known as Fixed Term Memberships which I think was developed by Jimmy D. Brown. All you need is an auto-responder & payment processor like clickbank or e-junkie to pull it off. How it works is you deliver prepared content each week or so for a pre-determined time (i.e. 3 months, 6 months, 1yr.). Using this method, you’ll find there’s no need to create a platform that requires regular maintenance. You can basically have it available all year-round. Members are likely to stay because it’s not a never-ending membership. What do you think about that? Pretty clever huh 🙂

    • Jonathan Fields says:

      That’s definitely an alternative that’s been around for quite a while. A few challenges are (a) email deliverability, (c) there are now sooo many email autoresponder-based mini courses that are given away free that there is a widely held perception that that format is not worth paying for, (c) there no mechanism for engagement and feedback (which is part of the point), (d) people are still very leary of open ended commitments and (e) yo still have the same content creation burden. I’d love to see retention numbers on a few of those products to know better how well they work.

      • Ingrid says:

        This is exactly what I’m struggling with right now. I’ve got great content and the membership model appeals to me but I want my course to be more than just an email course – I think there should be a certain amount of interaction in there otherwise my students may as well just buy a textbook! but how much and in what format?

        Great post – thanks for helping me further along in my decision making! Off to check out Prfessor.com

  10. Adam King says:

    I’m sure you’ve heard this before, but I was thinking about this very thing earlier. I knew a “standard” membership structure wasn’t going to be effective for what I wanted to teach. The alternatives I had investigated weren’t looking too promising either. So, this is the first piece of content I’ve read that made me think outside the “proverbial” membership box.

    This really got the wheels turning. Going off of the SoulCycle example, what do you think of content modules (i.e. individual lessons) that can be sold separately or in a congruent series?

    • Jonathan Fields says:

      I think it’s an interesting model and in fact that’s very likely the direction I’m about to go in myself with a few variations

  11. Jonathan,

    I think one of the issues with open-ended membership models is that they don’t sit well with the implied ‘benefit of learning’ i.e. what we hope to get out of the process.

    I might sign up for a course because I want to learn how to do something and then go put that new-found knowledge into practice. There’s a level of knowledge that I want to achieve and that implies a begining and end to the process – suiting a single payment or modular approach better.

    Where I think recurring membership models can work well is in fast-changing (often technical) niches where the customer expects that their knowledge will need constantly updated in order to achieve their goal. Lynda.com for software and Marketingprofs.com for marketing execs would be a good examples here.

    The analogy I would use would be the difference between a text book (one-off payment or modular approach) and a trade magazine (subscription). You don’t buy the trade magazine until you’re already in the industry.

    • Jonathan Fields says:

      Good insight, Mark. In fact, in the next few months I’ll be launching a digital version of my Tribal Author Camp. And, because things are moving sooo quickly in book marketing right now, there’s actually solid justification for a rolling program that would keep members up to date with the latest strategies and results.

    • Robert says:

      I too feel that the open ended course is not for me. There are certain procedures I want to learn in a course and some I would never use.

  12. […] Business Strategy Part 3: Taking Membership and One-Offs Online […]

  13. A membership site is only a technical implementation of web technology.

    It’s separate from payment methods: continuity vs. one-time-fee.

    And those two are also separate from time periods: fixed vs. unlimited.

    Mix ‘n’ match!

  14. Hi Johnathan,
    Thanks for your detailed comments on membership sites and both the difficulties and opportunities with developing reliable income streams from using these strategies.
    The link to Prfessor is interesting and certainly has some potential, I will be following it up and may bring it into conversations with a few of the projects I am working with.
    Phil

  15. Neil says:

    Great ideas as usual with insightful comments from all. I’d point to http://www.garynorth.com and http://www.bmyers.com as good examples of recurring membership sites with reasonable prices and really active helpful forums. Both provide great info and archives (in different areas) and I’ve learned a great deal from the content and the members. They are reasonable values and I’d suggest both these guys make a great income as well. I belong to both. Looking forward to what’s up and coming Jonathan. Lovin’ the third tribe stuff as well.

  16. erik says:

    Hi Johnathan,

    I just wanted to say “thanks” for the compare / contrast.

    I’ve been playing with an idea since january, which is slowing evolving into a “fixed term membership site” idea that everyone here seems to be looking into.

    I struggled trying to come up with a decent “gameplan” during 2009, so I’m really happy I’m finding these insights right now…

    *cross fingers*

  17. One valuable bit of advice folks have given me (which you include here) is that people love closure; they love graduating, finishing, just plain being done.

    I want to educate people, but telling them we’ll start now, and never ever be done, is intimidating (even if it’s true that we’ll never know it all.)

    But telling them “this class lasts 8 sessions and you’ll learn A, B, and R” means they can see the light at the end of the tunnel (and that it’s NOT the headlamp of an oncoming train.)

  18. Sunny says:

    Great info! I recently launched a membership-based site where the content is free to the reader but the businesses pay for increased exposure. This isn’t a set it and forget model though, since we will have close/regular contact with our business members. I’ve been working on a book and trying to find an agent to represent, but have started to think that maybe the eBook route is the way to go?

  19. Sharon says:

    Jim Edward’s The Net Reporter is a great monthly membership site that has been around for almost 4 years now…Jim is a content making machine, unmatched by few others.

    He is also famous for his ‘smackdowns”.

  20. Kasey says:

    Brilliant article! I have finally launched my site and am dealing with this exact dilemma, trying to make sure I am making wise decisions. And as always, Jonathan answers my questions before I even know what to ask. I read this post first, so I am excited to go back and read the previous posts, right now, in fact! Woohoo!

  21. Sanjay says:

    Jonathan,

    Firstly many thanks for the post. It was very timely for us.

    We are in a position where we are close to launching a paid membership site. Initially we decided on a monthly subscription model, but then decided to use a lifetime access, one off fee instead. The main reasons for this were that we were concerned about having to continue to churn out new content to keep the interest of the monthly subscribers going. Also there was the possibility that people could use the site for a week, download the content and then ask for their money back.

    However, we also have a concern about the one off model, in that providing lifetime access would mean exactly that. There could a be scenario in the future, where we may have to close the site down. What would this mean for customers expecting ‘lifetime access’? Would this mean we would have to keep the site open all the time? This of course would also mean more cost for us in the future, in terms of maintaining the site and providing access to customers. If we have many customers then the site will continue. If not, then we might have to shut down.

    I was wondering if you could kindly share your thoughts on this?

    Best wishes,

    Sanjay

  22. Brad Smith says:

    I like the idea of eventually moving to a subscription model, but as you point out it is difficult to feed the content beast. Its hard enough to generate the free content needed to attract new members plus the paid content needed keep the member site fresh. Overall I think the choice of business model is closely related to lifestyle design – you need to choose a model that fits your overall life goals.

  23. This is the best article on different online membership models I have found by far. The examples were great and I was happy to find one that was not a sales pitch in disguise.

  24. Interesting read here..

    I opted against the subscription model for my next project, mainly because I am unable to really sustain any level of support and improvements to the product (its a CBT based product) — I create a simple price structure and it made life much easier from the marketing stand point.

    Plus, I agree with some of the other sentiments.. the product I am marketing is one of those which the end use will just want to be done with when they are completed, not something they will want to ‘keep up with’

    Excellent post!
    -scott