THE CLARUS Blog

How the Membership Economy can Reshape Loyalty – featuring Robbie Kellman Baxter [Interview]

Robbie Kellman BaxterRobbie Kellman Baxter is a consultant and speaker who created the popular business term “Membership Economy.” She wrote a very popular book on that subject titled, “The Membership Economy: Find Your Super Users, Master the Forever Transaction, and Build Recurring Revenue.”

Baxter, who is a customer loyalty expert, has been providing strategic business advice to Silicon Valley companies for more than 20 years. She is the founder of the consulting firm Peninsula Strategies LLC, and regularly presents to professional associations, leading universities, and corporations.

Her clients have included large organizations like Netflix, SurveyMonkey, and Yahoo!, as well as smaller venture-backed startups. Before she started Peninsula Strategies in 2001, Baxter served as a New York City Urban Fellow, a consultant at Booz Allen & Hamilton, and a Silicon Valley product marketer.

We caught up with Baxter to discuss the current state of loyalty and, in particular, what role subscription services play now and in the future.

 

Jim Tierney: Can you talk about your views of the current state of loyalty and how it impacts the customer experience?

Robbie Kellman Baxter: I think people are still as loyal as ever. They have access to better information, so they can be much more discerning about whether their loyalty is merited.

Today, information is a lot closer to perfect and, as a result, people might appear to be more fickle, because it’s easier for them to make informed decisions, easier to switch.

But the urge to be loyal is still there.

I feel that a lot of loyalty programs are really just rewards programs for frequency or depth of purchase, which on some level, has nothing to do with loyalty. Habits can drive loyalty and loyalty can drive habits, but they are not the same.

 

Jim: Why do you think subscription services have gained in popularity in the customer loyalty world?

Robbie: Subscription services are exploding now and technology is enabling it.

Companies love subscription models for the recurring revenue. Tracking behavior is easier. You can get much better data if someone is subscribing. It’s really appealing to the company for both the revenue and the data.

Subscription services are also appealing to consumers, who appreciate the value being packaged differently, for example, access to rides without the responsibility of ownership of a care

The tools that make subscription models possible are more available than ever. It opens up a lot of opportunities for companies to offer more personalized and relevant benefits without the baggage.

 

Jim: How do you think subscription services impact the broader picture of customer loyalty?

Robbie: The ultimate sign of loyalty is if I give you my credit card and I trust you to solve my problem forever. That is almost the definition of loyalty: Charge me what you need to give me the benefits I need.

One of the issues around moving to subscription pricing is the brand is asking you to trust them. You’re going to ask them, “Why should I trust you?”

With a subscription loyalty program like Prime, just the free two-day shipping or included shipping, that pays for itself. Then Amazon layers in additional benefits like music, video, and trials of new products, and Prime becomes really, really valuable.

 

Jim: We write extensively about the benefits emotional experiences that consumers have that make them loyal to specific brands. How do you see the role of emotional loyalty in the retail world today?

Robbie: Emotional connections when someone goes beyond saying it makes me feel a certain way, that is almost the definition of brand trust.

I travel 100,000-plus miles a year and United still causes a lot of frustration and stress for me. They’re putting a lot of responsibility on me to become an expert on pricing and fees. Their “loyalty” program isn’t really building loyalty, just a behavior they want.

 

Jim: What are brands doing well when it comes to impactful customer loyalty and where do the challenges lie?

Robbie: I think the brands doing the best job are the ones who know their customers very well.

It’s difficult and expensive to be all things to all people. You need to know who you’re designing for, and then design your offering to continually layer in more value for the person with that need.

The best competitive advantage is a close relationship with your customers.

Public libraries were created to provide people with free access to the world of knowledge. That’s also the mission of Google. The problem is libraries used to be limited to books and printing presses and those books were kept in physical places. Now there are better ways.

Some brands love their products more than they love their members. You should be willing to change your products and services so that they continue to deliver on your overall brand promise.

Netflix is a good example of a company that has changed a lot to cater to and change with its audience and offer them compelling benefits such as custom content and access across multiple platforms. Netflix is trying to give us access to the best content in the most efficient way possible, and they keep changing to meet consumer expectations.

 

Jim: Amazon is the gold standard for premium loyalty programs and loyalty programs, in general. What can brands learn from Amazon as it relates to gaining loyalty and retaining customers?

Robbie: Amazon started with one thing–being the best place to get books. Then Amazon layered in more benefits, becoming a retailer of everything, a hardware provider and a provider of digital services.

Amazon has the ability to continue to layer in more value and it uses Prime to introduce new products and services. This has been a great strategy for Amazon.

 

Jim: What do you foresee in the subscription services world and how might it impact customer loyalty?

Robbie: I think people are willing to be loyal. They’re just more aware of what they’re giving and what they’re getting in return.

This is a great opportunity for companies to rethink their loyalty programs to ask more and to give more.

Know who your best customers are. Rethink loyalty and develop a new way to bring the best value to your best customers.

 

Jim: What trends do you see as far as the current and future path of effective customer loyalty programs?

Robbie: More subscription-based programs. They’re exploding.

There will be a lot more of them for products and services that people care about.

 

Jim: What constitutes loyalty?

Robbie: When I think of someone who is loyal, someone makes a choice or a preference when things are hard.

A loyal friend isn’t loyal just because they come to my parties. Their loyalty is about a mindset and about a sense of belonging.

I’m loyal to this restaurant even though they burned my toast last week because the toaster was broken. I’m loyal because, overall, they treat me well and the benefits I get merit that trust.

There are good reasons to have discounts. It can get someone in your store and it can change behavior, but it doesn’t create loyalty by itself. You need a bigger program than a punch card.

Loyalty is about the relationship. It’s about being treated as an insider and being recognized for your achievements and contributions.

Are You Ready to Go Premium?

If you want to become a 24/7 presence in your best customers' lives, it's time to get started.