I often write about how to shift your mindset from ad-based revenue to a subscription-based model. But when I speak about subscriptions, I’m talking about more than setting up a paywall, charging for content, and waiting for the renewals to roll in.
A subscription model will only work if you take it to the next level and give your paying customers a truly unique, customized, valuable experience: a membership.
Sometimes this can be a challenging concept for an online publisher to grasp. What can you do to stand out from the myriad of other content creators online? Today, I want to look at how a non-media company created a membership model in hopes that it will inspire you to think creatively about getting into the membership game.
Restoration Hardware No More
Founded in 1979 in Eureka, California, Restoration Hardware was initially a place where consumers could find well-made, inexpensive hardware and fixtures. Over the years they expanded their offerings and reach, but they encountered financial troubles around the time of the housing market collapse in 2008. Following a move to end public trading that year, the company regrouped and later filed for an initial public offering in 2012 under their new name, RH.
But the name wasn’t the only change. Their focus has shifted, too. Looking to pull away from competitors like West Elm and Pottery Barn, RH began to concentrate their efforts on high-end furnishings, rebranding their stores as “galleries.”
Galleries opened in historic buildings in major metropolitan areas across the U.S. RH’s CEO Gary Friedman penned a letter to customers drawing a link between RH’s design ethos and Vitruvius’ approach to architecture. It was clear that RH was striving to position themselves as a timeless, upscale option for a refined, educated clientele.
From Shopper to Member
As the next step in this up-market rebranding, Friedman announced a membership option. For a $100 annual fee, members receive benefits including free shipping, savings on both full price and sale merchandise, and advanced access to sales.
For those familiar with Amazon Prime, these might sound like fairly standard membership perks. However, RH takes it further, offering benefits that feel highly personalized: a complimentary one-on-one consultation with RH’s in-house interior designers and a concierge to manage your orders.
This shift from traditional retailer to membership-based furnishing club has been wildly successful. As of last month, their stock price had risen to its highest levels in five and a half years.
Why Does the Membership Model Work?
This subscription model is pretty smart. It not only offers clear benefits to the consumer but also allows RH to simplify their business model.
Benefits to the Member
Anyone familiar with RH’s price point (a $6,000 couch is fairly standard) realizes that the $100 annual fee more than pays for itself as soon as you buy one item and receive the membership discount of 25 percent. This means that those who are already members can easily justify renewing for that nominal fee each year, while those who are not yet members but are considering the purchase of one item of furniture would be foolish to pay full price when they can get such a benefit from signing up.
And RH does a great job of playing up that cost-saving benefit. Any visitor to their website is presented with two price points for each item: “regular” (listed first) and “member” (below, and bolded).
Additionally, the type of client who is spending $6,000 on a couch likely has a large home with lots of rooms to furnish, or perhaps even has multiple residences. This client is also likely busy with work and would benefit from services like a concierge to manage orders, or an interior designer to take some of the guesswork out of selecting, say, a dining room chandelier from a number of options.
Benefits to RH
While they’re offering clear value to their customers, RH is also making their own lives easier. With the membership model, as Friedman explains, they’re able to carry less inventory in stores, thereby simplifying their logistics.
Additionally, the membership model takes the pressure off of RH to draw in new customers constantly with promotions and advertising. Once members have joined and identified themselves as brand loyalists, RH can exert more energy generating new sales with those clients rather than chasing after entirely new leads. Signing up for a membership “qualifies” a client as a high potential lead.
How Can You Make the Membership Model Work for You?
How do you harness these principles, put into action by a home furnishings company, and apply them to your online publishing business? There are a few lessons to be learned here.
1. Create a Site that Draws in the Audience You Want
RH’s upscale stores are more than just standard showrooms—they are shopping experiences with in-house interior designers and concierges. RH built a business that would catch the eye of their desired audience and offer something beyond what a shopper could get at Crate & Barrel or Ethan Allen.
So how do you distinguish yourself from your competitors? The first step to creating content you can monetize is creating a unique product, and you can only do that with research. Talk to your current users, analyze what your competitors are doing, and find your sweet spot.
The other component to creating worthwhile content is ensuring that it is results-driven. Create active content that doesn’t just describe, but provides specific instructions that drive your reader to action.
2. Make Membership a No-Brainer
The RH membership provides a clear benefit to those who join, which is primarily financial. Make readers feel like signing up for membership with you is the only choice, which you can do by drawing them down the funnel and keeping your best content behind a paywall.
As I explain here, it’s fine to share some content for free. In fact, it’s that free content that will initially entice new readers. But be strategic about what’s available to everyone and what you provide to members. While informative content can be given away for free, keep results-driven content waiting for members behind the paywall.
3. Go Above and Beyond for Members
Even if you’re not a member, you can still purchase items from RH. But the membership takes things a step further and offers additional perks (outside of cost savings) to members.
As a publisher, you can do this, too. Beyond your traditional content, you may also choose to include extras, like access to exclusive events, chats with experts, or serialized online courses, for your members. Making these perks available to members only gives those who are paying for membership a sense that they are a part of something exclusive and unique.
4. Cater to Your Whales
RH clearly did their research before undertaking such a drastic shift in their business model. And they continue to finesse their approach, with changes like the addition of restaurants, cafés, and wine vaults to their gallery spaces. These changes aren’t coming out of thin air. You can be sure that RH is consulting their members and asking what they want out of their shopping experience.
You need to do the same thing. Once you have created a membership base, take a look at your most enthusiastic and engaged members. These are your whales, and you have a lot to learn from them. Although they may not necessarily be your biggest source of income, they are your biggest fans.
Understand what makes them so enthusiastic and focus more on those aspects of your content. Their insight will help you create a better product overall.
Have you learned anything about the membership model from someone in another industry? If so, I’d love to hear about it.
About the Author
Rob Ristagno, Founder and CEO of Sterling Woods, previously served as a senior executive at several digital media and e-commerce businesses, including as COO of America’s Test Kitchen. He started his career as a consultant at McKinsey. Ristagno holds degrees from the Harvard Business School and Dartmouth College and has taught at both Harvard and Boston College.
Rob is the author of A Member is Worth a Thousand Visitors: A Proven Method for Making More Money Online. He regularly speaks at key media conferences, including at Niche Media events, Specialized Information Publishers Association meetings, and the Business Information and Media Summit.