Rich Schefren Digs Membership Sites: Why the Hell Not?
Posted on July 20, 2007
Filed Under Information Marketing |
What Does Rich Schefren Want From Joe O’Brien?
Rich Schefren (no aff links in this article) wants me to:
focus on building businesses in a strategic way and not just chase after opportunities.
He told me so in a recent email.
More specifically, Rich Schefren is advocating the Membership Site business model as a strategic platform.
I only read a couple of paragraphs of this particular email before I felt the urge to blog, so here’s some thoughts on the benefits of Membership Sites off the top of my dome:
Benefits of Membership Sites as a Business Model for Marketing Information
- Regular Cash Flow for you and your affiliates. Say for example you had a membership program that cost $47 per month every month. If you managed to attract 300 clients into the program, and without accounting for the fluctuation of drop-outs and new sign-ups, that would work out to be a little over $14k per month of revenue. Your affiliates need paying so let’s say half (150) of your clients were referred by affiliates and you pay them a commission of 50% per referral.
- Direct sales: 150 x $47 = $7050
- Referred sales: 150 x $23.50 = $3525
- You make $10575 (7050 + 3525)
- Affiliates make $3525
I’m ignoring a whole bunch of issues such as refunds, cost of developing the product and paying others for services to keep the thing running but if you were consistently pulling in $10k per month you could easily afford to pay a couple of salaries to manage most of the tactical requirements.
- Huge margins on products with bugger all variable costs in terms of production, distribution and consumption (i.e. digital information products)
- Enhanced client relationship due to their financial and emotional investment in you and your product. If you can do a good job servicing your clients they’ll remain loyal and continue to purchase through you.
- Clients may also profit by referring others into your program, effectively doing your marketing and sales for you.
- A lot of consumers feel the need to justify their purchase decision to themselves and will thereby articulate the benefits of your program to others = Word of Mouth (Viral) Marketing + reinforcement of client loyalty.
- Related to cash flow: Forced Continuity payment plans can keep bringing in the dough even after the client has extracted all the value and/or lost interest in you or your product provided they forget to cancel their subscription. This is one of the scungier benefits of subscription products and not exactly a stable or strategic foundation for your business!
I can’t say I disagree with Mr Schefren’s enthusiasm for Membership Sites and it’s definitely something I’ll bear in mind for the future.
Joe O’Brien likes the Membership Site Business Model
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