(music)
- I am so excited for this conversation I'm about to have
with Robbie Kellman Baxter, who is a management consultant
and the author of the book, "The Membership Economy: Find
Your Super Users, Master the Forever Transaction, and
Build Recurring Revenue".
And we're going to talk a little bit about a question
that's on a lot of people's minds right now, which is
how you create a business model that keeps you sustainable,
that keeps revenue coming in, and most important, keeps
you actively engaged with your customers.
Robbie, thank you so much for coming here.
- Oh, thanks for having me, Lisa.
- It's really exciting.
So Robbie, first of all, what is the Membership Economy?
We've heard about it from American Express
- Yeah
- They're probably the most well known for their membership
play.
- Right, membership has it's privileges.
- Yes, exactly.
- So, it's a massive transformational trend that I've seen
with virtually every industry, from software to hospitality
to financial services.
And it's all about a move from ownership to access.
From anonymous transactions to known relationships.
And from one-way communication, where you're just pushing
messages at your customer, to an open conversation.
Not just between you and the consumer, but also among the
customers themselves, under your umbrella.
- So this sounds like this is a fundamental strategy shift.
I mean really a very different way of thinking about how
you engage with customers in every aspect of your business.
- Yeah, absolutely.
It's about putting the customer at the center of everything
you do, instead of the product, or the processes, or even
the technology.
- So what's so special about it now?
So we're here at the Global Summit, we're talking a lot
about exponential technology.
- Yep.
- Tell us about some of the core elements that are enabling
this transformation to happen around membership.
- Yeah, well so membership is not new, right?
I mean, we've had memberships since the 12th Century,
Trade guilds and religious groups, but what's happened
recently, two big things.
One of them is that technology has extended the
infrastructure that enables trusting relationships.
So we've always wanted to have these long term relationships
with the companies that serve us, but now it's possible to
do that not just with companies we know personally, like
the shop around the corner, but actually with organizations
where we've never met anybody.
And these are through technologies like always-on devices,
mobility, artificial intelligence that gives us a
personalized experience.
The ability to connect networks.
All of that is enabling new ways of relating.
The other thing is, the influx of capital, financial capital
that is giving entrepreneurs a longer runway to build
relationships with their customers before they actually
have to generate revenue.
- So the fact that we are always connected, and we have
so many different ways to connect, is enabling these
organizations to think differently about how to be a part
of those connections.
- Yeah, it's like a new palette of colors that you can
use when you're painting your business model.
- I love that.
Can you give us some examples about some companies that
have taken advantage of this new palette?
- Yeah, well there's two groups, there's what I think of as
the digital natives, the Amazons, Linkedin, Netflix, who
started their businesses thinking about the forever
transaction.
Thinking about this long-term, member oriented approach.
And then there are companies that have transformed to
membership models.
Companies like Intuit and Adobe, who have moved from these
anonymous, boxed transactions to a real ongoing relationship
subscription model community with the people they serve.
- I'd love to dive into that second group, because I
imagine a lot of people listening are probably a part of
a more traditional organization.
And they're wondering, yeah I want to be a part of this next
way of thinking about my business model, but I'm not sure
where to begin.
- Yeah.
- So what have you seen companies do well when they're
making the transition from a more sort of anonymous buy
to a more customer focuses, long term relationship service?
- Yeah, so the first thing they do, the minute you have a
good product, it's kind of ironic, but the minute that a
company has a good, successful product, it makes it hard
for them to really go back and be customer focused.
Because now suddenly, they are beholden to the product
that they have created.
- Yeah.
- So the first thing I always suggest is to take a step back
and go look at your customer again.
And try to understand what it is they really need, what
they're trying to accomplish, and how you'd be solving it
maybe if you were starting from scratch.
So you kind of get a whole new set of ideas.
And I know you're really big on design thinking
- [Lisa] Yes.
- And creativity, and this is right up your alley.
That's really where to start, and then it's about doing
small tests and iterations, as opposed to going away and
coming back with like the jazz hands and the big reveal.
(laughing)
Like, "Tada!"
But really, testing with customers and adjusting along
the way.
- It must be really hard to ask them to shed what they know.
I mean, I think sometimes we get stuck with the curse of
knowledge, what we know
- Yes.
- Are there certain prompts you give them to get them into
a more generative mind stance?
- Yeah. So for really big companies I say, what if your most
creative team member left and hooked up with the
technologist from your favorite tech company and a guy
with really deep pockets.
- Oh, okay.
- What would they do?
- I bet that jolts them up.
- Yeah, because so often like, I work with a lot of media
companies for example, and they'll say well, we have a lot
of printing presses, so we really can't move away
from our print, right?
Or we have newspaper delivery people, so we can't
move away from print.
And you think, well gosh, that's not gonna stop a start-up
from going right to digital, which is more convenient
and also has a less capital-intensive model.
- What I love about that prompt is that it's so specific.
I think everyone can imagine their most creative employee.
And then it's not hard to imagine them leaving, and what
that would do to an organization.
So I love that example.
You talk about another example that really captured my
imagination, this "frictionless" car wash.
Can you tell us about that?
- Yeah well, so it's a funny story.
A few weeks ago, I was at the International Carwash
Association annual event.
An event like this one in some ways, but also all about
carwashes, so it's a little different.
And one of the things they were asking me about is,
how do you do unlimited car washes by subscription.
And a lot of the carwash companies are moving toward
that model.
And the main reason they're moving toward it is to have
this forever transaction with the people they serve, who
want a forever promise of always having their car be clean.
That's what they want.
Nobody wants to go to the carwash.
You want your car to always be clean.
But the second thing that they learn, they knew that that
was a real driver, and so they priced it basically it's like
three car washes, the cost of three car washes gives you
unlimited car washes.
But what they realized is that some people who only
got two car washes a month, or even one, that they wanted
unlimited car washes so that they didn't have to talk
to anybody.
They wanted a frictionless carwash.
They said, I will pay a premium so that I can just wave
my card when I come to the carwash and not have to
talk to anybody as I go through, and not have to exchange
money, or leave a tip.
Because those were the moments of friction that made them
dread doing the car wash.
- Interesting.
So what I heard in that is two important things.
One is, can you re-frame the value proposition
- Yeah.
- Going from getting your car washed, to really having
a clean car all the time.
And the other is really paying attention to
those sticking points.
Like who would have thought that talking to somebody would
be the thing that keeps you away from a carwash?
- Yeah, we want connection, but maybe not with our
carwash guy.
(laughing)
- Yes, right, exactly.
So Robbie, you know that at Singularity University we spend
a lot of time talking about impact.
Does the membership economy work in the social sector?
You know are there other examples that you've seen of
organizations that are not necessarily in the corporate
world that are using this strategy?
- Yeah, well you guys talk a lot about grand challenges.
And one organization that I work with, the American Nurses
Association, has a grand challenge going on right now where
they're focused on helping the 3.5 million nurses in the
U.S. get healthy.
Because nurses are, of the five major elements of health
which is like stress, sleep, weight, smoking, and I think
drugs maybe, I think those are the five, they perform
less well than the American population at large,
in four out of five.
So they're really using online community, they're using
their subscription model, they're using their live events,
all to support this initiative, this grand challenge around
making nurses as healthy as possible this year.
- That's really exciting, because of course if nurses are
healthy, then that has this cascading effect for what
happens to all other patients.
- Exactly.
It helps patients, it helps patients' families, it helps
kids, it helps communities, so yeah.
- That's one of the things we talked about when we help
leaders think about how they can all become impact drivers,
is to think about what is the theory of change and how do
you map a system of flows, and this sounds like an
interesting example.
- Yeah.
- So we also have a lot of entrepreneurs in our community.
And many of them come up with new ideas and first think, I'm
gonna give it away for free, the whole "freemium" model
- Yeah, love freemium.
- Tell us what you think about the freemium model?
- So freemium is a hammer, it's a tool.
And there are places where it's the best tool and places
where it's really a clunky tool.
Freemium does three things.
One of them is, it gives people an opportunity to change
behavior by trying something for an ongoing period of time
at a very low cost.
Second thing is it creates a network effect, which is it
creates more value for the other customers.
And the third thing is it serves as a marketing channel.
So if I send you an email and at the bottom of it, like
Hotmail did, it says, "get your own free email account
here", then you're actually part of the channel.
- [Lisa] Right.
- So those are good reasons.
If you don't have one of those three reasons,
don't do freemium.
- Yeah.
I know you talk about Linkedin, I think that's a great
example of freemium as part of a larger strategy.
- Yeah.
- And would love to hear that example played out
with freemium being a part, but not all of
how they think about it.
- Yeah, absolutely.
So I said there were three reasons to use freemium,
Linkedin uses all three.
They use it to change behavior, so we used to use, maybe
people don't remember this, we used to use Rolodex's to keep
track of our contacts, and we used to have physical print
resumes that we used to let people know what we were up to.
So Linkedin wanted to change the behavior to having us post
our resumes, and to keep track of our professional
connections through their community.
So that was the first thing.
Second thing is, Linkedin becomes even more valuable with
each new person that joins, so there's definitely a
network effect.
And the third thing is that most people that are on Linked
in were invited by somebody that's already there.
So actually, the members of Linkedin, the free members
that aren't paying are actually bringing other people in.
And the way that Linkedin pays for itself is through
recruiters, salespeople, and people looking for jobs.
And those three groups are willing to pay a tremendous
premium for access to that large network.
- What I love about that example is that these two business
models, one the freemium, for those of us that just want to
have our professional resume out there, and the other with
the paid membership of the recruiters, they feed off of each
other, right?
- Yes.
- They become more valuable the bigger that they get.
- Yeah.
- And I think that's a really important connection
that is not always made, that sometimes these things
operate separately.
- Right, and the thing that I think you're bringing up also
is that freemium works really well when there's a
network effect.
- Yes.
- But when there's not, you might want to try like a free
trial, like if they're saying I don't know what it tastes
like, then you give them a taste of the best that you've
got, like a bite of your filet mignon.
But if they're like, well I just want something free to fill
me up, then you give them hamburger forever.
And that's really what freemium is.
- Yes, yes interesting.
So Robbie, I think that all leaders are gonna need to
really take a hard look at their business model.
What suggestions would you have for leaders that want to
really understand how to get into the membership economy
and how to make sure that they really are getting their
leadership team prepared for thinking very differently
about strategy?
- Yeah, so I think the first thing is to get them out
talking to customers.
And really understanding, what is the value that they
provide, ya know as Clayton Christensen says, what's the job
that your product does for them, and that's one piece.
Also getting into their shoes and understanding what
technologies they expect and see as the new normal.
And the other thing is not getting too wrapped up in
the technology
Because even though technology is great, it's not great when
it's not in service to an actual benefit for the person
you're trying to serve, the customer.
- That's such a good point that you made.
I mean, we're at Silicon Valley, we get very excited about
technology
- We love technology.
- Sometimes we forget to check if it's actually serving
our customers.
- Right, sometimes it's just about the cup holders.
- That's right.
(laughing)
Sometimes it's just about having the augmented mustache on
the thing and we don't really know if it's actually
adding value.
(laughing)
And do you ever help your clients really understand
their customers differently?
Do you like go on customer visits, or how do you help them
do that?
- Yeah, yeah, absolutely.
So we go on customer visits, we do surveys, we call them up
and talk to them.
We do whatever it takes and one thing that I think, you know
you mentioned that you have very large organizations here
and very small, you know sometimes people say, "Well Robbie,
you don't understand, we're a very small company, we're
lean, we can't talk to our customers."
And I say, you know, the corner store, they can talk to
their customers.
Everybody, you might even have a bigger advantage in
knowing your customer when you actually see them or you
have a limited number of customers.
So while the bigger companies might be using very
sophisticated analytics and research systems.
You don't need that.
Sometimes it's just enough to talk to your customers and
ask them what they need.
- I think that is such an important point, and something
that everybody can do.
If you have not talked to your customer in the last week
- Yeah.
(laughing)
- Go and find a customer and talk to them.
- Yeah.
- Another thing, Robbie, that I know you do is you're a
constant student of different business models, and you've
got lots of examples in your book.
But you'll look at anything from the Crossfit community
- Yeah.
- And really understand how that's taken off, to churches
and other different kinds of organizations.
So how do we become more curious?
How should we look at new businesses?
- Yeah.
- What are some questions we should ask?
- That's a good questions.
So becoming more curious is innate, we all are curious, in
fact if you've been with a four year old recently
- Yes!
- You know we are born to ask questions.
- Yes.
- And over time I think we get embarrassed about it, or we
think we know too much.
So what I suggest is, you know, ask questions.
Look at businesses, think to yourself, "why is this business
successful? What can I learn from this business?"
You know, and putting things together, a lot of people have
said to me, no we want to be the Netflix of our industry.
And on some level you can't copy an organization.
On the other hand, if you say, "what would that look like?"
You'd ask the second question, so okay, great, what would it
look like if you were the Netflix of your industry?
What would that be?
If you Amazon ed your competitors, what would that mean?
And so sometimes just asking the second question is a great
way to really break open a paradigm.
- Great, well so many wonderful things that you had to
share, go and talk to customers, ask better questions, try
to understand which organizations are doing well, and why.
Be curious about it.
Robbie, thank you so much for coming today to talk about
the membership economy and how we could all be better
connectors with our customers so we can build forever
transactions and sustainable organizations.
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