The LIES about Continuity and Membership income

[Ken Preuss]

Ahh, here we are again.

'Tis that time of year when someone comes out with a major launch relating to the "best IM strategy in existence": making continuity income through membership sites.

First let me say I don't claim to know it all, nor do I have anything personally against any of the big-name trainers. I really don't.

My commitment is to two things: 1) helping real people get real results, and 2) reinforcing simple truths based on experience.

The big launches relating to starting a membership site will have you believe the following (taken directly from their sales pages, all of which are similar to the others):

"Membership sites are the easiest way to make a solid consistent income"

"You never have to look for more customers" (yes, the sales page actually says that)

"Continuity income allows you to work once and get paid over and over again"

"The 'Set it and Forget it' way of making money online"

Here's my point. As with everything else in this industry, all sorts of things are said to get you to buy the premise of what is being sold.

---> If you don't buy the premise you won't buy the product.

The problem is this: there are many exaggerations and inaccuracies in what is being shared with you.

So let's address the facts, ma'am.

1) Membership sites involve work - in many case A LOT of work

Anyone who has ever started and *successfully* run a membership site will tell you it's not a cake walk. Yes the continuity income is nice. But in order to keep that income consistent - and even to get it built up in the first place - really takes something.

One of the key things to remember is that customers are NOT inherently interested in paying for something on an ongoing basis. Think about it - if you had the choice would your default desire be to pay for something once or to keep paying for it over and over again?

Because of this customer expectations are often high with membership sites. Often this has to do with continuously providing more and more content, which can be fun but it's certainly a ton of work depending on the nature of the site and content.

My point is simply that membership sites are never a cake walk no matter how you slice it (pardon the pun ).

2) The attrition rate with most membership sites is high

This is a biggie and is rarely if ever discussed on a sales page nor highlighted enough in the training materials themselves.

The attrition rate - the rate at which customers cancel or fall out of the membership - is quite high with most membership sites. Why is this?

Well, truth is there are a ton of factors. Maybe the content wasn't good enough in their view, maybe there wasn't enough interaction, maybe the membership itself is not at all consistent with the premise under which they purchased in the first place.

Whatever the case, the idea that "you never have to look for more customers" in a membership model is complete and utter bunk.

On the contrary, to maintain a consistent and thriving income you ALWAYS need to be attracting new customers. That's because your existing customers will be dropping out at a much higher rate that you may think.

Sure, there are things you can do to offset this attrition and good courses will always cover this.

However the fundamental element of human nature will always be present - so regardless of what you do a certain attrition rate WILL exist. There's no getting around it.

3) A membership model is NOT a business model

This is the biggest thing to remember, and it's one that most are completely oblivious to seeing.

At its core, membership is simply a structure for product delivery and payment receiving. And that's all it is.

A membership model does NOT create what your business fundamentally is to your customers. Specifically:

- If you don't understand your target market, a membership model won't magically fix that
- If you don't provide something your target market WANTS, a membership model won't magically fix that
- If your training or information products are severely deficient, a membership model won't magically fix that

I can't emphasize this point enough. A membership model is only a structure. If your business is lacking the core fundamentals then it won't matter one lick what structure you are using.

The point is not to get seduced into thinking a membership model is the magic bullet that will solve all your problems.

Quick story:

Several years ago shortly after I first started marketing to real estate investors, I had this "great idea" to start a membership site for the industry. I too fell in love with the idea of "ongoing recurring income", because heck, who wouldn't want that?

I decided that my membership site would be filled with real estate articles, a forum, a killer knowledge base...all the same stuff that everyone says to put into a really good membership site.

I also decided I would make it "top notch" by having my web programmer build it from scratch. I spent close to $8,000 (yep, 8 grand) developing the site so it would be exactly the way I wanted it.

And I must say, it was damn impressive. It was miles better than anything else in the real estate industry and I was really proud of that.

But here was the problem: The customers didn't want to pay for a membership! And if I had opened my freakin' eyes rather than become completely seduced by the membership model, I would have seen it clear as day.

It was right in front of me. There were already several HUGE free forums people were flocking to in real estate, and there was no evidence whatsoever that existing customer behavior would have them paying for a membership site. None.

And guess what? They wouldn't pay for it. Gee, who'da thunk it?

So after (gulp) $8K spent and a couple months working that sucker to the bone, I folded it and moved on to something else based on actual evidence that customers WANTED it and were more than willing to pay for it. Within a couple months I was back up to a solid and growing 5 figure monthly income.

Here's the moral of the story:

Do not be seduced by strategy - membership or otherwise.

Focus on your underlying business model as well as providing what your customers want. If the strategy matches these things then move forward. If not, pass and don't think twice.

You'll be glad you did.

Best regards,
Ken

[LB]

I think that ridiculously high churn rates are a problem especially in the IM niche with many customers joining for only one or two months and then leaving. In many cases it would be more profitable to simply sell a one-time product rather than try for membership income. This is especially true if you are a beginner and may not have competitive content to offer each month.

On that same note, if you create a truly "sticky" site that people "can't live without" they will be happy to pay monthly for it.

Keep in mind that in the "real" non-IM world, membership fees are typically substantially lower.

It kills me to see a lot of beginners charging $97 per month for a site and then two months later it's closed.

[Eric Lorence]

Thank you very much for this take, I would have to agree.

[JasonParker]

I get what you're saying... and I know there's always some #1 strategy buzzing throughout the IM world. I actually believe it IS best though, having watched a friend rake in 6 figures per month with his newsletter for a while. It takes no more energy to write a newsletter for 100 people than it does 10,000.

[Alminc]

Excellent post Ken.

I would just add here that those who romantically picture the membership model as the magical solution for lasting recurring income are most often those who sell membership scripts and plugins. They try to introduce the software itself as the magical, powerful income producing machine that you just need to install and presto - recurring income is born...while the software is actually just a tool as any html editor and will never produce one single dollar without the investment of tremendous human efforts in content creation, marketing and entertaining.

[Debbie Songster]

You are absolutely correct.

• Its not easy
• People don't want to keep paying
• If there isn't something new in there each time a person logs on its like they aren't getting their money's worth --and I mean EACH time a person logs on.
• There is always some new gimmick or technique that lures them away
• Its NOT a business model

All your points are dead on - I just felt the need to post them again.

As for the guy who writes a newsletter - thats different. If its a typical newsletter you are delivering it to Them - they get it, read it, end of story til the next issue.
With a membership site they are "coming to your house" - the expectation is different.

Besides I think there have been so many "membership sites" that have disappointed people that the expectation is greater now.

Personally I have belonged to many that were never upgraded each month even though the owners would leave messages that "new stuff is coming soon". Some I paid a lot of money each month to belong to.

A couple are with some really big name in the industry.

The bottom line, its a lot of work and I dont' think people realize that before they create one.

End of my rant

[Kyle Tully]

Nice post Ken, the key line in that whole post to me is this:

Originally Posted by Ken Preuss

3) A membership model is NOT a business model

I've seen it time and time again where someone thinks all they need is the perfect membership model and they'll magically succeed despite not thinking about any of the other factors involved in their business.

While I admit I'm a little biased (notice my sig link ) and do think, when done right, membership sites are a very effective model, there is definitely a certain naivety in regards to what it takes to create a successful site -- but then that makes it no different to every other model out there.

[Junaid Gamieldien]

I'm sure that it really is market specific. For example, who would subscribe to a "How To Get Your Ex Back" membership site?

But I suspect that the price point would be market specific too and is a big determinant in the potential success of a membership site.

I suspect that in some niches it would probably be easier to reach 1000 subscribers at $10 per month using a $5-$10 front-end funnel than it would to get 500 at $20 per month using a more expensive (or even the same) front end.

Just thinking out loud...

[Careygee]

Originally Posted by Debbie Songster

You are absolutely correct.

• Its not easy
• People don't want to keep paying
• If there isn't something new in there each time a person logs on its like they aren't getting their money's worth --and I mean EACH time a person logs on.
• There is always some new gimmick or technique that lures them away
• Its NOT a business model

All your points are dead on - I just felt the need to post them again.

As for the guy who writes a newsletter - thats different. If its a typical newsletter you are delivering it to Them - they get it, read it, end of story til the next issue.
With a membership site they are "coming to your house" - the expectation is different.

Besides I think there have been so many "membership sites" that have disappointed people that the expectation is greater now.

Personally I have belonged to many that were never upgraded each month even though the owners would leave messages that "new stuff is coming soon". Some I paid a lot of money each month to belong to.

A couple are with some really big name in the industry.

The bottom line, its a lot of work and I dont' think people realize that before they create one.

End of my rant

Yes, this thread is pretty well dead on.
I started one in 2006 and found out much of the above.

The main point is above (In Red) and it pertains to the biggest problem
that is not pointed out. In 2006 I found that out.

I am now working on a site which I started in Feb of 2008 and
I need a few more things done to be qualified to be able to
launch and call it a true quality site and apply most of the above
comments to the site's structure to be fair to customers and to
stand the test of time.
Over 8 months and counting.

[Kyle Tully]

It's only a lot of work if you set it up to be such. And members only expect what they sign up for

In fact, a huge mistake newbies make is investing huge amounts of time doing all the work of setting up a full-blown site without first proving the site will actually sell.

They model other sites (without any real idea if that site is actually profitable) and keep churning out masses of content thinking that is what keeps people interested. It's not, or at least it's only a small part of it.

Like any model there are tips and tricks to learn that make it so much easier than most people believe.

And like most things it's a matter of perception and beliefs.

[John S. Rhodes]

There are many different types and flavors of membership models:

* restricted access to special content
* autoresponder memberships
* 1-time fee memberships
* secure forum memberships

I could generate a fairly large list of memberships. My point is that
you might be throwing the baby out with the bathwater. Before I
go on, I want to agree with you:

* memberships can take a lot of work -- but not ALL of them do
* memberships face attrition -- but it's often a slow decline over time
* memberships are not business models -- but they are part of models

Let's really investigate one big issue: attrition. If you have a membership
that only requires a 1-time fee then there is no attrition. Sure, there
might be refunds, but you don't exactly face attrition. You can make
a lot of money from these memberships and they can be low work.
They can also be used to deliver a ton of value. Everyone wins.

You're making some outstanding points but you're also making it
seem like memberships are evil. They can be wonderful. They can
be relatively low work, especially in relation to the ROI.

~ John

[Frank Donovan]

I broadly agree with the substance of the OP, but I think Kyle makes an excellent point:

Originally Posted by Kyle Tully

It's only a lot of work if you set it up to be such. And members only expect what they sign up for.

Many successful membership sites merely provide a weekly or monthly newsletter - you only need to be setting up massive content, forums etc. if that is what you've led your prospective members to expect.

But, yes. Some of the claims being made in the big launches are a bit OTT.


Frank

[Debbie Songster]

Ken started this with

'Tis that time of year when someone comes out with a major launch relating to the "best IM strategy in existence": making continuity income through membership sites.

Continuity income through memberships

John you bring up some good points on the types of memberships but a couple of those are not continuity programs. If there is no monthly fee then the attrition rate is going to be extremely low if at all.

Carygee - I can identify with you. I know how much work has gone into mine.

And yes Kyle - a membership site is just like any other business venture. You need to see if there is a market for it before investing time and money.

I'm sure numerous people have started membership sites thinking its going to be a walk in the park and the current sales climate is trying to make membership sites look as easy as writing an article.

I would bet money that the vast majority of people who started one didn't have a clue how much was involved until they were knee deep in the project and felt obligated to continue.

I'm close enough to Vegas - where do I place my wager - I'd probably win this one