Online Business Models Explained: Subscriptions and Membership Programs

online business models subscriptions

This series is slowly coming to its final episode, however this isn’t the one yet.

So far we’ve been talking about things like: services and consulting, products, affiliate income, and advertising. These are all valid online business models. Today let’s focus on something that is not that obvious, but has been fairly popular lately nevertheless – subscriptions and membership programs.

What a membership program is

A membership program is commonly known as a premium area to which you can gain access by paying an ongoing fee of any kind (monthly or yearly). The premium area can contain almost anything … software, text content, and any kind of digital products.

Essentially, a membership program is a product, but what’s interesting about it is the way it’s delivered to customers. They don’t get the actual product, only gain access to it. They can interact with the product by logging in to their membership accounts.

What the steps of creating a membership program are

The actual part of “creating” is not very different from creating any other kind of product.

First of all, you have to decide what type of a membership program you want to offer. Is it going to be a piece of software, or just some text content on a given topic? Or maybe something entirely different?

As I’m sure you know very well by now, creating an app (software) is usually very expensive and consumes a big amount of time. In most cases, you have to hire a team of developers, designers, and testers (if you want to do it right).

This can be a topic for an entirely different series, so here I’m only going to talk about some basic text-based membership programs to explain the whole idea.

Once you know what it is exactly that you want to create you should compile a complete outline of the whole program for at least 3 months worth of subscription time.

This is very important. If you’re planning on providing text-based content (premium articles, tutorials, etc.) then you need an outline for the next 3 months. You never want to wake up one day with absolutely no idea what you’re going to share with your subscribers.

Once you have the outline ready you should create one month worth of the actual content. You need this startup package, so to speak, to show your initial subscribers that there’s indeed something going on in your membership section.

Now the section itself. How to get it done technically? No surprise here – WordPress. Only this time you’re going to have to make a small investment, and buy the WishList Member plugin. The basic version will cost you $97 (there’s a 30-day money back guarantee). The plugin offers an easy way of setting up your membership program with content you already have, and also adding more content later on. It also supports all major payment processors.

Once you have everything set up you can start marketing and launching your membership site.

Why membership sites work

This is something we can tackle from two angles.

First of all, why do they work for online businesses? Usually, membership programs are not that expensive to set up and maintain. Everything is kept together by a system designed specifically for this purpose (the WishList plugin), so in case of any problems you can contact the support.

The profits are also somewhat predictable. At least if the program has been around for a while. Once you know for how long people remain subscribed to your program (on average) you can predict the amount of money that will appear in your bank account the next month.

Finally, you only need to sell your program to a customer once, and then they can possibly be a member for years to come … paying their monthly subscription fees. So the lifetime value of a customer can go through the roof.

Now, why do membership programs work for customers? They feel safe. Customers are only committing to being a member for one month. They know that they can unsubscribe at any point. Essentially, there’s no risk if you put a money back guarantee on top of this whole thing.

A well set up membership program also delivers the content in the right order and in well thought through packages that can be easily digested. So the customer doesn’t have to decide how many pages should they read this day, the program does this for them.

Popular price ranges

money

Membership programs are sold for a variety of different prices.

Some people go as far as charging their customers $5,000 a month. Honestly, I can’t imagine a package of content that is that valuable. In most cases this is only a practice used by “guru” marketers trying to sell the “next big thing.”

In the normal world, on the other hand, membership programs are usually sold for around $30-$200 a month. This sounds both honest and reasonable.

At first, $30 might sound a little small, but remember that you’re selling multiple times to the same customer. So if they remain subscribed for, let’s say, 6 months you are still making $180 off of that customer.

The price shouldn’t be too high either because it can easily go over people’s level of “can’t live with that.” For instance, if you charge someone $10 a month for something they rarely use then they might still decide to remain subscribed regardless of this minor expense.

Marketing membership programs

The rules are not different from marketing other digital products. You still need to create some promotional material, decide on a marketing strategy, and choose a way to reach your target audience.

As I said in one of the previous episodes, we’ll focus on marketing in a separate post. However, I still want to point out one approach that works rather well for many membership-based business models.

I’m talking about an affiliate program.

Affiliates like to promote all kinds of membership programs because they know that they get their commission every time a customer pays the monthly fee.

For an affiliate, this is an obvious opportunity … sell once, get paid multiple times. But you, as the manager of the membership program, need to make sure to pay your affiliates regularly.

What’s a typical commission for an online membership program? Anything between 50% and 80% of the shelf price.

Sounds high, I know. But remember that affiliates bring you sales that you wouldn’t have gotten without them.

What’s your opinion on membership programs? Are you a member of any? Or planning on launching your own?

There’s at least one more part coming out in the series, so don’t forget to come back to get it. Feel free to subscribe to my RSS feed or email updates to get the posts delivered to you the minute they are created.


  • Pomeline

    Sometimes I really hate to sign up for membership sites but I’ve appreciated it when it was my time to create a membership site. What’s be biggest fallback of membership sites by the way? I guess there are generally many advantages.

    -Pomeline

  • Karol K.

    It’s probably the fact that you have to create new content constantly. But this isn’t such a bad thing, actually.

    If you create 6 months worth of content then you can confidently bring new people through the door knowing that you don’t have to do much for the first 6 months (except updating the content to remain up-to-date).