Most businesses work in much the same way, the customer chooses the products and services and then pays for them. But there’s another way of buying that’s really taking the world by storm in everything from movies to websites and it’s something that many businesses could really benefit from. It’s a membership.
A recent study showed that mobile phone users in San Diego were paying $3 per minute for mobile phone calls. Not because they were choosing this, but because they were buying bundles and not using all of their minutes. This is something that many small businesses can learn from.
It’s also true to say that once customers parts with cash for a membership, they are more likely to buy addon’s or shop more with you. Many nightclubs who have sold VIP memberships report increased bar sales. It stands to reason if someone has paid good cash to jump a queue that they’d want to get the use of it, so visit more frequently. It also stands to reason that they’ll, therefore, spend more at the bar.
How can other types of business learn from this? Let’s take the example of pet shops. I generally buy my cat and rabbit food wherever I am. I have no great loyalty to any particular shop. But what if my local pet shop offered me the chance to buy my food up front. Let me clarify, my cat and rabbit each the same type of food every week, they also eat the same amount each week. What if my local pet shop was to let me set up a direct debit for my pet food at a small discount? The buying decision has now been removed and I can just drop in an pick up my food. Great eh?
But what if they go a step further. I need to go in to collect my food, so what if they then offer me a small discount on other purchases? As I need to go there anyway it makes sense that I pick up my extras while I’m in. What’s happened is that I’ve been turned from a disloyal, floating consumer into a very loyal customer.
There’s another plus too. The pet shop has improved its cashflow by collecting my direct debit before I collect the food, maybe a few days in advance, maybe a few weeks if I pay monthly. What they’ve really done is have me pay for the chance to buy more from them.
How can you use this in your business?