Small business owners continue coming up with different approaches to attract and keep customers. Membership Programs offer an approach which can make sense for many businesses. Because it is much more expensive to attract new customers than retain current ones, membership programs for small business can be profitable.

What is a membership Program? Fundamentally, a membership program asks people to contribute something. It could be money, time , their presence, their contact information, or certain actions. People that join a membership program have a unique relationship with an organization and are usually afforded certain privileges such as special access to valuable information or price discounts.

A membership program can offer financial benefits and provide increased community support to a local business by fostering a feeling of belonging.

A well designed membership program can:

  • help improve customer loyalty by fulfilling one’s innate desire to belong;
  • help businesses generate more revenue from existing customers;
  • improve referral business. VIP Programs can incentivize your existing customers to promote your products and services to family and friends;
  • make your revenues more predictable by charging recurring fees.

And here’s another benefit – because it allows you to learn more about your customers, it also permits greater customer segmentation and enhanced personalization, thereby improving customer communications.

A Loyalty Program which offers discounts and other incentives to its members is an example of a membership program. Loyalty Programs arose due to an increased need for companies to differentiate themselves in the marketplace. When the ability to differentiate via product features lessened due to increased competition, companies turned to Loyalty Programs and other membership programs to gain a competitive advantage.

But membership programs are not easy to create. They take time and you need to establish a structure at the onset. A continued focus on membership growth activities and on monitoring success metrics is required to make them successful. The number of members added / dropped, member churn rate, average subscription rate and lifetime membership value are important performance indicators.

But if you can persevere, stay focused and build a successful membership program, it will pay dividends for many years to come.