To the layman, “recurring revenue” might sound like meaningless jargon, but as an insider, you know different. Business models that can bring in regular, predictable income one billing period after the next have become extremely fashionable in business, often to the extreme—even luxury car makers are trying to get in on the act, gating various features behind a few extra bucks per month on top of the tens of thousands you’re already paying for your shiny new set of wheels.
Some of these tactics border upon the ridiculous, but there have been certain types of businesses making recurring revenue work for decades. People have been subscribing to newspapers and magazines for generations, and even daily necessities like milk and eggs were taken care of under the same principle once upon a time.
Charitable organizations also have the most success by getting good samaritans to sign up for regular donations rather than one-offs, and there are lots of clubs that you can join who charge monthly or annual dues—you probably have clubs dedicated to sports or hobbies like golf and tennis near you that have been around for ages.
If we go back even further, then we come back to memberships for Gentlemen's Club. The term Gentleman’s Club has now accumulated a certain level euphemism, but back in the day it meant exactly that—around the turn of the 20th century social clubs were a huge part of daily life among the prominent set, perfectly illustrated in literature by how Sherlock Holmes’ brother Mycroft seems only ever to be found at the Diogenes Club whenever his expertise is required.
Today, what’s clear is that the membership model has stood the test of time and is being increasingly pursued by businesses of all sorts.
This article delves into why, as well as how you can take full advantage of the different types of membership model out there, choosing and leveraging exactly the right one for your business.
What is a Membership Model?
A membership model refers to the structure by which you offer value to your paying members or subscribers and exactly how you collect their fees—which includes things like frequency as well as tiered or other more innovative subscription plans, as well as one-off payment options that may either be an introductory or high-ticket option.
Why You Should Use a Membership Model for Your Business
We’ve already touched on the fact that recurring revenue is valuable because it’s regular income, meaning excellent cash flow for your business as well as more accurate forecasting of financial performance and metrics. This is huge in its own right, but there are several other benefits to membership models that can sweeten the deal even further.
One among these is the fact that you have a lot of leeway and flexibility in how you can structure your memberships.
Let’s imagine for a moment that you were in charge of a tennis club. If it’s a small club with simple facilities, it might make sense to have a single membership fee that you charge every member. However, once you start reinvesting and growing your club, options start to emerge. Building some indoor hard courts to go along with outdoor grass courts and illuminating the lot will let you raise your fees since members can choose their surface and play at night. Investing in your bar and lounge facilities might let you open up a social member category for those folks only interested in the social and networking aspects of the club.
This analogy could go a lot further, but it already serves to highlight the way you can ramp up your revenues by adding value to your product, craft upsells with different propositions, and even attract entirely new categories of customers. And that’s not even touching on how you can add one-time payments and high tickets (add a gear shop so members can buy tennis gear, or rent out the whole club for a party) to your list of options.
That’s not to say the membership model is a one way street in terms of benefits. Your members will benefit from this sort of flexibility just as much as you do—having options with membership tiers lets them choose the way they want to interact with your business in terms of frequency as well as price.
Some members need a low price, low contact plan to get their feet wet before going all in, and you can give them that. Others may run into tough circumstances that eat up their time and budget for a month or two, and a downgrade option will increase the chance of them sticking around as opposed to the binary option of terminating. They might mean to rejoin, but just never get around to it.
This particular situation outlines one of the crucial advantages of memberships—the efficiency of retention versus acquisition. Even though members may end their subscriptions for a wide variety of reasons, it’s a whole lot easier to keep them part of your community than to actually acquire new members. Acquisition takes a lot of effort (and funds) but retention doesn’t—and a membership model for your business will allow you to lean on the power of retention rather than having to make new sales constantly.
Types of Membership Models
There are two main types of membership models used by businesses and organizations today, but there’s also a third category that sometimes comes into the conversation too. Let’s go over them briefly here, then follow up with examples of each:
Flat Rate Membership Models
Flat rate membership is usually considered the “classic” option, and it’s generally implemented when a business decides that a one size fits all strategy is the way to go for their particular offering and market. It’s an uncomplicated way to do things and that has its own benefits, being straightforward to reckon with and generally being an easy sell for members.
That being said, you might be losing out if you decide to implement flat rate membership. We’ve already mentioned the benefits of having an affordable alternative as a stepping stone, and you’re also turning down the potential upside of that segment of customers willing to pay more for a higher level of content or more personalization.
Tiered Membership Models
Tiered memberships solve the inefficiencies of flat rate memberships, letting you tailor your plans to a wider variety of customers and not miss out in the way you might by offering only a single flat rate. However, it’s important to communicate the differences between the tiers clearly and make clear to members what they’re getting at each tier—and then there’s the logistics of actually ensuring that each member gets exactly what they signed up for.
One-Time Payment Models
One-time payment generally isn’t a feature of membership, but there are several instances where this becomes very much part of the equation. Some organizations, for example, offer lifetime membership as a high-ticket option for members who’d rather go all-in with a lump sum than pay an amount every month for a couple of years or more.
Other organizations mix in a one-time payment with membership dues, although this is hard to pull off unless there’s significant demand or a very clear up-side to joining. Prestigious golf clubs, for example, often charge a five or six-figure initiation fee that new members have to cough up in addition to the regular monthly or annual membership fees.
8 Membership Model Examples
1. The Groucho Club
Having already mentioned the fictional Diogenes Club, it’s worth going into some depth with a real example!
The Groucho Club was founded as something of a counter to the stuffy Gentleman’s Club scene in London, and it was based on the principles of gender equality and upholding the creative arts. You need to be invited by a member before you can join up, but the club reportedly runs a tiered membership based on age, with dues going down for under 35’s and under 30’s applicants.
Members who live far enough from London (country members) also benefit from a reduced rate, with overseas membership also being a thing—as it tends to be with most private member clubs. You’ll need to be in the creative arts to even think of becoming a member of The Groucho Club, but once in you’ll be rubbing shoulders with the likes of Mark Ronson, Lily Allen, and Kate Moss.
Membership Model: Tiered fee structure depending on member age and location. Lifetime membership can also be purchased for a reported $15,000.
2. Garrick Club
Right on the opposite end of the spectrum, the Garrick Club was named after an actor and began life in the Theatre Royal, but has since been a standard-bearer for the stuffy. The club was founded in 1831 and has counted umpteen members among the legal profession including King’s Counsels, Supreme Court judges and members of parliament, but only decided to open its doors to women in May 2024.
Current British monarch King Charles III is also a member, and listed his profession as “self-employed” on his nomination form back in 1985. As you might imagine, it’s almost impossible to get into the club (there’s a five year waitlist and a complex proposal process) but if you do manage you’re looking at a flat fee of around GBP 1600 per year.
Membership Model: Flat rate membership following extensive proposal process.
3. Brookline Country Club
The United States of America’s oldest golf club, the Country Club at Brookline was founded in 1882 and is one of the original five founding members of the United States Golf Association (USGA).
Famous for hosting multiple major championships as well as the controversial “Battle of Brookline” Ryder Cup in ‘99, the club has 1300 members who pay dues of around $1500 per month. However, this figure pales in comparison to the joining fee that lucky new members have to shell out—estimated by various publications to be upwards of $250,000.
There’s also a waitlist, with Tom Brady reportedly waiting years before finally being accepted. Prominent country clubs in the US can be extremely picky, with Chicago Golf Club refusing Bulls legend Michael Jordan membership. Don’t feel too bad for #23, though, he went ahead and built his own ultra-exclusive club in Florida.
Membership Model: Flat rate membership fee plus quarter of a million dollar initiation fee.
4. Los Angeles Science Fantasy Society
Not every club worth talking about needs to be exclusive, and LASFS is a great example of one that’s just as notable as the rest in its own way–it’s the world’s oldest continuously active sci-fi and fantasy club–while also extremely easy to become a part of.
It was founded all the way back in 1934 and has met every single Thursday since. Trolls and creepers aren’t allowed, and membership is priced at $4/week, $12/month.
Membership Model: Flat rate membership.
5. Amazon Prime
Not every membership model needs to be used by a social, sports, or hobby club either. Ecommerce business lends itself very neatly toward the membership model, and it’s a safe bet that you’ve heard of the global juggernaut that is Amazon.
Amazon Prime is the company’s membership program, and it gives members perks including a selection of on-demand and live entertainment, faster delivery, and lower prices on their online shopping. All you have to pay is a small flat fee per month, with the occasional free trial to whet your appetite. Many other Ecommerce giants have similar programs with accompanying benefits structures, such as GameStop’s Pro memberships.
Membership Model: Flat rate membership with one-month free trial. Discounts available for students, so it could be viewed as a tiered structure.
6. Netflix
Having begun life as a mail-based rental business, Netflix is the current leader in video-on-demand streaming media and a common sight on household devices the world over. Often in the news for various attempts to crack down on password-sharing, Netflix uses a tiered pricing model where the lowest tier includes advertisements but the premium option allows Ultra HD resolution, two users in a different location to the household, and concurrent use on four devices.
Membership Model: Tiered membership.
7. Mercedes Acceleration Increase
We have already mentioned automakers dipping their toes into the waters of subscription plans, so here’s the scoop! If you order an EQE or EQS from Mercedes in the US, you’ll have to pay $60 per month or $600 per year to bring your car’s output up to 348 and 435 horsepower respectively, a difference of 60 and 80 versus not paying.
This is software controlled rather than a matter of better or worse hardware, so it’s quite hard to swallow—as was the $17 per month subscription for heated seats that competitor BMW planned to introduce but ended up shelving due to the announcement’s poor reception.
Membership Model: Flat rate, with lifetime activation a purchasable option.
8. Patreon
Finally, the creator economy is an excellent source of examples for membership models since memberships are one of the best ways for creators to monetize their content and earn directly from their audience.
Patreon is one of the best-known creator platforms out there, and it has a tiered pricing model pictured above. Creators themselves aren’t restricted to Patreon by any means (here’s a list of Patreon alternatives) but if they do choose to use Patreon, they pay a subscription to Patreon to use the platform.
Membership Model: Tiered membership.
The 6 Steps to Creating a Successful Membership Model
So, now that you know all about the different types of membership models deployed by a variety of businesses, how do you go about creating a successful membership model for your own business? Time to find out.
1. Define Your Business and its Purpose
First things first, the nature of your business will define what sort of membership model will work best. From those examples above, can you imagine if Amazon Prime had a steep, country club-esque initial fee to sign up, or a private institution like the Garrick Club offering a one month free trial to all comers? Or, perish the thought, if a car company were to—oh, wait. Nevermind.
The fact is, your business and product will dictate what sort of membership models you can eliminate right from the start. If you’re selling SaaS or are a content creator, for instance, you’re probably looking at tiered memberships being the front-runner at this stage. You could also start with a flat fee structure, then branch out when you’re ready by adding tiers above and below.
On the other hand if your business is online courses or you’re an ebook author, your product is well suited to a one-time payment structure—but you’ll want to figure out some way to provide added value, such as a community, that you can charge a flat rate for at the very least. This way you’ll keep revenue trickling in, and have your most keen customers close at hand for when your next course, ebook, or other digital product is ready to go.
2. Analyze Your Audience
The next, and equally vital, step is to start researching your audience and getting as good an understanding of them as you possibly can. Without really knowing your customers, it’s almost impossible to come up with a solid membership model—and in fact, the wrong model for your audience might do a lot more harm than good.
We mentioned SaaS a moment ago, and it’s a great example of how the audience or customers can dictate the business model. Are your customers individuals or companies? If they’re companies, how many people do you expect to use the software? Can you group users by the feature set that they require? The answers to these questions will dictate major parts of your model, and you’ll soon see patterns begin to emerge among your user-base.
3. Choose Your Specific Membership Model
Now that you have a clear understanding of your audience and how they interact with your products or content, you can pick the best membership model for you or even design a hybrid model that best suits the situation at hand.
Tiered membership models can be structured in a number of ways, and while most businesses give you options to sign up based on the number of features you require, other companies charge more for less disruption (looking at you, Netflix, with your Standard plan versus Standard with Ads). You can also set up tiers based on how many people will be using your product if targeting companies or households.
Tiers can help you take advantage of opportunities you see while researching your audience, but don’t be afraid to go with a flat rate. Especially when just starting off, you might not have the time or ability to cater to different levels of membership, so go with a flat rate and a small set of benefits—the money you earn from this can be used to reinvest into new content and an expansion of your membership model further down the line.
4. Outline Your Fee Structure
Pricing your membership is a complicated endeavor and is possibly beyond the scope of this guide, but one way to go about it is to check out a platform with similar businesses and see how others are doing it. Head to Whop and click on the category closest to yours and browse a little—just a few minutes checking out the vendors on Whop will give you an idea of how other businesses are structuring their membership models.
Also remember that anyone who’d consider subscribing to you is also being targeted by other membership services. You can bet that they’re being bombarded by advertisements left and right for Prime, being asked by their friends if they’ve seen the latest show on Netflix, begged for tips by streamers, and all that on top of the budgetary demands created by today’s high cost of living environment.
So, structure your fees sensibly, and while nobody’s expecting you to provide the same value as the big players do, ensure that you do indeed make your memberships worthwhile.
5. Finalize Your Premium Content
This one’s mainly for content creators, but no matter your business, you need to ensure that you’re giving your audience enough value. When people feel like they’re not getting what they paid for, they’re going to churn, and that’s a situation you want to avoid.
Content creators generally operate on something like a freemium model. They put out lots of content for free, and then create some extras (whether that’s courses, exclusive premium content, personalized content or direct contact, or something else) that they can charge for. Members then sign up because they want more from these creators.
If you’re a creator, you’ll need to go the extra mile to give people something more that’s worth paying for—but don’t go overboard. You’re probably going to have to create all of this content yourself, and it wouldn’t do to overload yourself or burn yourself out. Decide what sort of additional content you can create easily, or how much more you want to make, and then be up front with your prospective members as to exactly what they’ll get when they sign up.
6. Market Your Membership Model
With all the pieces of the puzzle now in place, it’s finally time to launch and market your membership model to your audience. This is where social media comes to the fore, and you can pitch your audience wherever those touchpoints are—but remember not to sell too hard. Not everyone will sign up for your membership, and some will resent it if you try to sell them on it too hard and too often.
Working with a Membership Management Tool: How and Why it’s a Great Idea
Setting up a membership means creating additional premium content, and that’s going to take a lot of time and energy. Unfortunately, that’s only the tip of the iceberg. Getting a membership system in line can be extremely tedious, and if you try to do everything yourself, you’ll get bogged down in a world of DMs and spreadsheets to the detriment of everything else you have on your ever-filling plate.
That’s why membership management software exists. A good membership management tool or platform can take over a lot of the administrative minutiae and automate a surprising number of processes, to the point where you won’t even have to lift a finger to manage your memberships any longer.
We’re talking payment processing, generating calendars of events, organizing members and membership tiers, automatically assigning membership privileges when they sign up, hosting (and setting up) your digital store page, communicating with members, and much more. A good membership management tool will let you get set up easily, and even offer customer service—meaning that you’re not going to lose any time and energy managing your memberships.
Creating and Managing Your Membership Business with Whop
If you want to get started with a membership model for your business or community, Whop is well worth checking out. An entrepreneur-focused platform providing solutions for every sort of digital business, Whop takes care of everything you need when you launch your membership program—from payment processing and Merchant of Record services to digital fulfillment, customer service, member management automation and hosting your digital store page, you’re definitely going to be in safe hands.
With your whop, you can put all of your premium benefits within your members’ reach with a click and a drag—whether you want to give them access to your Discord server, digital downloads, ebooks, courses, or anything else, Whop makes managing your member community an absolute breeze. Visit Whop.com to find out just how easy it is to get started.
