Customer Retention Programs, Part 4: Clubs

by | Sep 24, 2018 | Customer Retention, Increase Revenues, Small Business Support | 0 comments

Clubs can be a powerful customer retention program when it comes to meeting a specific business need. Although not as popular as memberships or packages they can sometimes generate a stronger commitment from your club members and generate consistent revenues.

Clubs are useful to generate specific activity like buying a high cost item or getting clients to use other services they might not have tried. They are also used to create exclusivity, but clubs do have their downsides. If not correctly set up or suited to the clients who joins, it can cost your business long-term revenues. Knowing how to setup and sell your club is critical when making it a successful part of your customer retention strategy.

Customer Retention Programs, Part 4: Clubs

This is part 4 of our series on customer retention programs and covers all aspects of clubs. Discover the difference between a club and a standard membership and how to organize a club to best serve your clients and your business. Find out what makes them successful and what mistakes can cost your business long-term revenues.

What are Clubs?

Clubs are a lesser known prepaid retention program and are similar to memberships. The club member pays a club fee or makes a special purchase in return for club benefits. Where clubs are different from memberships is they are often used to incentivize the purchase of a higher cost or unique item. They can also be used to get clients to try different services or to create exclusivity for the program, service, or business. Club structures can vary widely and might have a recurring fee or a one-time purchase or payment. They can also offer either limited or life terms and include discounts or specials on other products or services.

Many customer retention programs are called clubs when they are actually simple memberships. People have become resistant to committing to memberships so the business may opt to call them clubs for the more positive psychological effect the name has on the potential member. We will reserve the term club for a customer retention program designed to get a client to buy a higher cost or unique offering or incentivize them to use other services.

Like memberships and packages, clubs can be valuable part of a businesses customer retention strategy because they are also prepaid. The business receives the money up front as a fee or for the purchase of a high cost or unique item and the member gets access to the club benefits. Again, care must be taken when designing them or they can backfire and cost the business revenues and clients.

How to Setup a Club

Clubs are usually set up to create a specific goal the business deems valuable. When properly crafted, both of these programs will generate long-term repeat visits that translates into success for the company and client alike.

Just like memberships, the business should do a discovery before setting a club up to answer these questions:

  1. What are the clients needs and wants?
  2. What is the goal of the club?
  3. How are clients for the club being sourced?
  4. What is the conversion process?
  5. What percentage of clients is the club for?
  6. What would be considered “successful use” of the club?
  7. How many recurring periods should the club run for?

These questions will give you a framework for how to set up your club to work best for your business and your clients. The answers to these questions will provide you with the information to design and run a successful club that will deliver repeat visits and consistent revenues.

    1. What are the client’s needs and wants?
      Serving the client is always the most important part of running a service-basedbusiness. It is too easy to forget this, when designing programs, so they tend to be built around the company’s needs. Yes meeting the company’s needs is critical, but if the client isn’t being served first, the program will fail and neither will be served in the end. Spend time talking to clients or potential clients. Ask them, if they were to belong to a club, what would that club look like. You can get great insight into what they want this way.
    2. What is the goal of the club?
      Once you have established what the clients needs and wants are, it is time to look at the business’ needs. A successful club will build a bridge that connects these two seemingly separate needs. Is your club for getting clients to purchase a higher cost item? Is it to get them to buy a unique or uncommon item? Is it to get them to use services they might not have otherwise? Is it used to create exclusivity? By defining what the goal for the club is, you can then build it out to meet the need your company has.
    3. How are clients for the program being sourced?
      Defining the source of the client for club membership is important. It frames what the cost of the program will be, what the benefits will include, etc. This step is essential because if you don’t match where the potential club member is coming from, you might not create a good fit. If you want the club to be successful, it has to be easy for the client to step in to and to use consistently. It also helps you to decide what order the club will be offered, or your “triage of offering”, if you have more than one retention program available.
    4. What is the conversion process?
      Defining your conversion process will help you increase the rate at which membership for the club will happen. Decide if it is the first offering or the last resort. Is this an upsell for an ala carte client or is this a conversion from an introductory package. This information will help you tailor the process of onboarding new club members to make a successful program.
    5. What percentage of clients is the club for?
      Creating limits is usually the best way to insure success of the club. If the club is for everyone, then resources can’t be efficiently directed to make sure the program is successful. It also creates an issue where it might cause the business to push clients that aren’t a good fit into the program. If the entire business is set up as a club, then this same question applies to the businesses target clients.
    6. What would be considered “successful use” of the program?
      By defining what would be considered successful use of the program you can better prepare for the allocation of resources. The last thing you want to do is sign a number of clients up and find you can’t meet their expectations. Defining what the successful use of the program would look like also helps to identify what an unsuccessful use of the program looks like. This is important so you can identify clients who aren’t well suited for the program and fit them into something that works better for them. This is a recommended practice to insure long-term success of the business.
    7. How long should the club run for?
      Some clubs are life term clubs, but most have an expiration. Spend time working through the implications of different durations for the club. Usually limits are better because they create a time pressure that gets clients to take action. This question is really dependent on the purpose of the club and there is no correct answer.

Having the answers to these questions will equip you with the knowledge to set up club to be successful. Remember, it is important to place the needs of the client above the business because if it doesn’t work for them, it won’t work for the business. Once that is set as the top priority, the rest of the priorities will fall into place to insure the goals of the program are met. Successful customer retention programs are great for the client and the business alike.

Clubs Configurations

There are likely more variations of clubs than there are memberships due to the diverse needs a business might when choosing to create a club. Again, they are a customer retention strategy that usually serves a specific purpose. They can get clients to purchase higher cost or unique offerings, get members to use other services they might not otherwise try, or they can be used to create exclusivity. Clubs can sometimes be the best approach to customer retention, depending on the nature of the business, the services, or their client demographic, but care must be taken when setting them up to avoid potential problems.

Higher Cost Item Club

This club is for the purpose of selling a higher cost item. This item could be the most expensive service, or a package of services. The business then offers them other benefits to “sweeten the deal”. Usually the other benefits are lower cost to provide with a relatively higher perceived value.

  • Pricing: The price of the higher cost item or package
  • Period: variable
  • Benefits: The purchased item plus free or deeply discounted, limited or unlimited services and or products
  • Duration: 1 or several periods

Unique Offering Club

This club is for the purpose of selling an item that is lesser known that the business deem as highly valuable and/or has a greater profit margin. This type of club can also be used as a type of education program to bring awareness to something that is new or not well understood. Again, the business uses other benefits to incentivize the purchase.

  • Pricing: The cost of the unique item or offering
  • Period: variable
  • Benefits: The purchased item plus free or deeply discounted, limited or unlimited services and or products
  • Duration: 1 or several periods

The “Other Services” Club

This club is for the purpose of getting clients to use other services they might not otherwise try. For this type of club, there is usually a common, or anchor, service that most people come for. In this scenario, the business has other services they deem valuable. Perhaps the services are new and clients don’t know about them. It could be that the services are more profitable or offer greater capacity. Whatever the case, the club is set up to use the anchor service to bring clients into the club where they will use the others services as well.

  • Pricing: The cost of the anchor service (can also charge a small premium)
  • Period: variable
  • Benefits: One anchor service per benefit cycle plus deep discounts on other services.
  • Duration: 1 or several periods

The Exclusive Club

Some services are naturally scarce in nature. If a service takes a long time, or is particularly labor intensive, it is often an good idea to limit its use with an exclusive club. Exclusive clubs can also be used to create perceived value. For some businesses, this may be an effective approach to offering services, especially if their client demographic wants things that few others have. Creating a perceived high value through exclusivity can also be a way to generate more revenue for the same services that might otherwise be less. Creating exclusivity can be a double edged sword, however. Be sure to do plenty of research into your client personas before offering an exclusive club or it may fail entirely.

  • Pricing: More than average for a service or fee
  • Period: variable
  • Benefits: Access to club benefits. They could be free, discounted, or even average price for the services.
  • Duration: 1 or several periods
  • Limits: Highly limited to create perceived scarcity

Downsides to Clubs

While clubs can be an effective customer retention program, they are not without their downsides. Commitment is usually the biggest obstacle. Clients tend to resist recurring fees. The number of clients that opt into clubs is often far lower than any other type of prepaid retention program. Having fewer club members limits the value of the club for the business unless it is very well planned and executed.

Another issue with clubs is the financial incentive to push clients into the clubs. If the clubs are not well suited to the client, they will likely cancel. If they cancel upset that they were charged fees and didn’t get to use the benefits, they might not ever come back. This poses a long term revenues reduction for the business. It is crucial that programs are designed and sold to clients to serve them and not the business.

It is also very common that, after a club membership has expired, the client may not want to renew and might find the retail price of the services too high. It is important to have another way a client can access the services at a discount. Earned retention programs are great for converting old club members and keeping them coming back regularly, even after their club membership expired.

Clubs, although not very popular, can be a very effective way to get repeat visits from your clients. They are just one of many effective options for customer retention programs. They can serve specific needs of the business by getting clients to buy higher cost or unique items, use services that they might not try, or even create exclusivity to increase perceived value. Clubs can be an important part of a company’s customer retention strategy and can also convert new clients into repeat visitors and incentivize more frequent visits. Be sure to subscribe to our blog to receive the next post that begins to cover earned retention programs like loyalty rewards and referral programs.

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