Should membership businesses focus on getting new members or keeping current ones?

April 13, 2017

I interviewed Troy Dean of RockStar Empires to understand how membership and course business can grow. This is our interview.

When it comes to membership-based businesses and membership-based sites, what’s your experience?

We’ve been running a membership website now at WP Elevation for over three and a half years, and RockStar Empires for about eight or nine months at this stage. Before that I was doing consulting work and client services, so over an 18 month, two year period I transitioned away from client services to 100% online revenue through membership websites. It’s awesome, man, it’s been a game changer. I love it.

When it comes to growing your membership-based business, a lot of the time we focus on our email list to start with. Why is it so important for us to grow our email subscriber list?

It’s a good question, and it’s a complex question. Everyone’s inundated with emails these days, and so email marketing is definitely getting harder. However, what we forget is that every single day people are signing up to their first email list. Just because you and I have been doing this for a while and people reading this might have been doing it for a while, and they might think, “Well, email marketing’s dying,” it’s not.

“every single day people are signing up to their first email list”

There are millions of people falling in love all over again, just like we did when we first discovered the internet. For me it was Amy Porterfield, or Marie Forleo, or Jeb Walker, or Brendon Burchard. I’m like, “Wow, this is amazing.”

The reason that email is important it’s like getting a phone number from someone that you like at a bar. It’s like, this is my way of getting in touch with you. There are other forms of communication that I think are more engaging, but if you have a list of email subscribers it’s like having a list of potential customers, and it’s one of the most valuable assets that you can build in your business.

What do you think that membership businesses need to remember in order to grow or start their email list?

A membership-based business is based on the premise that you’re going to be able to continue to provide value to your customers in exchange for a membership fee.

Let’s look at the offline world. If you’re a gym, basically all you need to do is stay open and make sure your equipment works, and people will pay membership and a percentage of people will come and actually use the gym and get the results.

“A membership-based business is based on the premise that you’re going to be able to continue to provide value to your customers in exchange for a membership fee.”

A percentage [of people] won’t. That’s the same with an online business. Some people just won’t use the service, they’ll pay but they just won’t use it.

The big distinction, I think, for a membership-based business is, this is not a transactional relationship. You don’t want to put up a free offer and have someone sign up and download it, and then you’re done.

That’s actually when your work begins. When somebody signs up and joins your email list, that is when your work begins, especially as a membership-based business.

In order to create ongoing revenue from your members, you need to provide ongoing, recurring value, and you need to start that from day one. That’s the big distinction for membership-based businesses.

Should businesses focus on getting new members, or keeping current ones?

Both, and I’ll tell you why. One of the biggest costs in your business is going to be the cost of acquiring a new customer, apart from staff and possibly rent.

If you can acquire a new customer AND if you can bring your cost per acquisition down, then you make more profit. The best way to bring your cost per acquisition down is to have your existing members refer their friends.

If I say to you, “Hey, Mike, I joined this new gym, and it’s awesome and it’s a game-changer, you should come along,” and I get you in on a buddy pass for a day and you come in and you join and go, “Wow, this is unbelievable,” it’s cost the gym nothing to acquire you because I’ve done the work for them.

Keeping your existing customers happy does a couple of things. It reduces your churn, so it increases the lifetime value of your customer, which is good for your profit.

It also inadvertently brings your cost per acquisition of new customers down, because they tell their friends and word of mouth is the best form of marketing.

“The best way to bring your cost per acquisition down is to have your existing members refer their friends.”

You should focus on keeping your current members extremely happy, and you should also be focusing on getting new members. Always be pouring people in at the top of the funnel, which goes back to the third thing we talked about, which is growing your email list. For me, it’s really simple math.

If you’re generating 50 email addresses a day off your website, that’s about 18,500 email addresses a year. The golden rule is, in an online membership-based business, that you should be able to generate $1 per month recurring revenue for every email that you’ve got in your database.

You got 18,500 emails in your database after a year of generating 50 leads every day, then you should be able to do $18,500 a month in recurring revenue out of that membership business.

I don’t know about you, but $18,500 a month is a game-changer. You don’t have to do consulting work at that point. If you work at a full-time job you can transition, just run your membership business.

50 leads a day, 50 email addresses a day, if you’re not doing that then you should be focusing on that. That’s the number one thing you should be focusing on.

What’s most important when it comes to actually keeping our current members happy?

A lot of people think it’s more content. My wife actually works for a company who have a meditation app.

“More content will just overwhelm people, and they’ll bounce because it’s too much.”

One of the things that they’re struggling with is, we’ve just got to keep putting out lots of new meditations and new content to keep our app users happy. That’s not the case. More content does not equal more value.

We’ve adopted this thing internally where, particularly at RockStar Empires, we know that we have to take our students on what we call, “from zero to win”. We assume that any student that joins one of our membership programs is at base zero.

We just make an assumption that you don’t know, you’re just starting from scratch. You’re joining our membership program or our course because you want a particular outcome.

What are the steps that we need to get you from zero to win? What does a successful student look like? It’s not necessarily more content, it’s a structured way of using, and applying, and implementing the content that we have.

Stu McLaren refers to this as the success path. We just call it from zero to win. What does a successful member look like? What are the steps they need to take to get from zero to hero, or zero to win?

That’s your job, is to guide them along that path, and that’s what keeps them happy. More content will just overwhelm them, and they’ll bounce because it’s too much.

How do we decide what to charge for membership?

“Rule number one is, whatever you charge it needs to be profitable for your business”

Here’s the thing about pricing. Pricing is completely made up. Pricing is completely arbitrary. There are no rules when it comes to pricing. Well, actually, there are two rules.

One is it has to be profitable for your business, that’s rule number one. Don’t worry about what anyone else is charging for a membership website. Who cares what anyone else is charging?

I don’t care what someone else is charging for their membership website, because I have no idea what their business looks like. They might be living in Thailand earning US dollars.

If you’re living in Thailand, you don’t need many US dollars a week to live like a king. I live in Australia, one of the most expensive countries on the planet.

I need to charge a lot more than the dude who lives in Thailand and has no staff. Rule number one is, whatever you charge it needs to be profitable for your business, because if you don’t maintain profit you’re not sustainable, you won’t be able to keep serving your members, you’ll hit the wall, it’ll all be over.

Rule number two is it has to be perceived as value for money. The phrase “value for money” means that the customer needs to feel and believe that they are getting more value than the money they are giving you. The way we price our products is we say, “Okay, well, what does it need to be to be profitable to our business?” Let’s say it’s $97 a month, which our membership is $97 a month, which is more expensive than most.

Then we say, “Okay, what value do we need to provide to make it a no-brainer for our members to be very happy to give us $97 a month?” It also kind of has to make sense to the market.

As I say, pricing’s completely made up, that’s true but if you charge $9000 a month and try and sell that to freelancers, you bring strife.

If you charge $59 a month and try and sell that to accountants, forget about it. They won’t buy it, it’s too cheap. They won’t value it. It has to make sense to the market.

I’ve got an idea for a course or a membership site, what do I need to do to start?

“I love this question. My answer to this question is the complete opposite of what I’ve ever heard anyone else say.”

The answer is very simple. If you’ve got an idea for a course or a membership website, then find one person to pay you to do that for them as a consultant.

[Hypothetically] I’ve got a course on massaging, right? I can teach you to be an amazing masseuse (I can’t, by the way, I’m just making this up).

I’m going to sell this course for $497, and then I’m going to show you how to become a masseuse and how to start running a business as a masseuse so you can start going and massaging clients and earning money.

We good with that? Sweet.

The thing that I should not do is set up a membership website.

The thing that I should do is go find someone who wants to become a masseuse and run a business as a masseuse, and say to them, “Hey, man, I’ve got this framework and this training that I wanna use to help you to start your business. And I’m gonna charge you a thousand bucks, and we’ll spend three weeks together, and we’ll spend a couple of hours every few days over a three week period.

And by the end of it, I’m gonna do whatever I need to do to make sure you are up and running, that technically you’re a great massage therapist and you’ve got all your business stuff sorted out.”

If you cannot get one person to pay you as a consultant to deliver that outcome, how in the hell are you going to get hundreds of people a couple hundred bucks to deliver it digitally?

That’s the first thing you should do. An online course or a membership website should only be a way of scaling a business model that is already proven to work.

How do I choose an audience or a customer market? What niche do I go after?

“I just can’t teach anymore people because I’m full six nights a week, and my loft only holds six people. I gotta scale this in some way.”

Two things. First of all, if in doubt, refer to the answer to the previous question.

If you’ve got a bunch of people who’ve paid you, go after that market.

There’s a great story about a girl named Meghan Telpner. She’s got an online membership course called The Culinary Nutrition Academy. She was quite ill. She’d been diagnosed with this rare illness.

The doctors said, “Look, you’re just going to have to manage symptoms for the rest of your life.” She went, “No, no, no, I’m not gonna do that.” She turned to nutrition.

She was working as an account executive in the advertising industry. She walked out of that career, turned to nutrition, basically healed herself through nutrition, and then started teaching other people in her loft in Canada, six nights a week how to cook beautiful, wholesome, healthy meals.

Eventually she capped out. She was like, “I just can’t teach any more people because I’m full six nights a week, and my loft only holds six people. I gotta scale this in some way.”

Obviously, you just go after that niche because you’ve already proven it works. Go after something that you’ve already proven works, and couple that with something you are extremely passionate about.

Running an online course or an online membership website, despite popular rumor, it’s a lot of bloody hard work.

What’s the most important tool that membership businesses need to look at?

The one tool that you absolutely need to get your head around is how to automate what they call dunning. Dunning is what happens when a credit card payment fails.

What happens when that credit card payment fails? There’s a series of emails that go out to the customer asking them to update their credit card details. There are services set up, in fact check out Stunning, just Google stunning dunning, and you’ll find a whole bunch of services out there, companies out there that actually write and have services to recoup and to recover failed credit card payments. As you scale, that’s the one thing that you’re just leaving money on the table if you don’t get a handle on that.

Dunning, it’s not actually a tool as such. There’s a whole bunch of other cool tools you can use, but this is an important one because as you grow and scale, it’s the one that’s going to hurt you financially.

If you want to get started…

Probably the best place is rockstarempires.com. It’s a minimum viable blog at this stage, so it’s barely up and about. We’re laying the runway as the plane takes off, so to speak. On Twitter @troydean is a good place to hit me up as well.

 

Our favourite piece of advice is about dunning. It’s something we hadn’t even considered before starting our membership funnels.

What was your favourite answer Troy gave us? Anything you’ve taken away? Let us know in the comments below.

 

Michael

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