Why Does the Membership Model Make Sense？

洪楸琪

【Abstract】The purpose of this research is to discuss the functions of membership model and how it effect on the companies. And this paper also discuss the membership model offer a method to help the corporation develop its business to achieve the goal of increase sales. Moreover， the membership organization experiences the change within the development of technology. The membership model saves many corporations and help them become strong in the market. Nonetheless， the membership model is not limited use in profitable business， it also applicable for the non-profit organizations， such as charitable corporations.

【Key words】Membership； Business Strategy； Sams Club； Non-profit Organizations

Introduction

Membership model as one of the business strategies which utilized widely by many different kinds of institutions， it must have many advantages to help the companies create value and earn the profit. “The membership strategy is an example of institutional strategies that represents a firm-level attempt to manipulate and establish institutions so that a firm may derive advantage” （Brandt & Bresser， 2012， p.3）. For instance， Costco is the typical of the membership model. Pay a certainly monthly fee for the privilege to enjoying the shopping discount， higher membership fees， get more discounts. Every family cannot live without groceries and other household items， and there is a place include everything that they want and have more discounts， it must attract the people to shopping. There is no doubt that Costco develops customers loyalty. All in all， Costco is a win-win to make its business earn money and make customers happy to shopping.

Membership models are common among various and different kinds of businesses. Everything from health and fitness to entertainment incorporates some aspects of the membership model. It is applicable for both commercial and non-profit organizations for strategic growth and competitiveness. It also overcomes technologies. For instance， Blockbuster video dissolved its physical stores in lieu of online video streaming technologies. Regardless， both methods necessitated the use of a membership to participate in the entertainment services. Membership models may be either paid or unpaid. There is no certain technology， structure， or status applies to all forms of membership organizations. Instead each individual organization develops its own membership construct to support its strategic operations and decisions.endprint

The Advantages of the Membership Model

The membership model is one of the better methods to help the corporation achieve the goal easier. The membership uses widely in the market industry is because it can bring the advantages to the corporations. Firstly， the membership can develop customers loyalty for the corporation. “…focuses on a customers repeat purchase behavior that is triggered by a marketers behaviors” （Hennig-Thurau， Gwinner & Gremler， 2002， p.2）. For example， the famous cosmetics store-Sephora， which also using the membership model to attract more sales volume. Although it is a non-paid membership， it still has earned high profit annually. Because it using the membership integration system. Every product what customers pay will be transferred to membership points which integrate to their accounts. When the membership points reach a certain point， the customers can enjoy many benefits， such as， have great discounts in the seasonal membership sales， free custom makeover， free two-day shipping and so on. Those of the benefits become incentives to attract its members to shopping frequently and they have a strong reason not to purchase the cosmetics products anywhere else. Moreover， the membership model also can help the corporations build a strong customer base. If the corporation can provide the low-priced， good quality products and some of the good privileges to their members， it will attract more and more customers， even can steal the customers from its competitors. Therefore， except above， the corporation should have a good and long relationship with its members if it want to go further. “…customer satisfaction further perpetuates customer voluntary participation in marketing” （Yong-Kei， Byung-Ho， Dong-Jin & Sunghyup， 2014）. In order to get more customers， the corporation should satisfied different groups of customers. For example， with a development of the society， more and more people are pursuing to have a high-quality life. That is why luxury private clubs exists in many residential communities. People only need to pay a high price membership fee a year， they can enjoy diversity luxury service in the club. That is， the residential community not only develops middle-class family， it also attract the upper-class people.

The Dynamics of Change

Change happens throughout life. All businesses must experience some aspects of change， including membership organizations. A good example is Blockbuster video. The use of streaming video separated its use of physical stores and outlets where members were served. Membership models had to adapt to change through time … in doing so， physical stores were replaced by streaming video sites. However， despite the changes in technology platforms， the underpinnings of the business model did not change. Blockbuster Video was an American video provider of home movie and game video rental service through the physical video rental stores. Blockbuster Video founded by David Cook in 1985， after he sold it to Waste Management Inc. in 1987， Blockbuster Video became the industry leader under Huizengas leadership. Blockbuster have had present over a dozen countries around the world， and it was using the membership model to run its business. Only the members can rent the videos from the stores， and they should gave back in required time or they should pay the penalty to the stores. Over past 20 years， Blockbuster was developing so well， however， after the streaming video sites invented， the business of video physical stores were became worse and worse. That is， Membership model had to adapt to change through time. “…the Internet and the World Wide Web， which are making electronic commerce much more accessible. They offer easily usable and low cost forms of electronic commerce” （Timmers， 1998， p. 3）. Because of the internet commerce will help the corporation save more cost and easily to maintain， the physical video stores were replaced by the streaming video sites， such as Hulu， Netflix， YouTube， etc. However， despite the changes in technology platforms， the basis of the business model did not change. Basically， a membership requirement persisted for customers to use the service. For instance， Hulu is an American online company which provide streaming video service which offer a selection of TV shows， movie， and other streaming media. People pay the monthly membership fee and they can watch over thousands of videos online. And Hulu offers a 30-Day free trial only for new subscribes after they purchased their first plan.endprint

Non-Profit Versions of the Member Model

The examples about Costco， Sams Club， and the video business were all examples about for-profit businesses. In those cases， using the membership model worked successfully to generate profitable revenues while being a part of the companys strategy. This use of the membership model strategically is not limited only to the world of for-profit and commercial companies and businesses. Instead， it is applicable to various types of charitable organizations. Commonly， member-based， non-profit organizations are found among religions who use members for spreading their messages and ideologies （Foss， 2007）. Basically， religious organizations who seek to grow and serve the needs of their localities are also appropriate places where the member model can be used （Foss， 2007）. By incorporating this type of member strategy， the religious organization can spread its ideology or message strategically across time and distance （Foss， 2007）.

Non-profit organizations also include charitable organizations. Two member-based organizations whose strategies rely upon membership prevalence for success are the Civil Air Patrol and the Coast Guard Auxiliary （Controvich & Gordon， 2004； Kroll， 2010）. The Civil Air Patrol is an auxiliary of the air force. The Coast Guard auxiliary is an auxiliary of the navy. The Civil Air Patrol is responsible for performing search and rescue missions and aerospace education whereas the Coast Guard auxiliary is responsible for water safety and search and rescue （Controvich & Gordon， 2004； Kroll， 2010）. In both of these cases， members are recruited to serve without any type of payment for their service. Instead， the members may incur the membership fees and any other additional charges that are applicable for requiring community services and generating public good within society via volunteerism. Basically， the membership model is spread via referral network or by some formal type of advertising.

In both cases， the use of the member model is necessary for ensuring that strategic goals and objectives of the military services are met. The Air Force uses the Civil Air Patrol for about 90% of inland search and rescue missions （Controvich & Gordon， 2004）. Similarly， the Coast Guard auxiliary is an essential component of water safety strategy and coastal patrol for the navy （Kroll， 2010）. So， it is essential for the member model to be used effectively and efficiently when implementing strategy.endprint

Conclusions & Recommendations

A membership model is used to compete in both the U.S. and overseas for many companies. In order to do so， membership models must accommodate various market segments. The membership model provides a basis for club-style retailers who sell bulk quantities of goods. This type of membership be spread out of oversea. Sams Club stores are a common example of this type of membership strategy. In general， people must buy in large quantities to gain the membership benefits. For example， someone who owns a restaurant business， and who must purchase large quantities of foodstuffs or materials， would find Sams clubs beneficial. Oppositely， Sams Club has grown its business through the use of the membership model by servicing the needs and wants of those whose purchases generally occur in bulk amounts.

The use of membership business models has proven effective both internationally and domestically. Its effectiveness crosses several product and service lines. Many corporations experimented and adapted member models within their business strategies. Because of its historical success， the member model is recommended as a viable resource through which market penetration may occur strategically. Among for-profit businesses， this is an important aspect of strategy – if growth does not occur， then stagnation might happen. In order to foster growth， for-profit organizations must use member models to ensure that new people or privileges are added to the organization whereby new markets may be served and exploited.

Another method using a membership model is the video store. The video member model saw good success until the use of streaming videos across the Internet. For example， Blockbuster stores were common sights across the nation， both in urban areas and small communities. After the introduction of the streaming video， physical stores were eventually phased out of existence in favor of video streaming memberships. Despite the change from a physical store to a virtual store， one thing remained a factor toward the strategic success of the company： membership base that obtained by its goods and services.

Although the majority of the companies looked at in this paper were all for-profit companies， the use of the member model also can be found in the non-profit world. A good example is the use of the member model for spreading religious ideologies and messages. Similarly， the membership model can be found among charitable organizations. Organizations like the Civil Air Patrol and the Coast Guard Auxiliary must successfully implement the membership model in order for their long-term strategies to be effective. In these cases， if the membership basis is unsuccessful， then the organizations may be unable to fulfill their respective strategic responsibilities. As a result， because they perform search and rescue operations， human lives could be lost if the membership model is hampered or unsuccessful.endprint

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