The Membership Economy

The “Membership Economy” Defined

Netflix shows how subscription businesses differ from membership organizations. Netflix subscribers gain access to hundreds of movies and television shows, but a Netflix subscription means more than simple access. You can talk about shows with fellow users, you develop a feeling of loyalty about the company and you enjoy being part of the Netflix family. You share personal information with the company in exchange for this connection. Netflix harvests the data and creates personalized recommendations based on your past movie choices.

Any customer-centric firm that develops continuing, formal relationships with customers is a membership organization. Connecting fulfills a human need. The emerging membership economy includes YouTube, news sites like DIGG and Reddit, and photo-sharing sites such as Flickr and Pinterest. Existing businesses of all sizes can incorporate the principles of the membership economy. For example, a California salon offers subscription haircuts.

Mobile technology enables people to participate in membership firms using a range of digital devices, and the processing costs are low. Individuals react with these...