The Membership Model - Magazine Subscriptions and Your Business

Recently I was skimming a magazine when I landed on their Subscription Offer page. Now, I like marketing, and I like to save a penny (buck, cent, or whatever) wherever I can, so the percentages caught my eye. It also helped that they were in a big red font.

What interested me is there were three separate percentages. The first said 'up to 33%', the second said '25% off' and the last said something like 'save 15% off newsstand prices'.

Now, people have become used to getting a discount when they subscribe to a magazine, after all, it's guaranteed revenue, with only a postal delivery charge, etc. etc. but to have three separate savings bands seemed to be something of a novelty, so I dug deeper.

The 15% saving was for an order placed for delivery to the newsstand. The 25% saving was for an annual subscription, and the 33% saving was for a monthly subscription, paid quarterly, by Direct Debit.

(For those outside the UK, Direct Debit is a recurring instruction to the bank to make a payment to the recipient, at the value that the recipient determines. Like a Standing Order.)

It's that 33% level that interested me. The magazine publisher has made a decision to attract Direct Debit subscribers over those that choose to pay an annual subscription. Having just chosen not to re-subscribe to another magazine for 'value' reasons, I think I understand why.

The accepted wisdom is that the cost of acquisition is highest for the first customer. Put another way, the cost of getting the customer in the first place (i.e. the first sale) in many cases will obliterate the margins on that first sale.

The margin goes up each time they buy. So, repeat customers are valuable - which is why we go to extreme lengths to keep them happy. And also why the subscription model is so useful.

The Subscription Model

The trick is to increase individual customer value by subscription. This doesn't necessarily mean that the customer has to take out a subscription to a magazine - virtually everything, from cigars to wine, can be sold on a subscription basis.

Even if it's a free subscription - to a newsletter, for example - you get all the subscription benefits : regular contact, regular delivery, the possibility for back end sales, etc. Of course, you have to offer something of value. This remains true whether the content is free or paid for.

The paid subscription model is often considered to be more powerful in terms of customer value, because, having spent money with the business once, the customer is more likely to do so again. If they are free subscribers to a newsletter, it might take a larger investment (of time, if nothing else) before they will actually spend on a back-end purchase.

In Internet marketing terms,  the king of the subscription models is the Membership Site.

The Membership Site Model 


PayPal makes it easy (using recurring payments) to set up a membership site that generates direct income. The Internet makes it easy to deliver quality content; the simplest of all membership sites are just forums that customers have to pay to participate (fully) in.


The value comes from the subscriber base, with the site (business) owner often just steering the continuous stream of information to cover subjects that will be of use.


More sophisticated set-ups deliver blogs, videos, and other content through the membership site, in return for the, usually modest, monthly fee.


It's also a model that can be replicated in the bricks-and-clicks world too : offering an actual product, posted to the subscriber, alongside the online content. The two delivery methods can work hand in hand; mailing rebate coupons with the product, or providing rebate coupons in a free newsletter.


The opportunities for leveraging the subscription model are endless, and applicable to almost every start-up business, to build a solid repeat customer base.

Is My Business Idea Any Good?

Working out whether a business idea is any good is a tricky proposition. There’s the tried and tested ‘overnight test’ where the entrepreneur can leave the idea overnight and come back to it at a later date to see if it still holds water (and if they still want to do it!) However, as regular Dragon’s Den viewers will attest to, there are three key questions that often crop up.

Firstly, many investors, banks and Dragons included, will want to know the ‘margin’. This is the difference between the price of the product (usually wholesale) and the cost of manufacture; in the case of services, it is the difference between the cost or provision and price placed upon the service. In both cases, it is often quoted as a percentage, but it’s useful to know the actual numbers as well.

This becomes evident when the second question pops up : is the business idea scalable? In other words, are the processes, knowledge, and business activities replicable to the point that a decent return can be had, in terms of the margin? Does the business scale such that the return increases, at least in line, and preferably better than proportionally to the units sold?

A scalable business is attractive because it elevates the business from something that could make a living for one person working out of their own home to a profitable business that could make money for investors, employ staff, and perhaps go on to become a household brand. For example, if all the skill required to produce the product is non-transferable, it isn’t scalable, and therefore isn’t really an investable business.

Whether that matters or not will depend on the needs of the business owner – but even a scalable business needs to react to one final question : how big is the market? One person with a talent and a hungry market can make a living, but it needs a hungry market and a repeatable income generation process to become an investable business.

So, investors need all three to line up – the margin has to be interesting, the business scalable, and the market has to be big enough for it to scale into at those margins. Of course, there’s flexibility in there : higher margin products (houses) need a smaller market to generate the same amount of money as, say, biscuits.

Individuals such as human cannonballs who have a talent that is in demand, can only satisfy a finite market, and so are not examples of scalable businesses, even if they manage to build a profitable income for themselves. To become scalable, they would have to find a way to transfer that talent (stage schools take a similar approach) to others, and build a business that way.

If a business satisfies the margin, scalability and market criteria, and would be attractive to an investor, then it’s half-way to being a good idea, and certainly worth some additional thought!