Memberships vs. Subscriptions: How to Choose the Best Model for Your Business Growth

The goal of every business is to have a constant flow of revenue and avoid the feast-or-famine cycle. Recurring revenue provides a strong foundation for your business, allowing you to focus on growth without the constant worry of income fluctuations.

There are two main models of recurring revenue: Memberships and Subscriptions.

In this blog post, we’ll break down the differences between the two and help you choose which best suits your business needs.

Defining Memberships and Subscriptions

What is a Membership?

Memberships are an access-based model where you provide valuable resources, tools, courses, and community support.

• Examples: Online communities, coaching programs.

What is a Subscription?

Subscriptions involve the regular delivery of products or services, often focused on convenience or ease. Unlike memberships, subscriptions typically don’t include community or personalized support.

• Examples: Subscription boxes, Netflix, Software as a Service (SaaS), Amazon Prime.

Key Differences Between Memberships and Subscriptions

Access vs. Delivery

• The membership model focuses on providing restricted access to valuable content and community support.

• The subscription model centers on the delivery of products or continuous access to a service.

Engagement and Community

• Community is the backbone of the membership model, fostering a group of people working towards a common goal. Peer support and exclusive content make memberships stand out. Satisfied and engaged members = loyal members, which directly impacts recurring revenue.

• Subscriptions are more transactional. You pay to access the service or product, and there’s no emphasis on community. The focus here is on improving the product to retain subscribers and grow revenue.

Pricing Models and Flexibility

Membership pricing is often tiered, providing flexibility and serving different audiences. Subscription pricing tends to be fixed, based on the value of the product or service, with fewer options for customization.

Customer Relationship and Retention

Memberships focus on building long-term relationships with loyal members through engagement and personalized support.

Subscriptions prioritize product or service delivery, often emphasizing the acquisition of new subscribers since the offering remains the same.

Benefits and Challenges of Memberships

Benefits:

• Memberships build loyal communities and create an audience that knows and trusts you.

• It’s easier to launch new products or services, providing greater potential for upsells and cross-sells.

• Tiered pricing offers flexibility and allows you to serve different audience levels.

Challenges:

• Recurring revenue in a membership model means continuous delivery of resources and value.

• It can be challenging to keep all members engaged and satisfied, especially in larger communities.

• Members often expect personalized support at lower rates, which can strain resources.

Benefits and Challenges of Subscriptions

Benefits:

• Subscription models offer recurring revenue with minimal effort once set up.

• Since this model focuses on product or service delivery, much of it can be automated.

• Customer support requirements are lower compared to memberships.

Challenges:

• Continuous updates to the product or service are needed to maintain customer interest.

• Without a community aspect, there’s less opportunity to build trust, leading to potentially higher churn rates.

Factors to Consider When Choosing Between Memberships and Subscriptions

Your Business Goals

• Do you value customer relationships or product development more? If long-term client relationships and community are essential to your business, membership is the way to go.

• If you prefer letting your product speak for itself without catering to individual needs, the subscription model may be a better fit.

Audience Preferences

• Does your audience need community support, or do they simply want access to your product or service?

• Memberships are often better suited for coaching, online courses, or when personalized engagement is key.

Content or Product Availability

• Recurring revenue requires ongoing work. Are you excited to create valuable resources and offer support regularly?

• If you’re more focused on the product itself and prefer less hand-holding, subscriptions might be more suitable.

Pricing Strategy

• Membership models usually work well at lower price points, but tiered pricing offers flexibility.

• Subscription pricing tends to be fixed, with less room for adjustment. Both models require finding a price that aligns with the value of your offering.

Scalability and Growth Potential

• How do you plan to scale your content or product? Will your membership model diversify into private coaching, or will your subscription model expand into multiple products?

• A clear growth plan will help determine which recurring revenue model is best for your business.

Examples

Membership Model:

• Example 1: A coaching business using membership to build a loyal community.

• Example 2: A membership program following an online course to retain engaged members, making it easier to upsell new offerings.

Subscription Model:

• Example 1: A subscription box company achieving rapid growth through consistent product delivery.

• Example 2: A SaaS company using subscriptions to build a stable revenue base.

Hybrid Models

What about combining both business models? For instance, if you have an online course, you could add a membership to keep users engaged after completing the course.

Read here to know why membership program after an online course is a smart move.

This guided membership program will help build loyalty and increase long-term value.

Later, as your customers’ needs evolve, you could introduce a SaaS product, creating a hybrid of both subscription and membership models.

This diversification could generate multiple streams of recurring income for your business.

Conclusion

Choosing between a membership or subscription model depends on your business goals, audience preferences, and how you want to grow.

If building a loyal community and offering continuous value excites you, a membership model is likely the best fit. We have done for you membership site template which will help you getting your membership program up and running in no time.

On the other hand, if you prefer focusing on delivering a product or service with minimal ongoing engagement, a subscription model may better suit your needs.

Ultimately, either model can provide a steady stream of recurring revenue and help your business grow. You could also explore a hybrid approach, combining the best of both worlds to diversify your income.

Whatever you choose, aligning your model with your long-term vision will set you up for success.