There are companies that have been thinking creatively and aggressively about membership for a long time, even if they aren’t digital at their core. I include them because these Membership Economy organizations led the way and have stood the test of time, often competing in crowded, sophisticated, highly competitive markets.

It’s important to remember that membership is not a new idea, nor is it new for private-sector companies to benefit from membership models. They do some things extremely well—like building a strong brand and continuously reinventing services around the changing needs of members while staying true to the brand promise. But unlike companies using loyalty programs, the Membership Economy companies discussed in this chapter have fully embraced membership at their core.

We can learn from American Express and T-Mobile what mature Membership Economy businesses look like. We also will see how membership models can evolve gracefully when the organizations respond to the changing needs of their members.

American Express: Give Membership Its Privileges

Since 1958 when the company launched its first card, American Express and the idea of membership have been inextricably linked. Most American Express Card Members prefer to use their American Express card over others. They remember when they got their card and feel that it’s a higher-status card than others. This illustrates the enduring love members have for membership models because they fill powerful human drives—like needs for affiliation and prestige.

Since the beginning, when American Express launched its first travel charge card and priced it higher than the Diner’s Club card, it has always called customers “members,” and has focused on providing special treatment for them. According to Elizabeth Crosta, Vice President, Public Affairs at American Express, the idea of membership, and service to its members, is core to everything it does. The company calls its members Card Members and not cardholders for a reason, Crosta explained, “Because they are a Member of American Express and that Membership gives our customers access to premium services unmatched by others in the industry.”¹

The way membership has manifested itself in the brand has changed over time. The “Membership Has Its Privileges” (MHIP) campaign actually ran from only 1986–1991, although people still use the line, which sometimes connotes a high-end focus that is no longer the case. While American Express has continued to provide premium tiers of membership, it focused on becoming a more inclusive and welcoming brand that provides superior service to a broader range of customers, dramatically expanding the initial vision of the card. This doesn’t mean that it has changed who it approves for its cards. In fact, American Express is as prudent and responsible a lender as it has always been. Instead, it has created new products and services that appeal to new audiences that may not have thought American Express had a product for them. A great example of this is the launch of the Amex EveryDay Credit Card.

The Amex EveryDay Credit Card is focused on serving the needs of multitaskers—those balancing work and personal and family life—and there is no better example of a multitasker than a busy mother. While these customers would have been approved for an American Express card if they had applied, the members of this audience didn’t think the company had a card that was right for them. They thought American Express was only for people who traveled frequently or who made large purchases. American Express spoke to these customers, learned what they wanted in a card, and created one to specifically meet their needs.

At American Express, membership has always been about something different: From the first day you get a card, you are a member. Membership delivers a larger community and a company that will protect you and help you when you are in need. Membership for cardholders is rooted in services. American Express is a services company, not just a financial services company. As it develops new products, it continually develops new ways to serve its members. Today, the company has products for travel, for shopping locally, for cash back, and for other benefits for people with a range of lifestyles and preferences. Its business has changed over the years, but it’s always about putting customers first.

One of the biggest challenges American Express faces is how to communicate membership to someone who hasn’t yet experienced it. Loyalty is strong, but American Express needs to acquire new market segments to grow and stay relevant as a brand.

Toward this end, it has invested in new membership experiences. For example, American Express is the founding sponsor of “Small Business Saturday.” The day serves as the ceremonial kickoff to the holiday shopping season for small businesses, much like Black Friday is for larger national retailers. American Express launched the U.S.–based initiative in 2010 to help small businesses in the aftermath of the recent recession. Small business owners said that more than capital, they needed more customers to help rebuild their businesses. This program has since inspired a global movement with efforts in the United Kingdom, Canada, and Australia. Most importantly, this movement is much bigger than American Express and involves thousands of communities across the country, public officials like mayors and governors, as well as President Obama, who has shown his support by shopping with his children on Small Business Saturday. And, it gives American Express the opportunity to remind consumers about the important role that small businesses play in their local communities.

American Express is also investing in providing ongoing service and support to the underbanked—people who historically have not qualified for credit. It offers two products to attract this group to their community:

    Serve is a prepaid, reloadable card designed to provide an alternative banking solution to serve the 68 million underbanked in the United States. This segment has historically had to resort to payday loans and other economically disadvantageous options with high fees and low service. The card has a $1 monthly fee where permitted, which can be waived.

    Bluebird is a prepaid, reloadable account offered through Walmart. People can use Walmart cashiers as tellers and deposit money or withdraw it at the register. Bluebird members can write checks against the card as well. Bluebird charges a $2 fee for certain ATM transactions but does not have other fees common to prepaid cards.

American Express is an example of a membership brand that takes the formal ongoing commitment to all of its members seriously by continuously innovating and looking for new ways to serve.

Another giant company competing in a sophisticated, highly competitive market is T-Mobile. T-Mobile does not have the same long history as American Express, but it does play in a crowded, well-established market. It’s by differentiating itself from “business as usual” that T-Mobile has established itself as the most beloved of the often-vilified mobile carriers.

T-Mobile: Turn the Industry Upside Down

In 2011, value-priced carrier T-Mobile was testing pricing on data plans for tablet devices. Management already knew that its customers hated to be locked in by a contract, and, in fact, T-Mobile had been among the first of the carriers to offer month-to-month contracts. Managers knew they needed a program that would appeal to three key groups:

    “Connected Family” (just like it sounds—families)

    “Social Communicators” (20-somethings who use phones primarily for social purposes)

    “Aspiring Tech Enthusiasts” (people in their 20s and 30s who love gadgets but can’t afford them so they are later adopters than they would like to be)

Was there a way to simplify pricing to appeal to these groups? While crafting a brand positioning strategy for T-Mobile Broadband, Lindsay Pedersen of LCP Consulting interviewed people to determine directionally how people wanted to pay and how much data they wanted.

What she found was surprising. All of the 60 people she interviewed said they preferred an “all you can eat” package. On its surface, this behavior seems completely irrational. Yet, like the all-you-can-eat buffets in Las Vegas, T-Mobile consumers prefer the benefits of access, freedom from risk, and perceived bargain over the actual value of paying (less) for what they are likely to consume.

Pedersen recalls, “The resulting positioning I recommended—and that’s used to this day for T-Mobile Broadband—is ‘Freedom to connect richly from anywhere.’ Or, as the copywriters put it, ‘Take the Internet where life takes you.’ It was about freedom.”² For T-Mobile, this was an early step in what has become one of the most impressive turnarounds in recent history.

Today T-Mobile is transforming the wireless industry with its “uncarrier strategy.” It is removing the shackles of required loyalty—the dreaded two-year cell phone contract. In so doing, they are unleashing the kind of voluntary loyalty they believe will result in a true “forever transaction.”

This transformation started from the top, with the bold leadership of a new CEO, John Legere. When you think of wireless companies today and the advanced technology, it’s easy to forget that they grew out of archaic public utilities. It was from giant, monopolistic dinosaurs that the wireless companies learned how to treat their customers. All the major carriers knew their customers hated contracts, but T-Mobile was in a dire situation when Legere took over, and the board gave him the freedom to take some big risks.

Legere challenged his team members to think of themselves as the target customer.

I talked to Iniko Basilio, a T-Mobile marketing director, about what drove the pivot. He told me he thinks that the company moved its focus away from responding to competitors. Instead, it went back to basics and focused on its own customers. What was bothering them? “If you were an alien who arrived to earth, what would you think about the way the U.S. wireless industry treats customers?”³

T-Mobile’s offering did not align with its mission: “To help our customers build richer relationships and networks with the people and things that matter to them most.” Why require two-year contracts with each new device when customers wanted to upgrade hardware more frequently? Why force consumers to buy a subsidized phone and stick with it if they wanted a new one in six months? Then the marketing organization championed a really radical question: What if we get rid of contracts and don’t lock customers into one? After all, if customers are unhappy, they’ll find a way to leave you no matter what!

At the same time that T-Mobile abolished contracts it simplified the wireless shopping experience. When a customer walked into a T-Mobile retail store, there were too many options and pricing permutations. The complexity was creating friction and turning choosing into work. So the company made pricing simple: unlimited talk and text on all plans with the only difference based on what matters most to customers—the amount of high-speed data they needed.

Then T-Mobile got really creative. It turned its model upside down to make its members love the company. Employees were given the latitude to make the changes needed to truly delight members. Basilio remembers this time as very liberating for the employees, because they could finally focus on creating long-term relationships with customers, instead of constantly asking, “OMG, what’s Verizon doing? Let’s respond to that.”

These external changes in the member-company relationship are mirrored inside the company. T-Mobile embraces a model called “team together, team apart.” The idea is that you can debate something furiously within your team, and then align completely once the group makes a decision. Once you make a decision beyond your own department, you become a team together instead of a team apart.

Basilio concedes to the occasional “soul-crushing moments of disempowerment” because employees are so passionate and believe they have the best solution. But most of the time, he feels that the emphasis across the organization is to identify the pain points that matter most to customers and then address them with relevant solutions. It’s the ideal environment for a customer-centric marketer. What he loves about the culture is a focus on the right thing, members, and the fact that people from leadership on down are passionate about understanding the pain points of their members. “We’re not finding a cure for cancer, but we are humbly making an impact on something that matters to our customers. Their problems are our problems.”

Not everything has changed at T-Mobile. It’s still data-driven and analytical. It still does a lot of white-boarding—standing around a white board and charting goals and processes. But now it’s swinging for the cheap seats instead of hoping for a walk. Sometimes the most successful strategies are not best from a short-term business case perspective. Throughout the organization, now people are encouraged to take calculated risks and think about the big picture.

Different mobile customers have very different needs. Small business owners, families, people who just need a single line, gamers, travelers—the mobile phone carriers have hundreds of niche markets to reach. So carriers get knocked for not being responsive, even though they are highly fractured. Most carriers have focused on acquisition using a simple if commoditized message: price. Retention therefore becomes much, much harder—since without focus on attracting the right customers, the acquisition funnel can become more of a sieve.

T-Mobile tries to show its customers, from the moment of initial contact throughout the onboarding process, that the company is different. The company has implemented an outbound calling program in which the person who sold the service follows up with a phone call two weeks after the initial transaction. These calls don’t seem to bother customers, but they often lead to an additional visit to the store—either to set up a feature, troubleshoot, or even buy additional accessories or insurance. Not only is the customer happier since T-Mobile implemented the follow-up calls, but there is measurable revenue resulting from this postsale dialogue. The store has become a point for strengthening relationships beyond the initial transaction, and the employees have become customer success agents rather than order takers.

T-Mobile has over 50 million customers, but is still smaller than its three competitors.⁴ The mobile carrier business is saturated, big, and highly competitive. There’s hardly anyone over the age of 10 in the United States who doesn’t have a mobile phone. Effectively, the companies are only competing for each others’ churn by providing increasingly better experiences for specific market segments. T-Mobile eliminated contracts, yet its churn is decreasing. It has chosen to build a magnet instead of an electric fence, and the company is winning. Members are choosing to stay because of the experience, loyally paying their monthly subscription fees, even without a contract.

What We Can Learn from Traditional Membership Economy Companies

What must big corporations do to stay strong in the Membership Economy? They need to focus on the members—their needs, their frustrations, their satisfaction—rather than on corporate bureaucratic rules or competition. They need a clear brand promise versus “me too.” They need to have their members’ backs, like American Express. They need to focus on what members really want and be willing to take a different path from the competition, as T-Mobile did. By staying close to their members, both American Express and T-Mobile have continued to evolve their offerings, staying relevant and differentiating themselves from their formidable competition.

In the preceding chapter we considered loyalty programs through the examples of companies like Starbucks, United Airlines, and Caesars Entertainment. These companies have certain traits in common with blue-chip traditional Membership Economy companies like those profiled in this chapter. Both types of companies are competing in highly sophisticated, crowded markets. Both use data to really understand their customers, and they offer a deceptively simple value proposition, backed up by a lot of customization. A difference in their strategic response that leaps out at me is that the loyalty program companies haven’t really embraced membership—they’ve siloed it. Unlike the blue chips we discuss, they haven’t put the member relationship at the center of everything. They may be creating loyalty, but they are not creating the conditions for their customers to feel a true sense of membership.

Remember

    Even as the mission stays constant, the delivery needs to change.

    Keep measuring results and asking members for feedback.

    As you develop new products, be sure that you understand how they will serve members.

    Consider and invest in new membership experiences.

    Respond to member needs and concerns, not superficial competitive moves.

    Simplify pricing, especially at the moment of conversion.

    Make the members’ problems the organization’s problems—and then solve them.