Remarkable Retail

The Membership Economy with the World's Leading Expert on Subscription Pricing Robbie Kellman Baxter

Episode Summary

This week we welcome special guest Robbie Kellman Baxter, the world's leading expert on subscription pricing and membership models--and bestselling author--for a robust discussion of "The Membership Economy." We delve into what's been behind the phenomenal success of brands like Netflix and other disruptors that employ deep insight and the latest technology to build enduring long-term customer relationships. We also unpack how companies can re-imagine their business models to create a "forever promise" by leveraging commerce, content and community. Lastly, we discuss the cultural benefits of adopting a membership mindset. 

Episode Notes

This week we welcome special guest Robbie Kellman Baxter, the world's leading expert on subscription pricing and membership models--and bestselling author--for a robust discussion of "The Membership Economy." We delve into what's been behind the phenomenal success of brands like Netflix and other disruptors that employ deep insight and the latest technology to build enduring long-term customer relationships. We also unpack how companies can re-imagine their business models to create a "forever promise" by leveraging commerce, content and community. Lastly, we discuss the cultural benefits of adopting a membership mindset. 

But first we open up the episode with our quick takes on recent retail news that caught our attention, including Best Buy's new membership program, a potential spin-out of, Home Depot teaming up with Walmart for home deliveries, the somewhat shocking paucity of store closings and retail bankruptcies of late and the profitless prosperity revealed by Rent-the-Runway's IPO filing.

Robbie Kellman Baxter is the founder of Peninsula Strategies LLC, a management consulting firm, as well as the author of the bestselling The Membership Economy: Find Your Superusers, Master the Forever Transaction & Build Recurring Revenue.  Her new book The Forever Transaction: How to Build a Subscription Model So Compelling, Your Customers Will Never Want to Leave was released in April of this year. 

Robbie hosts a podcast as well, Subscription Stories: True Tales from the Trenches, which has featured subscription practitioners from Weight Watchers, HP, Bain & Co, and Impossible Foods, as well as numerous researchers and authors.

She coined the popular business term “Membership Economy", which is now being used by organizations and journalists around the country and beyond. 

Her clients have included large organizations like Netflix, the Wall Street Journal, and Microsoft, as well as dozens of smaller venture-backed companies. 

Over the course of her career, Robbie has worked in or consulted to clients in more than twenty industries. Before starting Peninsula Strategies in 2001, Robbie served as a New York City Urban Fellow, a consultant at Booz Allen & Hamilton, and a Silicon Valley product marketer.  

Robbie has been quoted or interviewed by dozens of media outlets, including CNN, NBC, and NPR. As a public speaker, Robbie has presented to thousands of people in corporations, associations, and universities. 

She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business. 

You can find more about Robbie on her website

Additional goodies for your audience are available here:


Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his       website.    The expanded and revised edition of his bestselling book  Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at  Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a      Forbes senior contributor and on       Twitter and       LinkedIn. You can also check out his speaker "sizzle" reel      here.

Michael LeBlanc  is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice.   He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career.  Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast,       The Voice of Retail, plus        Global E-Commerce Tech Talks  and       The Food Professor  with Dr. Sylvain Charlebois.  You can learn more about Michael       here  or on       LinkedIn. 

Episode Transcription

Michael LeBlanc  00:05

Welcome to the Remarkable Retail podcast Season 3, Episode 11. This one's going to 11, Steve. I'm Michael LeBlanc.

Steve Dennis  00:12

And I'm Steve Dennis.

Michael LeBlanc  00:13

You know, Steve, I wanted to start this episode by reminding our viewers and our listeners to subscribe, subscribe to our podcast on their favorite platform and smash that subscribe button on our YouTube channel. Now, why do you think I'm mentioning this right off the top? Well, of course, it's because of our very special guest, Robbie Kellman Baxter, the guru around subscriptions and membership programs. 

Steve Dennis  00:37

Yeah, it's a nice, it's a nice segue.

Michael LeBlanc  00:39

You brought, you brought her to my attention, you, she's in your book, right, she, you mentioned her and the whole subscription thing in your book, right, part of being remarkable, right? 

Steve Dennis  00:48

Yeah, I ran into her work, I think it was on, doing the second edition of the book. And in, actually in chapter, the chapter on Essential Number Seven, Memorable, where I go through a list of ways to be memorable. One of them is to build a membership or subscription model as well as the so-called Rundle, recurring revenue stream. So, as we talked about within the interview, it's not like clubs or membership or loyalty programs or subscriptions are new, but the way they have gone to a whole new level, I think both is thinking about it from a strategy standpoint and solving a broader set of customer issues, but, you know, the technology to do these things and I think by retailers appreciation of having that direct relationship with the customer, having the data and being able to leverage it. So yeah, it's just gotten to a, to a whole new level. So, I'm glad that, that I went down that rabbit hole a little bit in the book and then yeah, it's great to have her on.

Michael LeBlanc  01:51

We'll get to that interview right after, of course, we start with what's on your mind with the news. Let's start with this BBY, new membership program. What's going on there?

Steve Dennis  02:01

Well, this is also a nice coincidence, but BestBuy announced this week, a new membership program, which I think is called Total Tech, something like that. It's $199.95 a year. And there's a whole bundle of benefits. The one that kind of got the most play in the news is this special access to difficult to find products in light of the supply chain challenges is, as it gets more newsworthy, but there's a set of things free shipping and installation, free delivery, longer delivery, windows, special deals, a number of things that are really kind of layered, are a whole new layer of of things on top of some of the benefits they had tied to their credit card. And, it's pretty interesting, falls very much in terms of what we talked about in the interview, seemed to be pretty well received by, by the analyst community in Wall Street. So, they've been testing it, I guess for, for a while now they're rolling it out.

Michael LeBlanc  02:55

Speaking of interesting days, our friends at Macy's have been up to, have been up to some shenanigans, or at least some folks who have investments in Macy's have got, want them to do some shenanigans, what's going on there?

Steve Dennis  03:09

Yeah, so I feel like we may be getting this story every, every few weeks. So, this investment group is pressuring, encouraging, perhaps, is a nicer way of saying it, that Macy's should consider doing a Saks, spinning off its ecommerce business from its physical store business. You know, we've talked about this, I think, generally speaking, those in the financial community think this is genius, you know, take advantage of the growth in ecommerce take advantage of the really, kind of, crazy multiples, in my opinion, on dot com businesses and kind of, you know,

Michael LeBlanc  03:47

What could go wrong?

Steve Dennis  03:48

What could possibly go wrong, right, but it really fights against this whole narrative of the channels blurring and 

Michael LeBlanc  03:54


Steve Dennis  03:55

the recognition that customers shop in both channels. So, I think from a strategy standpoint, a business strategy, long term perspective, it's nuts. I don't get it at all, from financial markets, being opportunistic, and perhaps not having any better ideas on how to improve your business performance. This, this could happen, 

Michael LeBlanc  04:14

Yeah. Yeah, yeah, yeah.

Steve Dennis  04:14

but I don't think Macy has responded formally. But, I think, you know, given, given the pressures that are out there, and given stagnant performance, who knows, maybe they'll pursue it.

Michael LeBlanc  04:27

So, some other interesting news between some two big, big players Home Depot and Walmart, and if I get this right, Walmart is going to be doing deliveries for Home Depot. Do I have that right?

Steve Dennis  04:39

That's right. Walmart has this program called Go Local, which is basically a last mile delivery program and they have started to offer it as a service to other retailers. It's not, it's not clear how many other customers they have because the, there's a sense that there are a bunch of smaller retail, kind of, like, Fulfilled by Amazon concept, this is fulfilled by Walmart but with local delivery drivers, but Home Depot is as far as we know, the first big retailer to sign up for it. 

Steve Dennis  05:12

So, I think it's interesting for a couple reasons, one is, which is probably a whole other episode, I just feel like the same-day, next-day delivery wars just continue to escalate, and Amazon has been obviously, kind of, raising the stakes on this for a while.

Michael LeBlanc  05:30


Steve Dennis  05:31

And, they have hundreds of, I forget the exact number but, they have facilities that are positioned such that they can do same day next day delivery and they have, you know, their own vehicles and then these, these flex drivers that do delivery. So, a lot of retailers are being compelled, I guess, to figure out how to better do next-day / same-day delivery, but they don't have the infrastructure necessarily, so they've been mostly leveraging their stores and putting together these local delivery drivers, so. So, that's a strategy of Walmart's in general and it's interesting that Home Depot is signing up to do this instead of, kind of, building up their capacity. 

Steve Dennis  06:11

So, I think it's, you know, it's gonna be interesting to see both how much more activity happens on the part of these big retailers to develop these capabilities I also think it's just interesting to look at Walmart because they're starting to operate more as, kind of, a platform business with their marketplace and some of these other, other services no more and more to come there I suspect, but it's, it's a pretty interesting move.

Michael LeBlanc  06:37

Yeah, pretty interesting. So, here in Canada we had some unfortunate news with someone I know, Mark McEwen, had a grocery store and he had a restaurant business and he had, he went into protection, he went, he declared bankruptcy. Now, he got unlucky. One of his biggest locations where he put a lot of money into, for the store, Eataly opened up, down the block, and then it was in a, you know, it was in a big, you know, office building / the residential and, of course, all the office people disappeared. So, you know, just a victim of bad timing. Great. He's a great restaurateur and operator. Now, but what struck me was and, and it's something you mentioned, as well is we don't really, and really haven't heard a lot of retail bankruptcies, they've, kind of, you know, gone quiet. 

Steve Dennis  07:19


Michael LeBlanc  07:19

Is this the calm before the storm or what’s happening here?

Steve Dennis  07:22

Unfortunately, I suspect it is. So, there were quite a lot of retail bankruptcies even before the pandemic and then the first year of pandemi-, of the pandemic, we saw a pretty big uptick, both with big retailers like Penney's and Neiman Marcus and others as well as small ones. And kind of, the same, I guess, trend in store closings. But this interesting thing happened that instead of all the store closings that were predicted, I think we talked about a couple weeks ago, of course, I predicted 25,000 store closings last year, ended up being more like 8000, Green Street advisors predicted that half the malls, half the mall anchors in the US would close within two years. And so we've got about 12 weeks for hundreds of stores to be shuttered. So, I don't think that's very likely, 

Michael LeBlanc  08:14

I don't think that's on the horizon. Yeah. 

Steve Dennis  08:19

And then similarly, I think, you know, the pace of bankruptcies has really slowed, and it's surprises people. What I think is going on is two things. One, which is more, perhaps profound, her perspective is. I do think one of the things that has happened by virtue of COVID is more retailers have come to appreciate the role of stores in all their business, you know, the curbside pickup, the ship from store. So, I think there is, actually, where the narrative, as we've talked about before was well, online is growing and that really comes at the expense of physical retail, that is certainly sometimes true. But what's been true for a lot of retailers is that they actually need their physical stores to, to make digital work. So, I think there is this realization, and that's, kind of, you know, caused people to, to maybe tap on the brakes a little bit in terms of store closing.

Michael LeBlanc  09:10


Steve Dennis  09:10

the, the thing that I think is more of a near term phenomenon is both, the, at least in the US, the amount of government stimulus, that is propped up spending, which will eventually be less of an issue. And, then the second thing is, as we came into this year, a lot of the retailers that had terrible 2020s, we're starting to see improvement, and they were starting to, you know, some of this, again, is a function of the stimulus, some it's a function of pent-up demand. And some of it is like, you know, let's just see how this plays out. 

Steve Dennis  09:45

So, I think there was a lot of the people, you know, the banks or others that might have forced people or landlords might have forced people into protection, the ones that were already on the edge filed last year, the ones that are on the edge now I think it's more of a wait and see attitude. So I suspect when we get into, you know, we get, and you know, when the holidays are coming up back to school so it's a, it's not a great time to try to force close store closings or force bankruptcies but you get on the other side will be a little bit more clear who the winners and losers are will have, I think a more normal perspective of what the retail trends look like.

Michael LeBlanc  10:21

Let's talk about Rent the Runway. Another IPO I’m following, you know, Warby Parker, a bunch of other folks doing IPOs. What, what are your thoughts on Rent the Runway? 

Steve Dennis  10:30

Well, number one, I do think this, there's this IPO boom, companies rushing to the markets, I guess, because the valuations are so, so frothy, and my number of these businesses have certainly been around for a while, and some of their investors, I'm sure, looking to take some money off the table. So, Rent the Runway, which is one of the more, I guess, high profile disruptor brands, just filed. And, you know, I'm gonna be like a broken record on this, the thing that has really struck me with these IPOs is, these businesses are much smaller than I, then I assumed they were. Rent the Runway doesn't even do a couple 100 million dollars a year in total revenue, which is, you know, kind of, the sales of one really good department store. Like it's not, that's not an asset

Michael LeBlanc  11:25


Steve Dennis  11:25

business. The really interesting thing, they lost more money last year than they made in revenue, which is pretty impressive. I mean, a negative, whatever, 115% operating margin. Now, again, you know, the argument is always, you’ve got to make these investments and, certainly, compared to Warby Parker, you know, they were in the internet, they're in the fashion business, they're in much more of the spec, special event, where to work, kind of, clothing, so, 

Michael LeBlanc  11:59


Steve Dennis  12:00

they absolutely got, got hit hard by, by COVID. So, it's a little bit hard to extrapolate from their last, you know, five, six quarters of business, what this is going to look like, but

Michael LeBlanc  12:14


Steve Dennis  12:14

yeah, as a, as an investment. I mean, you wouldn't normally go to market with negative sales trajectory, basically, and mounting losses. And, our buddy, Dan McCarthy, maybe we put the link in the show notes. Our buddy, Dan McCarthy, took a look at some of their churn rates, and they didn't look super healthy. So, 

Michael LeBlanc  12:37


Steve Dennis  12:37

It is, it's interesting timing. For a business where the fundamentals either are very hard to understand, or they don't look good. So, it's just a parade of these. These brands go into market. I keep calling it profitless prosperity, right, like, you know, everybody's so excited, look at these great brands, and then you look under the covers, and it's like, well, they're basically lighting a big pile of cash on fire every month, so.

Michael LeBlanc  13:02

Well that's, that's a good wrap on the news of the week. Once again, reminder to anyone who's listening to go check us out on YouTube and anyone who's watching on YouTube, the extended version because we chat for a while, so the bonus content that's on YouTube. Be sure and subscribe and follow us on the podcast. 

Michael LeBlanc  13:21

All right, well, let's get on with the rest of the show. the back half of the show, we got Robbie Kellman Baxter, talking about subscriptions, and it's a wonderful interview. So, let's have a listen.

Steve Dennis  13:31

We are delighted to welcome Robbie Kellman Baxter to the podcast, we're going to talk about the membership economy and all things related to that. So, we're, it's a hot area. We're excited to have you here and talk about all that stuff, but before we dive in, we usually like to have our guests just give us a minute or two on their background and their professional journey and, you know, what led you to this moment, where you're on the podcast with us?

Robbie Kellman Baxter  13:57

Sure, my journey to the world of subscription and membership models started actually about 20 years ago, I was consulting to Netflix, and I fell in love with their business model. I had been both a strategy consultant and a product manager in Silicon Valley before hanging out my own shingle. And I was working with a pretty broad range of companies and when I saw Netflix's model I just fell in love with their, you know, the recurring revenue but also all the little pieces that I noticed that were just a little bit different from how other businesses were run. And I wanted to understand what made it work so well. 

Robbie Kellman Baxter  14:47

And as I was falling in love with their model. Other people were too and I started to get calls from people who would say, you know, hey we want to be the Netflix of, you know, pretty much fill in the blank. We want to be the Netflix of news, of music, you know, bicycle parts, dental pain management, anesthesia, you know, everybody had an idea for how to be like Netflix. 

Robbie Kellman Baxter  15:11

And I started to try to put words and frameworks around what does it mean to be like Netflix and what is it that they're doing that is replicable, and also, what are they doing that is unique to them that you shouldn't copy, unless you are Netflix. And that was really the beginning of my journey of writing and thinking about and researching what I've come to call the membership economy, this this massive transformation as pretty much every industry is moving, you know, towards a model of optimizing around a long-term relationship with the customer, where they treat that customer in the way that they treat a long standing member.

Steve Dennis  15:56

And, I guess, it was what, 2015, when your first book came out, entitled, The Membership Economy, so, it's, it sounds like the Netflix experience was the thing that really propelled you. How else did you pull together the ideas for the book? We're always, when we have authors on and being an author myself, we're always a little interested in, kind of, how you, how you came up with those ideas into, into a form of a book.

Robbie Kellman Baxter  16:24

Yeah, it was a long time coming. Actually, I'm a very methodical and careful person. And I have notes for The Membership Economy that went back, you know, more than 10 years prior. So, 2004, I started putting together notes for this book that was going to be about what, what are these companies that I've been working with, what do they have in common, what are the frameworks that others could apply, why is this so magical, what are what are the shared attributes, and, you know, after Netflix, I worked with a bunch of companies, including Intuit's Pay Cycle, I worked with Oracle, when they were launching some of their SaaS businesses. I worked with Survey Monkey and its predecessor, Zoomerang and with each one of those clients, I got a little more clear on, kind of, what were these elements, and I wrote articles and I made notes. 

Robbie Kellman Baxter  17:16

But, really, the book came out of a lot of time in the trenches, working, kind of, shoulder to shoulder with companies that were trying to justify subscription pricing by building long term relationships, trusted relationships, preference with, with their customers, I ended up writing the book, almost as a one pound business card to explain, right to explain to people, my weird way of looking at everything through the lens of membership, and why I thought it was so powerful. And my thought was, if somebody is thinking about working with me, they can look through the book, and then they can either say, this is crazy, or this is really, right, this is crazy or, you know, which a lot of people at the beginning they did not get it, or

Michael LeBlanc  18:06

At least they bought the book, right, so that's the good part, at least they're looking through the book and deciding you're crazy.

Robbie Kellman Baxter  18:11

I mean, you're an author. So, you understand this, you know, I was not, they were not buying the book, I was giving them the book, my initial plan was to give the book away. Truly, as a one-pound business card, like, oh, you want to know more about me, here's 288 pages about me and if you find any of those pages interesting, give me a call. And, if you don't find them interesting, then you probably don't want to talk business with me.

Steve Dennis  18:36

Separates out the riff raff, pretty quickly. 

Michael LeBlanc  18:40

I love that, a one pound business card. And, you know, listen, you know, you've been thinking about this economy, as you put it, this ecosystem for, like 10 years subscriptions have been around for a long-time, one-way shape or another, you know, Columbia house records or, you know, some way, shape, or form that people can subscribe to something. And, you know, whether it's a loyalty program or clubs or whatever, and get things in the mail. It's funny, it's, kind of, had a renaissance back and forth, like many kinds of things do but, but what's changed from how things have evolved is at this intersection of technology that has enabled it, is it consumer behavior, what, what is it that sets this framework in your mind for the modern subscription economy?

Robbie Kellman Baxter  19:24

Yeah, I think, I think you're right, I think it's well, first of all, you're right that subscriptions have been around forever. Charles Dickens published his books on a subscription model where, you know, paid monthly to get installments of his novels. So, subscriptions have been around for a long time, but I think, in the last, let's say, 15 years or so, technology has extended the infrastructure that enables trusted relationships, ongoing relationships, the ability to pay somebody on an ongoing basis directly from your credit card, directly from your bank account. The ability to track a consumer's behavior through their, you know, their digital profile, the ability to aggregate data to serve data at very low costs. All of those technology advancements, kind of, created a painter's palette for new business model design. And I think organizations are always trying, or the good ones are always trying to create business models that better align with the desired impact from the customer, right? 

Robbie Kellman Baxter  20:32

So, I buy a car, maybe I buy a car, I get a bundle of benefits, right. I, I, I get this kind of car. So, let's say I buy a minivan. So, I have the ability to carry a lot of people and a lot of stuff. It's not very cool, right. It's, it takes up a lot of space. I am responsible for maintaining it, I am responsible for storing it, I can trick it out however I want, I can paint the sides, I can raise it or lower it. That's the bundle of benefits and costs, I have to pay all the money outright, in two years that will no longer be a new car. 

Robbie Kellman Baxter  21:08

If you unbundle that, you know, different consumers might want different combinations of benefits, you might say, I just want to get to work and home every day. And I don't need to carry anything, and I don't need to transport passengers and I don't have any place to park, you have a different need or you might say, you know what, during the week, I want to drive the minivan or the SUV, but on the weekend, I like driving a sports car. So, Porsche came up with their Porsche drive subscription, where you have access to a bunch of different cars in a fleet. So, I think that this is all about organizations rethinking their business model and trying to solve the ongoing issue. I want access to a bundle of benefits without maybe the burdens of, of ownership.

Michael LeBlanc  21:57

Amazon's, you know, early example is where they had that one touch button could just go away, because it just felt like there was even that was that even too much, too much work for the consumer, to press a button, how do these things come together in your mind that, that, the experience, the reduction of the friction and then this, this customization like, do they, is there a meeting place for those two things?

Robbie Kellman Baxter  22:18

Yeah, I think, absolutely. The way I think about it is an organization that wants an ongoing relationship with a customer, regardless of industry is making a promise to that customer, as long as you have this goal, or as long as you have this ongoing problem to solve, we will do whatever we can to solve it in the most efficient way possible in exchange for your loyalty, in exchange for you coming to us first preferring us at every turn, or maybe even paying us on a regular cadence.

Robbie Kellman Baxter  22:51

You have the opportunity as the vendor, as the, as the organization, to say, what other value can we lay in, right. One thing is, certainly we can send it to her on a regular cadence, so she never runs out, we can also, maybe, customize the duration or the frequency, we could even customize the different items in the package, we could even customi-, customize the formula, we could customize, we could provide her guidance, you know, so I think about commerce, content, and community as three areas, three levers for layering in value. 

Robbie Kellman Baxter  23:25

So, you could, you know, just on the commerce one alone, the customization is infinite. But, then you can also layer on access to other people who are trying to have good skin, experts who can help me make my skin better and community and content, write articles and videos and how to, and what we're seeing is organizations that focus on a forever promise and then layer in benefits across categories that are, that's, you know, quite unusual. Historically, you know, we have content, and we have physical product. And we're connecting you with other people who love those products as much as you do community.

Michael LeBlanc  24:00

We took a 2 by 4 to it, we just said we're going to, we're going to guarantee you the price, and no price increases. And we found that, in the early days, accelerated adoption. In other words, the price you buy it in 2019 will be the price we sell it to you in 2022. And that seemed to be a pretty interesting value equation as well. Do you see any of that happening or is it?

Robbie Kellman Baxter  24:25

Yeah, cost certainty is a very, you know, when I think about all the benefits that subscriptions offer, you know, efficiency and cost certainty are very often the, what I would call the acquisition benefits the reason people sign up and in fact, with Netflix, that first company that I really worked with on this model, you know, I think of their forever promise as being a large selection of high quality professionally created video content delivered in the most efficient way possible, with cost certainty and so, you know, 15 years ago, most efficient way possible was DVDs in your mailbox today, it's streaming to your phone and everywhere else. And, it used to be, you know, the big selection of content used to be content from other people and today, it's their own content, in the no late fees in the monthly, you know, they only do monthly, right, you can't do an annual subscription to Netflix, and you can always cancel, because that's really important to them. Those are, they're, I think still, they're three core, core elements of their promise.

Steve Dennis  25:31

One of the things that I think is really interesting about some of your work, and it really made me revisit some things that I guess I've come to believe is, you know, on the one hand, well we talked about earlier, like, you know, subscriptions are not new, loyalty programs are not new. But certainly technology has allowed many things to be possible that just weren't even conceived ever possible a bunch of years ago. 

Steve Dennis  25:55

But, some of these ideas around, like, it's pretty much marketing a one on one that retention, you know, trying to, you know, earn back your acquisition cost retaining customers lifetime value, like that's a fairly old idea, this idea of trying to understand customers at a deeper, deeper level, you know, not an old idea, but I still see a lot of companies really get too focused on or unable to get to that deeper level of what customer problem they're trying to solve, you know, sort of like the customer jobs to be done or solution orientation, bundling, unbundling, all that kind of stuff, but also at the same time not really understand the consumer psychology very well. 

Steve Dennis  26:35

And, one of the things you talked about, I can't remember if it's in the membership economy or the forever transaction, your more recent book is is this idea about the desire for customers to belong to something and as I recall, and correct me if I'm wrong, you that's a little bit where I think you make the distinction between membership and, and, kind of, the traditional subscription model. So, with that long winded question, I don't know if you understand what I was. I guess, I'm trying, you know, trying to get to how do, you know, what do brands need to do to not only understand the potential of technology, but to understand really, how do you become more customer centric, how you do, you know, deliver sort of a higher order set of customer benefits not just getting something off your to do list?

Robbie Kellman Baxter  27:15

Yeah, for me, when I incur, you know, when I, when I was writing, especially the first book, The Membership Economy, I was really trying to think about why membership, why not subscription, and what distinguishes a membership economy company. And, what I came to was that subscription pricing is somethi-, it's a tactic and you earn the right to charge with subscription pricing by making an ongoing promise to your customer and treating them like a member, treating them like somebody who belongs, who's not going anywhere, who maybe has your home phone number, you know, how do you design a business if you know that that person is going to be around to give you feedback and you're depending on them to, to be your, you know, primary customer primary business driver. 

Robbie Kellman Baxter  28:06

So, what I what I tell organizations is you need to have a member mindset culture. A membership mindset where you treat your customers the way you would treat them if they were members. And, that once you do that, it you start to see everything through that lens and you say oh wow, that means that we really need to change how we onboard our new members it changes how we build out our products it, it changes what we sell, what the array is, what the assortment is, what kind of services we provide around it, how we charge. One decision that you might make is when you have that relationships and we're going to charge as a subscription, but you don't have to have subscription pricing to have that that mindset that that way of thinking and feeling and treating the customer

Steve Dennis  28:53

And, what would you say are some of the barriers, well, maybe two sides of the coin, you know, which companies do you think have really others than some we've talked about already have have really embraced this this notion and made it part of their business model that perhaps some of our listeners will, will be familiar with and then I guess the flip side of that is what, what are the barriers to making this happen when you, when you get companies that are interested in it, but for whatever reason can't pull it off?

Robbie Kellman Baxter  29:18

Yeah, I mean, there's so many good examples now because so many companies are doing such innovative things but, you know, the biggest, you know, big ones I would say, you know, one of them is Amazon, with Amazon Prime, which is, you know, some would say a loyalty program, a premium loyalty program. 

Robbie Kellman Baxter  29:34

But, if you take a step back and say what's their promise there their promise is, we're going to have everything you need in a really safe way great assortment and, kind of, security and confidence, right, and you don't want to get your returns, if you wanna get your money back all of that you feel secure there. And they, with, with Amazon Prime, you know, they've layered in more and more benefits to better deliver on their, their goal, which is the easiest way to buy, right. They, they say removing all friction from the buying process, which includes, you know, the things I need are at different stores, it takes too long to come, I don't like going to a store, you know, all these different reasons. And one by one, they're removing those barriers through this focus on membership. 

Robbie Kellman Baxter  30:21

And it's interesting because as a retailer, you know, when you're a retailer, almost by nature, your business is going to be episodic, non-predictable, transactional, right. When I need something I go in, and I need different things at different times. But they've really done a good job both with Amazon Prime and also with their Subscribe & Save offerings, to, you know, build ongoing relationships to say, what are the habits that my members wish that they could have with me and how do I enable that, how do I optimize around that. And what it's done is, sort of, disruption proof them, because consumers aren't looking for alternatives. When you, when you take off your consumer hat and put on your member hat, you stop looking for alternatives, and you say, this company is how I'm going to solve my problems. 

Robbie Kellman Baxter  31:06

Another great example that doesn't or didn't have subscriptions was Apple, in the hardware space, right. You people would say, oh, I'm an apple person. This is like 10, 15 years ago, right, and then they'd go into the store and say, I need a computer and Apple would say, oh, with that, with your needs, you should buy this one, you're like, okay, I'll buy that one. Then you come back, and you say, I need a phone, and they're like, okay, buy this one. If you're that kind of person, and then you come back and say, I need a printer. And they say, oh, we don't sell printers. You say, ‘Oh, well then what should I do Apple’, and Apple says you should buy this printer from this vendor and you say, okay, I'll do that and so even though it wasn't a subscription, they weren't using subscription pricing. They absolutely had a membership mindset, they were solving the whole problem, which is, how do I put together a technology footprint for my needs, that works.

Michael LeBlanc  31:58

I love this thread of the, of the mindset because as I look through your book, The Forever Transaction is a great book, by the way, we're going to put links to both of your books in, in the show notes, encourage everybody to pick it up. Way more than a business card, by the way, it's way more than a business card. 

Michael LeBlanc  32:14

You know, Amazon's interesting because, of course, you've got a subscription within a subscription, right, so you have a number of products that they will send to you directly. But, what I, what resonated the most with me with your book was about, okay, I want to get this mindset and culture. Can you talk to the barriers or the enablers, conversely, of creating that cultural impact, we've talked about technology, we've talked about process, let's start with the people part? So, you want to introduce this mindset into organization, what are the, what are the challenges, and where have you seen people really win, you know, just transforming their organization?

Robbie Kellman Baxter  32:51

Yeah, well, so the biggest the biggest challenges I think comes around. Well, the starting point is metrics. So, a lot of organizations are very, you know, very much quarterly capitalists, right. You know, this is the number, this is the number that we need by the end of March. And everybody, whatever we have to do, if we have to stick in some late fees, if we have to raise our prices a tiny bit, if we have to lower our prices, and fire sale everything to hit that aggregate number, who cares what it does to our relationships in the future, you know, let's just get it done this quarter.

Michael LeBlanc  33:24

Yeah, worry, that will, we, we’ll worry about that next quarter, kind of thinking, right? 


Robbie Kellman Baxter  33:27

Yeah, we'll worry about that next quarter after I've got my bonus honestly, and I've left and gone to a competitor. And, you know, that culture, you know, a lot of times when companies are moving to subscription pricing to a member mindset, they'll say we want the subscription revenue, but we also want to hit our quarterly numbers, you know, when we have to choose between the two of them, we're going to prefer hitting our quarterly number, I think that's a huge problem. Right, you have to be very focused on the long game, that you're having you're, what you're trying to do is build an ongoing relationship with an individual customer and optimize for lifetime value. 

Robbie Kellman Baxter  34:03

That changes a lot of things, it changes how you design your product, it changes support, instead of support being, wait till somebody calls with a problem and then try to get them off the phone as quickly as possible. Your customer success team is actually trying to ensure that they're getting the value they're entitled to. So, let's say that you have a subscription, like, a clothing rental, that's very popular right now, a subscription, rent, you know, clothing business, right, if, if the clothes you're getting aren't the right ones, or if you don't know how to accessorize them, you might not wear them and if you're not getting the value you're entitled to you might cancel. 

Robbie Kellman Baxter  34:38

So, suddenly becomes the responsibility of this retailer to proactively help you style your clothes. Right, and so, you suddenly need stylists on your team, in a way that you might not have before. To have them, you know, available on the phone or on the site to help, help customers and, you know, marketing in traditional businesses, marketing ends, pretty much at the moment of transaction. But, in a membership model, after that moment of transaction, you have to continue selling them on the product, so that they use it, so that they get the value they're entitled to and they recognize that value, because if they're not using it, and if they're not recognizing the value, they're going to cancel. So, every role, I could go through every single functional area, every role changes. When an organization moves to a member mindset and sometimes in an organization when they have both businesses running, there's a lot of conflict, you know, which, which hat am I supposed to be wearing?

Michael LeBlanc  35:36

Well, and I wanted to just talk about one, maybe, it’s a tactical thing that I, one thing we ran into is a lot of about our business as the retailer was introducing new. And, the concern was, or the worry that if you had so many consumers on a, so many of your customers on a subscription, getting the same thing over and over again, it eliminates the newness and the freshness of the brand. And they start to go somewhere else looking for newness and freshness, is that something that you've dealt with?

Robbie Kellman Baxter  36:03

Yeah. Yeah, well, it, you know, and the interesting thing is, it depends on what your promise is to your customers. So, if your customers are fashionistas, then your subscription, better have new stuff every month, right, because that's what they're coming to you for. They're saying, you know, what I want, is I always want to look current, and I always want to be surprised, right, that's one ideal customer, I am not that ideal customer, I want to look appropriate, and look my best, which might mean that I wear similar styles or I wear, you know, kind of, the same things. So, the promise to me, and the way you layered in value for my offer would be very different. 

Robbie Kellman Baxter  36:42

And, then for the example you gave earlier of somebody with, you know, makeup or skincare products, they might want, if there's a major advance in technology that creates a better product, that's going to have a better result on my face, I would like you to layer that in. But I don't want to be out there looking, I mean, most people don't want to be out there looking for what's the best product for my face, and taking a risk of getting, you know, a breakout or, you know, a rash as a result of trying something new. 

Robbie Kellman Baxter  37:13

So, I think that what it comes down to is knowing your customer. And then as you pointed out, staying relevant, if you're not delivering in the best way possible, the most efficient way possible. On their promise, yeah, they're gonna probably end up realizing there's better options out there or, or more likely, what's going to happen is they'll stay loyal because they took off their consumer hat, and they've got their membership hat, and they're not looking for alternatives. But new prospects are going to, kind of, peek in the windows of your organization and say, oh, what they're selling is tired, I'm going to go somewhere else.

Steve Dennis  37:45

Well, Robbie, I know we're coming up on time, and I've got about 27 other questions to ask you. But we're just gonna have to read both, both your books and hire Robbie to help you. 

Steve Dennis  37:54

But, I do have one question that, it's come up in different forums on the podcast a number of times, and it's really around whether newer brands that aren't held to traditional profit standards or typical metrics, whether they have an advantage, just in general creating this, kind of, amazing experience, I wouldn't, you know, think about in the context of this membership model, but no, a lot of the digitally native brands, you know, the argument could be made that, well, we've got so much money to spend, they can, kind of, over invest in product design, they can over invest in marketing, they can over invest in various aspects of the customer experience and then the legacy brands have a hard time keeping up with them, because you know, they've got to hit their, their quarterly numbers. 

Steve Dennis  38:38

So, I guess my question, particularly since you've been in the valley for a while is, do you think there is a fundamental advantage to a newer, a newer brand that can really invest in the long term or for the long term compared to a brand that's been around for a while, not only has to change their culture, but they have to change customers’ expectations, and they have to, well, they'll have to, but typically, the pressures that short term payback?

Robbie Kellman Baxter  39:01

Yeah, absolutely. And you asked earlier, what's driving this, this membership economy and I should have added that I think that this culture, the startup culture, this Silicon Valley culture, is really contributing to it because, you know, I talked about how, you know, subscriptions are a long game, and you're really focusing on long term relationships, which means in the short term, you might be losing a little bit of money as you build trust and get to know your customer. You know, having a deep-pocketed investor who has a seven-year time horizon before they need payback gives you a lot of cushion to invest in those long term relationships. And, if you're a company that, kind of, lives and dies by your quarterly numbers, it's very hard to compete against that. And actually, I've seen a lot of closely held family-owned businesses do very well in the membership and subscription base. Precisely because They think on a long-term horizon, and they don't have to answer to anonymous, quarterly oriented shareholders.

Steve Dennis  40:09

No. Well, it's a, I think you I think you talked about Clayton Christensen, the Innovators Dilemma in your book a little bit if I recall,

Robbie Kellman Baxter  40:15


Steve Dennis  40:15

but this is, I guess, another, another aspect of that. Well, as we find ourselves saying, much like the news anchors we want to be we're going to have to leave it there, but appreciate all the great ideas, a lot of things, I think, that are really, really interesting to contemplate, as folks think about their strategy as Michael said, we'll put the links to both of Robbie's books in the show notes, I encourage you to check those out, as well as other content that Robbie's got out there and I just want to thank you so much for making time to chat with us on the podcast.

Robbie Kellman Baxter  40:44

Oh, thank you both for having me. I'm a big fan.

Michael LeBlanc  40:48

If you like what you heard, please follow us on Apple, Spotify, Amazon Music or your favorite podcast platforms, so you can catch up with all our great interviews. Subscribe, so that just automatically shows up, tell your friends and also new insights and new episodes will show up every week. So, tell your friends because that will help us share the word the good the good wisdom now be sure and check out and be sure and check us out on our new YouTube channel. Not so new anymore, we've got a couple episodes up there and just look for Remarkable Retail.

Steve Dennis  41:19

And I'm Steve Dennis, you can check out more of my work at my website, or on Forbes or on Twitter. And please check out my second edition of my book, Remarkable Retail: How to Win and Keep Customers in the Age of Disruption. Available just about everywhere books are sold.

Michael LeBlanc  41:39

And I'm Michael LeBlanc Producer and Host of The Voice of Retail podcast and a bunch of other stuff. You can find me on LinkedIn, learn about me on 

Michael LeBlanc  41:48

All right, Steve, great episode. Look forward to chatting again next week. Be safe and have a great rest of your day.


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