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Use the Freemium Model of Membership Marketing For Business Success
Today, we’re going to discuss “membership marketing”, and how it’s almost a requirement for a successful website. If you’re selling anything online, whether it’s ebooks, digital products or anything of that sort, then the membership system we discuss below can deliver those products in the most effective and profitable way.
Business Success Means Avoiding Churn and Increasing Revenue Per Customer.
To be a business success, you’ll need to avoid is customer churn (or “turnover”). If you get 100 new members, but 99 of them quit after 30 days, it’ll be hard for your business to survive. In a membership context, it’s the period of time someone will keep paying their membership fees. So while it’s vitally important to constantly acquire new customers, it’s just as important to maximize the revenue of each customer you already have. So what we’re talking about is the backend, and the marketing funnel you have in place.
With a subscription membership model – where you have a recurring billing system in place – the backend is the recurring fee itself. The issue becomes keeping people as members of your membership sites.
Let’s see examine how this plays out in the context of three popular business models:
Traditional Product Sales
Let’s first consider the traditional Internet marketing (publishing and sales) model, which is used by most online business owners. In this model, you create a product and a sales page, drive traffic to that page, and hope the traffic converts into sales. The average for that conversion rate is somewhere around 1% to 2%.
Assuming you have a $37 product at a 2% conversion rate, it means that for every hundred people you send to that page you’re going to sell two of those products at $37 ($74 total), and you’ll have a visitor value for each of those 100 people of $0.74.
Recurring Membership
The average conversion rate for a recurring membership site is often less than the traditional one product sale model; it’s generally 1% or less. So let’s now assume now that you’re going to charge $17 per month, rather than the original $37 product price point. But we start to encounter churn with monthly billing. In our experience, the average membership stick rate is between three and five months.
So for every 100 visitors, we’ll get one membership sale, and that customer can be expected to stick around for approximately four months. That means you’re going to generate $68 in revenue from that one signup (four x $17 = $68). That gives you an average visitor value of $0.68. When you use the membership model, you can also put backend offers in place. So once you already have a paid member, you can assume additional backend sales and commissions from that member – around $5 per month.
Now you have that one member, and they’re paid the $17 for the first month – will likely do so for about four months – and they’re also worth an additional $5 per month over that same period of time. So now you have $88 from that signup, and the average visitor value for the 100 visitors is $0.88.
Single-Payment Membership
The next structure is a paid membership with a single payment. Your conversion rate will increase because you’re asking people to make less of a commitment, and a membership generally has a higher perceived value than a simple product sale. You can expect a conversion rate of 2.5% to 3%.
Because there is less commitment, you can charge more still keep the conversion rate up. So let’s assume a one-time fee of $37 instead of that $17 recurring. Now your churn goes way down. The customers have already paid, so very few of them will actually terminate their membership. You’d be safe in calculating an average stay of 12 months.
So the calculation is as follows: You’re going to see a 3% conversion rate, and the total one-time fees are going to be 3 x $37 = $111. Factoring in the backend offers ($5 a month per paid member), and over 12 months you’re looking at $180 in backend sales and commissions, for total revenue of $291. This brings your visitor value up to $2.91.
But there’s an alternative model that blows all three of these out of the water when it comes to down to making money for you – the Freemium model.
The Freemium Model.
The Freemium model is basically a free membership with an upgrade offer. It works like this: you put a “free” offer in place on the front end of the site (in a later article we’ll discuss how to make this free offer not appear to be “free” – and why you’ll want to do so), and you’re likely to see a front end conversion rate around 35%.
If you then place a compelling offer on the backend, you’ll see a conversion rate between 5% to 10% on that offer. It’s often much higher, so let’s use 10% for our analysis.
This means that for every 100 visitors – you’re going to get 35 free members, and then a 10% conversion rate on these 35 members on the backend. So what you end up with on average is 31.5 free members and 3.5 paid members.
On your front end that’s 3.5 x $37 = $129.50. The paid member back-end value is $5 x 12 Months x 3.5 People = $210. The free member back-end value is $1.50 x 12 Months x 31.5 People = $567. Adding these amounts and you have $129.50 + $210 + $567 = $906.50, so your average visitor value is $9.06.
That’s a big difference from the more “traditional” models we discussed above (and more than 10 times higher the most common product sale model)!
Here we’ve opened the doors, we hope, for a lot of people to recognize that this Freemium model is a very profitable model.
Start Your Profits Today!
How To Make Money Online (yes, even if you’re a newbie)
Have you noticed how difficult it is to actually get any REAL information about how to make money online?
It’s a nightmare isn’t it? You start off buying up everything you come across – all promising your overnight riches but only to disappoint you and leave you out of pocket. Well it doesn’t have to be like that as Michael Cheney is about to explain in this interview.
Michael Cheney, one of the most-respected names in Internet marketing, has been online since 1995 and is the man behind the 6-Figure launches of AdSense Videos, 11 Days To List Profits and Michael’s Traffic Videos.
After receiving 1489 responses to a survey he put out to his list one big request came back from almost everyone;
“Give us something easy, step-by-step and proven to make money online that anyone can do!”
So that’s what he’s giving you in the new product Start Your Profits Today.
Q. Michael, thank you for taking time out of your busy schedule to talk with us today.
A. My pleasure – I know a lot of people out there want to get started making money online so it’s my job to get out and spread the word about how easy it is.
Q. So what do you see as being the main hurdles to newbies being able to make money on the internet? What is it that’s stopping them?
A. To be honest with you I think the main thing is information. There is just so much BAD information out there. Scams. Cons. Just bad information that is leading people astray and wasting their time and money. I mean you get onto the Internet and the first thing you see almost is these get-rich-quick schemes. It’s not your fault for seizing these so-called opportunities as they are presented so well. And believe me – I know there are thousands of you out there who have been taken for a ride by things like this. People on my list have been telling me this.
Q. Yes, you ran survey didn’t you to ask your list what they wanted? What sort of questions did you ask them and what did they say?
A. Well I asked how I could most help them. You know – I’ve been online since 1995 and make a lot of money online but I was keen to tap into their BIGGEST challenges and needs. So I asked them what sort of information they wanted to learn. What style of learning they preferred and how they wanted this information to be delivered. I was totally blown away by the responses – I got 1489 people completing the survey!
Q. So what did they say?
A. There some big common themes that kept coming up as I looked at the responses and all the comments. These were that people want something that is STEP BY STEP, something that is AFFORDABALE and something that takes you right FROM BEGINNING and doesn’t leave anything out. You can get really frustrated when you start investing in products that claim to make you money online only to find that leave out a massive piece of the jigsaw. Or they forget to mention that you need to buy X, Y and Z just to make their system work. And that’s where Start Your Profits Today is different.
Q. How do you mean exactly?
A. Well, for the first time – I take you, as a total newbie beginner, right through the entire process from beginning to end on making money online. You discover how to get your own website address, how to create your website and how to start bringing the money in by selling other people’s products. This is a distilled version of the best making-money techniques I have ever used in my 13 years’ online experience. This is quite simple the fastest, easiest and best way to make money online and I show you what to do every step of the way.
Q. Sounds great. So how do you take people through all these steps?
A. Simple – I have recorded short videos on-screen of me actually doing each of these steps so you just follow the simple success formula – WATCH. COPY. EARN. You cannot go wrong, even a child could do it. I’m serious!
Q.You’re right, it does sound really easy. So tell me, what are some of these steps that you go through in Start Your Profits Today?
A. You learn how to pinpoint the most profitable products to promote. You like that title?! I like to have snappy titles that inspire you to take action as it’s not all sexy make-money stuff right from the beginning. There are obviously crucial steps you need to take in preparation. You know – to get your website online, to get your website address and to add words and pictures to your website etc.
Q. So what exactly do you need if you’re a beginner starting out trying to make online? Are there some items you need to buy?
A. Great question – yes you do need to have a few essentials. You just can’t make money online without them. You’ll need your own website address and of course your own website. I show you where to get this and the best, cheapest place to go for this in Start Your Profits Today. Other than that you can do everything else pretty much for free.
Q. So you don’t need to buy lots of different things to get started online?
A. No not all. I’m a big believer in doing things that are free! I started out with nothing, working from my bedroom in a poxy one-bed bachelor apartment. Now I live in $800,000 house in the country. My point? When I started out if there was a free way to do something – I found it! And I’m still that way now so I uncover some of these insider money-saving secrets in the videos as well.
Q. So wrapping up then – who would you say would benefit from these videos? Do you need to have a basic level of knowledge on the internet to get started?
A. If you can turn on your computer you are good to go! Seriously! You’ll see that I take you by the hand and guide you through every step of the way. I hate jargon so you won’t see any of that and it’s all explained in simple English and you can go along and progress through to the money at your own pace.
Q. You really do seem to have created a product that every newbie is going to want! So I guess the big question is – how much money can they make using Start Your Profits Today?
A. Well this all really depends on your attitude. If you have a great attitude and you put in the time to go through the steps then there is honestly no limit. You could quite easily be bringing in a few hundred to a few thousand extra dollars a week once you are up and running. What you need to remember is that is exactly the same system that I use in my multi-million dollar business. It works for me, it works for thousands of other people and it will work for you too.
Q. That’s great Michael. Thank you again for your time today, I really appreciate you doing this interview for us. Well all that remains now is for anyone listening to this interview to get over to Start Your Profits Today and start your profits today!