CLASSIFYING THE ELEMENTS OF MEMBERSHIP VALUE

What is it that gets people to join a Club?

It’s a question that we might just be one step closer to answering.

At the most fundamental level, when prospective members evaluate membership (or any product or service or that matter) they weigh its perceived value against the asking price.

Generally, most marketers focus much of their time and energy on managing the price side of that equation, as it often represents the path of least resistance.

Managing value or developing ways to deliver more of it can be a daunting task for any company. In an effort to help businesses address this, Bain & Company, a leading management consulting firm, recently attempted to classify the elements of value.

They identified 30 “elements of value”—fundamental attributes in their most essential and discrete forms.  These elements fall into four categories: functional (saving time, reducing cost), emotional (reducing anxiety, providing entertainment), life changing, and social impact.

Some elements do matter more than others. The most powerful forms of value live at the top of the pyramid – similar to Maslow’s hierarchy of needs. To be able to deliver on those higher-order value elements, a company must provide at least some of the functional elements required by a particular category.

Across all the industries Bain studied, perceived quality affects customer advocacy more than any other value element. Products and services must attain a certain minimum level, and no other elements can make up for a significant shortfall on quality.

After quality, the critical elements depend on the industry.

More is clearly better—although it’s obviously unrealistic to try to inject all 30 elements into a product or a service. Even a consumer powerhouse like Apple, one of the best performers Bain studied, scored high on only 11 of the 30 elements.

Moreover, companies that score high on emotional elements tend to have a higher NPS, on average, than companies that spike only on functional elements. Strong performance on multiple elements does indeed correlate closely with higher and sustained revenue growth. Companies that scored high on four or more elements had recent revenue growth four times greater than that of companies with only one high score.

Apple excels on 11 elements in the pyramid, several of them high up, which allows the company to charge premium prices. TOMS excels on four elements, and one of them is self-transcendence, because the company gives away one pair of shoes to needy people for every pair bought by a customer. This appeals to a select group of people who care about charitable giving.

Interestingly, most clubs address a number of the elements. By definition, a private club should reasonably be expected to address more value elements than most retailers to justify initiation fees and membership dues.

So, how should the private club industry use the Value Pyramid? 

Differentiation:

Use the elements of value to identify specific ways of making your products and services more distinctive.  Perhaps membership can be considered an heirloom investment for future generations?

Competitive Positioning:

A theme across Bain’s study was that winning companies understand how they stack up against competitors. Clubs should identify where members perceive your strengths and weaknesses and how you might stack up on those relative to competitors.  We have yet to run across a private club where membership didn’t provide access to some unique benefit for their competitive market.

Functionality:

Seek new ways to make Member interactions easier and more convenient. For example, allowing members to use the club address to sign for and hold UPS packages not only saves time and reduces risk, but also gets Members to the club more often.

Innovation:

Reveal ideas for new products and for elements to add to existing products. Managers might ask, for example: Can we add therapeutic value to our service?

Retention:

Most clubs tend to analyze usage by ranking member spending and tee sheet utilization, and throw Hail Mary’s to those at the bottom of the list. What if clubs surveyed members to learn which value elements are most important to them, and then develop products and services that deliver those elements.

Pricing:

Raising prices changes the value equation, so any discussion about raising prices should consider the addition of value elements.

The amount and nature of value in a particular product or service always lie in the eye of the beholder, of course. Yet universal building blocks of value do exist. These elements can help clubs start thinking about ways to creatively add value to their membership products, and services and thereby gain an edge with recruitment and retention (and maybe even help to justify a price increase).  

Read the complete article: https://hbr.org/2016/09/the-elements-of-value

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