Membership vs. One-Off Courses – Which is the Better Business Model?
If you want to create an information product business, should you sell individual courses or create a membership site?
The answer seems simple: go for the membership! After all, who doesn't want to get paid every month, forever more?
In reality, things aren't quite that straight forward, though. Read on to find out what the best solution really is...
A membership is an alluring option, but my recommendation is to sell one-off online courses instead. Here's a summary of the 5 reasons why online courses beat information based membership sites:
Reason #1: Averages
Let's say you have a membership site and members pay $50/month for access. This should mean that every time a new member signs up, your income increases by $50/month, right?
The reality of any subscription business is that you'll have an average customer lifetime value (CLV). Some members will sign up and stick around for a long time. Some members will sign up and cancel immediately. On average, members will stick around for a limited, predictable number of billing cycles.
For the sake of simplicity, let's say your average is 4 billing cycles. That means every new member at the $50/month price tier is worth a total of $200 to your business.
Sometimes you'll earn more, sometimes you'll earn less. But on average, when a new member signs up, you get $200.
This isn't much different from selling an online course for a one-off price of $200, except that it takes longer to get the full amount.
Averages: The Bottom Line
Charging an ongoing subscription price doesn't translate to getting paid forever.
Reason #2: Content Churn
"Okay", I hear you say "but what if I improve my membership business to get members to stick around for longer? Then I'll earn more!"
An aspect of any subscription business is your retention rate and you can do various things to increase it. For an information based membership, this is more of a downside than an advantage, though.
To keep people sticking around, you can do things like:
- Create new, member-exclusive content on a regular basis.
- Host member-exclusive live events, group coaching calls etc.
- Provide new benefits to members on a regular basis.
- Create and cultivate a community of some kind, which is exclusive to members.
The problem is that all of these are a lot of work to maintain. What's worse, you have to do at least some of these things, otherwise there's no reason for members to continue paying.
The Secret to Long Term Subscriptions: Pain of Disconnect
Most successful subscription businesses we see online are SaaS (software as a service) businesses. They retain members not so much by continually adding value as by making it painful to quit the service.
Take an email marketing service, as an example: once you've started using it, you're tied in.
Sure, you can move to a different system anytime, but it's a pain in the arse to do so. Especially if you're a power user, it would probably cost you several days to migrate all your contacts, follow-up emails, automations, opt-in forms and so on. Who wants to deal with that?
So, even if your email marketing service doesn't continually add new features and new value for you, you're compelled to remain a member and keep paying, just to keep using the service as is.
Here's the crux of the matter: with an information based membership, we don't have the luxury of pain of disconnect.
Content Churn: The Bottom Line
You have to give members a reason to stick around, which means continuous, ongoing work. Because there's no real pain of disconnect, increasing retention in an information based membership business is difficult.
Reason #3: Scope
So, you've got your membership and you have to keep churning out new content and creating new value, to keep members sticking around. This creates another problem: your membership becomes this infinitely expanding monstrosity.
Counter-intuitively, this actually makes it less valuable, not more valuable.
With a one-off course, you have a much easier time controlling the scope of the product. You can make a course that is focused on a simple promise or outcome: "How to Get Six Pack Abs", "How to Create Engaging Videos" or "How to Resolve Back Pain".
These are simplified examples, but the principle is: you can make a course that aims to deliver one specific outcome and then streamline the course towards that goal. You can make a focused, valuable, simple course. A course that is finished once you made the final lesson.
Scope: The Bottom Line
A one-off course has a clearly defined, limited scope. You can neatly package a product, which makes it easier to create and easier to sell.
Reason #4: Resources
How do you split your time and resources between creating and improving your product and marketing your product?
This is a crucial question for any business owner to answer. If you focus only on your product, you may end up with an amazing offer... that no one knows about. And of course, all marketing and no product doesn't work, either.
If you're trapped in content churn for your information membership site, you're basically forced to spend a lot of time and resource on the product side. You have to keep producing value to retain members, after all.
And that means you have less time and resource available for marketing.
The worst case scenario is that you have a membership with few members. In this case, you aren't making a good amount of income and what you'd really need to do is focus more on marketing. But no matter how many or few members you have, you need to keep creating value for them, to justify an ongoing subscription price.
In other words: content churn in a membership model steals the resources you'd need to invest in marketing.
Resources: The Bottom Line
Selling one-off products allows you to limit the time you spend on product and then focus fully on marketing. Launching 2 or 3 courses in one year is likely going to lead to far better results than spending the same amount of time building out a single, recurring membership site.
Reason #5: Sticker Shock
When we analyzed some of the most successful information businesses on the web, we noticed that they all have something in common: they do limited launches of one-off courses at a high price.
Typically, they will have a course priced between $500 and $2,000, with enrollment only open for a limited period, once a year.
Why is this?
If you have experience selling something for a one off price vs. selling a subscription, the answer is obvious: subscription prices cause massive resistance.
It's generally easier to convince someone to give you a large amount of money, once, than it is to convince them to give you even a small amount of money, over and over again.
Let's go back to our customer lifetime value example: $50/month with an average retention of 4 months = $200 value per new member.
If you keep the product exactly the same, but you simply change the price from $50/month to $300 one time, you're likely to see equal or higher conversion rates as a result. That's how much of a difference that "/month" part of the price can make to your conversion rates.
Sticker Shock: The Bottom Line
People are motivated to avoid ongoing costs. In many cases, you can easily increase revenue in an information business by charging one large lump sum instead of a much smaller, recurring subscription cost.
When Does the Membership Model Work?
It's clear that my recommendation is to sell one-off courses. All things considered, it's an easier and faster way to build a profitable information business.
But that is not to say that subscription prices are never the right choice. There are a few cases in which the subscription model can be superior:
- For software and service businesses (all of the above applies to information businesses).
- For coaching and group coaching businesses - especially if your strength and passion is to work with people directly.
- For established personal brands and "fan" businesses - if people are happy to pay just to be part of your club or are fans who want to support what you do, even if they don't get anything directly in return (see Patreon).
What's your take? Have you tried launching an information membership? Has this post changed your mind on anything? Let me know by leaving a comment!