The benefits & drawbacks of lifetime memberships for membership sites
Should your membership program offer a lifetime tier? Here's what you need to know about the pros and cons of providing lifetime memberships.
Signing up for a lifetime membership is like dotting the line for a new cell phone contract.
If it’s a good one, you’re connected to a world beyond yourself, and have endless bandwidth to play Bejeweled.
If it’s a less-than-awesome agreement, on the other hand, you end up trapped in the seventh circle of the fine print inferno, losing money and patience like a sieve.
Trying to escape it feels a lot like… well, like a cat trying to open a door.
It’s doable, but it’s not easy.
And it’s even trickier if you’re the one offering the lifetime memberships.
Fortunately, paired with the right membership software and a little insider knowledge about how to create a membership website, you can make sure lifetime memberships are the right fit for your members and your business.
Which is where this article come in today. We’ll uncover the pros and cons of offering lifetime memberships, so you know the best course of action to take, regardless if it’s your first rodeo or your tenth.
Let’s start on a positive note.
Pro: Sustainable audience
What’s the biggest hurdle to selling your first online course or digital download?
Finding someone to sell it to.
Unless you have an audience built through a lifetime membership program, that is. When your members sign up for life -- and anyone in a free membership program falls into this group de facto -- you have a sustainable, reliable customer base to sell to.
That audience is a huge benefit to offering lifetime memberships as part of your package.
After all, you can’t establish yourself as an industry leader unless you have people to follow you, and when your members have invested in you for the duration of your membership site, you have those followers to lean on for product launches.
It’s a lucrative lean, too.
89% of professional brand managers say an audience-first approach is more profitable than trying to make sales directly.
Plus, there’s also this to consider:
43% of consumers in the United States make more (and larger) purchases with businesses that they’re loyal to.
Having a devoted audience is part of the star-studded success behind Apple products, experts say. With a 91% loyalty score, the tech company’s newest products practically market themselves to their consumer base.
They don’t have to make a sell so much as make their customers aware of the upcoming releases, and lo and behold, every new event is heralded by hundreds of customers waiting in line -- no matter where that line is on the globe.
Memberships are such a popular tool to build audiences that they’re a cornerstone of professional content creators, as well.
Gary Henderson of DigitalMarketing.org elaborates in his advice to content marketers, “You should never rely too heavily on any third-party to distribute your content. Instead, work to build direct connections with your audience through email, membership sites, or in-person events.”
So Krishna Teja’s lifetime membership for his Complete Salesforce Platform & Lightning Experience Training?
It not only nets him a higher upfront commitment -- which we’ll talk a little more about in a minute -- it also gives him an audience to sell his future and current courses.
Which means if you chose your membership model to create a purchase-ready audience, a lifetime membership can definitely work in your favor.
Of course, no good thing is without its dark side, which brings us to the first con.
Con: Higher upfront commitment
Asking people to commit to your membership for a lifetime is easy if it’s free, but if you’re using it as a source of revenue, you have to charge more -- probably significantly more -- for it than your monthly or annual packages.
You also need to do more work to prove that you’re worth the increased price and people will get value from using your membership over a long period of time.
It’s a little like marriage, actually.
Getting someone to say yes to the dress or yup to the tux (patent pending on this turn of phrase) takes a lot more work than getting someone to agree to a first date.
Only 8% of first-time visitors land on your website with the intention of making a purchase.
So asking for a higher upfront commitment to an already tenuous visitor? It’s a gamble, and if you want it to pay off, you’re going to have to put in extra legwork to make your website more trustworthy.
Trust, research says, is the crux to making an uncertain prospect convert into a paying customer.
And when you ask for twice or three times the price of an annual membership, like you see the American Marketing Association (AMA) doing below, you’re putting that delicate trust to the test.
If you’re as well-known as the AMA, it’s a test you can afford to put your business against. If you’re not, however, it could cost you more than it earns.
Fortunately, when it does pay off, it gives you so many more opportunities to sell digital downloads, online courses, and any other product on your proverbial (or not so proverbial) shelves.
Pro: Upselling and cross-selling opportunities
We mentioned this briefly in the first pro, but it’s one worth examining more in-depth.
When you have lifetime members, you have a lifetime of opportunities to upsell and cross-sell. (Aren't familiar? Check out this guide for using upsells and cross-sells.)
After all, 59% of shoppers prefer to buy products from a business or brand they already rate as familiar.
And, it’s significantly cheaper to make those upsells to existing customers. It’s 68% more costly to make the same upsell to a first-time buyer than to someone who’s already bought from your business.
By the way, not sure what cross-selling and upselling mean? That’s understandable, they’re somewhat ambiguous terms if you’re not buzzing like a marketing beehive.
Here’s a good visual description of the difference:
Basically, cross-selling is when you sell more products in addition to the product that someone bought from you. For instance, if someone is purchasing your lifetime membership and you sell a digital download together with it as a package without any special deals, that’s a cross-sell.
Upselling is when the transaction is upgraded to the next tier, such as if you had two levels of lifetime membership -- silver and gold -- and convinced someone to move up to gold.
Alternatively, it can also be when someone buys another product from you in conjunction with your original product at a promotional rate.
And lifetime memberships -- or members who renew annually -- perform consistently better when it comes to value, cost to maintain, and net revenue (i.e., total profit after deductions) than new members.
Ergo, Blog Biz School’s renewed members are more likely to yield greater profits for Chantel Arnett in the long run than new members.
And since lifetime members are automatically renewed members, the benefit gets even stronger year-over-year when they’ve signed up for the long haul.
That’s cross-selling at its finest.
Here’s the awesome news:
It’s easier to cross-sell and upsell your products than ever on Podia. Let’s run through it real fast.
Pop over to your products dashboard.
Select a product that you want to upsell. In this case, I’ll go with the digital download “Your amazing ebook.”
Click the "Edit" button with pencil icon and then head over to your "Pricing" tab.
Scroll down until you see the sparkly new “Upsells” section.
Then, click on the purple “Add an upsell” button.
From here, you have the option to add another paid product (i.e., not one of your free offerings) at a discount or with no discount. You can set your price cuts by dollar amount or percentage.
Since holiday sales are always around the corner -- selling more on Black Friday and Cyber Monday tops just about every creator's to-do list -- and prices tend to fluctuate during sales periods, let’s go with a percentage for now, so it’s always a tempting deal.
Once you’re ready to go, just hit “save” and then…
Presto! Your product will now offer an automatic upsell whenever someone purchases it.
You’re going to need this feature if a lifetime membership is your only tier, too, because the next con hits hard.
Con: No recurring revenue
Membership websites have a lot of benefits, but the biggest is that they’re a source of recurring revenue -- unless they aren’t.
You might be making more revenue off of your upsells and cross-sells, but you won’t be reaping the rewards of recurring revenue when your members sign up for life.
And that could easily put your business into dangerous waters with cash flow.
82% of small businesses struggle because of cash flow issues. 29% of them just plain run out of cash to keep their ship from sinking.
It’s such a recurrent problem that 79% of businesses can’t pay themselves.
Losing recurring revenue, therefore, can put your business in dire straits quickly if you’re not able to make up the income loss through your other channels.
And not to keep being a downer, but consider the case of Adobe.
Long ago, Adobe’s goods were a one-time purchase. Their software products often ran for hundreds of dollars, which made them inaccessible to many of their most predominant demographics today.
I.e., students and entrepreneurs who couldn’t afford to front that kind of cash for lifetime ownership of the product.
Since switching to a Software-as-a-Service model, which is the same type of business that most membership websites fall into, their profits have climbed and continue to reach new heights with every quarter.
Would they still be experiencing that kind of insane growth if all of their products were still a one-time purchase? Probably not.
Not that many solopreneurs, students, or hobbyists can drop the kind of prices you see for products like Adobe Acrobat Pro 2017.
Put in more membership-specific terms, take a look at Becky Mollenkamp’s membership growth.
She’s counting on at least $10,000 annually from her membership program.
If those memberships were all lifetime, however, she’d only get to count that income once.
When the next year rolls around, she’d have to drum up new business and focus her efforts on customer acquisition. That’s less than ideal.
Cash flow problems plague small businesses on their best days, and when you take away the recurring revenue benefit of a membership website, you have to double up on your acquisition efforts to keep your business solvent.
But that’s not necessarily a closer, because lifetime members can actually make that effort easier.
Pro: Referral and affiliate marketing
What’s better than a lifetime of opportunities to sell?
A lifetime source of referrals and affiliates.
And that’s noteworthy because referred leads are significantly more valuable than leads from any other source. They convert 30% more of the time and have a 16% higher lifetime value.
It’s one of Jamie Keddie’s favorite features for a reason.
But even if you’re not using an affiliate program to incentivize referrals, you should still encourage members to tell their friends and family.
Verbal referrals convert better than any other form of referral. In fact, a good word on your behalf will convert 32% of the time, while lead forms and emails only convert at 19% and 17% respectively.
Referrals are so effective as a form of customer acquisition that they’ve launched a startup from zero to 100,000 emails in a single week.
Their secret sauce? Pretty basic, surprisingly.
They asked for people’s information -- data that you already have from your lifetime members -- and gave them prizes based on the amount of referrals they made.
You could copy the same strategy by creating premium digital downloads or exclusive mini-courses in exchange for referrals that convert.
Better yet, gamify it and create milestones. For every five referrals, reward members with a one-on-one coaching session, or for every ten referrals, provide them with access to one of your full-fledged online courses.
Gamification, which is the fancy term for creating game-like interactions in non-game contexts, has had some heavy impacts for businesses in multiple industries.
Check this out:
Combined with a referral program and a lifetime source of people willing to put in a good word for you, what could gamification do for your business?
A lot, I’d bet. Play to find out.
So, should you offer a lifetime membership?
We’ve covered three pros and two cons in this article, but they’re just the tip of the iceberg.
The question is less if you should offer a lifetime membership, and more if it should be the only thing you offer.
And if you want to board the so-called gravy train of passive income (which is not, in fact, passive at all), the answer is pretty clear:
For most businesses, especially those still getting their land legs, a lifetime membership should not be your only offering. You should set up multiple membership tiers in combination with a lifetime program to get the most pros and the least cons out of it.
Until death do our membership part
Lifetime commitments are daunting from both sides of the arrangement. If you’re considering adding a lifetime membership tier to your website, keep these pros and cons in mind:
- The hardest part of selling something is finding the person to sell it to, so if you need to build up a customer base, a lifetime membership is definitely a viable path.
- Unfortunately, you’ll also have to ask more out of that potential audience upfront if you want to make up for the loss of subscription income.
- On the upside, you can mitigate some of that revenue loss by maximizing on upselling and cross-selling opportunities. Lifetime customers are easier to sell to than new customers and consistently provide greater net revenue for businesses.
- Still, the fact that you will lose recurring revenue is something you have to consider carefully Your one-time purchase will help your immediate income, but it could hurt your cash flow in the long run -- a struggle that many small businesses never overcome.
- Not all hope is lost, however. While you’ll have to ramp up your customer acquisition efforts to circumvent the loss of recurring revenue, you’ll have an easier time of it thanks to your lifetime resource of referrals.
Is a lifetime membership right for every business? No. Should you offer only a lifetime membership? Definitely not. But can it be lucrative and beneficial for all involved if combined with other tiers?
Without a doubt.