I send money to Africa most months.
Our projects in Kenya — the school feeding programs, the permaculture gardens — need funds on the ground, and Remitly is how I get them there. I have been using them for years. Same app, same routine, barely a thought.
Then last week an offer popped up on my screen. Join their membership club. Pay a small monthly fee. Get preferred rates on every transfer.
I stopped and stared at it for a good while. Not as a customer. As an accountant.
Then I joined anyway.
Because something clever is going on here…
Loyalty Cards Just Grew Up
You know the loyalty card. Buy nine coffees, get the tenth free. Starbucks built a global empire partly on a rewards app that most of their customers open before they even leave the house.
The idea is old and it works. You are not out hunting strangers. You are getting the customers you already have to come back more often.
Regular readers will recognize this. It is Way #2 of the 4 Ways to Grow a Business — increase your transaction frequency. The number of times each customer buys from you.
Remember, sales are not one thing. Sales are three things:
Number of active customers x how often they buy x what they spend each time.
Transaction frequency sits right in the middle of that formula. And it is far cheaper to move than dragging new customers in from the cold marketplace.
Membership clubs are the next evolution of that old punch card. And they are a serious step up. Here is why…
“Wait. A Discount? Doesn’t That Defeat the Whole Purpose?”
That is the first thing most owners say to me.
You hand out a preferred rate. You make less per transaction. How on earth is that growth?
Fair question. Let us do the math, because the math is where this gets fun.
Say you distribute specialty food products. You have 800 active customers. The average order is $400, the average customer orders six times a year, and your gross margin is 30%.
So a typical customer is worth $2,400 in sales and $720 in gross margin per year.
Now you launch a club. Twenty-five dollars a month — $300 a year — for 8% off every order and free delivery.
Scenario one: nobody changes their behaviour at all.
Your member still orders six times. Still $2,400 of product.
- Sales after the 8% discount: $2,208
- Product cost (unchanged at 70% of $2,400): $1,680
- Gross margin: $528
- Plus the membership fee: $300
- Total: $828
Against $720 before. You are ahead by $108, and not one person changed a single habit.
Read that again. The fee covered the discount before the customer did anything differently.
Scenario two: they behave the way members actually behave.
Now they order nine times instead of six, because they are a member and they have already paid for the privilege.
- Sales after discount on $3,600 of product: $3,312
- Product cost: $2,520
- Gross margin: $792
- Plus the fee: $300
- Total: $1,092
That is $372 more gross margin per member per year. Sign up 150 of your 800 customers and you have just added roughly $55,000 to your bottom line without adding a single new customer.
Run your own numbers, of course. Mine are illustrative. But the shape of it holds up in most businesses I look at.
Three Things a Club Does That a Punch Card Never Could
One — they stop shopping you.
This is the big one and it never shows up on a financial statement.
The moment somebody pays a fee to be your member, they stop comparing you to your competitors. The comparing just quietly ends. They have already decided. Every visit to a competitor’s website now feels like a small betrayal of money they have already spent.
You have moved from being an option to being their supplier.
Two — the fee pool pays for the discounts.
Here is the quiet beauty of it. Not everybody uses their membership hard.
Some members will transact constantly and genuinely extract every dollar of that discount. Plenty of others will pay the fee and use it twice a year. Their fees fund the heavy users’ discounts. Spread across a few hundred or a few thousand members, the pool covers the giveaway.
Gyms have understood this for fifty years.
Three — they become a member.
Do not underestimate this one. People are wired to want to belong to something.
A discount is a transaction. A membership is an identity. One is about price, the other is about being on the inside. That is why the second one earns loyalty and the first one only ever rents it.
It Is Not Just Money Transfers
Another company I know offers a Premium Membership. Very small monthly fee, preferred rates per kilo on shipping. Exactly the same architecture as Remitly.
Their customers come back. They ship more. And the fee income across thousands of members quietly absorbs the discounts.
What This Could Look Like in Your Business
Here is where it gets interesting, because almost nobody in the small and mid-sized world is doing this yet.
A restaurant. A monthly fee gets members first call on reservations, a standing table on Fridays, invitations to tastings and winemaker dinners, and 10% off the bill. You have just converted occasional diners into regulars.
A professional services firm. Guaranteed response times. A quarterly strategy call. First access to new offerings. Priority in busy season. Response time alone is worth a fee to most clients, because waiting is the thing they hate most.
A trades business. An annual fee covers two maintenance visits, priority emergency dispatch, and preferred rates on parts and labour. HVAC companies who do this well never have an empty week in the shoulder seasons.
A retailer. Early access to new stock, a members-only evening twice a year, free alterations, preferred pricing.
A greenhouse grower. Members get first pick of the spring inventory before it hits the public, plus a per-flat rate.
You get the idea. Take your best customers, ask what they would pay to be treated better, and build the package around the answer.
Before You Launch, Do These Five Things
- Cost the perks out fully. Every one of them. If your response-time promise means paying somebody overtime, that is a real cost and it belongs in the model.
- Size the fee against the discount. This is the whole ballgame. Your fee has to cover the discount at your customers’ current frequency. If you offer 20% off for ten dollars a month, you have built a machine for destroying your own margin. Do the arithmetic before you print the brochure.
- Load up on perks that cost little and feel like a lot. Access. Priority. Early notice. Invitations. A named person who answers the phone. These are nearly free to give and enormously valuable to receive. Lean on them heavily and keep the price discount modest.
- Test small. Pick one segment, run it for ninety days, and see what actually happens. Do not roll it out to your whole customer base on a hunch.
- Measure the right thing. Not how many members you signed up. Measure transaction frequency per member, gross margin per member, and retention against your non-members. Vanity metrics will happily lie to you for a year.
One Warning
Be careful with your A clients.
Some of your very best customers buy from you because they trust you, not because of price. Price has never come up. Dangling a discount at them can cheapen a relationship you spent a decade building, and you will have handed away margin nobody was asking you for.
For those clients, build the club around access and service, not price. Let the discount do its work further down the ladder, where it will actually change behaviour.
In Closing
Any business with recurring, loyal, repeat customers is the envy of every business without them.
Membership clubs are one of the few tools I know of that let you buy that loyalty with your own customers’ money. Remitly figured it out. The shipping company figured it out. Almost nobody in the one-to-thirty-million range has even tried.
And me? I have not looked at another transfer service since the day I joined. Not once. I am fairly certain somebody out there beats their rate on any given Tuesday. I no longer care enough to check.
That is exactly what you are buying.
Build a package of goodies. Price it properly. Test it on a corner of your customer base.
Then tell me what happens.
Thanks kindly for reading…