What: Capital venture company Andreessen Horowitz shares its views and recipes for success about paid memberships.

Why it is important: Tech companies are not the only ones to look for such programs, retailers such as Amazon and Costco increasingly understand that this is a great way to create additional flows of revenue while increasing customer loyalty and harvesting data.

China is considered to be much more advanced than the Western world when it comes to paid membership programs, essentially because its digital growth went directly through mobile phones without a PC and credit-card based development stage, which led Chinese players to experiment with monetization techniques which downplayed ads (not easily readable on smartphones).

Weibo, iQIYI (Chinese equivalent of Netflix), Bilibili and others see memberships as a method of customer engagement. For instance, in 2020, Weibo VIP membership accounted for $123m (7% of its revenue) but its members posted on Weibo for times more than on-VIP members.

Leading Chinese companies all have in common 4 traits when it comes to paid memberships:

-    A mixture of earned and paid perks: even though customers pay, they have only access to an initial baseline membership package, and can only get additional perks by increasing their usage through gamification. Earned perks are carrots to encourage specific behaviors and this helps to know more about the customers (Bilibili for instance has a 100-questions long questionnaire for customers willing to become VIP members).

-    An intricate levelling and points system, in order to give users a sense of progress. Weibo offers 7 levels of VIP membership, which gives access to various perks and allows the retailer to encourage specific behaviours.

-    A balance of flexing and functionality: membership level can be signalled by specific skins on social media, which encourages others to follow the example and try to achieve the same level of membership. But this is not all, some functionalities on Bilibili, such as posting comments for instance are only reserved to VIP members.

-    Partnerships with other companies, including in social media in order to provide a full ecosystem of functionalities to VIP members.

How to build a winning paid membership program