How MeUndies is using a membership model to grow its business

After pivoting from a subscription model to a membership model last November, MeUndies is tapping customers’ insights to expand offline and beyond underwear.

In exchange for signing up for monthly order replenishments, MeUndies members pay a cheaper price for their underwear (for women, $14 a pair as opposed to $16), get first access to new products, also at a discount, as well as exclusive prints, which are released on a monthly basis. By providing a regular stream of data around conversion and return rates, as well as feedback, members have influenced the brand’s push to categories like bras and loungewear, and dictated limited-run prints, like a St. Patrick’s Day edition.

These member benefits are meant to build a more established relationship with customers than MeUndies’ previous subscription model. That approach required that all customers enroll in monthly replenishments. When all customers are subscribers, there’s no exclusive, second-tier level for regular customers to achieve.

“After they try us once, it unlocks a price saving. It becomes a no-brainer. Then we improve that relationship over time,” said MeUndies co-founder Jonathan Shokrian. “If something doesn’t fit right, or if we’re missing something, or if we’re on the right track, this customer will tell us.”

Shokrian said that members account for half of its customers, and spend three times as much overall as non-members. Members help drive word-of-mouth sales as well as use the #MeUndies tag on Instagram, where users have a chance to be featured on the brand’s page. MeUndies doesn’t share revenue figures, but claims to be profitable, with double-digit year-over-year growth for the last three years.

E-commerce brands like MeUndies, including Billie, Fabletics and Adore Me, use membership models to retain customers in a crowded market, and more confidently ensure that business will grow month-over-month, which is especially important for startup brands under watchful investor eyes. MeUndies has raised $10.4 million in four rounds of funding, most recently in 2015, to support growth.

“The closer [the] connection to the customer, the better, and that means the data relationship and the exchange of value between the brand and customer is at the center of the sustainability of growth,” said Chris Paradysz, the founder of the agency PMX. “The membership model is one that has a nice, tight grip on a relationship where both are accountable to the other.”

But as other brands flooded the space since MeUndies’ launch in 2011, Shokrian said the subscription mandate became too much of a barrier in the mission to acquire more customers. So, non-member customers can now either buy a single pair at full price or a mix-and-match pack of between three and 10 pairs for a discounted bundle price.

“The replenishment model is a great way to get people to come back, but if you’re making great product, you don’t need to force people into one way of buying,” he said. “People have different purchasing habits, and with the market getting more crowded, we realized we could have better customer relationships by opening up that subscription.”

Now MeUndies’ job is both to keep members engaged, by offering them perks and responding to the valuable feedback they give by checking in monthly, as well as sway non-member customers to enroll. Shokrian said that 40 percent of first-time customers choose to become members at checkout, but that the brand avoids pushing the membership too hard. MeUndies will instead use what it knows about how a customer landed on the site — whether it was a member referral, a click from a Facebook ad or a podcast ad code, for instance — to tailor its messaging and promotions around the option.

“We now focus on retention over acquisition. Digital-first brands are realizing that word of mouth is a huge driver of customer acquisition — it’s No. 2 for us. You can’t rely on paid media,” said Shokrian. “That game is tricky. You have to keep raising, and the payback times on customer acquisition are really tricky. When people are members, they want to tell their friends, and we’re seeing that customer do the heavy lifting for us.”

MeUndies’ store network will help, too. Shokrian said that after opening one store in L.A., the brand saw a 20 percent increase in online sales in the surrounding market. There, non-members can get a first-hand idea of what a membership would entail, and hear about all the perks from a store employee.

“The feeling of walking into the store and communicating with an employee brings the brand to life,” said Shokrian. “Being digital-only for all these years has limited us around how deep we can build that relationship.”

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