Last night, my wife and I laughed at the young woman in the Direct Buy TV spot who boasted that she “got this $1,400 rug for only $600!” What they don’t tell you in the ad is that joining Direct Buy costs over $16,000 (over the course of 10 years). Congratulations, sweetheart, you’re only $15,200 in the hole!
However, I’m not here to judge the Direct Buy model or its customers. I’ll let Consumer Reports do that (they’re not big fans). I’m more interested in the clever marketing strategy of locking in your customer with something more than just loyalty, or satisfaction or even delight. Direct Buy virtually guarantees that every purchase their members make for the next 10 years will be through them. And although they claim to have no “retail” mark-ups, you can bet there’s a little slice for them in every sale.
Same thing for Costco. They only charge $50, and by all accounts I’ve heard it’s totally worth it. Of course, there’s some psychology at work here: once you’ve paid for a membership, you are predisposed to think it was a good decision and pass that opinion on to your friends. But regardless, everyone that I know that uses Costco is very happy with the service. And when they go there for the things that are giant bargains, they also pick up stuff that’s only marginally cheaper than other places. So Costco still makes full margin on most stuff, and guarantees that their paid membership keeps coming back.
On to bars. In the 70s and 80s here in New Brunswick, the byzantine liquor laws in force at that time required any establishment that wanted to serve wine, beer AND spirits, without requiring people to dine, and stay open past midnight, to be a “club.” And as a “club” you had to have “members” and “member” was defined as someone who paid dues.
I kind of like that idea, even now that it’s not required by law anymore. If I could get people to buy memberships to my bar, they would be more likely to come to my place than somewhere else where they have no “special privileges.” I’d have to give some thought to the privileges, but maybe lower drink prices, special “Members Only” parties for the Super Bowl, dedicated beer steins, their name on a plaque, whatever.