What To Do With Your Membership Site When a Recession Looms

Lately it’s been hard to ignore the negative headlines in the news:

• Millions feel Financial Squeeze of Runaway Inflation
• U.S. is only days away from an ‘absolute explosion’ on inflation: Pollster Frank Luntz
• Yellen Says High Inflation Locked In for the Rest of 2022

All of these troubling headlines lead many people to wonder: are we headed towards a recession? And if so, what can I do about it?

What is a Recession and Why Might it be Bad?

Recession is a scary word, but all it really means is that the business cycle contracts and people spend less money. When there’s less money moving around the economy it likely means there’s less money for you and your business because everyone is saving.

This typically means you’ll have fewer new customers and your churn could increase as your customers start reducing their spending to only the essentials.

To be considered an official recession, there must be a reduction in economic growth for two consecutive quarters. So, we could already be in a recession but not officially know it until quarterly GDP growth is calculated.

How Long Could This Last?

According to Fidelity, “since World War II, recessions have become less harsh, lasting an average of 11.1 months… The longest post-WWII recession was the Great Recession, which began December 2007 and ended in June 2009, a total of 18 months.”

So realistically, if we are in a recession, we’ve already gone through a few months and it will likely only last another 6-9 months. It would be surprising to see it last longer than a year in this current state.

What Should Membership Site Owners Do to Weather the Storm?

You could use all of your cash to buy gold, bury it in the backyard, and put up signs saying “The End is Near!” But we believe that it’s best to be proactive in these situations.

Double down on your business, so that when the recession ends you’re in peak physical condition and can hit the ground running.

Here are three key strategies for membership site owners for the next few months:

1. Reduce expensive customer acquisition
2. Trim expenses to keep margins high
3. Focus on optimizing conversions & reducing churn

Reduce (Expensive) Customer Acquisition

Customer acquisition is how any business starts. You have to put up signs, run ads, go to events, and spread the word via friends and family that you’re open for business and are offering something valuable.

And when an economy is growing quickly it’s usually pretty cheap to acquire new customers. You could spend $100 on Facebook ads and you might get 5 customers who spend $500 on your site. Or you spend a work week writing 5 blog posts that bring in 10 customers a month every month.

When an economy slows down there’s less money and every transaction needs just a little more convincing. This means that your $100 in Facebook ads might only net you 3 customers. And they might buy a more bare bones product netting you $200. 

If you’re seeing those numbers yourself, it means that your customer acquisition costs are going up. And there’s a point where they don’t make sense; Some businesses are literally spending $100 in ads to generate $50 in revenue, for example.

Take Inventory of Your Customer Acquisition

Now is the time to find out where all of your customers come from and roughly how much it costs to get a customer from each channel.

For Paid Memberships Pro we get customers from:

• Search Engine Optimization / content marketing
• Facebook Ads
• Conferences (WordCamps)

But in the current economic cycle, neither Facebook Ads nor conferences make a lot of sense. However, right now is actually a good opportunity to plan out our content strategy for the coming months.

This is because organic SEO takes time. So, we’ll keep investing in search engine optimization & content marketing while we scale back other customer acquisition.

Keep Your Margins High

When recessions come it’s usually the low margin businesses that struggle the most. A low margin business is one where you don’t make a lot of profit from each sale. If you sell a cup of coffee for $1.00 and it costs $0.90 for supplies, ingredients, and labor you only make $0.10 per sale. 

If ingredients spoil, or you have to hire more help, or you need to buy a new chair for your coffee shop you lose all of your profit.

In a recessionary environment we want to keep our margins high. Higher margins mean that we can make mistakes (like spill the coffee beans all over the floor) and still be profitable.

Here are some ideas to keep your margins high:

• Audit your recurring costs: trim anything that you haven’t used for the past 12 months. I personally love survey software, but we won’t need it for the next few months so we paused our subscription.
• Narrow your business offerings. Instead of offering 10 different services, it might be a better idea to only offer 5 services during a recession. This reduces your labor costs and makes the choice easier for your readers
• Barter for services. If you want to cut costs, consider trading services with another professional. Maybe they want to be a part of your financial membership website and you would love a fresh design for your home page. There are always opportunities—even during a recession.

Focus on Conversion Rate & Churn

One of my favorite pieces of advice is to focus on increasing conversions and reducing churn because these things continue to be useful when the recession is over. If you spend the next 6-9 months making sure as many people as possible get through your checkout, when the recession finally ends and your traffic increases, you should see higher revenue than you do today.

Likewise, if you can prevent churn in the first place, you’ll keep more customers today as well as when the recession ends. Both of these strategies improve the health of your business overall, and they’re the most proactive things you can do for your business.

Improve Conversion Rates

If you want to improve conversion rates, there are a number of things you can do:

• Email your best customers for testimonials (social proof) and add them to your site & checkout process
• Write case studies. These show future customers that you’re the right solution for them. They can take a while to write, but once complete, you can use them forever.
• Map your customer journey – if you haven’t heard of the customer journey before it’s a visualization of how people go through your site. At Paid Memberships Pro we have hundreds of blog posts which lead to a few key articles—which lead to our pricing page. We’re going to spend the next few months adding Use Case pages to our funnel.

These should increase our conversion rates by giving our readers more confidence.

• Give your checkout page a tune up. A cumbersome design, confusing navigation, or unclear pricing can all dissuade potential customers. You want to remove as many barriers to conversion as possible.
• Strengthen or highlight your refund policy. It’s always a good idea to have a solid refund policy, but in recessionary environments it’s even more important. Everyone wants to stretch their dollars and putting in some sort of guarantee gives everyone more confidence.

Reduce Churn

Improving conversion rates and reducing churn are two sides of the same coin. They often accomplish the same goal. If you have a lot of customers, reducing churn can be more beneficial and if you’re a newer business then improving conversion rates can often be more beneficial.

Either way, any effort you put into reducing churn now will help your business grow after the recession.

• Make sure renewal emails are enabled in Paid Memberships Pro. Let people know the renewal is coming so they’re not surprised.
• Email users about any expired credit cards. Depending on your payment gateway, you can see the expiration date for a credit card. If the card expires before the next payment date, email the customer and ask them to update their billing information before the renewal fails.
• Reach out to disconnected members. If you have an active membership site where users are often talking, reach out to users who have been quiet or inactive. Sometimes, they just need a nudge in the right direction to become active members again. Now is a great time to foster your community. If someone is active, they’re far less likely to churn and discontinue your membership, so encourage users to participate and get as much value as possible from your membership site.
• Develop onboarding materials. If you have a lot of information on how to use your membership site, now might be the time to turn it into an email course. Instead of overwhelming users with all of your content at once, you can email them one article a day (or week). We developed an email onboarding series last year and we’re thinking about expanding it with a few extra emails to help our new users. These automations can last for years and years and help your customers, whether you have 1 or 100 new customers a month.
• Develop the best content. If you aren’t getting sales, it can be hard to motivate yourself to create. But it’s also a quieter time. A recession is like working Monday night at a restaurant. Since you’re there, you should polish silverware, put out the plates, and clean up. Eventually when the business is booming again (Friday night) you’ll be happy you did all of that prep work.
• Encourage Users to Upgrade. If your level structure allows it, consider emailing existing users that you think would benefit from a higher tier of membership. Explain the additional features of your higher priced plan and the value they will get from upgrading.

Come Out of the Recession Stronger Than You Went In

A recession isn’t an apocalypse. It’s something that happens from time to time and businesses have to adjust. One of the best things about membership sites is that we have less overhead and it’s easier to pivot.

The news stresses us all out. Put it out of your head, and take action on what you can do today. Trim your expenses, cut the expensive customer acquisition channels, improve your conversions, and decrease your churn.

If you can do all of these things, your business will be in incredible shape when the money starts flowing a little more freely in the economy again.

Recessions generally last 11 months and we’re probably 3-4 months into this one. You might have a few months of quiet before life gets busy again. Now is the time to invest in your business and come out stronger than you went in. 

Let’s do this together.