As network effect grows, it tends to become a natural monopoly. Not anymore!
by Jonathan Quek, Managing Partner at Celebrus Advisory
The Membership Economy (And The Revolution of the Token Economy)
Imagine always having access to a new, clean car, without worrying about car maintenance, insurance, parking or paying taxes for it. Doesn’t sound bad right?
In our modern, networked world, this is the reality for an increasing number of people who simply want access to a product, rather than ownership of it. The result is that more and more companies are changing their business model from a customer-based to a membership oriented-one.
Transition from a Customer to a Member Mindset
Welcome to the world of the membership economy!
The advantage of the membership economy is that it allows us to bypass all the responsibilities and costs associated with ownership. But it’s a big shift. Because the traditional economy is built around the principle of ownership; when customers buy things under the standard system, they can do whatever they want with them.
Just think of car ownership. You can paint the car with an outrageous color or change the body kit. However, if the car breaks down, you have to fix it. You also have to pay taxes and secure a parking spot.
But what if you only need the car once or twice a week? Or even once or twice a day? Short term rent might be the best solution. That way, you will have access to a car when necessary, but not have to bear the responsibility to pay the cost of ownership.
The Rules of Business Have Changed
Fortunately, the internet makes this kind of access easier than ever before. And over the past few years, new web-powered companies have emerged, giving their customers convenient alternatives to ownership in almost every sector.
For instance, Malaysia’s very own unicorn, Grab, give us access to a fleet of cars with drivers whenever we need it. All we need to do is to book on its app and Grab pairs drivers with those who need a ride.
How Membership Economy Works
The membership-oriented business creates an ongoing relationship between the company, the users of the network; the customers and the providers.
Imagine the old ways of getting a driver. You engage a driver because you need to attend a major event. After the service is rendered and after you paid for it, the relationship is over.
The membership economy is different. When customers commit to a company, they get all the benefits and responsibilities of your ongoing relationship with the membership network.
I’m going to use Grab as a case study on the 5 major categories that creates a membership economy
- Digital Subscription:It cost nothing to set up an account with Grab. But online businesses like Netflix ask members to pay a recurring fee to access content, features or services.
- Online Communities: Grab create networks around shared goal – ride sharing. With this in mind, drivers and riders are allowed to review and rate each other. There is also a membership tier moving from normal member to silver to gold and platinum.
- Loyalty Programs: GrabRewards track and reward loyalty, by creating different tiers of benefits for frequent users.
- Referral Programs: Grab allows you to “Invite Friends” and reward you when you start referring your friends to be a part of the membership network.
- Complementary Services: As Grab track members spending and behavior, they start offering additional services like GrabDaily, GrabPay, and what I believe will be more to come.
The Membership-Oriented Business World
The membership economy is at the heart of the most valuable companies built in the last quarter century. Think Uber, Airbnb, Netflix, LinkedIn, Facebook, Amazon Prime, Dropbox, any many more.
However, as the network in the membership economy continues to grow, it moves towards a natural monopoly, allowing the owner of this membership network the pricing power to charge higher fees – understanding that even if members are unhappy and frustrated, they have few alternatives.
Think of how Grab acquired Uber in South East Asia and prices started to increase!
So yeah, at first, a membership-oriented business is highly beneficial to customers. But over time, not so much!
Up until now, most of the membership-oriented businesses are owned by private or public listed companies. However, as blockchain technology continues to mature, I believe that a well-designed decentralized tokenized membership network can change the game.
Blockchain is about to transform the nature of the businesses built around them.
Token Economy: Membership Economy on Blockchain
So imagine instead of the centralized company Grab, we create a distributed application – call it BlockGrab – a cooperative owned by it’s token holders. Let’s call it “BlockGrab token”.
Everyone who participates in the activity of the network, using and accruing tokens in the process, is effectively a network “owner”.
When someone wants a ride, BlockGrab software scans it’s blockchain for all the listing and filters the riders that meet his criteria. Without a centralized intermediary.
BlockGrab can also create it’s very own Token Economy.
- Payment: Instead of using the Malaysian Ringgit, you can use to BlockGrab Tokens to make payment.
- Reviews & Ratings: If you’re given a good review or rating, you’ll be rewarded with more BlockGrab Tokens.
- Membership: As you continue to hold more BlockGrab Tokens, your membership tier gets upgraded with more benefits.
- Referral Programs: As you continue to “Invite Friends”, the network grows bigger and rewards you with more BlockGrab Tokens for every friends you invite.
- Complementary Services: As additional services like BlockGrabDaily being offered, the usage of the BlockGrab Tokens increase and valuation of the tokens increases due to demand, indirectly making the BlockGrab token holders richer!
Ideation to Incubation
As I’m writing this article right now, the idea of “BlockGrab” is being executed by several blockchain startups. All hailing themselves either the future of transportation or the future of ride sharing.
1) Bit Cab – https://bitcab.io
2) Arcade City – https://arcade.city
3) LaZooz – http://lazooz.org
4) Dacsee – https://dacsee.com/
Why Token Economy is the Next Revolution of the Membership Economy!
When a membership network is owned by a private, centralized company. The value flows away from network members to the hands of a group of shareholders who hold equity of the company.
In a token economy, membership economy built on blockchain, the relationship between the customer and company changes. Members of the token have a stake in the entire membership network. Because there is no division between owners and participants, it’s easier to align incentives in the token economy.
This is revolutionary. A token economy is able to provide all the benefits of the membership economy without increasing costs to members that are unavoidable under private, centralized network ownership.
More importantly, these cost savings can be more than financial. They can also come in the form of increased privacy, ownership of data, and more favorable network policies.
So, instead of putting taxi drivers out of job, a blockchain-based membership-oriented business puts companies like Uber and Grab out of job and lets the driver work with their customers directly. Because everyone owns a part of this ecosystem.
 The term Membership Economy is coined and defined by Robbie Kelman-Baxter.