Customers pay a fixed recurring fee that lowers the marginal price of later purchases (free shipping, lower fares, discounts), often across several products.
How Membership Pricing works
A fixed fee lowers the price of every later purchase, so members concentrate their buying and try more of what the company sells.
How companies won with Membership Pricing
From the win chains in Strategy Canon case studies: what the winner did, and what its rival did at the same step.
vs. Barnes & Noble · 2005–14
Amazon
Prime and FBA: one fast-shipping promise for every seller's goods
What it did
Prime's flat fee made two-day shipping free on every order (2005), giving up millions in shipping revenue
Barnes & Noble
Barnes & Noble Membership gave 10% off in stores and 5% online
What does the fee make cheaper, and do members buy more because of it?
Who names it
Author
What they call it / where it appears
Thompson
Prime and the marginal cost of the next order
Shapiro & Varian +
Two-part pricing and lock-in
Note. Near miss: A premium tier that unlocks features but does not change per-purchase prices. Does not count: A subscription that is the product itself (Subscription Pricing); points-only loyalty programs with no fee.