This week, Taco Bell joined the membership economy. The favored Mexican-inspired quick service restaurant (QSR) announced that it’s launching a taco subscription service. For $10 a month, Taco Lover’s passholders can get a taco a day for 30 days.
In The Forever Transaction and The Membership Economy, author, consultant, and subscription model expert Robbie Kellman Baxter tells us that companies that focus on formal, ongoing relationships rather than single transactions are disrupting their industries and thriving. Two of Amazon’s most impactful innovations—Amazon Web Services and Amazon Prime—were born from a pricing shift. Pricing has the power to transform an entire business. Will this happen at Taco Bell?
Here’s how they, and you, can get it right.
I had the chance to sit down with Robbie on the Outthinker podcast and picked her brain on the concept of the membership economy. She’s spent the past decade focused on subscription and growth strategies, working with companies like Netflix, Fitbit, Microsoft, and Consumer Reports. She warns that it’s not as easy as applying a subscription price to your current products and services—it’s a forever promise that requires a full strategic adjustment.
Let’s take a look at the seven considerations companies need to make to build customer relationships that turn into a “forever transaction,” and how Taco Bell and the Yum! Brands parent company are addressing each one.
1. It’s not just a pricing change
An additional pricing structure requires a new set of rules, measurements, people skills, and cultural values. Taco Bell has long been known for its innovative culture featuring bike rides, time for executives and new hires to exchange ideas, meditation time, and early departure Fridays. The “Live más” motto, implying youthful energy and independent thinking, applies to customers as well as employees.
CEO Mark King says, “People are drawn to work for Taco Bell for the same reason fans are drawn to eat at Taco Bell. It’s fun, energizing, and unique.”
In 2021, the company hired Cashmere, an external agency of record that has worked with streaming brands like Netflix, Amazon, Hulu, and Apple TV+, to focus on culture, presumably around membership models.
2. The sale is the starting line
As opposed to transactional pricing where the sale is the finish line, in a membership model, the sale is the starting line. Robbie describes how companies can fulfill the forever promise: “We promise that you’re going to get the best prices. We promise that you’re going to get a highly curated set of products for your health or environment or deliciousness, or you’re going to get the best service experience.”
Taco Bell laid the grounds for loyalty when it was the first QSR to introduce mobile ordering through its app in 2014. To purchase the Taco Lover’s Pass, customers must be in the rewards program and have downloaded the app. The app features quick contactless payment, customizable menu options, and early access to new items. Members get ongoing benefits and save money. Yum! Brands says app users enrolled in its loyalty program spend 35% more than before they joined.
3. Simple pricing builds trust
According to Robbie, customers don’t want to have to become an expert in your pricing options. They want uncomplicated pricing that they can trust, and they hate it when companies “hide the cancel button.”
Taco Bell tested the Taco Lover’s Pass in September 2021 in Tuscon, AZ, experimenting with a price point between $5 and $10 before settling on a single pricing option of $10 for its US rollout. The membership does not automatically renew, so consumers have a choice to continue with their membership each month.
4. Consider freemium
Robbie says this is an option that every company should consider, but it may or may not be the right choice. A freemium, or giveaway model, may be necessary if you need to change user behavior (think newspapers moving to digital) or if getting more users will build viral or network effects (like LinkedIn).
Although Taco Bell does grant customers a free item for signing up for its rewards program, the Taco Lover’s Pass seems to address already heavy users where a freemium model would probably not be appropriate.
5. Onboard to deliver value
The onboarding process is the first chance to make an impression on your members. You want to get them to see value right away.
Once consumers purchase the Taco Lover’s Pass, they unlock access to a special menu of choices: crunchy taco, soft taco, spicy potato soft taco, Doritos Locos taco, and the option to make any of those Supreme. With regular tacos priced from $1.39 to $4.19, if a customer visits just twice a week, they’ll have unlocked value. The app ensures they’ll still earn rewards for loyalty.
6. Focus on customer success
You’ll want to make sure customers understand the value they’re getting. While Taco Bell is already known for its budget-friendly menu, extreme users of the new pass can save about $50 per month.
7. Invest in technology
In the era of membership models, Robbie says every company must become a technology company. Yum! Brands understands this. The company made three tech acquisitions in 2021: the AI unit of Kvantum performance marketing, a conversational commerce developer Tictuk, and Dragontail Systems for AI order management.
Former HR Director Stacey Payne (now at Sweetgreen, which also launched a subscription model this month) said in a 2016 interview that the company was creating consumer-focused roles in e-commerce, customer insights, digital innovation, and mobile technology.
We’re all familiar with how membership pricing has rocked the TV and entertainment industries. Will Taco Bell’s new pricing model be the next AWS-style breakthrough? Of course, it’s too soon to say. They’re not the first to attempt—Burger King has a $5 per month coffee subscription and Panera offers a similar “Unlimited Sip Club” for $8.99. We’ll see how the Taco Lover’s Pass fares.
Robbie’s podcast, Subscription Stories, dives further into how leaders are deploying membership models across industries. If you’re considering deepening relationships with your customers and shifting to a more predictable revenue stream, she recommends starting with two questions:
- Who do we want to serve really well on an ongoing basis?
- What can we promise them in exchange for their loyalty?
Focus on building the right values, organizational processes, and relationships, and the rest will fall into place.