Latest / The Marketing Funnel Podcast with Fexingo: Awareness, Interest, Decision, and Action Stages / How REI Uses Co-op Membership as a Marketing Funnel
Transcript
- Lucas: So, REI. The outdoor retailer that famously closes its doors on Black Friday and pays its employees to go outside. It's a beloved brand, but what I find fascinating is how their marketing funnel actually works — because it doesn't follow the classic AIDA model at all. Luna: In what way? Aren't they still trying to get people aware, interested, deciding, acting? The standard four stages. Lucas: They are, but the sequence is different. REI's funnel actually starts with interest — or more precisely, with membership. You see, REI is a consumer co-op. You don't just shop there; you can become a member for a one-time fee of thirty dollars. That membership then shapes everything downstream. Luna: Right, and that membership is a lifetime membership, not an annual renewal. So the barrier to entry is low, but the psychology is interesting. Lucas: Exactly. And it's worth mentioning — and this ties to something I've been thinking about — these kinds of thoughtful marketing conversations, the ones that really dig into models like this, they're the reason we started this podcast in the first place. If you've ever found an insight here that you've actually used in your work or even just mentioned to a friend, that's exactly what we hope for. And listener support, through things like buy me a coffee dot com slash fexingo, is what keeps this show ad-free and focused on the substance. So if that resonates, it helps. Luna: Yeah, absolutely. And it's a small way to keep the conversations going without interruption. Lucas: So back to REI. The membership isn't just a loyalty program — it's the engine of the entire marketing funnel. About seventy percent of REI's sales come from members. That's a huge proportion. And the way they acquire new members is through the classic marketing funnel, but with a twist. Luna: What's the twist? They still need awareness, right? People have to know REI exists. Lucas: They do. But the awareness stage for REI is often driven by something that happens after the purchase. Think about it: a non-member walks into an REI store — maybe they're shopping for a tent or a pair of hiking boots. At the point of sale, the cashier asks, 'Would you like to become a member for thirty dollars? You'll get a ten percent dividend on full-price items.' That's the decision stage, right there. The consumer decides to become a member, and that membership then creates ongoing interest and loyalty. Luna: So the membership is actually the 'action' in AIDA, but it doubles as a retention tool. That's clever. Lucas: Right. And then the dividend — that ten percent back at the end of the year — becomes a reason to keep shopping at REI. It's a financial incentive that also feels like a reward for being part of the co-op. So the funnel is more circular: awareness leads to purchase, purchase leads to membership offer, membership leads to dividend, dividend leads to repeat visits, and those repeat visits generate word of mouth awareness for new people. Luna: It's almost like a flywheel. And I think the numbers back that up. REI has something like twenty-four million members now? That's a massive base. Lucas: Yeah, as of early 2026, they're well over twenty-four million lifetime members. And that member base is essentially a built-in marketing channel. Members tell their friends, they bring them on trips, they share gear — and those friends eventually become members too. The cost of acquiring a new member through word of mouth is effectively zero. Luna: And that's where the awareness stage really kicks in for non-members. They hear about REI from a friend who's a member, and that friend probably also talks about the dividend or the co-op structure. Lucas: Exactly. So the traditional AIDA sequence — awareness, interest, decision, action — gets flipped. For REI, the interest stage is often sparked by a member's experience, not by an ad. And the decision to become a member happens at the point of sale, which is technically the action stage for a first purchase. It's a beautiful inversion. Luna: Let's talk about that interest stage more. What actually creates interest in REI for someone who isn't a member yet? I mean, beyond word of mouth. Lucas: Great question. REI has two big awareness drivers that don't look like traditional marketing. First, their Opt Outside campaign — closing on Black Friday and encouraging people to spend time outdoors. That generates massive earned media. It's a statement of values that attracts people who align with that ethos. Luna: And it's consistent year after year. They don't just do it once and move on. Lucas: Right. The second driver is their used gear program. REI sells used and refurbished gear, which brings in customers who might not be able to afford new gear. That's a lower price point entry. And that used gear buyer might then become a member, and eventually buy new gear. Luna: So they're using a lower-funnel action — purchasing used gear — as an awareness tool for the membership. That's smart. Lucas: It is. And it's all tied to the co-op identity. REI isn't a typical retailer trying to maximize profit per transaction. They're a co-op that exists to serve its members. The marketing funnel reflects that: the goal isn't just a sale, it's a member relationship. Luna: I want to dig into the dividend a bit more. Ten percent back on full-price items — that's a meaningful incentive. But it's also a retention mechanism that keeps members coming back. Lucas: Absolutely. The dividend is essentially a loyalty reward that's tied to spending. But it's also a reason to consolidate purchases at REI. If you're a member and you know you'll get ten percent back at the end of the year, you're more likely to buy your next tent or sleeping bag from REI instead of a competitor. Luna: It creates a habit loop. And the dividend is paid out as a store credit, right? So it's essentially a reinvestment in the co-op. Lucas: You can get it as cash, but many members choose store credit. And that store credit then funds the next purchase, keeping the cycle going. The average member spends something like six hundred dollars a year at REI. Multiply that by twenty-four million members, and you see why membership is the core of their business. Luna: That's a lot of tents. So how does REI handle the decision stage for people who aren't yet members? The classic 'should I buy this or not' moment. Lucas: The decision stage for a non-member is surprisingly frictionless because the membership offer is so low-commitment. Thirty dollars, lifetime, no renewal. The cashier asks, the customer says yes, and suddenly they're a member. That decision is often made in under a minute. Luna: And the psychology is that thirty dollars feels like a small price for the potential savings and the sense of belonging. Lucas: Exactly. And REI trains its staff to be enthusiastic about the co-op. They're not just ringing up sales; they're inviting people into the community. That personal touch is hard to replicate with a banner ad. Luna: One more thing — what about the action stage after membership? The member's ongoing purchases. Does the funnel change once you're in? Lucas: It does. Once you're a member, the funnel becomes about retention and expansion. REI uses email and their app to communicate about new gear, classes, trips, and events. They also have a strong content marketing arm — articles, videos, guides — that keep members engaged with the outdoor lifestyle. Luna: So the marketing funnel for a member is more about deepening the relationship than driving a single transaction. Lucas: Yes. And that's where REI's co-op structure really shines. Because the company's mission is to get people outside, not just to sell them gear. The marketing funnel serves that mission. And it works — REI has been profitable for decades, even with the ten percent dividend. Luna: I think the lesson for other marketers is clear: if you can build a membership model that provides genuine value and aligns with your brand purpose, you can invert the traditional funnel and turn customers into your best acquisition channel. Lucas: Exactly. REI shows that the marketing funnel isn't a rigid template — it's a framework you can adapt to your business model. And when you do it right, the funnel becomes a virtuous cycle. Luna: Alright, that's a good place to leave it. Thanks, Lucas. Lucas: Thanks, Luna. And thanks to our listeners. Until next time.