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Monday
Jul202009

Average Cost of Selling a Membership

Q: "What is the average cost of selling a membership to a fitness facility, factoring in advertising costs, sales staff, and number of members?"

A: Sales staffing and commissions are usually in the $75-$150 range per new member. $100-$125 is common with higher priced clubs.

Direct marketing costs (not including marketing personnel) are usually in the $75-$150 range as well. $100-$125 is also a common direct marketing cost with higher priced clubs.

If you have a marketing staff you would take that number and divide by your sales number to determine the full marketing expense load. My estimate is that it would add $10-$50 per sale depending on your marketing team payroll and head count.

All in, you can be at $200-$250 per sale in expenses for a premium priced club membership. This would be anywhere from 2-3 month of member tenure to break-even on acquisition costs. Retention has a much higher ROI.

Bill McBride, Chief Operating Officer
Club One
bill.mcbride@clubone.com

www.clubone.com
 

A: In this challenging economy, it is vital that you closely watch costs, reduce expenses, and according to business experts outside our industry, do not reduce marketing because everyone else will, or do not reduce sales training. You need to sharpen the saw as you will have less leads now than you did one year ago or do not diminish customer touch. The members will become more demanding and less tolerant of challenges/problems.

The simplest way to enable a small business owner to make better decisions, implement better, and get the necessary support to take action or follow through during tough times is to have a group of peers who are other CEOs.

The average REX Roundtable member has a cost of sales between $170 and $300. Keep in mind that a more expensive club may have a higher acquisition cost that profitably fits in their budget.

REX Roundtables has more than 90 club organizations (totaling over 500 clubs) that submit and share actual data three times a year. Many IHRSA past and present Board members and Presidents, including the current one are members of the REX Roundtables.

Eddie Tock, Partner
REX Roundtables for Executives™ Licensee
281-732-9757
eddie@eddietock.com
www.rexonline.org

A: The question posted in part answers itself. The formula of advertising costs + sales staff costs / # of members highlights just some of the variables that come into play.

Here are some other variables to consider:

  1. How many leads does the club get?
  2. How does the club do on lead conversion?
  3. How much is spent in TOTAL on advertising and marketing.*

* When figuring the total cost of advertising and marketing, be sure to include the following:

  • Direct advertising costs
  • Signage and billboards
  • Internal branding and uniforms
  • Brochures and fliers;
  • Web site creation/support;
  • Phone line/call costs
  • Sales staff wages, commissions, taxes, etc...
  • Approx 10% of front desk costs
  • Your new member integration program. A vital service new members look for and should be budgeted into every new sale. If you don’t have one, it’s costing you sales. (more information on this topic can be found at www.face2faceretention.com)

CLUB X has 2500 members and loses 1000 members through attrition. It sells 1200 new memberships annually from 2000 inquiries. Annual revenues near $3m and the clubs spends 5% or $150,000 annually on direct advertising and marketing and an additional 7% or $210,000 on the sales staffing and essential services to support each new membership. Therefore each inquiry costs $180 and each new sale cost $300. More importantly every time they skimp on essential services such as a proper new member integration program and systematized retention strategies, they will likely have to spend a further $300 to replace the lost member.

Going the extra mile to retaining a member at CLUB X with all costs factored in would equate to just $87 in year 1 and $46 annually thereafter. A wise an profitable investment.

Paul Brown, President
Face2Face Retention Systems
888/323-20107
paulb@face2faceretention.com
www.face2faceretention.com

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