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Monday
Nov032014

Best Practices: Month-to-Month Contracts

It is tough to get a commitment from someone for a year. That is why month-to-month memberships are becoming more popular in the health and fitness club industry.

Industry experts Jarod Cogswell and Geoff Dyer weigh in on the benefits, best ways to make them work, and more in Best Practices.

Q: No-contract memberships are becoming increasingly popular. What are the main benefits? How does a club stay afloat on a month-to-month membership basis?

A: It’s quite true that, today, many existing and prospective club members prefer the month-to-month (M2M) membership option over the long-term commitment that’s associated with a one-, two-, or three-year membership contract.

The sense of freedom that M2M offers, growing awareness of consumer rights, the recent recession, and the increased number of exercise opportunities, including many low-priced versions—all add to M2M’s appeal.

However, studying the situation more closely, we find ourselves forced to face a disturbing fact of life: Some 25% of all members become inactive within six months of joining a club, and that figure doubles, rising to 50%, after one year. Unfortunately, one of the black eyes our industry has earned is its reputation for locking inactive members into long-term, retail installment contracts.

By shifting our industry to the M2M model, one club at a time, we’ll become a business that focuses as much on member retention as it does on new member acquisition. If our clients can leave at any time, simply by providing written notice, then we’ll likely be much more attentive to their level of satisfaction with our service, programs, and facility upkeep.

Can this model prove as profitable as the contract sales model? Yes—absolutely! Because our reputation as service providers will improve, and, as a result, we’ll attract more customers. Granted, members may leave our facilities at a faster pace, but, with more people joining, the outcome will still result in a net gain.

Geoff Dyer
Founder
AussieFIT
Columbus, Ohio



A:
Monthly agreements have been in use for quite some time now, especially at higher-priced facilities, and have clearly demonstrated that they’re not only a viable payment system, but, in fact, can be a very rewarding one.

The challenge for you, as an operator, is to prove your club’s value on a month-to-month basis, which promotes and produces a higher level of service. It motivates your staff to focus on service, cleanliness, and member retention because every visit counts, and there may not be a second chance. In the final analysis, monthly agreements cultivate consumer trust.

Some other challenges present themselves when you don’t “lock” a member into a contract. For instance, it places a lot of pressure on the sales process. When members aren’t bound into a long-term agreement, they can leave at any time, so there’s a greater chance that you’ll lose them. You therefore need to be selling at the same or higher rate than the rate of your member- ship losses.

One of the advantages of offering no-contract memberships is that you won’t lose prospects who may be turned off by a long-term commitment. When people understand that they can leave whenever they like, joining your club becomes a comfortable decision - both psychologically and financially - that will tend to drive the volume you need to be profitable.

Of course, the clear and obvious key to succeeding with M2M membership agreements is to always give your members a reason to come back to your club. 

Jarod Cogswell
Founder, Enterprise Athlete 
President, Fit Academy, Inc.
Portland, Ore.

 

 

Best Practices is one of IHRSA's most popular features. For answers on hundreds or question, check more here.

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