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Entries in Geoff Dyer (4)

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.

Wednesday
Oct012014

AussieFit fighting teen obesity

Geoff Dyer, the founder of AussieFIT, which has two clubs in Ohio, was once an overweight teen, and, as a result, is acutely aware of the importance of physical activity for young people. So when, two years ago, the U.S. Centers for Disease Control and Prevention reported that Ohio had the 12th highest rate of diabetes in the country, he knew he had to do something.

Working with the Columbus Public Health’s Institute for Active Living, Dyer created a fitness initiative for Columbus-area youngsters, offering free summer memberships at his 25,000-square-foot facilities to teens between the ages of
12 and 17. “Studies show that even teens who are genetically predisposed to obesity will maintain a healthy weight by exercising for an hour every day,” he points out.

The opportunity to use the clubs’ cutting-edge strength and cardio equipment, cycling studio, and various group exercise programs offers a safe, healthy alternative to expensive summer camps or misspent free time, notes Dyer.

Monday
Apr122010

Training: Paid or Free?

Bill McBride, Scott Lewandowski, Geoff Dyer, and Brad Wilkins clarify a conundrum submitted by one reader who asks, If retention in mission critical, why make people pay for even the most basic level of one-on-one training?

Q: “If it costs far more to attract new members than it does to retain existing ones, why do most large health club chains emphasize on sales and closing techniques rather than on retaining clients through provision of cost free floor trainers? Most, if not all clubs are based on a paid-training model, but this ought to be part of the membership fee. Why the contradiction?”

A: Member retention is the bedrock of success. If your club keeps its membership engaged, delighted and progressing with results, it does better in all other areas – sales, ancillary revenue, referrals, community awareness, etc.

...sales and attracting new market segments is crucial to success.
The industry focuses on sales as a large number of members quit due to somewhat “uncontrollable” factors such as relocation, illness, injury, personal issues & financial hardship. An analogy is saving money – retention is the saving money & sales is the future earning potential. While we all like to save, without future income, many of us would spend through our savings and become broke. Sales is the growth engine. As our industry is still not attracting the vast majority of the population, with many mature clubs battling to sell more than their losses each month, sales and attracting new market segments is crucial to success.

Some clubs do indeed use an “included service” model – typically charging a lot more per month or somewhat more with a limited number of sessions allotted per month. Some allow the sessions to accumulate and some are “use it or lose it.” The right business model for a particular club is one that works for the business and the clientele. To run a multimillion dollar club at a relatively low price point and include highly educated service trainers for free is a challenged business model for many. Others that have free training and pay training struggle with two “silos” and a very confused membership base… Why pay when I can get it for free? As well as, what is the difference in qualification and service levels?

I do not believe there is necessarily a right or wrong approach with the various models, but I am of the personal opinion that regardless of your model, your members should be started properly on their journey and be able to get advice and support when needed as part of their membership. With that said, I would not offer on-going “free” personal training if you are offering fee based personal training (at the same dues rate) as this confuses two separate business models in the consumer’s eyes.

Differentiating what is included in the membership and what is an extra or enhanced service should be well thought out and articulated.

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

A: For a health club to be successful, the management must focus equally on membership sales and membership retention. Membership sales will continue to be a focus of a health club regardless of the club’s retention efforts.

Retention should not be the sole responsibility of the fitness department.
I recommend a cost free floor trainer such as a Fitness Specialist who offers fitness suggestions, coordinates fitness programming, and demonstrates new equipment. Health club owners decide not to create this position because it is an additional salary and prefer to use Personal Trainers who earn commission on paid sessions to service the members on the floor while prospecting for new clients. I agree that Personal Trainers should be interacting with members on the fitness floor to solicit new business. The dilemma is who is responsible to service members on the floor when a trainer is conducting a paid session. In the end, both scenarios have been successful for health clubs.

I would note that the fitness team is only a piece of the retention plan. Retention should not be the sole responsibility of the fitness department. The General Manager, along with his or her department heads, should outline each department’s responsibility in enhancing the member experience. This will create the most successful retention plan for club success.

Scott Lewandowski, Regional GM/Fitness Director
Fitness Formula Clubs
sl@ffc.com
www.ffc.com

A: All clubs focus attention on sales, it is the lifeblood of our industry.

Member retention is AS IMPORTANT as new member sales but not all clubs track their retention or measure the activities that impact the retention of their members.

To acquire a new member there is a marketing expense and a sales expense or commission. Most of the time these two costs added together equal $100 or more.

After the new member has joined every month that the new member stays will add bottom line revenue, after the acquisition cost has been recovered!

Members will stay longer if they are actively using the club, if they are properly oriented in to the club, if they “connect” with both staff and with members…the list of retention tools at our disposal is enormous.

Providing trainers on the floor to offer advice will help, as will providing orientation clinics, or 2-3 sessions with a trainer to show the new member how to use the club and its programs and equipment. The first objective is to focus as much time and attention to member retention as we do to new member sales. It will then be easier to prioritize which retention tools will work in your organization.

Geoff Dyer, Founder
Lifestyle Family Fitness
gdyer@lff.com
www.lff.com

A: You have asked some great questions about this wonderful industry we work in. And to answer this type of question it is sometimes a good idea to take a step back to observe the industry from a global perspective.

The first thing to realize is that it is a large industry. In the US alone there are approximately 30,000 fitness facilities. This includes everything from recreational centers, to large chains, to small chains, to “mom-and-pop” shops, to publicly traded companies, and everything else in between. These facilities can range in sizes from a couple thousand square feet to well over a hundred thousand square feet…with fee structures ranging from a few dollars per month to well over a hundred dollars per month. The point on this quick view of the industry is to show that there are a lot of different business models out there in the industry, with different strategies and goals…and this is why the contradictions you mentioned in your question seem to exist.

So, is member retention important? Yes it is. Do you need to manage your attrition rate? Yes you do. To what degree or effort do you attack it? Well, it depends. It depends on your model, your strategy, and your goals; it is all a numbers game that each and every one of us plays (no matter if we are a high-end low volume business or a low-end high volume business…or something in between) between membership activation, membership inactivation, facility capacity/constraints, fee structures, services, and available finances.

So, are all clubs doing the right things in regards to retention? Probably not. The days where commercial clubs could sustain profitability with 35% – 45% attrition rates are being challenged due to the current global economic situation. New approaches like the one you mentioned in your question should be explored to enhance the members experience and increase the club’s value proposition.

Brad Wilkins, Director of Fitness Mgt & Devt
Cooper Fitness Center
bwilkins@cooperfitnesscenter.com
www.cooperfitnesscenter.com

Monday
Aug032009

The Benefits of Selling Month-to-Month

Q: "I've been in the industry for over 13yrs. I don't understand this new wave of no-contracts. How does a club stay afloat on month to month membership basis? I know its the wave of the future but how does it work financially for the club? What is the benefit to offering no contracts? And should we make the transition as it seems most clubs are?"

A: Todays potential and existing Club members prefer the month to month option over the longterm commitment associated with a one, two or three year contract.

Given the fact that 25% of members are inactive 6 months after joining and that rises to 50% being inactive after one year, one of the black eyes to our industry has been the reputation we have earned from binding inactive members to long term retail installment contracts.

By shifting our industry to a month to month model, one club at a time, we will become a business that focuses on member retention AS WELL as new member acquisition.

If our members are free to leave with written notice at any time we will be much more cognizant of their satisfaction with our service, programs and facility upkeep.

Can this model prove as profitable as a contract sales model?

Yes...absolutely!

First, we will attract more members.

Second, our reputation as a service provider will improve.

Granted members will leave at a faster pace but with more joining the outcome will still result in a net gain for each of us.

Geoff Dyer, Founder
Lifestyle Family Fitness
gdyer@lff.com
www.lff.com

A: No contracts (month to month agreements) have actually been around for some time, especially for higher priced facilities. The main challenge is obviously proving your value on a month to month basis, but I believe that is what elevates and promotes a higher level of club service... it influences your entire staff culture to focus on member retention. The other challenge is that it places a lot of pressure on your sales process. If you don't have members locked into a contract, you have higher potential to lose them, which means you need to be selling at the same rate or higher than your losses.

The benefit to offering no contracts is that a large percentage of those interested in a club membership can be turned off by the long term commitment. Therefore, knowing that they (the prospect) can leave at any time is a comforting decision, especially in this economy. We offer two options: a one-year contract which allows a new member to join for a $25 processing fee or a month to month option offered at a $250-$500 initiation fee. The contract member has a buyout option to pay the full initiation (or pro-rated) if they wish to leave the club before the year expires.

Offering these two options during challenging economic times are working for us and yes, I would recommend the same for others. Please let me know if you need further assistance.

Jarod Cogswell, General Manager
ClubSport Oregon
jcogswell@clubsports.com
www.clubsports.com/oregon