Originally Posted: 02/24/09
One idea that has been getting the most comments from our seminars during the last six months is the one about offering a value membership to your new potential members as well as offering it to your existing membership at the same time.
A value membership, using a term that is appropriate for the perception of today's economy, is where you adjust your price structure to demonstrate that you are trying to accommodate the need for your members, and potential members, to get fitness at a lower price. I discussed this in an earlier blog but we can detail it here since I have been receiving a number of emails wanting more information.
For example, let's say you now offer a $49 per month membership for 12 months. In today's whacked out financial mess, many of your good members walk away from their memberships at the end of their term thinking they are going to save money. A member with four payments left of $49, for instance, might just quietly go away at the end of his term with the justification that his membership is a payment he doesn't want to make for awhile. Keep in mind, in his head he didn't quit the club, he is just taking a little time away until things change and he is planning on coming back.
Adding a vale membership is a way of keeping this member in the system and stabilizing your receivable base during perceived tough times. The value membership in this case would be adding an 18-month membership for $39 a month.
New prospects would be presented with an opportunity to sign up for the club's regular membership, but if saving money is the key for him, then the club also has a value membership that is $120 per year cheaper. Look for about 70% of your new sales to go for the $39 month option because it is lower although for a longer term.
I also think you need to reach out to all existing members and offer them the same deal. Many owners balk at this idea at first for two reasons. First of all, they believe that lowering the price at point of sale hurts the image of the club and will lower their total receivables. The other issue is what happens if all my members trade their memberships down $10? What happens to my cash flow in this cash?
The first point actually reflects what is happening in the markets these days, and especially matches the way I feel memberships will be structured during the next 10 years. Most owners need to show a lower price at point of sale and then work very hard to drive their average monthly EFT up with additional services, such as EFT 12-month training, which is working very well around the country, and other profit areas including 12-week weight management programs.
If you are in a very competitive market, this strategy is especially important for you to consider. Many of our low price competitors have created a new market reality where the average price perception has dropped. Offering a value membership allows you to show a lower price in the market so you can still retain market share. If all you sell is memberships, however, lowering your price had better result in a much higher volume. Most clubs don't see big increases in volume until they drop to $19 per month, which is not realistic for most full service facilities.
The compromise position is to offer a perceived lower price and then work on driving your average EFT number up for the month. For example, you might sell 50 memberships for the month showing a $39 per month value membership price at point of sale, but still have an average EFT monthly price of over $80 if you can convert about 20% of your new members into training EFT and weight management programs. In this case, you have the best of both competitive worlds. You show a lower price to attract new members, but your average EFT is higher because internal programming keeps your total average higher.
The second concern mentioned above also has a surprising twist. What would happen to me if all my members came in and converted their memberships to a lower price? Surprisingly, you would make more money during the next year.
Go back to the member who has four payments left of $49. He wants to save money and will quietly get lost when is membership is up. If this guy is offered a chance to save $120 per year voluntarily, and by trading the four remaining payments for a fresh 18-month membership, the club owner will actually make more money over time.
The key is that the lower price/longer term adds more money to the EFT compared to the guy paying just four more payments and leaving. It's retention people, and if members have a chance to trade for a lower payment versus leaving the club, then the key phrase, as it always is in this industry, is whomever has the highest retention will win the club wars.
What does this mean in simple terms? Adding a value membership and then letting your existing members have access to it will actually increase your EFT over 12 months.
Go back to the guy with four payments one more time. He can go home and tell his spouse that he just saved the family $120 a year by renegotiating his fitness membership. He will stay, and he will pay longer, because he was in control, something most owners take away from the membership, which leads to higher losses in the retention area.
Implementing this is easy but there are a few keys points that will make it easier for you to get it done. First of all, send your members a letter before you start using value pricing in the club. No one is madder than a member who feels cheated by the people he trusted. The letter should say something like this:
Thank you for all your suggestions. We are listening to our members, and to our guests, and we understand that for many of you staying at the club is important but you would still like to save money right now in your life.
Therefore, we will immediately offer a value membership on a temporary basis through the end of the summer. We will make a decision then if we need to continue value membership pricing beyond that point.
As you know, most of you are paying about $49 per month for a 12-month membership. Our new value membership will be offered at $39 per month for an 18-month term saving you $120 per year. Any existing member can simply stop by the desk during your next visit and rewrite your existing membership to a lower monthly fee with no questions asked.
And as always, we will honor whatever rate you have with us for any successive years you wish to be a member as long as you stay current or renew within 30 stays of expiration. This value option, therefore, gives all of our members a chance to lock in a lower rate for the duration of your membership.
Thank you for all your support through the years and please feel free to call or stop by if you would like more information about this new membership option.
The important term is "temporary”. This letter demonstrates that you understand that the people in your community may be having tough times and you care and wish to help with this offer. Keep in mind, if you are losing memberships to a competitor this option may help you stop the leakage by allowing the members to stay and save money. It is all a numbers game and your goal is to keep the most members you can for the longest period you can and this option helps get that done.
Something important to check out: If you have an interest in golf performance training, and live in a community that has a large golf population, look into the Titleist Performance Institute, created by Dr. Greg Rose and teaching professional Dave Phillips. They offer economical certification programs in three different tracks including trainers, med-based people and teaching professionals. This type of certification can add another dimension to your training programs, and more revenue over time.
Thank you to Body Training Systems. We just did a team webinar that was very successful. If you would like to listen, paste and insert this link into your browser.