Access FIT

Business as usual… is choosing the status quo

We have yet another national 24 hour health club franchise opening up in my home town… into what is quite a competitive market. They’ve got a pretty good offering… a relatively low price point, a shiny new fit out, a central location, and a good range of equipment. 

All of the things this relatively unsophisticated market looks for… with the novelty of 24 hour access.

I think that they’ll do OK and certainly take market share from the existing clubs.  Can’t blame the new guys for thinking that there’s an opportunity in this market because the competition is only average at best.

My question is what will the existing players do in response to this new competitor… my guess is not too much.

Not because they shouldn’t but because they don’t really have one… I’m seeing some new paint go on, some new promotions, and some false bravado (we’re not worried about them they not really in our market) but it’s pretty much business as usual.

Of course, business as usual perpetuates the status quo but the problem is the status quo changes whether we like it or not… so stop defending the status quo, might as well lead and not follow.

Are you looking after your expert members?

One of the strategies that I discuss in The Evolution of a Health Club Member: Survival of the Fittest Is NOT a Retention Strategy is to target members higher on the expertise curve. 

That means getting more advanced members into your club and keeping the expert members that you already have.

Why do you need expert members?

Expert members use less staff time, help less expert members on the floor, pay full price (i.e. don’t wait for discounts), and stay longer (better retention). 

In fact, if you had all expert members you would save considerably on pay roll because expert members don’t need assessments and programs, exercise instruction, or supervision on the floor.  They are essentially self-service members.

You just have to give them what they want and then get out of their way.

The problem is that as more and more businesses try to cater to the beginner market (because competition means we increasingly need the beginner market) our more advanced and expert members get forgotten about. 

And losing these members costs your business big time.  

So the question is… are you taking your expert members for granted?  When is the last time you bought some new equipment especially for them, made sure they have enough weights on the floor, maybe they need a lifting platform, are the CrossFit wannabe’s pissing them off, or could you upgrade them to a VIP membership for free?

Lose your expert members at your own peril.

Too much information…

…exactly how much information is too much information?

Sure we all live in the information age, sure we are all bombarded with all kinds of information every day (both commercial and non-commercial, solicited and non-solicited) and sure almost all the information we need is only a click away.

I’m concerned about both the quality and quantity of information that owners and managers are exposing themselves to.

The statistics are staggering… 1/3 of high school graduates never read another book for the rest of their lives… 42% of college graduates never read another book after college… 80% of US families did not buy or read a book last year (source Jenkins Group).

I know Thom Plummer is frequently imploring his tribe to read more (constantly recommending his favourite books…even mine) and I know that Michael Scott Scudder has personally cautioned me that owners and managers don’t want to read more than about 10 pages, or watch videos much longer than 20 minutes.

I recently gave a buddy of mine a copy of my latest report that runs just over 100 pages (free of charge) and his initial response was concern for the amount of reading he was going to have to do.

Obviously owners and managers are busy… I know I was.

The problem is you can’t grow your business on what you currently know… what you know got you this far but it won’t get you any further.

So, if you accept that you have to know better to do better… what can you hope to learn in 10 pages or 20 minutes?

The problem is that this industry has gotten used to what I call sound byte solutions… something that can easily be explained in 3-5 minutes. 

Of course, this level of actual understanding you get from sound byte solutions is pretty low… and the end result is a bunch of ad hoc tactics driving your business with no unifying strategy giving you direction.

A little knowledge really is a dangerous thing.

How robust is your knowledge?

Renowned physicist Richard Feynman said, “I don't know what's the matter with people: they don't learn by understanding, they learn by some other way — by rote or something. Their knowledge is so fragile!”

Nowhere is it more apparent than in our industry…owners and managers applying some strategy or tactic simply because that’s what the competition is doing. 

A low-pricer moves in…lets drop our prices. 

A training club opens up…lets buy some kettle bells.

A competitor runs a direct mail advertising blitz….lets run some ads.

Everyone runs a deep discount for the New Year…how low can we go?

All of these reactions are symptomatic of a lack of understanding of your own business.  I see it everywhere.

Of course, there is nothing wrong with evolving (or even radically innovating) your business offerings or business model…but doing so simply because the competition is doing it demonstrates a critical lack of understanding of your own business.

You can’t “me-too” yourself into a leadership position…better understanding leads to better decision making.

Be better today... but first you have to decide to be better

"The most difficult thing is the decision to act, the rest is merely tenacity. The fears are paper tigers. You can do anything you decide to do." - Amelia Earhart

Want to improve your retention…

…then focus on your beginners.

Why?

Because it is your beginners who quit very early into their memberships… 30, 60, or 90 days. And it is these early dropouts that drag your retention figures down.

Why?

Because retention is calculated using average beginning monthly memberships and average’s are sensitive to outliers (an outlier is an observation that is numerically distant from the rest of the data). Outliers actually skew your data, often significantly.

For example, imagine you have a club with 10 members and their membership terms (in months) were 36, 42, 24, 18, 56, 36, 2, 1, 3, and 1. The average membership term is 21.9 months… not bad, but the average actually hides the fact that there are two cohorts of members, 6 who maintain reasonable membership terms and 4 who don’t.

The average membership term for our first group is 35.3 months and the average for our second group is only 1.75 months.

If we could bring the average of our second group up to even half of the average of our first group (17.65 months) our overall average membership term would be a much healthier 28.5 months.

That’s an additional average 6.6 months of membership dues… now if our members are paying $40 a month that’s $246 per member or $2460 for our 10 members.

Of course, if we had 1000 members that’s an additional $246000 of revenue.

All of those beginners who dropout very early into their memberships are actually pulling your retention figures, and your profits, down… so eliminate the outliers by improving your beginners experience in your club.

Thom Plummer on trial memberships

Thom Plummer has a terrific post on his Blog explaining a couple of different types of trial membership options.

Personally, I am a big fan of the paid trial membership (it generates better qualified prospects and sorts out the “buyers” from the “tryers”), in fact, paid trial memberships are one of the cornerstones of the iPOS advertising system.

Thom knows his stuff when it comes to trail memberships but one point I differ on is the $9 trial membership to compete with the low-pricers. I think that it is smarter to offer a higher priced trial but to add more value to it with personal training and/or group training session(s).

The reason being that you don’t want to compete with the low-pricers on price… that’s their strength not yours. Better to provide them with something that the low-pricers can’t or won’t offer, adds to the trial member’s experience in your club, and moves them up the expertise curve.

So rather than merely getting prospective members who are only loyal to price, you can begin to demonstrate to them why it is better to pay a little more with you to get personal assistance in your club. And by the end of their trial they can see the value of your membership as opposed to the low price of your competitor’s membership.

Anyway have a read of Thom’s Blog post if you want some sensible advice on trial memberships… my recommendation is for a value added paid trial membership.

Advice for 2012…

My advice for 2011 was to become the best at something (…something that your members care about) in your local market. If you have done that my advice for this year will be so much easier to accomplish.

My advice for 2012… know where your new members are coming from (after all they don’t exist in a vacuum outside of your club).

Of course, if you are the best at something you’ll know why your new members are coming to you, you’ll know what they want, and so you’ll have a head start on understanding where they are coming from.

Here’s why it’s so important… the global financial situation will persist through 2012… consumer confidence will stay low… competition will remain tight… and traditional marketing will continue to produce a declining return on investment.

But… people will still pay for the best and if you know how to get your message to them effectively you will always outperform the competition.

So for 2012 understand that your prospective new members are real people, with real problems, looking for real solutions and they are out there looking for something… you’ve just got to convince them that it’s you.

P.S. If you need help getting you message in front of your best qualified prospects don’t forget you can still get a copy of The Lead Box Is Dead...Long Live iPOS: The Humble Lead Box Concept Reinvented for the Twenty-First Century for only $24.90.

Direct response marketing

I recently heard a health and fitness marketing “guru” say… “In direct response marketing one percent is gold”.

And remember that’s responses not sales.

Not that long ago direct response marketers were touting two percent as average, then it was one percent, and today apparently one percent is exceptional.

Michael Scott Scudder recently reported that most clubs now get ¼ of one percent response rates… in that context I guess one percent is gold.

Of course, a one percent response rate is a massive, not to mention expensive, 99% failure rate… not something that I’d like to bet my future on.

Think beyond what you already know

It’s hard to think beyond what we already know… that’s why most people don’t bother.

The problem is compounded because we don’t know what we don’t know… and most of the time we aren’t really interested in finding out (after all it might expose our ignorance or incompetence).

For most of us most of the time it’s easier to settle for the devil we know.

What you already know got you here… but will it get you where you want to go?

More insights from Michael Scott Scudder

Here’s another insight courtesy of Michael Scott Scudder’s e-mail newsletter FIG Leaves… Change in Advertising/Marketing: Newspaper no longer works; direct mail now gets ¼ of 1% response for most clubs; less walk-ins; percentage of members secured by referrals at a 10 year-low; Facebook and other social media commanding more and more attention from potential consumers.

These insights parallel what I have been saying for a while… traditional media is struggling to deliver on member acquisition for most clubs.

If you want to know what to do about it read The New Rules Of Health, Fitness, And Wellness Marketing: A Scientific Approach To New Member Acquisition, Retention, and Long-Term Loyalty it is available as a free download.

Core members and non-core members?

In a couple of discussions I’ve had recently owners and managers have referred to “core members”. One owner commented… ”we don’t worry too much about the young male market, they’re not really our core members, we are more of a family club.”

Here’s the problem I have with this attitude… with so much competition in most markets today losing even “non-core” members can hurt you… even ruin you.

Lets say you have a club with 1500 members and your non-core members make up 10-15% of you total membership or 150-225 members… now lets say these non-core members are paying $50 a month for their memberships… that’s $90,000-$135,000 in revenue per annum (not including non-dues revenue, direct referrals, word of mouth etc).

The fact is that those non-core members can represent a significant chunk of your profit margin… sometimes even all of it.

Sure you are entitled to run your club with a particular focus but my recommendation is to treat every member like a core member [note: that doesn’t mean treating everyone the same]… sometimes you don’t know what you’ve got until it’s gone.

Not invented here bias

People tend to fall in love with their own ideas… even dumb people with dumb ideas (especially dumb people with dumb ideas).

Of course, it actually makes sense if you consider that everyone has their own unique worldview and that our ideas will be consistent with our particular worldview. Prominent behavioural economist Dan Ariely refers to this as an idiosyncratic fit.

Basically, our ideas inherently accommodate our own idiosyncrasies and therefore we tend to prefer them over the ideas of others that don’t accommodate our particular idiosyncrasies.

For example, a friend of mine owns a health club in a smallish rural town. He was a previous state bodybuilding champion (about a decade ago) and his wife was also a reasonably successful regional bodybuilder and so, perhaps not too surprisingly, his website has images of himself and his wife in their “bodybuilding” prime.

The problem, for me, is that this is a small town without a big “bodybuilding” population and typical hardcore bodybuilding images can be intimidating to non-bodybuilders. Obviously, the concern is that people visiting the website will see these images and form the view that they aren’t a good fit for the club.

Dr Ariely, in a number of experiments, demonstrated that the Not Invented Here bias actually extends beyond idiosyncratic fit… it turns out that we love our own ideas simply because they are ours.

Of course, no matter how big or successful we are no one (person or company) has a monopoly on good ideas… witness the failure of Microsoft’s Zune, Apple’s Newton, and Tower Records.

It’s natural for owners and managers to want to run their businesses in a way that is consistent with their own worldview… just leave room for the possibility that “your ideas” might be hindering, not helping, your business.

So where are you getting your ideas?

Get out of your own way

When I let go of what I am I become what I might be." - Lao Tzu

Growth strategy or cash grab?

In my first report The Evolution of a Health Club Member: Survival of the Fittest Is NOT a Retention Strategy I make the point that not all members are created equal… some contribute to cash flow and some contribute to profitability.

Of course, cash flow is vital but if you are trying to grow your business you need to focus on those members that contribute most to the bottom line. Or in the alternative, you need to convert more of those cash flow members into more profitable long-term memberships.

Here’s the problem… you need to understand the difference and, in my experience, most owners and managers don’t.

If you have a growth strategy… your member acquisition activities will be targeted, they will incorporate one or more retention tactics, they will be measurable, and they will produce a predictable outcome.

If you have a cash grab… you will offer a significant discount, you will take all comers, you won’t have any specific retention tactics (apart from your “customer service”), and the outcome will be unpredictable.

Don’t get me wrong there is nothing wrong with generating cash flow from discounts and specials… just don’t expect to grow your business with them.

You choose your members…

…long before they choose you.

Most owners and managers have a “take all comers” attitude to member acquisition. But the fact is that you actually choose your members whether you realize it or not.

You choose with your marketing… you choose with your staff… you choose with your sales approach… you choose with the size, look, layout, and upkeep of your club… you choose with your programs and equipment… you choose with your pricing… you choose with your location… you choose with the members you sign up…

With everything you do you choose your members (by the way you choose your competition too)… so in the end we get the members we deserve.

If you want better members make better choices.

The old saying goes that beggars can’t be choosers… so stop begging and start choosing.

The law of supply and demand

The law of supply and demand is an economic theory that states that, all things being equal, an increase in supply will lower prices and an increase in demand will raise prices.

Makes sense of course… as more competitors move into a given market (increasing supply) prices for memberships tend to fall as owners and managers compete for a limited membership base.

Interestingly, the diversity of offerings and lower prices in the marketplace can actually stimulate additional demand and prices will settle at a new equilibrium point... although usually lower than the initial market price.

Why then do owners and managers discount their memberships during the New Year period… when demand for memberships is supposedly at its highest?

If the law of supply and demand holds true shouldn’t we be charging a premium, or at the very least not discounting our prices, during the New Year rush?

I recall one manager who recently boasted to me that he was discounting his memberships by a full 30 percent during the New Year rush but his competitor could only offer a miserly 20 percent discount.

Of course, many owners and managers today rely on the cash flow generated by the New Year rush… in fact without it many would not survive.

And because most of these New Year’s resolution members are not profitably retained owners and managers are forced to participate in the annual cash grab, and competing means discounting… and most often the biggest discount wins.

When you don’t know where your next member is coming from the pressure to compete, even when demand is high, is always present… and competing in our industry almost always means discounting.

You’re not as strategic as you think you are

I’ve been involved with more than a few “strategy” meetings in my time and they all tend to go the same way… owners and managers trying to figure out how they can improve their business by doing exactly what they are doing right now (or some slight variation of it).

At a stretch they might swap one underperforming tactic for another… direct mail isn't doing so well for us anymore, I know lets run a radio ad.

Here’s the problem… if you knew how to improve your business wouldn’t you have done it already? As Arthur W Jones famously said, “All organizations are perfectly aligned to get the results they get.”

Everything you are doing now is perfect to get the results you are getting right now.

Of course, the corollary of that is if you want to improve your business you’ll have to do something different… and most owners and managers aren’t good at different (at least not until everyone else is doing it).

If different isn’t always better but better is always different… than logically different is the obvious starting point for better.

The myth of the perfect ad…

Owners and managers often become obsessed with creating the perfect ad… you know the one that will have prospective members lining up outside the front door, cash in hand, ready to sign on the dotted line.

Sorry, but that kind of reaction is beyond the power of any single ad… even the late great Steve Jobs needed a 90 minute presentation to get the Apple faithful to get their sleeping bags and camp outside an Apple Store.

The problem is that no single ad can say everything to everyone; of course that doesn’t stop many of you from trying.

But inevitably, the more you focus on women the more men you alienate, the more you focus on baby boomers the more of the young adults you alienate, the more you focus on group exercise the more of the weights guys you lose, the more you focus on the hardcore exercisers the more of the beginner crowd you alienate…

At law there is an expression for it…”expressio unius est exclusio alterius” or the expression of one thing is the exclusion of the other.

By expressly mentioning one thing you are by implication excluding the others. You know what happens when your buddy tells you that his female friend has a “nice personality” you immediately infer that she is unattractive.

Of course you have to target your marketing but you’re damned if you do and you are damned if you don’t.

And advertising is so expensive, who can afford to have multiple versions of your message in the marketplace… all the time? It’s just not practical.

Well it wasn’t before iPOS advertising… with iPOS you can have a hundred (or more) different ads, specifically targeting different markets, where they congregate, generating tens of thousand of exposures every month for less than a tenth of the cost of direct mail.

Stop going crazy trying to develop the perfect ad… develop a hundred of them.

Check out the free preview chapter and the New Rules of Marketing report where we discuss iPOS advertising in more detail.

New ideas… you’ve got no idea

I was talking to a club owner and manager recently and he made the comment that, “we are always looking for new ideas in our club”.

Knowing this guy I’m sure he meant what he said but his actions belied his statement… he wasn’t doing anything particularly new or innovative in his club and as I discussed a few new ideas with him he was quick to offer up reasons why he couldn’t do anything right now.

When he said “we are always looking for new ideas in our club” what he actually meant was… we are always looking for ideas that other people aren’t doing that are fully tested, proven, and are guaranteed to make money.

A CEO at a non-profit that I talked to also made a similar comment, “this sounds great but can you tell me about someone else who has used this idea successfully?”

We all look at what others are doing as a guide to our own decision making. We are afraid that if we stray too far from the herd we’ll get lost, be vulnerable to predators, or walk off a cliff.

Of course, a herd mentality can hurt just as much as it can help… overpopulation, lack of genetic diversity, and missed opportunities.

Apple’s iPhone broke from the herd with its touch screen technology to position itself as a dominant player in the smart phone market while others adopted a wait and see approach that saw them relegated with the rest of the pack.

Curves, despite its more recent growth issues, became the world’s largest health club franchise with an innovative micro-club strategy that bucked the “bigger is better” conventional wisdom.

As the saying goes… different isn’t always better, but better is always different.

Every new idea starts somewhere… why shouldn’t it be in your club?