Forget-me-nots: 5 Good Reasons to Drop Discounts and Focus on Existing Customers

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Special offers should be just that: special. Next time your fitness or wellness business decides to offer greatly reduced fees for new members, think about who’s winning and losing on the deal, how your existing customers feel, and whether you can sustain cash flow given your choice of sales strategy.
forget-me-notsI was in the gym the other day when a display caught my eye: it was for a steeply discounted membership for new sign-ups. Had I just been visiting for a day, I might have signed up then and there. But I was already a customer.

Not surprisingly, it miffed me a little that here I was paying the full membership rate; meanwhile, my gym had wandering eyes and was looking for the next pick-up. It felt unfaithful, dishonest, and a bit like I was yesterday’s news.

I get the fact that no car looks as good as a new one, and that goes for customers as well. But here are some business reasons that it’s a poor strategy to drop everything to get new customers in the door.

1. It’s more effort to make the same money

If your normal membership fee is $60 a month per customer and your costs are $30, a customer at full price nets you $360 a year. If you drop that fee to $40, you bring in only $120 a year per customer. That’s a third of what you’d get at full price, meaning it takes three times as many new customers at the discounted rate to bring in the same amount of money. What’s worse, you’ll have to spend more money to get those customers because there are more of them.

2. You’re holding back a nasty surprise

For your customer AND you. Sooner or later you’ll have to raise prices. If you put off the awful news, it will just hit customers harder when the hearts and sunshine wear off and it’s business as usual. You face a choice: extend the discount to get those new customers more entrenched with your brand? Or drop it, go to normal pricing, and hope that in the month or so you offered the discounts, your customers will be loyal enough not to instantly switch to another gym with a steep discount for new members?

3. It’s harder to sell membership with conditions

Let’s say that to enjoy continued discounts, you tell customers they need to “lock in pricing” for a year. The good news for you is that you are more or less guaranteed the full yearly net profits of their membership. The bad news is that you have to wait another 12 months for a shot at more revenue from that customer. Customers who are on the move, experiencing life changes, in between jobs, or simply not able to commit to a year at a time may balk at yearly memberships. Maybe they’ll jump at it — after all, the benefit of a yearly membership is that you don’t have to think about it for 12 months. But for most people, anything more complicated than “bulk pricing” your membership risks sounding like some kind of bait and switch. Discount gym memberships that charge separate fees to use the tennis court, pool, or jogging track can leave a bad taste in people’s mouths. Offering a lower fee for single-club use seems like a great deal at first — until you’re out of your zip code and you have to pay a day-use fee to use your own brand of gym. Charging existing members the same price to use your spa services as complete strangers, and not giving members preference for available slots, feels less like your gym has spa services and more like they rented out the space to Massage Envy.

Discount what you want, but the moment you try to make that money back, it’s the little “gotchas” that leave people wanting to exit their membership as soon as their time is up.

4. Discounts emphasize price, not value

Do you have the best water aerobics class in the northern suburbs? The only Olympic-sized pool? A 24×7 “spin theater”? Knowledgeable coaches for triathlon training? Then why are you always running seasonal sign-up sales? As a prospect, discounts on a full-service club make me question not only the quality of services, but the economic viability of the company over the long term. They make me look over my shoulder and wonder if the company is so desperate for memberships they’re willing to charge YMCA prices for country-club-style facilities and services.

5. Customers are cheaper to keep than replace

As mentioned in this article in Inc. Magazine, it’s “cheaper to keep ’em.”

This requires a change in thinking for the average fitness business owner who’s used to doing the math in terms of feet on treadmills or butts on bikes. Turn things around for a moment and ask yourself how many of your add-on services, training programs, home fitness products, or healthy lunches you’d sell if the same customer came in regularly for 4 months, then 8 months, then a year, then 2 years. It doesn’t cost you much at all to retain that customer. A simple and sincere thank you at the door when they enter and leave. A holiday card thanking them for being a customer for (insert number) months and reminding them of your holiday hours. A comfortable, non-threatening yoga environment. Hot fresh towels outside the locker rooms. Keeping the facility clean.

Now ask yourself how much it would cost to keep RE-acquiring that customer every 4 months. Chances are it’s 3-4X what it would have cost to keep her for a full year. So what’s better — spend that extra marketing money and offer discounts to the newbies, or surprise your loyal customers with free “MyGymBucks”, free bottled water, or a “thank you” membership rate that’s actually NOT more expensive than it is for new members?

Something to think about.