We love to hear from subscribers. Need a sounding-board? Want to bounce an idea off someone? If you take the time to ask, we take the time to answer.
Here’s the latest round of questions we’ve tackled, some edited to fit:
1) At Club Industry, people kept saying membership does not make money. Programming makes money. Should we let non-members participate in our programming? Why pay membership then?
The folks who said membership doesn’t make money don’t really understand what they’re talking about.
Big picture, what makes money is giving customers a really wonderful experience that makes them feel that their lives are better, thanks to your business. That’s a MIX of what you do and how you do it (programming, for example), and how you price it (membership, “by the drink,” and so on.)
There are lots of ways to price your services and programs. A membership fee is a one-size-fits-all price. Charging on a consumption basis – by the class, by the hour, etc. – is another pricing tactic. Both are useful in the right setting, for the right customer and the right program. Neither is a silver bullet.
For example: I dropped my Gold’s membership. Why? For one thing, all I used was the cardio equipment and free weights. Not the pool, not the sauna, not group fitness, not spinning, not the Olympic weights, not child care. I felt like I paid an “all you can eat” price at a restaurant where I didn’t want most of what they served.
On the other hand: we have clients who offer comprehensive, integrated lifestyle change and weight loss programs. A single fee for the entire program (call it a membership fee if you want to) makes a lot of sense to customers.
To keep customers like me, Gold’s needed either a skinnied-down membership rate, or an unbundled approach where I only paid for what I used, when I used it. Yet an all-inclusive membership makes a lot of sense for someone who wants it all. You need pricing that meets the need of BOTH segments if you want to sell to BOTH segments.
Of course, lots of clubs say “Oooh, but that’s too complicated.” So be it. If you can’t figure this out, other businesses will. Customers will still be served, with or without you.
2) Is the day of the initiation fee over? How about 12-month contracts?
You’ll definitely continue to see startup fees, especially for healthy lifestyle businesses with multiphase or multimonth programs, health clubs, commercial fitness centers and those medical fitness centers who mimic commercial health clubs.
Whether they’re right for your particular business depends on your specific situation, the programs you offer, how you price them and so on. For example, if you’re selling to price-conscious customers, then the upfront fee lets you lower the recurring charge for classes, membership or program participation.
And waiving those fees can give you promotional flexibility with great optics while minimizing the financial downside. Plus, you avoid annoying existing customers who discover that the new guy’s paying a lower recurring monthly rate. On the other hand, annual contracts are quickly becoming a relic and that’s a very, very good thing. 12-month contracts are the pits.
The worst thing about them is that they create sales friction by making potential customers think longer and harder about their buying decision. It’s much easier to make, say, a $50/month decision than it is to make, say, a $600/year decision. Plus, in many states, an annual contract must contain even more mandated legal language, which is yet another turnoff for customers.
Historically, traditional health clubs loved annual agreements. They loved upfront payment for the whole year, or guaranteed monthly payments for a whole year via bank draft. They also typically counted on the fact that most customers would never use the services they were paying for.
Sounds crazy, doesn’t it?
Our take: a business model that depends on signing up customers who DON’T routinely use your services is a really bad business model.
3) Is it ever okay to discount?
This question came from someone who listened to the “Ditch Discounts” teleclass, where I spend a lot of time talking about how to position your wellness business so that customers happily pay full price.
Short answer: Yes, it’s okay to discount. Occasionally.
Long answer: Discounts should be A marketing tool – not THE marketing tool.
Discounting’s often an excellent strategy to get people to try something new. It’s especially effective when combined with a limited-time offer. And a volume discount can be a perfectly reasonable offer under the right conditions.
But if every marketing activity you do includes a discount, you’re shooting yourself in the foot. Constant discounts on your regular services suggest that they’re overpriced the rest of the time. And you train people to wait to buy.
Instead, look for other ways to enhance the value of what you’re offering customers. Three quick examples, just to give you a feel for how broadly you should think about this:
Keep the price the same, but give an extra session after every ten sessions. Effectively, it’s a 10% discount – and even better, it’s one of the most powerful loyalty programs you can implement.
Invite special guests and make a big fuss, far and wide, about how fortunate your business is to benefit from their knowledge. One of our clients conducts quarterly “meet and greets” for healthy lifestyle program participants and prominent local health and wellness personalities – a vegan chef, the head of the preventive cardiology program, and so on. Getting to meet and talk with these folks has real cachet among their clients.
Invite a special local vendor to preview new items of interest to your clients. We worked with a triathlon training camp that included previews of the latest and greatest cool gadgets for triathletes. Clients loved it!
4) How do we respond to discount competition?
We actually got questions related to this issue from a variety of businesses – yoga, fitness, massage, chiropractic, medical fitness plus a few others, so we’ll condense our reply to all those questions here.
If you’re truly losing business to discount competitors, the question you really need to ask yourself is this:
What differences do OUR CUSTOMERS see between us and Competitor X?
(That’s not the same as why YOU think you’re different. Answering this question requires actually talking and listening to your customers with a discerning ear.)
Then you have to decide whether you have:
1) a communication problem
Your wellness business does have unique and distinctive attributes that really matter to customers. But your marketing doesn’t adequately communicate what customers believe is special about your wellness business.
This problem’s actually fairly easy to solve. We work with clients all the time who just need help getting the word out.
OR
2) a competition problem
In the eyes of your customers, there’s actually not much difference between your business and the discounters. From their point of view, you ARE overcharging for what they care about.
The painful truth:
Many of the folks asking this question fall into Category 2. Your business isn’t particularly distinctive. You just wish your customers would pay higher prices.
You’ve drunk your own Koolaid. You really do believe your services are “cutting edge,” your facilities are “world class” and your staff is nothing but “caring, deeply-experienced professionals.”
But here’s the truth of what your customers experience: Lackluster interaction with interchangeable staff, run-of-the-mill services that stay the same from year to year, and if you closed tomorrow most of your customers wouldn’t miss your business that much.
You provide services on YOUR terms, the way YOU want to provide them, and you aren’t really paying much attention to what your CUSTOMERS think. Moreover, many of you are on a wellness mission, so you insist on providing programs because YOU like them and OTHER people SHOULD want them, rather than offering what customers DO want and will pay for.
What should you do if you’re in Category 2? Beat the discounters at their own game. Streamline your costs, drop the services people don’t use, maximize your efficiency and utilization – and drop your prices.
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