Is your wellness center, fitness business or yoga studio addicted to bad profits, earned at the expense of customer relationships?
Five bad profit practices to avoid:
1. Steep penalties that “trap” customers who would otherwise switch
A not-for-profit wellness center here in Dallas charges $150 when you cancel your membership.
Why? They say they want to discourage high membership churn. But they already charge triple what the big national health club chains charge – and their initial setup fee is about 30% higher than the one my current upscale health club charged. Seems like the financial deterrent to casual switching is already there.
I think the real rationale is entirely different. They’ve just found a way to make a little more money. The downside: customers who feel trapped often make sure EVERYONE they know hears their complaints. Is your business really willing to pay that price?
2. Stringent refund policies blindly enforced, often with unrealistic timelines
A coworker recently developed a rash after trying several pricy skincare and nutritional items from a local retailer. She talked with her doctor, who added strong warnings about possible interactions with her prescription medications. Not surprisingly, her next trip was back to the retailer.
When she tried to return the product on Day 6, the store refused – all returns have to happen within 5 days. True, they retained the profit from the initial sale – but at the expense of the customer relationship. She’s mad and she’s making sure everyone knows about it.
3. Nuisance charges that far exceed the value provided
Consider 7-11’s experience. These convenience stores historically charged exorbitant prices for staples like milk and bread, figuring that customers desperate for convenience would pay handsomely for it.
When did their growth really take off? When they lowered their prices to “normal” levels and focused on making money by offering unique products specifically designed to be super-convenient for drivers and others on the go.
Frequent offenders in fitness businesses: towel service fees, overpriced bottled water, a fee if you forget your ID card, charges to use other locations within a single chain.
It’s not unusual for charges like this to make up 20 – 30% of the bottom line for some businesses. Yet squeezing as many dollars as possible from customers when they feel they have no or poor alternatives is a lousy strategy for building long-lasting relationships.
4. Saving money on staff without considering the customer impact
Do you really want your customers to cringe every time they have to ask a question or resolve an issue? Hiring inexperienced staff, whether it’s receptionists or billing clerks, makes it hard for customers to update account information, get questions answered, terminate memberships, and more.
Sure, it may make your business a little more profitable this month to skimp on quality staff. But is it worth doing it at the expense of good customer relationships?
If you want to reduce cost, look for cost reductions that will also make life easier for your customer. For example, if they want to cancel a membership, let them send you an email or fill out a web form rather than forcing them to talk in-person with your sales staff. Trying to talk them out of it just annoys the pig, as the saying goes. Let your sales team produce “good” profits by focusing on genuine prospects.
5. “Special offers” that abuse otherwise faithful fans
One of the biggest offenders: the in-home exercise video market. Even well-regarded instructors pre-announce videos, hinting that the actual products will follow in a few months. They offer aggressive discounts for fully-paid pre-orders. Then delay after delay occurs, often pushing the final release date out as much as two years from the original pre-order date. This kind of treatment turns even raving fans into disillusioned cynics who share their disgust and fury with friends, family, and coworkers.
Offering a special price to new customers creates short-term profits by attracting lots of new customers. However, they’ll switch as soon as they find a slightly better price. Meanwhile you’ve ticked off your loyal customers by charging them higher rates. Plus, service often suffers while your business tries to handle the jump in new business.