// 12-month memberships versus no-contract terms

The 2011 Australian & New Zealand Fitness Industry Survey (ANZFIS) produced by Ezypay provides insights into every aspect of club operations, and also reveals the opinions of club members. Here, a panel of leading industry figures discusses a major outcome from the survey results.

THE 2011 ANZFIS EXPERT PANEL INCLUDED;

Simon Hall (SH)
Marketing Manager, Ezypay
Nicole Murphy-Pacholek (NP)
Centre Manager, Mingara One
Roxanne Olivares (RO)
Director of Programs, Newcastle University Sport
Nic Monteforte (NM)
Operations Director, Fit n Fast
Christina Vegners (CV)
Fitness Centre Manager, Health Mates
Reece Zondag (RZ)
CEO, Les Mills
Jamie Hayes (JH)
Managing Director, Healthy Inspirations
Justin Tamsett (JT)
Managing Director, Active Management
Richard Beddie (RB)
CEO, Fitness New Zealand

This year's survey revealed that 55 per cent of clubs sell a majority of 12-month membership contracts and only 15 per cent sell a no-contract membership. Interestingly, however, the leading reason cited by lapsed members that would influence them to rejoin their facility was the absence of a contract or a joining fee. Correspondingly, club owners and managers viewed no-contracts as the number one growth area in the year ahead, prompting the question;

Should clubs continue selling 12-month packages, or should they respond to the apparent demand for no-contract memberships?

RB I think we should sell whatever term we genuinely think will help that member achieve their long-term goals. I would be happy to sign for five years. That's me, and I'm not saying everyone's like that. But if someone wants to sell me a five-year membership and I'm openly committing to it knowing I wasn't tricked, then I'm okay with that, and the club should be okay with that as well. New Zealand sells a lot of 24 and 36-month memberships. And I think we should be okay with that, as long as we've done it in an ethical way.

I'm okay with selling no-contract, on one condition: price it right. So if you're selling a membership at $20 per week for a 12-month, don't sell the no-contract at $25 per week. It's just too cheap. I've seen businesses go no-contract, and I asked them 12 months later how it went. Biggest disaster ever and they had to backtrack. If you want to add it as an option, charge at least $30. And if you're not charging a joining fee on your standard product, it should be $99 on the no-contract. In fact, you can buy a no-contract at every club in the country – it's called casual visits.

RO We do have contracts. We have a 12-month contract that then rolls, which works for us; 60 per cent of our members are on direct debit, and they're all on contract. We have been considering a no-contract option, but purely just as an extra option, just because the word's out there. I agree there should be a joining fee: we have got a cancellation fee for contracts, so no-contracts should have a joining fee. We found that the direct-debit option didn't work for a lot of our student members, so we created an up-front semester membership. So it's the same concept really, it goes for 16 weeks and they pay a higher rate.

NP We offer a minimum of 12-months contract, and we used to have a three-month for those people that are unsure whether it's really for them. So we offered a three-month that was at a higher rate, and then if they continued past that duration, our sales team would call them and say 'If you commit to 12 months, we can drop your rate' and that actually became a selling tool. We have since replaced the three-month with a no-contract, and we follow the same practice.

CV We are running a similar situation. We offer both, so we have the minimum 12-month contract, which we've probably got about 90 per cent of our members on, and we also offer a flexible arrangement which is $10 extra per fortnight. Very few people take it; probably about three per cent. From the statistics we see, the ones that do go on the no-contract are staying just as long as those on a contract anyway. The feedback is they just feel more comfortable about their buying decision. But on the flip side, quite a few people actually want the 12-month, because they want to know they're committing themselves for at least that minimum 12-month period.

RB We did what is actually the world's largest survey on retention, and one of the key findings in the polls was that people that contracted for longer periods stayed for longer periods. The worst retention was three-month memberships.

NM For us a contract isn't an issue, as long as it's clear in the beginning what happens if you want to get out of the contract, and when members do want to get out of the contract, it's not difficult for them to do so. If it's clear up-frontthat if you cancel, this is what it's going to mean – a cancellation fee of X upfront – it's not a problem. People just want to be able to make an educated choice. We're dealing with a savvy consumer now.

Fit n Fast operates a low-cost model, which means we don't staff our clubs to the same volumes as a typical normal-size health club. So everything is made as simple and as streamlined as possible. So an easy-in, easy-out for members is the way that we've set the business. So they can sign online, they can cancel online.

JH But then the starter consumer, the new, nervous consumer who might be pre-disposed to joining on no-contract even though it was at no risk – if they don't get launched well and don't get into the habit, they're also going to be quick out, particularly if they're paying a higher price.

Planet Fitness in the US has a no-contract membership for $10 per month and a 12-month membership for $19.99 per month. But the 12-month membership is value-added, you can bring a friend any time, get access to other clubs and retail discounts etc. Obviously they want to up sell to the 12-month contract at double the rate. So there are different ways of playing.

RZ Essentially this is a pre-paid membership for a month. If you take us back 20 years, we used to sell short-term memberships, and this is just another short-term membership which happens to be for a much shorter period than the old three-month membership. I think this is the beginning of another cycle. Because, frankly, I think we'd all agree that the best thing to ever happen to our business was direct debits on a weekly or monthly basis to manage cash flow.

In New Zealand, the jury's out. I think it hasn't been long enough in New Zealand to say whether no-contracts are a success. One thing I will take out of the survey findings is that I'm going to do a reactivation campaign with my ex-members, offering them a no-contract membership.

NM In previous experience, we did do a trial run over in the UK where they went from contract 12-month memberships, and turned everybody into no-contracts, and it was a huge disaster. It was a massive failure. The Fit n Fast model is very clear, very succinct. We've started it as no-contract, so we're not doing something halfway in between. The contract became an issue in the past simply because it wasn't communicated correctly at the point of sale by the membership consultants.

In a nutshell
  • The fitness industry should be able to sell any length of membership provided it is sold in an ethical way, with the client's health as our priority.
  • No-contract memberships should be charged at a higher rate than regular 12-month contract membership

 

For more details about the 2011 ANZFIS, the discussion panel or Ezypay, email simon.hall@ezypay.com.au or visit
www.fitnesssurvey.com.au