// Will you change the way you sell memberships?
The 2010 Australian Fitness Industry Survey, produced by Ezypay, provides club owners and managers with insights into club operations, staffing, sales, marketing and finance along with the thoughts, feelings and perceptions of their club members.
In this series of articles, a panel of leading industry professionals discuss some of the major outcomes from this year’s AFIS survey results.The survey outcomes showed that, following the recent media coverage on membership contracts and the new membership agreement law, both club owners and members saw this as an important area.
Is the survey data strong enough for the industry to change the way it sells memberships?
JH: I think that we are in challenging times. I worry about clubs buying into a business plan with no-minimum term contract, unless they have proper processes in place to make those members stay. An operator with great strategies that make members stay could go to a no-minimum term contract, but I do worry there’s going to be a churn factor of club operators that say they will go to no-contracts – and yes, sure people will join – but can they make them stick? I think we are going to have to wait and see. No doubt it’s attractive from a consumer point of view because it’s a low transaction, but whether those clubs will be able to be profitable in the longer term will remain to be seen.
GG: Having worked with one major group and having knowledge of another, I think JH is right. Looking at their attrition rates of 60+% and their contract terms, at the 12-month mark the drop off rate is like a cliff. With a no-contract membership it would be like a sliding scale from one month down to 12 months with clubs missing out on the curve, which could take a business into the red.
GB: You also have to look at the effect it has on the membership consultants in the business. Once they make a sale, they know they’ve got that member for 12months which guarantees that revenue. If members start cancelling in that period, the pressure will be put on the consultants to sell more memberships throughout that 12-month period. At least with a 12-month term you know where your membership is likely to drop off and it’s manageable. No-contract will make business planning unmanageable.
GG: If you have a membership consultant remuneration system that gives kickbacks dependant on how long the member stays, there’s no incentive if the member can leave on a no-contract.
JT: So really, the elephant in the room is ‘we buy retention by locking people into contracts’.
GG: The contract has validity in my mind. I’ve heard so many people say that they join the club, they come along and then they have a relapse and drop out. Then they keep saying to themselves ‘I’m going to go next week, I’m going to go next week’, and at some point in that 12 month period they do start attending again. Perhaps they are yo-yo exercisers, but maybe the contract is a good thing for them – it’s that nagging presence and it’s on their bank or credit card statement reminding them that they need to get back to the gym. I believe that the contract is a valid methodology for engaging with people who are on that cusp, struggling to get connected and stay connected. But I think you need the choice to have a no-contract option as well, and to ‘load it up’ so that the cheaper rate is the person locking in for 12 months. You have to do it right, you’ve got to have the costs in the beginning to include the costs of orientation and training.
JW: I think you are absolutely right, there needs to be a place for both. The law changes are about the government forcing the industry to do this ‘crazy thing’ called customer service. It forces club owners to make sure that they are not just selling membership and forgetting about the person. I have a question for EK; with the Curves model being worldwide, are there contract issues in other countries around the world similar to what is happening here?
EK: Not as such; we truly believe there needs to be an agreement in place between the owner and the member for both of them to work towards. We also accept that – especially with women – they need to be able to enter and exit their membership with grace, and Curves has provisions to enable this.
SH: I think the issues we have discussed have moved us back to that all important area of staffing in our facilities, i.e., making sure staff are trained and qualified to ask the right questions when someone joins, to help people with the ‘stickiness’ of their memberships and to be able to ensure that the clubs are full of members who want to be there and are passionate.
Australian Fitness Industry Survey
The 2010 AFIS discussion series covers critical fitness topics including staff quality, social media, membership fees, retention and growth and the concerns around membership contracts. To view the full video series go to www.fitnesssurvey.com.au
NETWORK • SPRING 2010 • PP 61-62