In 1991 I saw a trend and then paradigm shift that was inevitably going to become the future reality of the health club industry. I told everyone that would listen back then that the average “health club introductory membership was overpriced” and we must lower our barrier to entry. No one wanted to hear that at the time because all people could hear was “discounting” and therefore a lot of those non-believers fell to their financial death. Their pride of not “discounting” (which MMC® does not condone discounting in the first place) their dues was apparently more important than paying the mortgage and payroll taxes. Today I have a new paradigm to share with you.
The 80’s was a time when a lot of people were getting rich in the health club business and everyone was building new health clubs to get in on the action; doctors, attorneys, casinos etc. Some of these people with absolutely no experience in the health club industry whatsoever. They just saw (and heard) what a great investment it was and jumped in with both feet. This created an overbuilt industry going into the 90’s with only conservative increases in new membership; which meant too many health clubs and not enough members. To me, it was clear that the industry was going to have to correct itself (just like today’s housing market) and when problems are left alone to work themselves out….well let’s just say… it takes a while. It is also noteworthy that initially when left alone to correct itself it does so, in the beginning, by overcorrecting. In my opinion, this is the state of the health club industry today.
I knew there was a market for a company that could grow the business for a selected few health clubs that was willing to think outside-the-box. And man I was correct. I started a company called mulligan marketing concepts® (“mulligan” representing a do over in golf) and we concentrated solely on raising as much cash as possible for independent operators throughout the US, Canada and Europe. We operated (and still do) for more than twenty enormously successful years selling health club memberships. We raised more than $40,000,000.00 for health clubs in the US alone.
My theory is simple….bring in the masses on a limited health club membership, upgrade some, up-sell others and increase daily receivables from the rest through your profit centers. Most people in the health club industry thought I was ruining the health club industry and giving the health club memberships away but in reality I was just lowering the barrier of entry and following the trend of volume pricing while creating an upgrade and up-sell twist, i.e., re-packaging and thinking outside-the-box. I strongly believed if we had more members and got them to spend more per visit (not to be confused with nickeling and diming them) on profit centers, e.g., Juice bar, massage, tanning, pro-shop, personal training, etc. We could grow the health club industry and grow our individual health clubs at the same time.
For the past twenty years health club owners would tell me they were considering raising their dues but would never consider lowering them. I could empathize with their feelings that they felt the value of their product was x and they wanted to get x for it. The problem is numbers are numbers. There are only so many people committed to a health and fitness lifestyle and even fewer of them in the higher income brackets with discretionary time and income. So when you raise your membership dues beyond your market there is only one place to go; it’s simple mathematics.
Let’s say for argument you own a health club in an area where there are 50,000 roof tops within a 5 mile radius of your health club that have someone gainfully employed. Now let’s say studies show that 10% (it’s more like 11% but we will use 10% for simple math) of your market is health and fitness conscious. That gives you 5,000 potential members on the surface. Then figure on how much someone must be earning to comfortably afford a membership at your health club. Now take that percentage from the 5,000. Let’s error on the side of high and say it’s 10%; so you have 1,000 potential health club members. But now you have to add into the equation all other fitness facilities, e.g., aerobic centers, local gyms, YMCAs, women only health clubs, swim clubs, country clubs (that offer fitness), hospitals, hotels (with fitness), and so on and so on.
It always makes me laugh when I meet with an owner and we do a competitive overview and he thinks any of the above is not his direct competitor. I am here to tell you, if someone is paying them one health club dollar….they are your competitors.
When times start to get tough and health club owners/operators need an influx of revenue they usually think of four ways to get it.
1.) Raise dues on current members.
2.) Get current members to spend more.
3.) Cut cost.
4.) Capture new members.
A lot of owners and/or operators think the best way to raise some revenue is to raise existing membership dues. This is a huge mistake because the fall out of disgruntled members offsets the increased revenue. These members were probably just waiting for a “logical” excuse to quit anyway and now you’ve handed it to them on a silver platter. This plan usually results in a loss of revenue more times than not. The only way this can work is if you start with a surplus of members and then thin the herd.
Another ill-conceived plan to increase revenue is to get your existing members to spend more in the profit centers. This rarely works since consumers fall into spending patterns and buying habits and it is extremely difficult to change these “conditioned” routines. Besides, punishing your loyal customers and members by always coming back to them for more money is a terrible idea.
Others believe the only way to survive the storm is to “cut cost”, and they usually start with lowering payroll, which in turn, diminishes service, which leads to unsatisfied members who leave the health club. No one has ever “cut” their way to prosperity. A quick tip to those of you afraid of losing your job…increase the traffic at your health club and you will become indispensable.
The best way to raise revenue and enjoy the storm is by bringing in new members and “condition” their spending patterns and buying habits at the point of sale. This is exactly what MMC® does; we bring in new business, immediate cash, and increased revenue from profit centers, long term residual income and unmatched player retention.
The trick in life is not to set the trends or even follow the trends. The real art is to see them and get out ahead of them (trends are usually set out of frustration with the status quo, which leads to people question the ways and reasons why things are being done the way they are, they begin changing the way things are being done, create new paradigms within an industry and the “trend” is set in motion).
I see the trend is ready to turn again in the next couple of years and the masses in the industry (80%) will soon follow like little puppies. A quick note on the 80 percentile….80% of the population is dissatisfied with their lot in life. If you follow them and do the same things they do you will get the same results.
I branched out of the health club industry in 2005 to focus on the golf industry which was following the same trends in the late 2000s as the health club industry did in the early 90’s. But as I said before, I follow trends. Recently I was reading a report (IHRSA) based on the numbers of the industry and saw what I predicted 10 years ago was coming to fruition today. Here are a couple of excerpts from the report that are relevant to tomorrow’s health club industry (that I have been preaching for 20 years):
• While the increase in total memberships added to the industry’s bottom line, other key drivers for the growth in industry revenue came from an increase in non-dues spending by both members and non-members. Also, the number of non-member patrons increased by 8.2 percent to 7.8 million in 2010, up from 7.2 million in 2009.
• “Economic indicators show that consumers were very price-sensitive with respect to health club membership dues,” said Melissa Rodriguez, IHRSA’s research manager. “With increased traffic, clubs added value to memberships and offered quality ancillary services, for which consumers were more willing to pay premium dollars.”
Other articles that have caught my eye in the recently are written on the numerous health clubs selling memberships for as low as $8 to $10 a month. I really believe (know) they are missing the boat. Again these people have just copied what they have seen on the surface and think they get it; but they haven’t gotten anything but headaches. The cheap health club membership should just be a “hook” not a business model.
20 years ago in 1991 I saw this paradigm shift starting and I got out way ahead of it. Today I see a new shift (trend) as well. The industry is correcting itself and will end up where it always belonged. I know a lot of you out there disagree with my predictions but it is my gut feeling you only disagree out of fear of the reality just as you did in the 90’s when I was running promotions throughout the US advertising “raise $250,000 in 30 days”. I ran those promotions successfully for more than 20 years and raised more than $40,000,000.00 in the health club industry and more than $10,000,000 in the golf industry. I’ve worked with hundreds of health clubs, sold thousands of memberships, spent millions of dollars in marketing, hundreds of thousands of dollars in market research and I am still going strong today after 30 years in the health club business; the last twenty-one of those years as the president of MMC®. I love the health club industry and want to see you thrive in it as well.
There is another shift in paradigms I would like to share with you. We use to think we must hide and safe guard all of our knowledge (intellectual property) so no one can steal it, copy it, or benefit from it in any way, without us being compensated first. Well I am here to tell you that is history. We live in a time of information and people are hungry for it now. If you can give them immediate value for free they will come back for more and be willing to pay for it because they know you are the real deal. People want to trust you before they do business with you. If you can provide them with value up front and not want anything in return you will gain their trust. Then you must under promise and over deliver to exceed their expectations to keep their business. I like to use the example of when I first started in the business in 1982; we gave out free two week guest passes. We would get the prospect in the health club and do their measurements, help them with their diet, take them through a complete workout and then (and only after we gave “value”) we offered them a huge discount off their new health club membership if they chose to trade in their free two week pass for a health club membership today. After all, health and fitness is a lifetime gift you should give yourself and your family…not just “two weeks”.
Today it is still one of the best ways to build trust within your market. I also believe as a marketer it is a great way for the people in the trenches (salespeople, membership counsellors, sales associates, etc.) To effectively drive business in the door at ground level. Although following up with those prospects has changed through the years, from home phone calls to email and now to SMS. The basics still work; you just have to adapt them to the times.
I want to leave you with giving you value for spending your valuable time reading this article, so here it is plain and simple:
The average health club (not niche clubs) out there has a perceived value of $29.00 a month (about dollar a day). If you have racquet sports, pools, etc. You have additional profit centers like juice bar, tanning etc. You can literally get whatever you want for your product/services but you must package and present it first the way it is perceived. “Perceived value” is the key. People’s perception is their reality. This is your foundation……start building.
I am going to share a couple of marketing facts with you that will help you design an elementary campaign. I say “elementary” because without the complete knowledge of psychology, history, marketing media, market research, demographic studies and a host of other data, your marketing skills will always be “elementary”. This is why when copycats, try to copy MMC®’s campaigns, they always fall on their face. I am not saying this out of bitterness (because I am honored they love my work), but out of trying to educate you as the listener, to really learn the craft of health club marketing and professional sales. These people only see the initial offer, the “hook” and assume they know everything; when all they know is enough to get themselves, and whosever money they are spending….broke. So understand at this point this information is of great value, but it is only the beginning.
Let’s discuss a few ways you can work on capturing health club dollars in your market. Here are a couple of facts our (health clubs in general) busiest days are Monday thru Thursday and of course Friday, Saturday and Sunday you can shoot a canon in most health clubs and not hit anyone. So common sense tells you the weekend days can be designated as a lost leader.
For those of you unfamiliar with the term “lost leader” a simple way of defining it is the part of your product or service (must have value to the consumer) that is least valuable to you and the bottom line of your business that you can practically give away to get new customers. There is always a lost leader in every business; just think outside-the-box and you’ll discover it.
The loss leader is then used as your “hook” in your ad copy, radio spots, social media etc. Hook, just like in catching a fish is baited with your “tag line”. The tag line has to grab the immediate attention of the consumer; then you set the hook with the loss leader. Haven’t you heard “any bad day of fishing beats any good day at work”? Lol
It is amazing that hundreds of “health club want-to-be marketers” foolishly focus only on the dollar amount and think it is the “cheap price” that is bringing in the huge numbers. These copycats go out of business frequently taking their bargain hunting clients with them. The price is only a hook (using the correct hook is only 1% of the fishing trip); you still have to get the fish in the boat, not to mention the 100 other things before and after. You must know your target audience and how to get them to “act now” this is where MMC® stands head and shoulders above all others.
To run a successful marketing campaign you must enlist some key elements.
• Know your business: I mean really know what you are selling. People buy for emotional reasons and justify their purchases with logical reasons e.g. Someone might buy a health club membership for status, lifestyle, image, connection with the opposite sex, etc. Then they will justify their purchase with things like…health, fitness, live longer, etc. What reputation (brand) does your health club have in the marketplace and more important what do you want that brand to say? That is what you are selling.
• Know your audience: If you have an upscale racquet facility that you want positioned in the market place as an exclusive health club then you need to focus your attention to consumers who can afford, are willing to pay, and you can satisfy some their emotional needs by being a member of your exclusive health club. Just as if you want to brand yourself as being the “it” health club for the young hot executives and so on. The key is to know their emotional needs and how your product/service meets those needs.
• Do your research (homework): If your data (research is more than a year old…it’s outdated). MMC® started profiling the desired consumer back in the early 90’s when it was outrageously expensive. Today MMC® has a staff dedicated specifically to our research division that works 24/7 for our clients because we want “real time” data but the average business with a limited budget can go online and get a ton of data on their market absolutely free.
• Decide which form (medium) of media fits your budget and goals: a lot of times this is difficult for small businesses with limited budgets. What might be best to reach your goals might not always fit within your budget. Be creative (think outside-the-box). When I started MMC® I knew I needed to do direct mail because all of my research unequivocally proved direct mail to be the best option for targeting consumers who fit our profile within our client’s geographic area (which in most cases, not all, depending on if you are rural, downtown, etc., is about a five mile radius of your health club). My challenge was direct mail was very expensive compared to newspaper ads, radio, social media, etc. But it also was the most effective producing the greatest ROI and was the only way I could get a one on one connection with my demographic. So I went to the largest mailing house companies and started negotiating (at this point I didn’t even have a client) and told them I would give them all of my business if they would give me the very best pricing available. I found a couple of companies I felt could give me great value with dignity and integrity, made the partnership and we still work with them today. My next challenge was to come up with the initial cash to launch the first mailing (since most owners lived in a negative cash flow). I came up with an idea, ran with it, and here I am today.
• Decide on the offer: this is where most people drop the ball. You must be able to offer something so unbelievable that it grabs the consumer’s attention. You have ten seconds to let them know what’s in it for them or you lose them. Most people are afraid to give too much away, or if the offer sounds too good to be true nobody will believe it. Stop over thinking it. Yes you can’t give away the store but if you don’t give enough value you’ll never get people in the door. It takes some thought but come up with a win-win for you and the customer. Einstein was quoted as defining insanity as “doing the same thing over and over expecting a different result”. Come up with something you’ve never tried before and try it!
• Presentation/delivery of your offer: How is your brand being presented? In my career I have been blessed to work with a great team and align our team with competent companies with similar goals. We have researched all forms of media marketing and have been able to test what works and what does not. Simple things like a return address on an envelope can decrease or increase a percentage of a marketing piece’s response. It can determine whether that piece will get opened or will not. The same goes for what you write in a subject line in an email, or the first three words in a text message, when trying to pull from your marketing efforts. Just think about what would grab your attention if you were on the other end.
• Create excitement: After you get the consumer’s attention with the hook (tag line) you must be able to keep their attention. This is where ad copy comes in. I like to keep it short and sweet. I want to show as much value as possible.
• Call to immediate action: You must get the consumer to act now. Limited time only, limited stock, etc., are great “calls to action” but, you would be amazed at how important of a role the fear of scarcity has on the consumer of being left out; use it with integrity. What I have learned most is whatever you say you must mean and stick behind. If you say it ends Sunday the 8th then you better end it Sunday the 8th. Keep in mind, you are building a brand and reputation and you want people to know you keep your word.
Of course there is no possible way I can cover everything you need to know about health club marketing, research and sales in one article so I plan to write articles, record audios and produce videos periodically to help you better market and sell your health and fitness product or service in the near future.
Health Club’s Roadmap To Success
Throughout our site you have learned a lot about health club marketing and professional sales. Now it is time for us to give you a roadmap to financial success.
You (the owner), have invested millions of dollars into your health club. On some level, you understand the importance and absolute necessity of health club marketing, branding and professional sales. Not to invest into this area of your business is an oversight that must be remedied. By this point you are completely aware that MMC® offers our services on a “success” basis, therefore eliminating any additional investment or “upfront cash” on your part. You also know at this point, to ask your GM and/or sales staff to effectively grow the business without the proper research, education and tools is like asking a blind man to be your professional driver.
Start with MMC®’s Cash Campaign. This will accomplish the following things and much more.
•Raise the revenue to fund all future campaigns
•Raise the revenue to get your club(s) in mint condition
•Lock-up all members within a five to ten (5-10) mile radius of your health club for two(2) years
•Start building your mailing list, SMS (text messaging) list, email list, social media list, etc.
•Buys you the time not worrying about revenue to start implementing customer relations and loyalty programs
•Revenue to pay some bills and maybe even yourself
•MMC®’s Cash Campaign is designed on a two (2) year health club membership. We do this for several reasons and one of the reasons is to lock-up the relationship from the point of sale. This health club membership is a great value to the public so we look at it as “buying the member’s loyalty” in the beginning. This gives you two (2) years to “sell” the member on staying loyal to their new health club home…your health club.
Roll out MMC®’s EFT/Monthly Dues Campaign. This will accomplish the following things and much more.
•This campaign should be launched within 60 days of the cash campaign. This campaign is when you now start building your brand and raising your rates. In previous areas of this site we shared with you that raising rates or dues is a terrible idea, unless, you are starting off with a surplus of health club members. If you have just finished our cash campaign you have anywhere between 500 and 2,000 health club members. Now, we can start “thinning out the herd”.
Most health clubs mess this up so bad. They are always so afraid of discounting then end up “discounting” themselves out of business. The old adage “you get what you focus on” is so true. They refuse to do it right the first time and build up; instead they are on a slow spiral down. MMC®’s approach is to lock-up every member within ten (10) miles and then start raising the perceived value as getting greater and the product becoming more of a commodity; whereas most health clubs do the complete opposite and start high and then gradually lower and discount their product to where the public perceives the value of the product as getting worse, not better.
•Our EFT/Monthly Dues Campaign is design to capture those targets (members) who were not interested in a PIF (paid in full) option but prefer to pay on a monthly basis. This is a great addition to anyone’s business model because it brings in set revenue monthly; which makes it easier on bookkeepers and management having this monthly revenue stream.
•This health club membership is higher than the cash membership but is also a two (2) year commitment.
Roll out MMC®’s Elite/Ambassador Campaign. This will accomplish the following things and much more.
•This campaign is designed for the member who wants it all. This is the health club membership everyone will secretly aspire to. These are the members who workout three to five times a week, and want people to know their name when they get to the health club, they want to have the nicest lockers, they want to play in all the club events whether its tournaments or leagues, racquetball, tennis, etc., they don’t want to be charged additional fees, they want to walk in the pro-shop and get immediate attention, free towel service, they want to attend the social functions etc. This quality of service and attention commands a premium health club membership fee.
•You are now financially sound enough to charge whatever you feel is appropriate for the level of service and product you offer. You have been building your brand by building the perceived value of your product and services within your market.
•You now have a surplus of health club members and you have been growing slowly through your monthly campaigns getting the word out this is the health club to be a member of. It’s just like a night club or restaurant…everyone wants to go where it’s happening.
At the end of this two (2) year cycle your original health club members will be up for renewal and it is time to raise their membership rates. Do not make them change their membership structure because you do not want to encourage fallout, although at this point you are well prepared for it if it were to happen because you now have a surplus of health club members.
By raising rates you will definitely experience a drop in health club members which might be a good thing at this point and you can gauge what the health club membership value is based on your success. Even the members that drop off of the membership will still want to work out/train at their preferred health club since you have been satisfying their 6 core emotional needs for the past two (2) years and have conditioned them to link happiness with your health club.
Join MMC®’s Platinum Plus Membership. This will accomplish the following things and much more.
•We have set our Platinum Membership on two (2) years as well. This too, has been done for many reasons. First it will take at least two (2) years for you and/or your staff to become proficient in health club marketing and professional sales. Second, it will complete one full cycle of facilitating the most important mediums of marketing media for growing your health club and your health and fitness career. Third, you will have built such a strong foundation even if you only apply ten percent (10%) of what you learn during this period you still will be able to grow the business effectively.
•In the beginning of this you will be starting out with the basics like introductory sales training, building your lists, building and registering for social media sites, doing community outreach campaigns, etc. Since you have already run the cash campaign you won’t have the pressure of “raising revenue” looming over you which will give you the time to do these tasks effectively.
•This membership is as important as any of the other campaigns because without the everyday details and seed planting, the health club will always be dependent on the next “campaign”. Planting seeds daily will pay dividends with compound interest.
•This workshop is where we take you through the seven (7) steps of financial freedom.
If you are ready to stop “hoping” and start knowing you have planted the seeds for an abundant harvest…partner with MMC® today!
I hope you have found this information to be of great value. Please take time to view the entire site for additional free tips on growing your health club, and your health and fitness career. Watch the videos (please be patient while they load and buffer), read the text and pick and choose what is valuable to you and fits your current and future business model.
THANK YOU FOR PARTNERING WITH MMC® TODAY IN GROWING YOUR HEALTH CLUB AND YOUR HEALTH AND FITNESS CAREER.