Health Club Management: Pricing your dues correctly

Feeling trapped when it comes to pricing?

Should you raise your health club rates or implement an annual/maintenance fee program?

Do you feel trapped when you are deciding to raise your rates?

In today’s economic environment and with the onslaught of the low-cost club, under $25.00 per month, increasing your monthly dues can be very tricky. Depending on your clubs amenities and the competition in your area, will you be able to compete better by raising your rates, or by implementing an annual/maintenance fee (AF)?

It is easier to raise rates by $x.xx or xx% per month as long as your rate structure will remain at or below  your competition’s, especially if amenities are the same or better. If your increased rates will cause you to be at the top of the rate scale and your amenities and/or services are no different than those of your competitors you may lose market share. Here is an article on Raise Your Health Club Prices and Outshine Low Priced Club Competitors. If you find yourself agreeing with this article you may want to raise your rates.

However, if you cannot compete with the amenities of your competition or your amenities are the same, keeping a lower rate and implementing an AF fee may be more conducive and easier to sell.

8 Guidelines you need to follow BEFORE you implement an annual/maintenance fee for your club:

1. Can you legally have such a fee according to your State’s regulations that control the health & fitness industry? Will there be any State bonding issues if you implement such a fee? In many states, collecting funds in advance requires a surety bond to cover any losses to the consumer if a club closes prior to any fees being fulfilled by the club. So make sure you review your state’s regulations for your industry. You never want to get on the wrong side of a government agency. Unfortunately they believe they have to protect the consumer for all actions no matter the cost to the business that pays the taxes. (A little political jab)
2. Consult your attorney once you have determined you can legally implement such a fee and add the necessary language to your contract. Spend a thousand dollars to do it right the first time and avoid more expensive legal fees down the road. Caution: be careful that your attorney does not get carried away with the wording. We all know they get paid by the word, just kidding, but it seems that way. This is not rocket science. Avoid all the legalese if possible. It will scare your member and only give you another objection to overcome.
3. What is the AF going to be used for? Do not expect you can just pocket the money and buy yourself a nice new car or take a nice trip. You must reinvest in your club. Replace old equipment, add new services or renovate your club each year. You must show you are willing to invest in your members. If you do not earmark a significant percentage of the fee for such capital improvements or added services you, will lose all the goodwill you have earned over the years, and in turn lose market share.
4. Does the AF pertain to the past year or to the upcoming year? If the fee is for the past year then you may be able to avoid any bonding issues. If the fee is for the next 12 months then bonding and/or state regulations could come into effect. The fee can be applied to current members also, but you must do the proper PR to make sure you do not lose members. If you have not raised your prices within the past couple of years this should be a very easy PR campaign.
5. When will you debit the AF? You can debit the AF on the same date for all members, or instead schedule the debit based on the membership type, join date, or a combination of the two. If you utilize the one or two draft dates per year, one option is draft in the Fall and/or in the Spring based on the join date. For example, anyone that joins from January to June the fee will be drafted in October. If the join date is July through December the AF will be drafted in April. Always have the fee debited on a different day than the normal monthly draft date. This will avoid confusion and also help with eliminating returns. If you add the fee to the normal monthly debit you will increase your risk of returns.
6. What is the price break for such an AF? If you were planning to raise your rates $xx per month should the AF be that amount times 12, or somewhere below? Should it be one month of your average dues? This must be carefully considered especially if you are going to include your current members. The range for the AF for our clients is $15.00 to $49.00 per year.
7. How will I justify the AF to current members? This is a very sensitive area and may cause you to lose some members, but it may well be worth it. If you handle this correctly your members will understand, especially if you have not raised your fees in the past couple of years.  What you do not want to do is play favorites to any special membership group since most members use all the same amenities. However, the one time you can charge no AF or a different AF is if one type of membership is significantly different from the others in value and  services offered.
8. Will I prorate the AF up to the date of the next AF? Pro-rating the fee for new members allows for a larger up front initial payment and usually does not affect the sales process. It will cause your sales staff to make some calculations based off a pro-rate “cheat sheet,” but if they are unable to handle simple math they should not be working for you. Implementing an AF program can also help in closing new sales when you run promotional campaigns. We have all run the “no money down” or “dollar down” promotions. Now these promotions will have less of an impact on the cash you collect when the member joins because you are now getting additional money from the prorated AF that will help absorb some of the enrollment discount you offer in your promotion.

The decision to add an annual/maintenance fee can provide a great boost to your club & your wallet, but do not implement the AF haphazardly.

Now see the 8 steps to implementing a successful AF program.

8 Steps for Successful Implementation of an Annual Fee at Your Health Club

Last week we discussed the 8 guidelines you need to follow before implementing a successful annual/maintenance fee program (AF). I hope you have already started the ball rolling, at least considering all the options and surveying your current members and staff for feedback.

This week is the easier part: How to implement the AF.

 8 steps to implementing a successful annual/maintenance fee program:

1.      Clearly state the fee during the club tour

2.      Clearly mention the fee in any marketing material. The last thing you want to do is surprise a potential member with a fee they were not expecting.

3.      Clearly highlight the AF in your contract and have the member initial the section.

4.      Clearly state the terms by which the membership can be cancelled.

5.     Make clear to the member that your club’s cancellation policy must be followed; otherwise the AF will still apply even if they close their bank account to avoid any and all fees. You are making an investment in your club for your member’s future use they should give you the respect you deserve to properly cancel the account.

6.      Clearly state the annual fee is non-refundable, especially if the AF is for the next 12 months.

7.      Post signs in the club prior to the debit date of the AF to remind the members. Out of sight out of mind is not the way to go, as so many clubs do. The posting of signs is highly unlikely to cause cancellations from your active members who use the club. Non-active members may question the fee or even cancel. However, this should never happen if you are communicating with all your members, not just with those using your club. That is a topic for another discussion.

8.      Consider closing the club for X days once per year to implement any club renovations and/or add the new equipment. The best time to do this is in the summer, of course. Close the club for two days and thoroughly clean, renovate (new paint goes a long way), add new equipment, rearrange the equipment or train the staff on new services. When you re-open the members can see the difference and will greatly appreciate that you care and you are willing to re-invest in the club and their health. I have seen some clubs close over the long Labor Day weekend every year. They close Friday night and re-open Tuesday morning so they can get everything completed.

Now you have the information to make an informed decision about raising your rates or instituting an annual/maintenance fee. The tough choices are when to implement and how to include your existing members. Once you give this some dedicated thought, planning the implementation should be easy. If your current billing software or your current billing company is unable to help you with the introduction of an AF give us a call.

When Corporate Policies & Common Sense Clash

Why does it seem that some health & fitness clubs
have no common sense?

LA Fitness in Palm Harbor, FL recently revoked the membership of a mother helping her son work out. Mom is a personal trainer, but not at this particular club, and the club has a policy that no outside trainers can train members in their club.

From a business perspective, this is a very logical policy. If the club did not have this policy, they would be opening themselves up for all kinds of legal issues, not to mention lost revenue.

However, where is the common sense here? Based on this action the club is saying no one can help anyone with their workout, except LA Fitness employees. Does LA Fitness really want to alienate their members in this way?

It is one thing to revoke the membership of an outside trainer training someone for money, but a parent helping a child? Or a friend helping another friend? Just because they have the knowledge of a personal trainer does not mean they are trying to take business away from the club.

Maybe the club should have their trainers walking the floor more often, instead of sitting behind the front desk,  talking to their friends or having their eyes glued to their smartphone.

Have some health & fitness facilities really become this customer unfriendly?

I hope not.

To see the news report, click here.

Trade Journals: Helping or Hurting Readers?

Do trade journals help or hurt the health & fitness industry?


Being in the health and fitness industry for the past 27 years, I have seen a dramatic change in how the industry's trade journals have changed. Not only the reduction in the number of trade journals and/or the move to digital instead of print, but the quality of the articles.

How many trade journal articles are written by actual journalists? How many are written by people with real knowledge about the industry? How many are written by the advertisers? How many are stolen/re-posted from other news/blog sources? Have you ever tried to publish an article in one of the trade journals without having to advertise with them? How many times have you seen false information in an article? Even worse, would you even know if what you are reading is false?

Case in point, I know of a trade journal that re-posted a very inaccurate article on a health club owner, claiming that the Attorney General of that state alleged that the owner was defrauding his members. In reality, the owner was providing a much better service at a lower cost, and 99% of the members were very happy. It was later discovered that this erroneous story was nothing more than a witch hunt.  The health club owner spent tens of thousands of dollars in legal fees, to prove that he did nothing wrong and actually followed the law as it is written. The publisher of the inaccurate article could have instead investigated this case as an abuse of power by a government agency -- something that would have actually informed others in the industry, and helped them better manage and protect their businesses.

However, when this was brought to the publisher's attention, they refused to take the time to investigate, and then wrote a supposed "retraction” in their next issue. They explained that they only reprinted from another source. So instead of investigating, one false story led to another.

Here's a more personal case: I recently sent an article to two individuals at Club Industry, asking if they would be interested in publishing what I'd written, which was about health club membership pricing and annual fees. (We do not advertise in Club Industry.) Months went by with no response from either person. Then in the February 2014 edition, an article appeared with almost the exact same information. When I confronted the author of the article the response was, “My apologies, I honestly did not read your email.. but in doing a search I see your email now… I did not look at your article…” This is very hard to believe, since the article was almost a word-for-word copy of my original article. Apart from this matter, I also wonder what it says about a publication, when two staff members do not even bother to read their emails.

You tell me: here is my article I sent to Pam Kufahl and Stuart Goldman of Club Industry on November 4, 2013, and here is the Club Industry article published February 2014.

It could very well be an honest mistake on Club Industry’s part, and Club Industry does do a better job than all the other industry trade journals. However, in this day of non-investigative reporting, having advertisers write content, and re-posting articles written by others, I am left to wonder what is really going on with the trade publication industry. Are they actually helping the industry they serve? What happened to real investigative reporting that helps the industry?

Let me know your thoughts.

Top 5 Reasons to Survey Your Health Club Members

According to the Radial Group, a provider of marketing and consulting services for health, wellness and fitness facilities, these types of businesses need to leverage every competitive edge they can get.  One of the best ways to maintain that competitive edge is to use surveys to gauge the experiences of members.  In a world where keeping an extra 5% of your current customers may improve your bottom line by as much as 95%, it's critical to know what your members are thinking and feeling about your business.  We've provided a link to the Radial Group's complete article on "Nine Customer Survey Best Practices for Wellness Businesses" at the end of this blog post.  But before you read about best practices -- which will help you create your member survey -- here are the top 5 reasons you should conduct a survey in the first place.   

Top 5 Reasons to Send a Survey to Your Members 

 

Get Feedback: Ask your customers what they honestly think about your products, services, events or marketing. You won’t know until you ask. The knowledge you gain will be invaluable to your business.


Set the Bar: Surveys allow you to look at your business at a certain moment in time. Benchmark how you are doing in different aspects of your business and make goals to improve or maintain that status over time.


Evaluate the Competition: Ask what other products or services your customers use, and find out why or what they enjoy about them. Doing this will make you aware of the alternatives in your market and how best to compete.


Learn New Ideas: Your customers are an untapped resource for you. They are smart, creative, and likely have ideas that you haven’t thought of. Just imagine all the cool ideas you can get from the people that matter the most and know your business!


Guide Business Decisions: Using surveys, you can gather information that is helpful in making informed business decisions. The feedback you get from your customers can guide you in future product, marketing, or organizational decisions – both big and small.

EBCS can help with your member surveys. 
Call us for more information at 800-766-1918

 

Nine Customer Survey Best Practices for Wellness Businesses, from The Radial Group

Other helpful links:  

Do You Like Success? How Customer Satisfaction Surveys Help,
from The National Business Research Institute

Using Surveys to Get the Information Your Business Needs -- Survey Says?  Identify Your Objectives, from The Harvard Business School Working Knowledge Archive