What Are The Four Golden Opportunities for Gyms?
Today's wellness/fitness industry has four unique markets that represent the future of bottom-line profitability. These four markets are where astute operators should concentrate their marketing and promotional efforts. The four target markets are as follows:
Each has its own unique set of circumstances and each is difficult to attract through traditional techniques and approaches. However, the rewards for the bottom-line can be tremendous.
- Deconditioned Market
- Aging Market
- Youth Market
- Corporate Market
In the industry in general these four markets represent the prime target populations. While our industry traditionally has been about "fitness", the result of the traditional approaches has been to attract individuals who are simply "fitness" minded. They are passionate about fitness, but not loyal to the clubs that they join.
However, the population at large is currently being educated through media sources and community based education programs about the importance of exercise as it relates to lifestyle modification. Health improvement overall as it relates to lifestyle modification and wellness is the total goal for these sedentary individuals. These targeted individuals are not "fitness" minded, but are being educated to become "health" minded. As a result, the industry needs to expand on the programs and initiatives already being planned and implemented relative to these markets.
Disparities in Health Club Retention
The "fitness" types that our industry has historically sought come and go without any real sense of bonding or allegiance. Wherever the next great facility opens, the next great price "deal" appears, the next great exercise fad appears, or their favorite group fitness instructor decides to go, they follow. So, as an industry, we are failing to give them any powerful reason to be committed to us. The result is a national average of 50% - 60% retention of members. That is pathetic. Furthermore, the average life expectancy of the 50% - 60% who leave the facility only have an average participation time of sixty days. The picture painted is clear. As an industry we have done a poor job of inspiring people to feel committed to our clubs. The answer to the dilemma is in changing the target market from fitness to wellness.
Hospital based wellness centers and YMCA's are attaining retention rates of 80% consistently. This is not only amazing in that it stands in contradiction to the established industry norms, but under closer analysis it becomes even more impressive because the members that they are attracting are the very markets listed above. The deconditioned, aging, corporate and youth markets who the industry has typically ignored heretofore. Furthermore, in the traditional health club marketing and programming approach, these four markets represent the highest percentage of the 40% - 50% who dropout of the club!
The reason that the hospital based wellness centers and the YMCA's are so successful in retaining members is that they plan their marketing, sales, programming, equipment and facility layout to make these non-exercisers feel comfortable. They in essence make the members and their communities feel as though they are "married". The loyalty is tremendous. Those of you in commercial facilities needs duplicate this success.
Three Sad Truths About Health Club Attrition
Sad, but true.
- Most new members have belonged to facility's before. They are not "new" to the fitness scene.
- Attrition rates, when analyzed show that many members leave to join other facility's.
- According to FitLinxx Co-Founder, Executive Vice-President, Andy Greenberg, "There are more former members of clubs than current members of clubs in the country today."
As Thomas Plummer states in his book, Making Money in the Fitness Business, "If I knew the fitness business was this hard, I'd have gotten a real job!" He introduces his chapter on sales with, "Sales in the fitness industry are based on 20 years of bad habits."
What he says is quantifiable and true. It seems as though the most common techniques for marketing and sales are simply modified copies of everyone else's ideas. Just look at the marketing concept in most newspapers or television advertisements - sensuous female, hard body male - this concept does not appeal to the millions and millions of people in the four key markets mentioned earlier. In fact it's intimidating to them.
There will always be a market for successful "fitness" operators. That is why the chain clubs are so strong and can use the above type of advertising successfully. Of course their advertising and market budgets are larger than most independent operators annual revenue total.
This is the reason why there is so much consolidation going on in the industry today. Average to poor bottom-line performances signal the need to sell the small or failing "fitness" only facility. It is really the signal for a determined owner that it's time for a change. How many times has our industry seen people trying to replicate big chain techniques and fail year after year? It doesn't work! Throw out the old and bring in the new!
The "Wellness" Wakeup Call Was Sounded
The "big bang" theory for our industry really should have spontaneously combusted upon the release of the report, "Physical Activity and Health" in 1996 by the U. S. Surgeon Generals office in conjunction with the Centers for Disease Control and the President's Council on Physical Fitness. The picture painted by this comprehensive report was not pretty. The direction that our industry's efforts needed to be directed toward were clearly delineated in that brilliant composition. Since that time, volumes of additional newsworthy information has added fuel to the "wellness" fire, including the deconditioned, aging, youth and corporate markets as well. The report certainly got the fire of change burning with more intensity.
The needs for these four markets are not based on "fitness". They're based in lifestyle modification with exercise as a prescriptive health intervention or more simply put "wellness".
The High Cost of Club Attrition
Just using simple math it is easy to quantify that increasing a clubs retention rate from the high of 60% (strong by traditional "fitness" standards) to the 80% attained in hospital based wellness centers and YMCA's results in enormous bottom-line increases with no additional expenditures.
Example 1: 60% Retention Rate:
A 2,000 member Facility:
Annual membership cost = $500.00
Annual retention rate - 60%
In this scenario the facility must replace 800 members per year. This means that the facility must average 67 new membership sales per month simply to maintain an annual growth rate of ZERO!
800 memberships lost @ $500 = $400,000.00 per year in "lost" membership revenues due to attrition.
Example 2: 80% Retention Rate:
Annual membership cost = $500.00
Annual retention rate - 80%
In this scenario the facility must replace only 400 members per year. This means that the facility must now average only 34 new membership sales per month simply to maintain the annual growth rate of ZERO.
400 memberships lost @ $500 = $200,000.oo per year in "lost" membership revenues due to attrition.
Therefore, by improving the annual retention rate from 60% to 80% the facility has a net gain of $200,000.00 with no additional advertising or marketing expenditures.
That's a lot of money. "Wellness" vs. "Fitness"? I know that you get the point already, but the illustration is eye-opening.
Even the cost of marketing to these four special populations is much lower. It just requires stronger planning and determined, intelligent execution.
The approaches to each of these four markets moves outside of the frustrating venues of newspapers (low rate of return), radio (low rate of return) and television (low rate of return) advertising. In attracting these markets there can be no sense of reactive sales and service staff. The entire staff must be positive and proactive. In other words, no matter what is happening in any staff person's personal life, it cannot be brought into the club. Consistent motivated customer service oriented performance based in a quantifiable system will be the key to maximizing our bottom-line potential.
The Deconditioned Fitness Market
We all know this segment of the population by the less than flattering term of "Couch Potato". While this market cannot be attracted effectively through conventional methodology, they can be attracted with good old-fashioned hard work and innovation.
The basic differentiation between the "fitness" marketplace and the "wellness" marketplace (which is much more likely to attract and keep the deconditioned person) are readily clarified by the "Stages of Exercise Adoption".
- not even thinking about exercise
- thinking, but not doing
- participating, but new to exercise
- regular exerciser
The "fitness" marketplace is made up primarily of "Maintenance" and "Action" types. The "wellness" marketplace includes these types but also includes a large number of the "Contemplative" group. The deconditioned individuals are attracted through education and target specific outreach programs. These types of programs also favorably impact the "Pre-contemplative" sector of the deconditioned market.
The "fitness" business has had a bad reputation in the general population for more than twenty years. There is an industry wide improvement occurring, but the new "wellness" type of operation is hospital based and with that comes immediate credibility and comfort level to the general population. Obviously hospitals are viewed as a place where people go to get healthy. "Fitness" facilities are viewed as where the "beautiful people" go in the minds of the deconditioned market. Additionally, the "fitness" operator is still viewed as the "bad guy" who is unscrupulous.
The deconditioned market can accurately be described as "non-motivated procrastinators". They are not properly motivated as to the importance of exercise as it relates to their health because of the inadequate education they have so far received about the issue. Furthermore, they live and have lived a sedentary lifestyle which is based in procrastination related to healthy living and especially exercise and nutrition. They need to change their lifestyle or their quality of life will continue to decline and many will meet with catastrophic illness and even premature death.
Generally speaking, this group is not interested in a traditional one-year type of contractual commitment, so a change in venue is important as far as initial response from this group. As a result of the lack of education about the importance of healthy living and exercise they are also reluctant to pay for something that they are not sure that they will stay committed to. Think about what has fueled this group in the past. Failed weight loss programs and other "pie in the sky", unrealistic initiatives that have been packaged in a slick format.
Sell "Programs" not "Memberships"
The deconditioned market is much more likely to initially join a "program" instead of buying a membership. They may just continue to renew the program over and over again because they are comfortable with the program and/or the program administrator. Getting them involved is what matters the most. Then keeping them involved is the key. It's not a matter of membership or no membership. It's a matter of creating a relationship that can and should last a long, long time. The person who falls into the deconditioned category is very likely to know other people who are likewise deconditioned individuals. Therefore, a consistent program designed to proactively solicit referrals becomes a major source of profitable operation. Unlike media advertising, referral leads are very inexpensive and even more likely to result in a long-term relationship.
The deconditioned individual needs support once they gain the necessary education and begin to seriously consider getting involved in any exercise program. The traditional approach of an initial fitness evaluation and a brief training session on how to use the equipment is waste of time and a recipe for failure. The low retention rates mentioned earlier and the fact that there are more former members than members are obvious proof of that. The deconditioned person needs unavoidable ongoing support. Clubs would be wise to consider adding computerized interactive fitness technology (Fitlinxx, Schwinn Fitness Advisor and Technogym, etc.) in order to maximize our efforts to attract and retain these markets.
This technology is the "pied piper" of all four of these special populations (deconditioned, aging and corporate). Many times club operators will say, "That stuff is too expensive." I try to help them understand that the initial cost is irrelevant when you realistically view the long term return on investment (when properly applied), because in that scenario, the only question can be, "How can you afford NOT to have that type of technology in your facility?"
About Geoff Hampton
Go to Part 2