Art's Blog

5 Tips to Increase Profits Right Now.... by Art Rothafel

Here's my most recent article sent out to the various fitness trade pubs.  I hope they publish some of it as way to help studios, club owners, trainers and other health professionals increase revenue.   You absolutely must over-service your members/clients as "Kings & Queens" of your business! 

5 TIPS TO INCREASE PROFITS RIGHT NOW
Member Acquisition Vs. Member Leverage

For the past several years new fitness trends required facility owners to increase overhead with new equipment, new programming and specialized staff – often with little or no ROI.  The logic behind this imbalance often was justified as a means to acquire new members in such a competitive market.

Today’s economic downturn, however, necessitates a different strategy.  Service-based businesses must shift focus from “acquisition” (pursuing new members) to “retention and leverage” (increasing revenue through existing members). 

The following are five ideas that require minimal expenditures while generating ROI almost immediately when properly executed:

Pro Shop:  All clubs, studios, and spas should dedicate floor space for a pro shop, retail center or kiosk.  Existing pro shops should evaluate and set new revenue goals.  Key considerations:    

• Carry only best-of-breed or exclusive (non-internet) products; 
• Private-label as much as possible to maintain margins;
• Build traffic through creative merchandising;
• Commission staff on pro shop sales;
• Expand existing lines and introduce new products;
• Promote pro shop and products throughout the facility;
• Make products available via club website for out-of-towners.

Frequent Member Rewards Programs:  Airlines do it.  Starbucks does it.  And you should at least consider it, too.  With a focus on increasing member activity and building traffic, a “frequency rewards program” can add to a facility’s overall revenue picture.  Frequency programs can be initiated at check-in, pro shop, personal training, special classes/programs or all of the above.  Even a low-tech punch card system can be implemented with success.  Frequency reward points can be redeemed for:

• Training sessions;
• Pro shop discounts;
• Membership monthly add-ons;
• Co-sponsored venues and events (restaurants, movies, golf, etc.).

Speaker’s Bureau:  A speaker’s bureau requires virtually no capital, adds value to a membership and draws non-members to your facility.  Most local speakers will lend their expertise at no charge provided they are allowed to hand out business cards and collateral.  Presentation topics might include:  10 Ways to Cut Household Costs, Eat Better and Be Happy;  Finally, the Truth About Weight-Management (staff);  New Investment Strategies in Today’s Market;  How to Shape-Up and Prepare For A New Job Interview.  The best ways to take full advantage of your presentation is to:

• Invite local media;
• Video the presentation for your website;
• Provide pro shop product samples (bars, drinks, etc.);
• Offer special “right now” membership pricing for non-members.

Co-Promotions/Sponsorships:  Hikes, Bike Rides, Grocery Store Field Trips, Fitness Contests, Boot Camps, 5K, 10K and Mini-Marathons are just a few of the activities that can be co-sponsored and co-promoted with non-competitive businesses with minimal shared investment.  During any of these events, it will be important to:

• Display your logo via signage, banners, apparel, print collateral, lead boxes, etc.;
• Set-up an exhibition table or booth to showcase products and services;
• Video and photograph the event including members, staff, participants for web, newsletter, bulletin boards and other promotional vehicles;
• Distribute media releases with photos before and after the event.

Education-based Programs / Weight-Management / Nutrition Education:  Creating a classroom environment, allowing participants to arrive in street clothes and teaching a paid curriculum is one of the most lucrative services a facility can provide.  Although it takes time to organize and plan it does not require major capitalization.  Plus, these education-based curriculum can be moved off-site and become a profitable mobile “classroom” at corporate conference rooms, churches, schools and community centers.  Education-based programs held in classroom environment will:

• Generate new and ongoing revenue both onsite and off-site;
• Introduce your facility to non-members;
• Motivate participants through education toward personal training and nutrition services;
• Attract media attention.

While the fitness industry is known for being “trendy,” it remains incredibly competitive and suffers the same demise felt by all retail businesses during an economic downturn.  However, with a shift in focus, a little creativity and a “take action” mandate, your facility will not only survive, but perhaps, even prosper.

Spit in the Eye of the Economy... by Art Rothafel

I don't know about you... but, I plan to spit right in the eye of this down economy!   Therefore, I'm going to keep pounding on this subject.

 Shift... Shift.... SHIFT.... your focus, energy and marketing dollars away from chasing new clients and members and put it toward leveraging your existing clients and members.   (* I'm not saying don't get new clients... but judge how much and where you put your focus.)

Look, I know you receive loads of e-mail from sales consultants, gurus and marketing experts.  All of them claim to have the best way to get new clients or members.  And they might... but, new client/member acquisition is at an all time high $$$$$$.  

Think about it.  How many people during a recession are even thinking about joining a club or hiring a trainer.  If anything, they're wondering if it's something they going to cut.

Shift... Shift.... SHIFT....

• Sell hard goods. 
• Create new services. 
• Establish loyalty. 
• Treat your best members and clients like kings and queens.

Right now in this economy it's all about RETENTION and LEVERAGE. 

Take an hour today or tomorrow and just THINK:

Can you:

• Offer new products in your pro shop?
• Establish a frequency "rewards program" in your facility?
• Provide a paid class like weight-management 101 curriculum?
• Present a local speaker (like a family financial planner) to speak at your facility (trade out)?
• Co-Sponsor or cross promote with any local merchants?

 If so... then, put your full energy into it.  We can spit together!

Operation Pro Shop.... by Art Rothafel

Here’s a note I received three years ago from a Texas club owner, Eric Webster.  It's a demonstration of "leveraging" existing members... it's also quite motivating!

“…..it started with our pro shop.  For many years our pro shop was a waste of time and space.  In fact we almost got rid of it since it was only selling about $500 per month. 

 Then we initiated OPS (Operation Pro Shop).   We approached it as a marketing exercise.  We sat down and established a goal, a strategy and a set of tactics. 

Our goal was to increase average sales by 10X ($5,000) per month ($60,000 year).  We gave ourselves one year to achieve that goal. 

Our strategy was to increase awareness of our pro shop and drive traffic into it.

We implemented many tactics.  We challenged our staff to come up with creative merchandising displays.  We hung self-made posters around the club, on equipment and in the locker rooms about products in the pro shop. 

Staff who sold any of our own branded products (supplements, skin care, journals, reference manuals, cookbooks, apparel, coffee mugs, shaker bottles, etc.) received a commission for the sale.

At your suggestion we started “Saturday Taste Tests” offering free samples of Metabolic Optimizer, Whey Protein and our own homemade energy bars to draw members into our pro shop.  Members not only enjoyed the free samples but typically made several purchases while they were in the pro shop.

We also started a point system with a punch card just like a car wash.  For each purchase over $10 the member received a “punch” on their card.  At 15 punches, the member received a free 30-minute training session.  It continues to be a very successful incentive.

We set daily, weekly and monthly sales goals for the shop and tracked it on a huge graph which hung in my office.  We held weekly sales meetings and recognized those who earned the most commissions.  It became somewhat of an obsession!

There are so many other little daily details but the main point is that we had total “buy in” from the staff.  That’s what made it all work.

Well, take a look!!!!  For year ending 2005, our pro shop revenues were $160,369!" 

Acquisition vs. Leverage.... by Art Rothafel

Here's one thing upon which almost all business consultants agree.  The cost to acquire a new customer (acquisition) far exceeds the cost of marketing (leverage) to an existing customer.

What do I mean by this?

Big clubs have a "cost of acquisition" number they use to determine how much it costs to sign-up a new member.   They simply look at how much they spent on marketing/advertising for the month and divide that dollar amount by the number of new members.  For example, let suppose a club in the month of June spent $10,000 to sign-up 30 new members.  ($10,000 ÷ 30) = $330. The acquisition cost per member is $330. 

Now, during an economic downturn this becomes a concern because it's harder to attract new members when people and companies are cutting back their personal and professional budgets.   It means the cost of acquisition will go up.

The answer for all businesses is to focus more on leveraging their existing customers.  How to do this?  Here are just 4 suggestions:

Call Members:  That's right.  Pick up the phone and call your clients and members.  Whether it's simply a customer service call: "How are we doing?" or testing a new concept: "We're thinking of starting a Yoga Program and are interested in your feedback."  Call them.

Expand Profit Centers:  Create a new pro shop or get more creative with an existing one.  Be more creative with merchandising and expand your line of products.

Create Value-Added Propositions:  Develop value-added programs like weight-management curriculum, sport specific programming (skiing, swimming, biking, etc.) outdoor boot camp programs, grocery store outings, etc.

Recognize Best Members/Clients:   Regardless of criteria, recognize your "Best Members/Clients" through awards, photos, newsletters, website, rewards (gift certificates), etc.  You or your staff will figure out the best way to recognize your best members.