Tough economies force business owners to look at all possible revenue streams. Lately, many in the industry have talked about adding enhancement fees into a club’s pricing strategy. These fees often are used to make much-needed improvements to facilities, add new equipment or fund a new program.
Taking the number of member accounts and multiplying that by the proposed fee amount will show you the gross revenue that you could generate. It’s often a substantial sum, but I challenge the notion that enhancement fees are the answer to increase revenue.
I challenge the practice in the name of customer service. I challenge its integrity and honesty. And I challenge it as a way to quickly generate money because it will ultimately do you more harm than good.
My first reason for opposing enhancement fees is that club operators already advertise $25 to $75 enrollment fees that could bring in similar sums but then often discount or eliminate those enrollment fees to attract new members. We need to stop that and instead bring value to the enrollment fee.
Secondly, you can get revenue similar to enhancement fees by simply raising your monthly dues. You can justify increased monthly dues using the same arguments that you would use for charging an enhancement fee, but I expect you would get less flak from members and you will reap the benefits longer.
In my opinion, this is a question of value. By providing a strong foundation of value in our clubs, we ensure good retention. Club owners must reinforce to their staff members the fact that members must see and feel the value of their membership with every visit. Using members’ names, providing clean facilities, offering worldclass workouts and taking a personal interest in their lives all convey value.
People look forward to coming to your club when they feel like they are important to you. It is within this feeling that the value lies. Don’t get me wrong: looking slimmer or feeling better are motivators for members, but knowing that someone is interested in their well-being is even more valuable. When the perception of value falls below the cost, people cancel their memberships. It is that simple.
People will pay for things that they need once they see the value those things add to their lives. Are they willing to pay for something that, in their minds, has less value? No. Suppose you use the enhancement fee to put new cardio equipment on the floor. Great idea, right? Not for your members who only attend group fitness classes or who only lift weights. Anyone who comes to your club and participates in any activity besides using the cardio machines now has a valid reason to feel cheated or at least not see any value in paying this fee. People will ask, “What’s in it for me?”
When you instead have an honest, across-the-board dues increase, your members see that $3 or $4 more per month is not that big of a deal. It allows them to decide if the club still has value to them at that new monthly amount. As long as you engage your members in many areas of your club, you can withstand a rate increase with only a minimal amount of fussing.
The timing of any changes to pricing strategy is critical. It does not make sense to institute the change in June and July when many people are thinking about engaging in more outside activities.
Another problem with implementing enhancement fees is that it often stops some club operators from thinking about other ways to increase revenue. Club operators always must explore other ways to generate more revenue, but in ways that provide value to members. Try investing money in another program that will get your members engaged and keep them at your club longer. Spending more money to get more members involved in the other areas of your club far outweighs the amount of money that can be generated by enhancement fees, and it does not cause the collateral damage of cancellations. The last thing we need in this economy is unhappy customers with undervalued services and the ability for our business to slide rather than rise upward.
Let’s do what is right for our members, and in return, they will reward us with their loyalty. Pay it forward. It brings great returns.
Thomas Kulp is the chief motivational officer at Universal Athletic Club in Lancaster, PA, and CEO of Fitness Club Consultants. He also is president of Mid-Atlantic Club Management Association. He can be reached at 717-799-5155 or [email protected].