I have always been intrigued by the number of parallels between software companies and health clubs. For example, both are hyper focused on growing similar key metrics. Monthly recurring revenue at software companies is akin to monthly draft in the fitness space. Attrition at health clubs is often referred to as churn at technology companies.
The one metric, though, that has the most similarities is referred to by those in the tech world as “share of wallet.” Investopedia defines share of wallet as: “The dollar amount an average customer regularly devotes to a particular brand rather than to competing brands in the same product category.”
Software companies often try to introduce new or additional services to generate as much revenue as possible from each customer. The reasons are quite simple and include metrics such as added revenue, improved customer satisfaction, increased retention, customer acquisition cost and brand loyalty.
Fitness club operators spend a lot of time focusing on the more traditional metrics of customer satisfaction. Several tools gauge variables such as net promoter score or more traditional metrics of membership renewal and cancellation rates. Although important, these metrics provide you data in a bubble—your bubble with little to no comparative perspective to other brands. In a competitive environment with as much choice as we have in fitness, what matters most is understanding how your members will split up their spending between you and the competition.
So, how would one go about assessing their share of wallet? To do so, you need to understand why a member may look to a competitive product or service to meet a need. For that exercise, look at Peloton. Peloton sells a $2,300 bike and a $4,300 treadmill in addition to a monthly subscription service so that their users can bike or walk at any time from the comfort of their own home for…wait for it…$45 per month. The company was recently valued at more than $4.15 billion.
By contrast, gyms provide a wide choice of equipment, live interactive classes with real people, showers, kids clubs and lots of other amenities for as little as $10 per month.
So where can you start to increase your wallet share? The following are steps you can follow to arrive at a starting point:
Step 1: Use existing data available in your management systems to understand metrics such as your draft blend, which can be arrived at by dividing your total monthly draft by the number of active members. To get deeper, you may also define customer personas by age and/or gender and attempt to estimate what you are currently collecting from these smaller groups given that you may choose to market services that are more targeted.
Step 2: Analyze the personas and ensure you can determine what people in particular profile groups purchase and the amount they are willing to spend on these purchases. The idea is to assess what this person might spend if they handed over their full wallet to you.
Step 3: Calculate past spending in order to understand how much share you currently have. Keep in mind that you now know how much you could have vs. how much you currently are getting.
Step 4: Execute. Now that the share of wallet amount has been assigned, it’s time to do what we do best in the fitness industry: market and sell. A simple program would be to upsell (and thereby increase wallet share) of members who have purchased personal training in the past but not since.
A great side effect of assessing wallet share is that it forces you to look introspectively at existing members instead of prospects in an effort to raise your worth with them.