Leslie Nolen leads The Radial Group, which provides business know-how for health and wellness businesses. E-mail her at [email protected] or visit http://www.radialgroup.com to subscribe to free weekly business tips.
Profits earned at the expense of customer relationships hurt your business. And businesses without lasting customer relationships flounder, wither and eventually die.
Check your business for these bad-profit practices:
1. Steep penalties that “trap” customers who would otherwise switch. A nonprofit wellness center in Dallas charges $150 when you cancel your membership. Why? The facility’s management says it wants to discourage casual switching, but it already charges three times what the national health club chains charge, and its joining fee is about 30 percent higher than the fee charged by a similar club. Seems like the financial deterrent to casual switching is already there.
In truth, they’ve just found a way to make a little more money. The downside? Customers who feel like hostages often make sure everyone they know hears their complaints. Is your business really willing to pay that price?
2. Stringent customer service policies that are blindly enforced, often with unrealistic timelines. A co-worker recently developed a rash after trying several pricey spa items she had recently purchased. She talked with her doctor, who warned her about possible drug interactions. Not surprisingly, her next trip was back to the club where she bought the products. The club refused to refund her money because it has a five-day return policy—and she came back six days later. True, the club retained the profit from the initial sale, but it was at the expense of the customer relationship. The client was furious and made sure everyone knew about her experience.
3. Nuisance pricing that far exceeds the pain to the business or the value provided to the customer. Consider 7-Eleven’s experience. These convenience stores historically charged exorbitant prices for staples like milk and bread, figuring that customers desperate for convenience would pay handsomely for it.
When did 7-Eleven’s growth really take off? When it lowered its prices to normal levels and turned its attention to unique products specifically designed to be super-convenient for those on the go.
Frequent offenses in fitness businesses include towel service fees, overpriced bottled water and snacks, a fee if you forget your ID card, charges for occasional use of other locations, and more.
It’s not unusual for charges like this to make up 20 to 30 percent or more of the bottom line for some businesses. Yet squeezing as many dollars as possible from customers when they feel they have no or poor alternatives is a lousy strategy for building long-lasting relationships.
4. Saving money on staff without considering the customer impact. Do you really want customers to cringe every time they have to ask a question or resolve an issue? Hiring inexperienced staff, whether they are receptionists or billing clerks, makes it hard for customers to update account information, get questions answered, terminate memberships, and more. Failure to train staff because “you’re too busy” and it’s “quicker to do it yourself” is no excuse.
Sure, it may make your business a little more profitable this month to skimp on quality people, but is it worth doing it at the expense of good customer relationships?
Instead, look for cost reductions that will also make life easier for your customers. For example, if members want to cancel a membership, let them send you an e-mail or fill out a form on your Web site rather than forcing them to talk in person with your sales staff. Let your sales team produce high-quality profits by focusing on genuine prospects rather than “save initiatives.”
5. “Special offers” that abuse your most loyal members. Among the biggest offenses are discounts and giveaways for new members that aren’t available to existing customers. Sure, you’ll perk up short-term profits by attracting lots of new members. However, they’ll switch as soon as they find a slightly better price. Meanwhile, you’ve ticked off loyal customers by charging them higher rates. Plus, service often suffers while your business tries to handle the jump in new business.
While many health clubs try to avoid this trap by simply discounting the joining fee, what about your members who didn’t happen to get that discount when they joined? And what about the members who walk past the piles of goodie bags for new members in the sales office?
You’ll also see this practice from health club instructors who develop exercise videos. Even well-regarded instructors pre-announce videos, hinting that the actual products will follow soon. They offer aggressive discounts for fully-paid pre-orders, then delay after delay occurs, often pushing the final release date out as much as two years from the original pre-order date. This kind of treatment turns even raving fans into disillusioned cynics who share their disgust and fury with friends, family and co-workers.
If your health club is caught in this cycle of bad-profit addiction, start making changes now to regain your members’ goodwill.