Change the way you view membership and program revenue: Embrace customized service.
Traditionally, many fitness facilities employ a “membership team.” These individuals are often referred to as “membership sales advisors,” “membership sales specialists” or “membership sales representatives.” Their duties usually entail selling packages and retaining customers—using strategies such as prospecting via phone and email, reaching out to corporations and the community, and garnering referrals. Compensation is a base salary or an hourly wage of $8–$15 per hour, along with a 3%–7% sales commission based on annual sales. In addition, there may be bonuses and incentives that hinge on meeting a goal.
However, the sales landscape is changing, and fitness facility owners and managers need to shift how they approach sales, marketing and outreach. It’s no longer feasible to expect your standard sales representative to meet the same goals as before. Competition and other factors make a compelling case for a new approach.
The State of the Union
A main objective for fitness facility owners/managers is to generate a target number of sales presentations, factored with an anticipated closing percentage. This objective meets both new membership and program sales expectations each month. An anticipated closing percentage for new-member activation is 60%–80%, based on the business model and the quality of the presentations. A success ratio of 30%–60% for program sales (personal training and other fee-based modalities) is an achievable expectation. [Editor’s note: The information here and below, including data and percentages, is based on feedback and statistics from clients of New Paradigm Partners, a fitness industry management and consulting firm owned and operated by this article’s author.]
The birth of the low-price competitor and the emergence of small-group training centers have put a strain on traditional fitness facilities. The result has been consolidation and less guest traffic. It’s not that facility operators are experiencing a mass exodus when a competitor comes to town. Instead, the “once upon a time” traffic no longer exists. This causes fewer monthly new-member activations and a net loss of clients over time. Sometimes club operators don’t even know this is happening until it’s too late.
Membership consultants also feel the strain, and they’re finding it more and more difficult to generate the number of “new-member presentations” needed to hit target goals. Retention continues to be a challenge; the average retention rate among clients is approximately 65%. This means, in theory, that facilities are turning over their entire membership in a 3-year period. Due to attrition, most operators are finding that developing nondues revenue is critical to business survival.
Creating a New Path to Success
When our firm, New Paradigm Partners, works with fitness facility owners, managers or operators, we ask them what their expectations are for their membership teams. Typically, they tell us the goals are to activate new members, service and retain those members and add profit centers such as personal and group training. When we ask them how these employees are compensated, the response usually focuses on commissions through new-member activations—with no real accountability for retention and program sales.
New Paradigm Partners has worked with dozens of facilities on how to empower membership sales representatives to take a lead with servicing members, instead of fishing for customers and leaving them in the boat. We recommend replacing the old membership/sales-based job titles with new terminology like “program advisor,” “member experience representative” and “wellness coach.” In addition, we usually recommend that the job description and compensation for these individuals be shifted. Purely sales-driven incentives must be decreased; they need to be balanced with other incentives, including retention and fee-based programming.
A successful organization located in Boston, Fitness Unlimited, ensures that each of its program advisors “owns” a member. Owner/operator Paul Maduri compensates his staff on a percentage of the electronic funds transfer (EFT). He has a lower-than-industry-average attrition rate, which he attributes to the “continued service” that his employees are financially motivated to provide to their members. He has determined that usage relates to retention, and therefore his advisors are trained and held accountable to contact their “low users”—members who haven’t used the facility in 30 days or more.
Healthy Fit, located in Mamaroneck, New York, compensates its consultants at a higher membership commission that matches program sales levels. Each month, staff are given a program revenue goal; their membership commissions increase based on the amount achieved. Typically, the program revenue goal is set at 20%–30% of new member program activation, which is consistent with nondues revenue standards.
Several mid- to higher-priced health clubs across the country are shifting from a culture of “selling memberships” to one of “activating programs.” Creating programs that yield results and better retention—as well as training staff to market, activate and service members’ participation—is an industry trend. For many fitness facilities, the membership sales position is evolving into the role of program advisor.