4 Ways to Increase Revenue

Wouldn’t it be great to gather the best practices of fitness facilities around the country and distill this knowledge into one terrific guide to success? This column explores the very best secrets for operating, managing and marketing a fitness facility. Whether you manage/operate a small studio or a large, multipurpose fitness center, these golden nuggets will help you run your business more successfully and profitably.

Four Sensible Strategies

You may not have thought of these methods for boosting your bottom line:

1. Start an enhancement program. Over the past 5 years a new term has emerged in our industry: the “annual rate guarantee,” or “enhancement fee.” While there are many ways to increase revenue, research done at New Paradigm Partners has shown that members are more comfortable with, say, a one-time payment of $39 than they are with a monthly increase of $3. This has become even more true as low-cost competitors increase their market share.

To ensure a successful program, it’s important that you follow a very specific marketing strategy. First, you need to show members how their investment is being put back in. For example, each year most fitness centers put 5% of their revenue into acquiring new exercise and facility equipment, offering new services and programs, and investing in staff training. When you talk to clients, make it clear that these items are the objects of—the justification for—your enhancement fee. Highlight upgrades throughout the year with balloons, signage, Facebook posts, e-mails and other communications to your members.

One or two months before each billing date, survey your membership base and ask them to vote on how they’d like to see their enhancement dollars put to work. When you take prospects on their initial tour of your facility, mention the program to differentiate your facility from others.

Although the fee is collected once per year per member, consider collecting it in three installments. At New Paradigm Partners we found that this can increase the enhancement fee revenue by 25%. It will allow you to get new members into the program quicker, and you’ll collect the fee prior to attrition. Note: Before you implement this fee, check your state laws, as not all states allow an enhancement fee. Research your state’s Health Club Act, or contact the state attorney general’s office. If you live in a state that has restrictions, you may be able to set up the enhancement program separately from the startup paperwork process while still meeting legal requirements.

2. Charge a processing fee. Consumer surveys have indicated two specific barriers to joining health facilities: enrollment fees and long-term contracts. If you decide not to charge an enrollment fee, how do you recoup your investment? Charge a processing fee instead. Consumers are more amenable to paying a “processing fee” than an “enrollment fee.” What’s the difference? Processing fees are usually less of an investment and are justified by the cost of “processing the membership,” which includes marketing dollars, sales commission, paperwork processing and the physical membership card.

Following this approach will allow you to use the phrase “No Enrollment Fee” in your promotions, which will help you generate more guest traffic. When using this marketing strategy, you should disclose that processing fees do apply. Your new members will be aware of the fee; however, it eases their minds to know they won’t get hit with an exorbitant enrollment fee.

For more ways to increase income, please visit the online IDEA Library and look for “Easy Ways to Increase Revenue” in the January 2013 issue of IDEA Fitness Manager. Note: This was the first in a series on best practices gleaned from highly successful fitness owners and managers. Check out later installments in the online IDEA Library.