Show Me the $: How to Make Group Fitness Profitable With Fee-Based Programming
Everywhere, people are talking about the downturn in the economy and how they are cutting back to make ends meet. But have you stood in line at Starbucks lately? Despite today’s dour economic indicators, people are still forking out up to $4 for their daily dose of java. Multiplied by 30 days, that translates to $120 a month for what is essentially coffee grounds and water! Yet consumers don’t appear to be balking or depriving themselves of what they’ve come to perceive as a necessary indulgence.
The point is that people will find a way to pay for what they think they need, even in an economic slowdown. This same principle applies to health and fitness. With obesity rates escalating, there is no shortage of people who think they need to get in shape. In good times and in bad, these people are willing to pay to attain their fitness and weight loss goals. Like designer coffee, group fitness classes can satisfy a want or a need. And like Starbucks, your fitness facility can turn a profit by satisfying consumers’ wants and needs. One way clubs can do this is by offering well-designed and specialized group fitness classes for which members will stand in line to pay extra
Categorizing Fee-Based Classes
How do you decide which classes members will pay an additional charge for? The first step is to assess the types of classes you are considering for the future. This assessment will help you determine which classes will likely strain your current staffing and budgetary resources and may warrant an additional fee from members. (I would not advise changing the status of programs on your existing class schedule as it is extremely difficult to justify suddenly charging extra for a class that was previously free!)
Make a list and divide your projected classes into two categories, as shown below. Category one consists of classes that are more generic in nature, such as step, sculpting, water fitness and circuit training classes. These classes are usually taught by group fitness instructors, as opposed to specialized teachers. The equipment required is considered standard for most fitness facilities. Finally, category one classes are typically offered on an ongoing basis, as opposed to taking place over a finite period of time.
Category two classes, as a rule, require instructors with specialized training in nontraditional fitness disciplines, such as t’ai chi or ballet. These classes may also require the purchase of unique and expensive equipment, such as Pilates machines. Category two classes often run for a specific number of sessions—a six-week boot camp, for example. These classes may even include non-fitness-based components, such as nutrition lectures by local registered dietitians, as part of, say, a 12-week weight management program. They are also typically curriculum based, meaning that skills are taught in a progressive manner and participants build on what they learned in the previous session. Additionally, category two classes might be designed for a specific target market within your membership (e.g., pre/postnatal women).
Finally, keep in mind that some classes, like indoor cycling, yoga and Pilates, may fall into either category; place these types of classes in the appropriate category for your club.
Finding the Right Slot
on Your Schedule
Once you’ve determined which classes would warrant an additional fee, you will be in a better position to come up with a class schedule that works. The free classes are fairly easy to schedule once you’ve determined the wants and needs of your members. The fee classes aren’t as easy to schedule. Lack of studio space, time or qualified staff can present challenges.
There is often some controversy among members as to when a fee-based program should be offered. Those not participating in the fee-based program may strongly voice their opinions that it should take place during a non-prime-time slot. At the same time, those paying for the program will believe it should take place at a time of their choosing.
So when do you offer a fee-based program? The answer is
whenever there is an available time slot. While prime time is best, chances are the prime-time slots are at a premium and satisfying the needs of most members will take precedence over catering to special groups. So be creative and find an alternative time that works for the types of participants you are hoping to reach. You will be amazed at how many people are willing to wake up early and pay for what you can bill as a fabulous “early-bird” workout! For example, we have one fee-based program on our club schedule that meets Monday through Friday for five weeks at 6:00 am; despite meeting at this ungodly hour, this program consistently manages to generate more than $7,000 in revenue each time it is offered.
With regard to scheduling fee-based classes, the best advice is to pick a time that is open but try not to ruffle too many feathers, especially if you are introducing something new and exciting. Begin with programs that give members what they want or need. Your most popular instructor or trainer should teach the program. Use equipment on hand to keep costs down. With the proper marketing plan, you can add many new fee-based programs that members want or need.
The Six P’s of Programming
One way to go about planning profitable fee-based group fitness classes is to follow what I call the “six P’s of programming.” This simple formula consists of the following essential elements, all of which you must address in order to take a fee-based class from the initial planning stage to the final execution:
- plan of action
Define the purpose of the programming. In this case, the purpose of offering fee-based specialty programs is to increase revenue for the group exercise department, add the newest and latest in group fitness onto the schedule, and satisfy the wants and needs of the members. All of these purposes will have an effect on club membership sales and retention.
When deciding on the type of program to offer, you first need to determine what the members want; then you must find a way to satisfy them and still make a profit. To be competitive, you need to know your program better than the competition knows theirs. One way to get a handle on what other clubs are offering is to attend one of their classes; you can also learn more by simply getting your competitors’ promotional material.
You also need to understand what your members hope to get from the program. You can glean this information by holding small focus groups, sending members written surveys, listening to members’ suggestions and asking for opinions from those who take classes that are similar to the one you are considering. Remember that people will buy solutions to their problems. And your facility can provide those solutions at a cost. For example, an obese member can address his or her weight problem by purchasing a spot in your new six-week weight loss program.
People will also pay to satisfy their needs and wants. For instance, an executive who wants and/or needs to feel less stress is very likely to sign up for a fee-based stress reduction series of yoga and meditation classes. Solutions and satisfactions are the benefits your members buy and expect to achieve from your specialty programming.
Be sure the advantages to your club outweigh the disadvantages of offering the program. It is entirely possible that they will not! For example, based on a member’s suggestion, we recently considered adding a fee-based Feldenkrais class to our schedule. We wanted to ensure that interest was sufficient to warrant the cost of implementing such a class, since it would require hiring a specialized instructor. We conducted a verbal survey of members and also offered a one-day complimentary session to introduce this mind-body discipline. Most of those who attended the tryout session said they had little interest in paying for such a class because the results were not what they expected and they felt their needs were being met by similar classes in which they were already enrolled. As a result, we decided not to offer that class at this time. While a Feldenkrais class might fare much better in a club with different demographics, it just wasn’t a good fit for our members.
Before you consider any kind of new specialty programming, it is vital that you know and have access to detailed information about your current membership. Usually, your facility’s owner, general manager and sales office can provide the basic demographic data (e.g., age, gender, income) needed to help you identify your target market. Your target market consists of the specific individuals, distinguished by their socioeconomic, demographic and/or interest characteristics, who are the most likely potential participants for the program.
You can use the same demographic data for market segmentation, which is a method of organizing and categorizing your membership into several different segments. This strategy will prove helpful in developing a multitude of fee-based programs. For example, you can divide your membership by age into categories such as seniors, baby boomers, children and infants. You can then design special fee-based programs for each of these groups. Conversely, you can divide your membership into—and create programs for—specialty groups, such as arthritis sufferers, pre/postnatal members and those with high cholesterol levels.
Whichever method you choose, remember the old 80:20 rule, which says 80 percent of your profit comes from 20 percent of your members. If you can get a handle on that 20 percent of the market, you will prosper.
Class fees are somewhat determined by current market conditions and your competition. In today’s slower economy, setting a price for your program could be one of the most difficult pieces in your marketing puzzle. The dilemma is whether to aim for a higher volume of customers at lower prices (i.e., the Wal-Mart philosophy) or to attract a lower volume but charge higher prices (i.e., the Neiman Marcus philosophy).
Think about your membership demographics. The price you decide on should reflect the perceived value the program holds for your members. Ask yourself what the local market will bear. Obviously, a higher-quality program requiring a specialized instructor can command a higher price—assuming members can afford it and assuming they appreciate the fact that the class and instructor are above average in quality.
Be sure to consider your break-even point, or the point where total revenue equals total costs. You must at least meet your expenses (break even) before you can make a profit. Play with different prices and offer the program only if you can meet the break-even point. Say, for example, you set a cost of $100 for 10 meditation classes with a goal of signing up 15 participants; the projected revenue from the program would be $1,500. Now, add up and deduct $800 for expenses associated with conducting and marketing the program (e.g., labor, flyers and posters). Your net revenue, or profit, would be $700. In all likelihood, this profit would be worth the time and effort required to offer the program.
But what is the break-even point for this program? To find out, take the $800 (expenses) and divide it by $100 (the cost to participate). In this case, you need eight participants to break even.
A word of caution: When setting a program price, it is best to aim a little high. If you are not achieving your desired participation level, lower the price as needed. (But never lower it below your break-even point!)
Advertising and promotion costs are essential to the success of any program, and you should not overlook them. Be sure to include the costs associated with these functions when determining the break-even point of any program. Posters, banners, buttons or pins, direct mail and bill stuffers are all wonderful ways to promote a new program, but the costs can add up—especially if not allocated or spent wisely. If possible, consider trading club guest passes or club memberships with local service providers like sign shops or graphic artists to decrease your actual marketing expenses. Ask around or put up a sign-up sheet at the front desk to see if any of your existing members want to trade their expertise for club dollars that can “pay” for special services, such as personal training, lunch in the café, spa services or items in the pro shop. Being resourceful could make quite a difference to your bottom line. You can also save money on advertising by using in-house resources, such as club newsletters, announcements by instructors and other staff, telemarketing services, e-mail blasts and in-house flyers.
When promoting any new fee-based program, expose your members to a minimum of five advertisements on its benefits and features. Some advertisements should be visual—for example, large posters on easels in the lobby, or flyers on bulletin boards positioned in various common areas around the club. Other advertisements should be verbal; these could take the form of instructor announcements in existing classes, “scripts” for front-desk staff and perhaps phone calls to members who have taken similar classes in the past.
Regardless of how you decide to advertise the program, keep the message consistent in all your promotional material. A consistent message will increase the likelihood that members will stop and take notice. It will also minimize confusion and familiarize people with the program. The first attempt to advertise any new program is typically the most challenging. Once a program is tried, its success will become one of its biggest marketing tools. Because word of mouth is invaluable, it is essential to actively solicit feedback to determine if members’ solutions and satisfactions (perceived benefits) were achieved. If they were, the members will be far more likely to sign up again and perhaps bring a spouse or friend.
Once you have defined your purpose, program, prospects, price and strategies for promotion, you can begin to create a plan of action. This plan must include a realistic timeline for implementing the program within your projected budget. For the program to succeed, you need to give yourself ample time to take all the necessary steps. Success is not restricted to your profit margin. Happy members are equally or more important when defining the success of your program.
While no two fee-based programs are exactly alike, there are certain steps you need to take when implementing all new programs. It is essential not to overlook these steps and to ensure that you plan sufficient time to accomplish (and pay for) each step. The general tasks you must accomplish include contacting your target members, readying promotional material, creating and displaying signage, and hiring and educating staff. For a breakdown of the steps involved in organizing a specialized, fee-based program I helped implement at the Pacific Athletic Club in Redwood Shores, California, see “Sample Timeline for Fee-Based Postnatal Fitness Program” on page 32.
Once you have established your timeline, you will need to finalize your projected budget to ensure that adequate funding is available to complete the necessary steps. At this point, you may find that several expenses have emerged that you hadn’t considered when you determined the program’s break-even point. As a result, you may need to tweak the price of the program to accommodate the new costs. You will ultimately need to compare your revised projected budget with the actual costs of the program, once those are known. For an example of items to include in the budget, see “Sample Budget for Fee-Based Postnatal Fitness Program” on page 34.
Once the program has started, continue to evaluate every class. Solicit feedback from participants and adjust the workout as needed. You may be surprised at some of the things that surface after a program gets underway. For example, in the case of a postnatal program, you probably would have anticipated that the primary motivations of the mothers attending would be to lose the weight gained during pregnancy and tone up in certain areas, such as the abdominals, hips and thighs. But after the class has met several times, you might notice some secondary motivations, such as having the opportunity to be around other moms and having a reason to leave the house after being holed up with an infant for days on end. Knowing this can help you refine certain aspects of the program so that it meets or exceeds other, more subtle member needs. This kind of new information can also provide fodder for your marketing campaign. (For example, “Get Out of the House and Get Into Shape With Other Moms” might entice members who value the chance to socialize more than the chance to sweat!)
Another way to capitalize on new mothers’ cravings for camaraderie is to provide catered snacks for your group to enjoy on the last day of the program. Snacks can be simple, healthy and inexpensive—for instance, bagels, fruits, juices and water. Hold this social event after the last class and use the time to let participants openly discuss their pressing postnatal issues, such as nutrition, baby care and postpartum blues. And don’t forget to ask for feedback on the entire program and together plan a course of action for the next series. Consider the changes in your participants’ fitness levels and add new appropriate exercises. Hopefully, you will find that most of your moms will re-register for your next new postnatal fitness program.
The Bottom Line
In today’s economy, you can’t afford to miss out on the potential profits of successful fee-based programs. If you give members what they want and need, you will realize profits and may even bolster your membership numbers in the process! By following the six P’s outlined in this article, you can provide the results your members are seeking and the profitability your club deserves.
Here is an overview of the actual steps we accomplished at Pacific Athletic Club in Redwood Shores, California, prior to the start of a fee-based postnatal fitness program. While these steps were specific to a specialty group of our members, you can use the steps as a guideline for planning other types of fee-based classes.
Name of Program: “Baby and Me”
Date of Program: July 1-31
12 Weeks Prior to Start Date:
1. Write an article for the club’s newsletter, outlining the benefits of postnatal fitness.
2. Take photos for the newsletter, posters and flyers.
3. Contact local OB-GYN doctors and ask if you can send information regarding the postnatal program offered at your club.
10 Weeks Prior to Start Date:
1. Follow up with OB-GYN doctors. Ask if program brochures could be available to their postnatal patients. If yes, work on a design and layout for the brochure. Keep costs down by maximizing in-house support.
2. Get photos and information to a sign shop for posters and flyers.
8 Weeks Prior to Start Date:
1. If possible, sort e-mails using membership demographics and send a quick “Coming Soon . . . Look What’s New for New Moms” e-mail to all new parents.
2. Follow up with the sign shop.
3. Send brochures to OB-GYN doctors.
4. Write up an internal staff memo describing the postnatal program. Be sure staff can answer the six most frequently asked questions: Who, what, where, why, when and how much? Specify who will be teaching the class and the name of the contact person responsible for signing up members.
5. Don’t overlook your in-house children’s center, as many of your postnatal moms use this service. Be sure the center’s staff is well informed. You may consider having some type of incentive contest that rewards the staff person who signs up the most moms for the program (offer this person a paid day off!).
7 Weeks Prior to Start Date:
1. Pick up posters and flyers from the sign shop.
2. Distribute information handouts that outline the specifics of the program for members and nonmembers.
3. Make in-house flyers. If possible, use computer clip art or photos on the flyers so the materials are eye-catching. Keep the written information consistent with all other printed promotional materials so the message isn’t diluted or confusing.
6 Weeks Prior to Start Date:
1. Display posters and flyers throughout the club (don’t forget the women’s locker room!).
2. E-mail the sorted parent group again. This time, send all pertinent program information, emphasizing how and when to register.
3. Be sure all personnel are informing members about the program.
5 and 4 Weeks Prior to Start Date:
1. Increase the visibility of the program. Set up a table, TV and VCR in the lobby. Display brochures regarding postnatal fitness and related items of interest, such as nutritional brochures explaining calories needed when breast-feeding and article clippings on mood swings or postpartum blues.
2. Be sure instructors and other staff are regularly announcing the class.
3. Check that all posters and flyers are in good condition.
4. E-mail the same sorted membership group one last time, requesting final registrations.
5. Personally ask new moms to join the program. Let them know about its benefits; especially emphasize that they can bring their infant with them to class in a stroller. That is a real sales point. New moms hate leaving their babies in child care.
3 and 2 Weeks Prior to Start Date:
1. Call all registrants and reconfirm date, time and other pertinent information.
2. Consider whether you need to better position the table in the lobby to increase the participation level.
3. Purchase any materials needed for the program, including small, inexpensive gifts to give new moms who complete the course.
4. Check that all areas to be used during the program are in working order, with all equipment stocked and functioning properly.
5. Continue all avenues of promotion and advertising until the day of the event.
1 Week Prior to Start Date:
1. Be sure everything regarding the program is ready to go. Any handouts and materials should be in an area that is readily accessible and known to staff.
2. Send a memo to all staff members, reminding them when the program starts and where to send participants.
3. If time permits and staffing is available, reconfirm program particulars with registrants one more time (believe it or not, quite a few members forget to show up!).
4. Type up a final list of all registrants. Include membership number, telephone number and baby’s name and age.
On the Start Date:
1. Be sure all front-desk personnel know where and when the postnatal class meets, whom to contact if questions arise, the name of the instructor, the cost of the program and whether an interested mom could come to observe.
2. Have ready a final list of registrants. Bring a sign-in sheet with clipboard and pen. Make sure participants sign in as they enter the room.
3. Bring your little box of handouts and materials to the room prior to the start time.
4. Give yourself ample time to set up for your first class. Test the stereo equipment and cue all necessary music.
5. Be sure there are enough mats, dumbbells, rubber bands, stability balls, etc. for all paid registrants.
6. Be sure the room is clean and fresh. Mirrors should be spotless. Air conditioning should be on if necessary.
7. Don’t forget about yourself! You should be neat, professional and excited to meet your new moms and their babies.
8. Ask your new students to go home and write down their program goals and expectations and bring their list to the next class. The lists will give you a clear understanding of participants’ wants and needs. Your job will be to fulfill them, using your knowledge, enthusiasm and teaching talents.
The following is a very simple format that compares the projected budget against the actual budget for a sample postnatal fitness program such as the one outlined earlier in this article.
Name of Program: “Baby and Me”
Target Market: women aged 20-50 years
Target Segment: postnatal women
Time: 11:00 am-12:15 pm
Location: studio 2
Member Participants (10 @ $100 each) $1,000
Guest Participants (2 @ $125 each) $250
Total Projected Revenue $1,250
Labor @ $30/hour (8 classes x $30) $240
Food (for lunch on last day) $65
Beverages (for lunch on last day) $25
Total Projected Expenses $435
Total Projected Revenue $1,250
Less Total Projected Expenses $435
Total Projected Net Profit $815
Notes: Analyze your budget and determine your break-even point (i.e., the point when total revenue equals total expenses). In the example above, the break-even point is $435 (the total projected expenses for the program). Divide this amount by the cost of the program per member ($100) to arrive at the number of members needed to break even (4.35 members), and round that number up to the next whole number. Thus, a minimum of five members must register before you reach the break-even point. Using this formula gives you the control to cancel the program if you don’t reach this minimum. Be sure your club includes a provision on the program’s registration form stating your right to cancel a program owing to lack of participation. If you do need to cancel a program, be courteous and inform registered participants as soon as possible.
Now let’s assume you did achieve the break-even point for the postnatal program and you implemented the program. Let’s also assume that what follows are the actual revenue and expenses for the program versus those you projected.
Projected: $1,000, Actual: $1,600
Projected: $250, Actual:$0
Projected: $1,250, Actual: $1,600
Projected: $435, Actual: $465
Projected: $1,250, Actual: $1,600
Less Total Expenses
Projected: $435, Actual: $465
Total Net Profit
Projected: $815, Actual: $1,135
Notes: This budget shows an actual total net profit greater than projected. The actual number of members participating was 62 percent higher than estimated (10 members you projected would participate, divided by 16 members who actually participated). However, guest fees were $250 less than projected. Since most of the actual expenses were close to those projected, the $250 loss in actual guest fee revenue had little effect on the program’s profitability. The actual net profit was 28.2 percent higher than projected ($1,135 – $815 = $320, divided by $1,135 = 0.2819, or 28.2%). In summary, the budget reflects a successful program.
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