The Tipping Point: The Need for Clubs to Evolve is Now

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Owners and managers within the health club industry have always felt special and unique. I’ve heard them say, “Our business model is different than any other business.” However, different isn’t always better. There are certain aspects of other industries’ business practices that health clubs can learn from. After all, customers and clients have the same wants and needs — no matter what the product they are purchasing.

The owners that realize this and make the transition to accommodate their client base will be the ones that are successful and profitable. First, let us look at what is forcing the fitness industry to be more consistent with other industries.

• The economy is likely going to grow at an extremely slower rate for years to come, countering the old days when new member rates were high no matter what.
• We have yet to find a way to increase the percentage of people using health clubs. The dollars are fixed, like other industries.
• The business model of clubs offering weight and cardio equipment and showers for $10 per month is growing and taking an increasingly higher percentage of the market.
• No-obligation memberships are becoming the norm.
• The $10-a-month business model has underestimated the initiative of its members to terminate, even at such a low rate. Profitability at these types of clubs is under pressure due to high terminations, labor for customer service and the cost of new equipment and facilities as they transition from a new startup to a more mature business.
• The very high-end clubs that provide tremendous facilities, excellent customer service, activities for the family, top-notch instructors and trainers, a wide variety of classes, pools, courts, snack bars and restaurants — along with the prestige in town of being a member — will continue to maintain the niche they have carved out and be profitable.
• The 10,000- to 60,000-square-foot facilities that charge $45 to $75 per month will be under tremendous economic pressure to stay in business.  They will have low revenue per square foot, receive resistance from members to pay for six to eight fitness options when they are only using one or two, have difficulty keeping state-of-the-art maintenance, upkeep on equipment and facilities, and will face difficulty paying to convey excellent customer service from their employees.

Let’s look at some of the mainstream business practices that are now required in our industry, that were never previously deemed as necessary.

• No contract memberships and pricing competition.
• Online joining from a person’s home or phones.
• Online booking, scheduling and purchasing of training plans from home or phones.
• Personal training sessions allocated and paid for on monthly billing.
• Gift certificates (in club and online using discount codes).
• Small group personal training.
• Additional payments for some classes.
• Yearly maintenance fees.
• Interface with social media.
• Integration of demographics
• and search engines to monitor the success of marketing.
• House charging for additional revenue.
• Retention statistics, measurements and costs.
• Customer service at an
• extremely high level.
• Remote access to the facility or specific locations within the complex.

Charles Darwin said, “It is not the strongest of the species that survives, or the most intelligent that survives. It is the one that is the most adaptable.”

Our industry is evolving and success will be predicated on how well clubs adapt to the ever-changing and dynamic customer requirements. It is critical to implement these necessary improvements. Your success is contingent on teaming up with a management software company that understands and is on the cutting edge of providing solutions to these issues (also factor the product, price, promotion and people/support provided). The winners will be the facilities that proactively provide the solutions to the members of the fitness industry.

David Porter has been a sales consultant at Twin Oaks Software Development for many years. Previously he ran several businesses, including Suburban Athletic Club outside of Boston, which he co-owned and operated for 10 years. He can be reached at 860.829.6000 or dporter@tosd.com.