Members who remain longer, members who spend more and new members all enhance a club’s financial performance. Recurring Payments (RP) made through payment cards offer health and fitness clubs a simple and highly effective way to retain customers, reduce costs and improve cash flow. Also known as automatic bill payment and direct payment, RP lets customers authorize vendors to automatically charge the amount owed to a payment card on a regular basis. A simple enrollment form is all your member signs to have their payments electronically transferred into your account precisely when due.
Traditional invoice-remittance methods pose outstanding receivable issues for health and fitness clubs. RP is tailor-made for clubs, which mail a significant number of bills every month and have to process a corresponding number of paper payments, incurring significant paper, postage and administrative costs. The bottom line is simple: it costs health and fitness clubs more money to collect the membership dues that their members owe.
Recurring payments allow clubs to receive all member payments on time. Statistics from the research firm Celent Communications show that old paperbased billing costs service providers between 70 cents and $2.00 per statement to process. Electronic billing can slash the cost to as low as 3 cents per bill.
Much of the demand for recurring payments has been driven by an increasing consumer preference for electronic payments. According to the Federal Reserve, checks currently total 45 percent of all non-retail cash payments, down from 55 percent in 2001, while credit card payments have increased from 21 to 24 percent and debit from 14 to 19 percent.
The Benefits of Recurring Payments for Health and Fitness Clubs and Consumers
A recurring payments program can yield considerable operating efficiencies for health and fitness clubs, including reductions in collections. Additional benefits include:
• Customer retention;
• Improved cash flow and reduced exposure to bad checks;
• Guarantee of payment in-full and ontime;
• The ability to offer a customer convenience;
• An easy way to increase “house” charges.
Much of health and fitness club success is contingent upon customer service and retention, as well as the facility’s total cost of receivables. In addition to monthly membership fees, recurring payments can be set up for supplemental membership programs, such as personal trainers, juice bars or any other ongoing member expenditure. Additionally, when health and fitness clubs automate receivables with recurring payments, members are freed from the hassle of carrying cash for incidentals, sitting down each month to write out a check to the club and taking the opportunity to evaluate whether or not they really “need” their membership.
Consequently, members are given the convenience and security of knowing their bills are paid on time. With anytime access to the Internet and Interactive Voice Response (IVR) systems for real-time payment posting, health and fitness club members can avoid late-payment charges, and membership freezes.
A 2003 MasterCard sponsored research study, revealing consumer attitudes of recurring payments, found that all the customer service benefits, cost savings, and positive ROI (Return On Investment) that Recurring Payment programs deliver have put health and fitness clubs among the top industries in terms of credit card recurring payment usage. The study showed that 62 percent of health and fitness club members use some type of recurring payment method to pay their monthly bills, compared with 50 percent of insurance industry customers, 22 percent of utility customers, and 43 percent of customers of online Internet services.
Despite the growing numbers, a significant market opportunity still exists for health and fitness clubs. Senior analyst, Beth Robertson of TowerGroup says, “Consumer use of electronic or card-based payment options may be on the rise, but more than 68 percent of bill payments continue to be made by check.”
Summary/Conclusion Across all industry segments, billers have become more receptive to new, more efficient payment options that displace paper-based processes, reducing costs, increasing efficiencies and generating a positive return on investment. Today, achieving savings from paper turn-off by implementing customer self-care, estatements and electronic bill payment is a top priority. A recurring payments program can help health and fitness clubs accomplish all those goals, while playing a key role in delivering unmatched customer service and enhancing customer satisfaction.
As consumer payment preferences continue to shift away from paper, embracing the flexibility, convenience and security of payment cards, health and fitness clubs should pump up their own Recurring Payment programs.
For more information, visit www.mastecardbusiness.com and click on Recurring Payments, or call 914.249.2000.
