Two Tiered Memberships Lead to Angry Clients
Everyone is looking to save as much as they can with the bad economic news. Every bit helps and now more than ever your clients are more aware of piece prices and also any charges associated with orders. The same holds true in the regular world as consumers look to save on everything from coffee to cereal. Private label brands continue to outperform more expensive national brands as people try to extend their resources. Memberships in all types of civic organizations are suffering and charities are having some of their worst year in decades. Smart business owners are doubling their efforts to gain customers from weaker competitors but not all of their decisions make sense.
Take for instance the local fitness center that is struggling to increase their membership base as customers have moved to a newer less expensive nearby competitor and others have just decided there was no longer enough money in their personal budgets to pay dues. There are three ways this business could have made an effort to make up for the lost revenues. The first and easiest method would be to increase the per person revenue. In this setting that would be accomplished by extending the services offered such as opening a juice bar or adding equipment or classes that require additional fees. Other opportunities would exist in terms of selling promotional gear to clients but that ship has sailed so to speak and the days of "cool" gym gear are gone. Another option is to simply raise monthly rates which in good times might work but in the recession it would simply result in customers either forfeiting their memberships or going elsewhere. That leaves the third option which is the age old method of increasing sales which is to obtain new customers. This is easier said than done and most gyms have already exhausted potential clients in any given area. After newspaper ads have failed and signage in the streets have blown over the only way to draw people into the gym are special offers. The problem with any second tiered pricing strategy is that it will inevitably alienate the customers that have stayed with you all along.
In this case new customers off the street or those that have been gone for a few months are rewarded with paying one third of what steady clients are required to pay. It may increase sales initially but it will create a significant amount of negativity amongst old members and will cause some to outright leave and go to other facilities. The only way to pull off this type of discounted membership is to offer existing clients something in return which is either a discount on premium classes or at the juice bar. Perhaps giving them a piece of clothing with the gym logo would also help but all too often the gym owners blinded by the influx of what will mostly turn out to be short term customers see the money coming in the door without realizing they have won the battle but lost the war. Newspapers are littered with stories of these types of programs going bad and facilities vanishing. In fact many States have now adopted laws that protect citizens with insurance in the case that a facility were to vanish.
Consider your sales activities closely and weigh the possibility that an existing client may not view it as favorably as new clients. In the end it is customer retention that will keep you profitable not new customers constantly jumping from vendor to vendor shopping only on price. No business will ever survive catering to clients that shop purely on price.