About three years ago I moved to another town… about 26 miles from where I was previously living. Because of the distance, I cancelled my membership at the gym I was going to, and took out a membership at an LA Fitness gym about two miles from my new home. I paid a hefty down payment in order to get my monthly dues down to the lowest rate… $15 per month. It made sense, because I have been a gym-goer for most of my adult life, and I would save a substantial amount of money over the long term.
I had one of my sons on the same low-cost plan. A few weeks ago, he decided to move out of the area, and I wanted to transfer his membership to another son. I inquired about doing that at my local LA Fitness, but they told me that memberships couldn’t be transferred. So I called the LA Fitness home office in California, and asked them. Again, they said that memberships couldn’t be transferred.
My response was, “So you’d rather me cancel the membership that my one son can no longer use, instead of making a simple name change and retain the monthly income.” David, the person I talked with said that it was a “company policy” and that if they did it for me, they’d have to do it for everyone, and they weren’t willing to do that.
You can here the entire call here: LA Fitness Call
Now, I understand policies and procedures and how important it is to have standards that apply across the board. But from a business standpoint, this particular policy makes absolutely no sense. If I cancel a $15 membership ($180 per year), it’s not going to break LA Fitness. And even over say, a 10 year period ($1,800), that’s not going to cause LA Fitness to go bankrupt.
But what if several people with similar circumstances, and who are paying double what I’m paying, decide to cancel the non-usable membership? What would that cost the gym? Still, maybe that won’t be enough to cause the gym financial hardship.
Putting the income that the gym might lose aside, the “taste” and loyalty I have for LA Fitness has been diminished. This experience has caused me to look at other aspects of my visits and experience with LA Fitness. Overall, the gym is a great place to workout. And the people (members) I’ve met and established relationships with are super.
But there are negatives that I’ve not let bother me up to now. For instance, there are certain pieces of equipment that need to be recovered because of cracks or tears in the upholstery, machines that have been broken for several days, a tear in the carpet that they’ve covered with a 25 pound weight wrapped in yellow tape, and a maintenance guy who insists on vacuuming right where you are working out, or standing in front of you and cleaning the mirror that you’re using.
Then there are the trainers who hog the weights or the equipment and treat the customers rudely. The gym opens at 5:00 am during the week, but not until 8:00 on Saturdays. If you spend an hour or 90 minutes at the gym, you won’t leave until 9:00 or 9:30. Then to get home and shower and get ready for your day it could be 10:00 or 10:30… half your Saturday is gone.
Other LA Fitness locations in the area open at 7:00 am, and some even open at 6:00. As you might imagine, when they open the doors at 8:00 instead of 7:00, the gym is immediately packed, making it difficult to find the right weights or equipment when you need them. But if they opened just one hour earlier, some of those members who would like to come in earlier would relieve the crowd that arrives at 8:00.
Now I’m not bagging on LA Fitness. Overall, they do a pretty good job. The gym is clean, organized, and the people who work there, for the most part, are friendly. Normally, the negative things that I mentioned might not bother me. But because I’m not able to transfer a very low cost membership that I paid a hefty fee up-front to get to another family member, it’s caused me to be more aware of several small things that I’ve previously overlooked.
Petty? Inconsequential? Silly on my part? Perhaps. But they’re real to me… and they’ve caused me to look at the gym, it’s management, and their policies differently. And these same things can be real to other customers and cause them to see things differently, as well.
So what’s the take-away from this experience? What can you learn from it? And how can you use my experience in your own business, or if you’re a consultant, in your clients’ businesses?
Policies before people is seldom a good idea. I understand the need for standards and consistency. These are important for any business. But when policies make paying customers upset, cause them to look for other negatives that they would normally overlook, cost the company money, create negative word of mouth or publicity, and even cause them to look for alternative places to spend their money and do business with, those policies need to be carefully examined, and if necessary and feasible, revised.
If you’re a business owner, take a look at the policies you have in place for dealing with customers. Do they make sense? Are they more beneficial for your business than for the people who pay you? Do they create goodwill, or cause ill feelings?
If you’re a consultant who works with business owners, consider the same questions for your clients’ businesses. Often, business owners get so caught up in the day-to-day “doing the do” of the business that they either don’t see, or they overlook policies and procedures that can irritate their customers or clients, and can cause distention and loss of income. A second set of eyes can be very helpful to your clients and help them to see things from a buyer’s standpoint that they might not otherwise see.
Sometimes, all it takes is a simple tweak or adjustment to a certain policy to make it better, more customer friendly, and more profitable for the business. But changing a policy by itself may not be enough. Making an announcement to your customers or clients about your change and how you’re trying to make it easier to do business with you, can go a long way. It’s one thing to make changes behind the scenes, not letting anyone know about them unless they ask. But being proactive and bringing attention to what you do will create goodwill and a “We care about our customers and are making changes that will benefit you and make it easier and more fun to do business with us” attitude and company culture.
So how do you make those announcements? If you’re not using a printed newsletter or an email ezine newsletter to communicate with your customers, you’re making a huge mistake. Today’s marketplace is cluttered with competitors who are doing everything in their power to get more of their best prospects. And who are their best prospects? They’re people who already see value in the products and/or services you’re selling, and they’re currently buying them… but they’re not buying them from you. They don’t have to be “sold” or convinced about the value… they already see it and have, and are currently experiencing it. The only thing you need to do is convince them that doing business with you is a better option than with whom they are currently buying from.
In other words, your competitions’ best prospects are your customers or clients that you’re not taking care of. And unless you have some effective systems in place to let them know what you have, the value of it, and what you’re continually doing for them that makes doing business with you not only the best option, but in fact, the ONLY option, you’re going to lose them.
Consider that most businesses lose between 18 and 22 percent of their existing customer base every year. Let’s say that in your business, you lose, on average, 20 percent… and you want your business to grow by 10 percent this year. And let’s say that you have 1,000 customers. A 10 percent increase would give you 1,100 customers.
But remember, you’re losing 20 percent of your base due to attrition. That means that after deducting 20 percent from your current base of 1,000 customers, you’re left with 800 customers. So to get to 1,100 customers, you’ll have to generate 300 new customers. 200 customers to replace those you lost, plus 100 more for the 10 percent increase. Thats a 37.5 percent increase… not in prospects or leads… but in actual customers.
(Calculation: Current: 1,000 minus 20% = 800. Desired: 1,100 minus 800 = 300. Percent: 300 divided by 800 = .375)
If you have a closing ratio of say, 30 percent of the leads you generate, in order for you to get 300 new customers, you’ll have to generate 900 new leads, or 33.3 percent more. (Calculation: 300 divided by 900 = .333)
That’s a LOT of leads!
But what if, through some good customer contact and building and strengthening relationships with them, you cut your attrition losses in half… you only lost 10 percent of your base. Then you’d only have to generate 450 new leads. Think of the marketing and advertising money you’d save by only having to get 450 new leads instead of 900. Add to that savings the amount it costs you to convert (sell) a lead into a buying customer, and the savings can be very significant.
If you have any experience in business at all, you’ll immediately recognize that it’s much easier and considerably less expensive to keep a customer than it is to create a new one. They already know you, (hopefully) like you, and trust you enough to open their wallet and give you their money.
Keeping your customers happy and returning to buy from you over and over, oftentimes takes a simple note, letter, email, call or visit. As I mentioned earlier, a regular and constant stream of email ezines or print newsletters can be great tools for keeping your good customers on board. Now, consider if you did a mix of print and email… one of each every other week. That’s two contacts (one of them can be sent for no cost) that provide valuable and informative information to you customers.
What would that do to your business (or if you’re a consultant, your clients’ businesses)? How many of your competitors (or your clients’ competitors) do that? Probably none of them. Can you see how this would set you apart from everyone else and help position you as the go-to business for the products and services you sell?
In the three years that I’ve been a paying member of LA Fitness, I haven’t received ANY correspondence from them. With three memberships at $15 per month each, I’ve paid them more than $1,600… and they’re not willing to make a simple name change on one of my memberships so they can keep the monthly income coming in.
LA Fitness has a LOT to learn about how to treat their customers… and it starts at the top… at corporate. So take a lesson from my experience and be proactive in how you treat those who provide you the house you live in, the cars you drive, the vacations you take, the educations you provide your children, the funds for your future retirement, and the overall lifestyle you live.
And as always, please let me know your comments and feedback… and realize that I’m here to help you move closer to your goals. Please let me know how I can help you.
Martin Howey, CEO
TopLine Business Solutions
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