Is Your Business Customer Friendly? Lessons You Can Learn (and Not Do) From LA Fitness

by , under Customer Service

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


14 Comments for this entry

  • A simple essay. A powerful message: the Internet Reformation lets us all decimate a poorly-managed business globally. Without spending a cent. Your essay could even go viral, Martin. Will LA Fitness management wake up and smell the coffee? I’m going to bet no. And while that may be a sad outcome, it will remind the rest of us of the power that the net has distributed across the world with quiet indifference. Well done! And thanks.

    • toplineb says:

      Nah, they’re not going wake up. Silly to even think they would.

      But as you say, a message on the net can create quite a stir.

      Thanks for your comments… very much appreciated!

  • Ken Thomson says:

    What an insightful piece. As so often happens, management seems to ignore the importance of great customer service. And of course, the impact on the bottom line of marketing costs to try to regain traffic to replace those that walked.

    We all go into business to satisfy client/customer/patient needs. There’s no other way to survive, let alone prosper. But as a consultant or turnaround specialist, you often have your work cut out to change the management’s mindset, when the kind of situation discussed has been allowed to develop.

    It’s one thing when the company owner seeks help to address declining revenues. It’s another when you walk in and offer assistance. So often, business people just don’t want to change anything, even when they’re going down like the Titanic. Looks like you might have another client, Martin.

    • toplineb says:

      You’re right, Ken… It’s sometimes tough to change the mindset of the leadership of an organization… especially a large one. Each LA Fitness is independent, but the individual operators seem to think that because they are “LA Fitness” that they, too, are a large organization. The reality is, the only reason LA Fitness Corporate is a large organization, is because they have several smaller shops that contribute to the overall size.

      The individual gyms need to realize that customer satisfaction, service, and treatment is critical to their survival. It’s not uncommon to see gyms come and go… happens all the time.

  • Hi Martin,

    I was very intrigued with your call to LA Fitness, I currently work for the company on a part time basis. I can tell you the policies are set especially on memberships to discourage fraud but as you pointed out it also disrupts customer service and ultimately has caused a loss of customers. I do know that the clubs are very limited on what they can do because I have access to it all and actually would not be able to complete that request. This actually is quite common on their PIF (Paid in Full) memberships, bottomline LA Fitness spends more time recruiting than retaining and will catch up to them.

    • toplineb says:

      Hi Jason… I appreciate your response.

      Here’s where LA Fitness’ decision doesn’t make any sense…

      I have a family member who can’t use the membership any longer because he is moving out of state. I have another family member that would like to use the gym, and all I asked for is a simple name change from one person to the other. LA Fitness said they couldn’t do that, and if effect, said that they would rather lose the income from a cancelled membership than to change the name and retain that income. All they would have to do is make a name substitution. Same number of people coming to the gym… no difference but a name change.

      Now let’s look at another scenario. I work out at the gym. My fiance works out at the same gym. We get married. She changes her last name to mine. LA Fitness would make the name change in that instance. Same number of people coming to the difference… no difference but a name change.

      Do you see how stupid LA Fitness’s policy is? Makes absolutely NO sense.

      Now calculate what it costs to generate a new customer… ad costs, marketing, prime location that attracts attention; and sales costs… commissions, hourly pay, benefits, etc.

      Seems to me that it makes more sense to change a name on a membership and retain that income, than to try and generate a new customer.

  • Scott says:

    Martin,

    A very interesting article.

    You should write up a press release about it and promote Topline.

    Then give a copy to the local L.A. Fitness manager and perhaps they’ll see the light? [I won’t hold my breath either 🙂 ].

    Be well and stay strong my friend!

    Scott Krech

    • toplineb says:

      Great idea, Scott… and I won’t be holding my breath. Some business owners “know it all” and they’re going to run their business the way they want to run it, not necessarily the way that’s in the best interst of their customers. LA Fitness is a perfect example of that.

  • Martin,

    Glad to see you back and sharing your perspectives. The gym I belong to has some of the same issues. At times, I wonder why they even bother with a Suggestion Box.

    Understood and strongly agreed re: policy before people and some of the “customer service” you see in business. And, folks typically resist change – even when their livelyhood is at stake.

    Respectfully,

    David

  • Steve Adam says:

    Martin, nice job as usual… It just goes to show you that no matter how big the business, company or organization they are just as vulnerable to loss through bad marketing practices. This is why every Topline Consultant should consider any business (no matter the size) operation as a potential client.
    I think we as consultants often times feel that just because a company is large and size-able in operation, that they have “all their ducks in a row”. Nothing could be farther from the truth! Many of us might shy away from a really huge payday with that train of thought. In reality, I have found bigger and better opportunities going after larger companies because they too are making marketing mistakes, just on a larger scale. And since everyone else is thinking the same thing (ie. “Surely they have internal employees taking care of this!”) it levels the playing field and presents less competition and greater opportunity for the individual who will press forward and pursue the account. This mindset works even better in a lousy economy.
    If you’ll look around with “CAT-scan” perspective, you’ll see that this is a season of tremendous opportunity with an abundance of low hanging fruit… and anyone who is willing to assert themselves with a little effort- armed with some good Topline marketing information will have so much more of an advantage as a Topline Consultant. Keep up the good work Martin.

  • Martin Howey says:

    Here’s an email I got from a client…
    ================

    Martin, you are not alone having problems with LA Fitness.

    My daughter was a trainer a LA Fitness and was treated very poorly as a employee, but not before she got my wife and I to sign up.

    After my wife signed up because they have a very nice pool, she convinced me to join too.

    At first the gym was good, but then I got robbed. My locker broken into, and I speculate it was a setup by and employee. But the worst part of it was the LA Fitness management, both in the Bloomfield Hills, MI location and corporate HQ could not have cared less. They simply washed their hand of the whole issue, pointing to all the signs that they have no responisbility for anyone’s personal property. And, I understand that to a point. The sad part of the whole ordeal was, they gave me no assistance at all. I had to call the police myself in order to file a robbery complaint. And then LA Fitness management did nothing to help find the thief and recover my stolen cash and credit cards. They just did not care about anyone but themselves. In fact that swept it under the run to make sure that no other member found out about it.

    Thanks for sharing your story Martin and reminding me how important it is to treat your clients, customers and patients as you world expect to be treated.

    Sandy Barris

    P.S. Oh by the way, LA Fitness would not give my daughter a leave of absence when she volunteered in the Americore Program so she was forced to quit her job and would not even consider rehiring her when she returned to Michigan.

  • Martin Howey says:

    I’m so sorry, Sandy, to hear about your loss and experience with LA Fitness. It’s very unfortunate.

    The local gym owners seem to think that they are offering a wonderful service and facility to their members (and in a sense, they are). The reality is, that their members are making it possible for them to be in business in the first place, and secondly, to remain in business and be a viable force in the marketplace. But they’re not the only game in town. There are other gyms popping up on a regular basis, and the number of people interested in a gym membership at any one time is limited. Other activities such as jogging, cycling, basketball, softball, etc., are other forms of exercise that can take people out of a gym environment.

    Your daughter’s experience is not uncommon. The faces on the trainers at our local LA Fitness change on a regular basis. They’re replaced with yet, another ill-trained, unknowing person who has taken some sort of “certification” course, but looks like they’ve never seen, not to mention, used a barbell or dumbell in their life. The prices they charge for the quality of training the member gets is ludicrous. And the results? Negligible from one month to the next. No wonder that you don’t see those who were students one month return the next month, either to continuing with the trainer or training on their own.

    No results… no service… no caring on the part of the gym or the trainer… results no continuing membership fees, or referrals. That is, unless they lock you into a contract with the threat of a lawsuit or credit ding if you try to cancel. And for the trainers who are mistreated… no continuing referrals from them, either.

    It’s a sad situation, but unfortunately, it’s not isolated to LA Fitness. It’s something we’re seeing more and more of in almost every kind of business. That’s why our consultants are having the best successes in securing and keeping clients. The business world needs more business owners who “get it” and are willing to, not “PAY the price” but actually “ENJOY the price” of keeing customers and client happy, returning, and referring. And that’s exactly what our consultants are trained to do for their clients.

    Martin Howey, CEO
    TopLine Business Solutions

  • Martin Howey says:

    Here’s an email I got from a client…
    ================

    Martin,

    I am 100% in agreement with your comments regarding LA fitness and their policy to have memberships non-transferable. A paid membership is a paid membership no matter who is using it. The CSR that you spoke with was trying to justify this policy by telling you that if LA fitness allowed memberships to be transferrable, then they would lose out on a new membership. He was missing the point that the membership you wanted to transfer is a paid membership.

    A bad business policy is one that has no flexibility based on reasonable circumstances and does not serve your target customers.

    Regards,

    Stephen Grant

  • Martin Howey says:

    Funny thing, Stephen… If I were single and dating a single woman who also worked out at the gym, I’m sure LA Fitness would gladly change her last name to mine. But if one of my sons was leaving the state and couldn’t use the membership any longer, and another of my sons could, LA Fitness refuses to change the first name.

    Same amount of work on their part. Same number of people coming to the gym and using the equipment. The only difference is changing the last name on one membership, and the first name on the second.

    But they’d rather lose a customer and the income they’d make on him/her because the membership was cancelled because the member could no longer use the facilities.

    Seems like a pretty stupid move to me… especially when you consider the cost of attracting, converting, and processing a new member.

    Martin Howey, CEO
    TopLine Business Solutions

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