What happened at the South End BSC (Boston Sports Club) blew my mind. Let me tell you the story first, then give you my analysis.
The Story
I teach private tai chi classes. One of my student is a member of this BSC. When the weather is not nice, we do our weekly class there. I belong to a different club already, so I do not have a great reason to join this one, as my student is either paying the guest fee, or we take advantage of sometimes a “free guest” day to do our class at the gym.
However I do live and work blocks away from this gym. So I decided to save my student some money, and also get a secondary gym that I can use, and join this club today.
After our class I sat down with the manager at the gym and about to sign up for a membership with an annual commitment worth $828 to them. Instead the manager very successfully annoyed my student/friend and me. I am not joining, and I think my friend, who has two memberships (husband and wife) at the gym is thinking about leaving.
Why? As my friend was listening to the membership cost, she realized that she has an older plan which is more expensive and has less feature. She of course ask the manager if she could switch to the new plan. The manager said “sure, but there is a $59 upgrade fee. “Surely you must be joking” we said, plus this member just gotten you a new member. The manager was less than helpful at the situation. She told my friend to take it or leave it.
That is not all. I knew there was a “one time joining fee” for the membership, of $58, which is pretty common for healthclub to get some additional revenues. I asked the manager if she would waive it. I would expect there is a 50/50 chance of her doing something, or offering something to “sweaten the deal”. Instead she said “no” pretty straight out. When I explained
that it is cheaper actually for us to pay the occassional guest fee so she is going to loose a membership sale because of this, she told me”well it is your choice”.
So we both walked out. It is not the money that is the issue. It is the way the manager responded to both situation. Even if the manager was a little bit more apologetic about
my friend’s situation, or offer a token gestures to my new members, maybe a coupon for a class (which I probably will never use), I would have joined. Instead she gave us a pretty definite “I don’t care” message.
For me, a healthclub a service oriented business. Sending a “we do not care” message is just plain dumb.
The analysis
The healthclub business is a high fixed cost business — the lease, the equipment capital cost, utilities, staff etc. They make money by over selling memberships to get “utility” out of the fixed expenses. Adding member is the only way to make money. So face with the
situation of either not making the $828 + $59 fee, or just making the $828 membership, why would they not take the $828?
On the membership upgrade, it is worth potentially loosing two existing members
(a perpetual $160 / month ) over not making an extra $59 upgrade fee? It does not make any business sense.
Looking at Town Sports International (CLUB)’s financials, they are not doing so well. They finally made zero earnings per share last quarter, up from a loss of 7 cents per share same quarter last year. That is they were loosing 7 cents per a 3 dollar share. If they are doing so badly, why would they not empowered their employee to bring in more business, and retain
their membership base? Or maybe this is why the manager do not care, and why they are loosing money? Which is the chicken? Which is the egg?
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