Cover Story Classics

TRUST

By: Norm Cates

• For this article, Log In to:
• Download PDF

August 2009 Edition

Publisher's Note: In 2018, when Club Insider reached the milestone of 25 years in publication, we changed our tagline to "Celebrating 25 Years of Trust." (this was updated each year until we hit 30 years; now, we have added a + for the subsequent years of our 30s) Most importantly, though, this tagline represents the reality of TRUST being required for our publication to exist. If we did not have the trust of our readers, our authors and our advertisers, we would never have made it.

During those 30+ years, one of our goals has been to be the shepherd of the health and fitness club industry's history. We very much believe those who do not know their history are doomed to repeat it. It is for this reason that I came up with the idea of and presented this year's Cover Story Classics series. To say that picking from the hundreds of cover stories we have done for those that best exemplify our publication's beliefs and best teaches the lessons of our industry's history was a difficult task would be a complete understatement.

To close this year's Cover Story Classics series, we are going to go back to August of 2009. The title is simply: TRUST. As you read, please once again keep in mind, some statements may be dated, but I have updated/removed that content wherever possible for clarity and space requirements. Above all, the important thing to keep in mind is where the United States health and fitness industry was then, where it is now and where we believe it should go next:

• Then, we were at 45 million members and a penetration rate of 18% (IHRSA).
• Now, we are at 77 million members and a penetration rate of 25% (HFA).
• The obesity rate is 43%... So, where do we want to go?

At quick glance, and I know an overly simplistic one, though we have come a long way, it doesn't seem like we are winning. But, I feel we are on the cusp of greatness and for two reasons:

First, time may tell GLP-1s to be a gamechanger, as they are helping people most likely too embarrassed or scared to enter health and fitness clubs with the ability to more easily lose 15 - 20 pounds on their own, thus possibly breaking down one of the greatest barriers to entry our industry has ever known. Attracting and harnessing this previously unattainable percentage of the population may be the greatest industry achievement of this century.

Second, the power of design, science and technology has culminated in the greatest facilities this industry has ever known able to accomplish more for the human body than we ever dreamed. Now, it is time to really let that secret out!

I don't have the answers, but as my Dad wrote in this speech/article from 2009, "this speech (and now, cover story entitled, 'Trust') is intended to stimulate an industry-wide discussion, and then, an action plan on the topic that is of great and crucial importance as we choose which direction to go at this fork in the road."

No matter what, though, it cannot be done without the TRUST of the consumer and providing them with a real, tangible result.

• • •

This is the transcript of a speech I (Norm Cates) delivered on August 18, 2009 at the National Fitness Trade Journal Conference in Reno, Nevada:

I bet many of you are wondering what I'm going to say in this talk about Trust, and if I were you, I'd be wondering, too.

Since the title of my presentation today is, "Why Building Trust in Your Community is the Key to a Great Future For Your Club," you might think the answer to my question is obvious. But, it's not.

Today, I will be telling you the truth about the status of our health and fitness club industry, as I see it. I may offend some of you with what I say, and if I do, I apologize in advance. But, I predict some real "AHA moments" for some of you. Regardless of the outcome, I am going to say my piece to help every one of you in our industry, whether you're a health club or fitness center owner or a fitness industry vendor.

I'm going to discuss industry issues that are impacting new membership sales in the United States and what we can do about them. The sensitive subject of Trust has never been addressed in our industry the way it will be here today.

But, before I get started, let me say a couple of things. First, please hold your comments, all questions and all cussing until I've said my piece. And, please, turn your cell phone off now.

I trust you will be energized as I attempt to achieve several things:

1. I'm going to discuss the idea of "insurance" to protect people who are members of health clubs that close, and I'm going to explain why we're stuck with the Churn* as a large part of our new membership source. Then, I'll explain why escaping the Churn is necessary for club success in the future.

*For folks who are new to our industry, welcome aboard! The "Churn" is the practice in which our industry continues to attempt to supply itself with needed new customers (a/k/a members) by taking away customers (a/k/a members) from other clubs, i.e. everyone is fighting over the same pool of potential members.

2. I will explain "Benefits" marketing and how it should be used to focus on non-members instead of "Features" marketing that tends to draw existing club members.

3. I'll tell you how to go about building more Trust in the minds of the citizens in your community, especially people who are not currently members. You will receive some new tools for new member prospecting and recruiting, so you can leave here, go home and get started right away.

4. Finally, I'll tell you about some of the most well-trusted club operators in our industry and share some comments from each of them.

Club Closings Damage Health Club Industry Trust

Our industry, like the rest of America, is subject to the woes of the economy. Right now (during the Great Recession), we're experiencing club closings at a somewhat higher rate than we normally do. Suffice it to say, the picture ain't pretty.

It's important to know that virtually every time a club closes... damage is done to consumer Trust of our industry in the area where it happens. Sometimes, the damage extends nationally. If the right things are not done, this damaged Trust will hurt new membership business for everybody in the area for some time.

The severity of the damage to our industry's Trust from club closings depends on:

A. What the closing club owner does and how,

and

B. What the competitors of the closing club choose to do.

"Insurance" for our industry image and reputation is available simply by those two parties, a club owner who is closing his club and at least one competitor of that owner, doing the right things.

So, today, I want to suggest that, if and when you ever have to close your club or know somebody that must close, think of this speech and this idea of "insurance" for clubs that must close. Or, if you have a competitor that's closing, remember that both of you working together can insure less bad press, thus, less Trust damage from that closing. If you are the surviving club owner(s), you are the one(s) with the most at stake because you have more to lose, as well as much to gain.

The surviving club owner should make real efforts to help place the members of the closing club in his and other clubs in the area. That's because doing so will minimize bad publicity and press. Remember, this idea will be better if more than one surviving club participates because spreading the member absorption from a closing club to more than one club also gives the displaced members better options to choose from. This lessens the potential for bad feelings, bad publicity in the press and damaged Trust for all surviving clubs in the area.

For sure, you can expect very good "word-of-mouth" PR among the adopted members that you take in, and a well-orchestrated "adoption" of all members by several clubs surrounding the closing club can give our industry a very favorable PR image, as opposed to the alternative, which is negative for all in our business.

We are ALL in this together, and making this move now, and in a big way, will surely help our industry start the process of avoiding further damage of Trust because of clubs that close.

Damaged Trust from Club Closings is Not All We Must Overcome

Unfortunately, club closings are just part of the Trust-damaging events in our industry. Our industry's history is riddled with other events that have been Trust Busters, and they have been instrumental in keeping our industry dependent upon the Churn instead of attracting people who are not members.

Let me give you some examples, and let's see if they ring a bell for any of you.

• How about Bally Total Fitness' long run of problems, including back in the mid-1990s when Bally had over 1,500 pre-sale consumer complaints filed against them in the Boston area before they even opened the doors of their first club there? How about Bally filing for bankruptcy twice in a two-year span?
• And, I'm sure you've heard about the events in Texas involving steroids sales in gyms.
• Of course, I'm sure you have also heard about a Dallas, Texas-area chain club throwing paperwork with member credit card numbers into dumpsters behind its location and subsequently being prosecuted by the State of Texas Attorney General's office for it.
• Then, there was the chain in Ohio, Tennessee and Kentucky I had shopped a few years back. The shop was tape recorded because the chain's reputation was that it was standard practice to tell all prospects to join their club because their competitors were going out of business.

And, how about these?

• The continued use of the "Retail Installment Contract," one of the worst industry reputation-damaging things ever created and used in our industry. Can you imagine how many Americans our industry has permanently turned off by suing them for a membership contract collection?
• What about the continuation of "bait and switch" advertising?
• And, how about high-pressure membership sales, including the infamous "Turn-Over" (TO), where a sales office is wired so the manager can listen in on sales presentations, then steps in to perform a TO if the sale isn't being closed.

The list goes on and on, but I'm sure you get the picture. Suffice it to say, we have a lot of work to do in the PR world for our industry in the United States.

We Know We Are Better Than That!

You and I know that we, as an industry, are far, far better than the reputation we must fight in consumer minds every day. We, as an industry, are far more professional than the average American realizes today. Millions of Americans don't do business with us because of many old memories they may have or may have heard about from friends or relatives. We, as in industry, are struggling with an old reputation... one from the past, and to a lesser extent, a reinforced negative image caused by club operators who are still doing unsavory things. We must fix this. This is the PR game we must win!

Our Industry is Living Off the Churn

Let me make something clear. Some of us, myself included, have damaged our industry's reputation and its standing in the eyes and minds of American consumers during its relatively short history.

That's why our industry is not a favorite of Americans, and a very high percentage of them don't do business with us at all. That fact is embarrassing for all of us, and it has to change.

I submit, and strongly believe, that the lack of and damaged Trust in our industry is at least partially responsible for making clubs live off the Churn, subsequently preventing our industry from having far more members in the U.S. than we have right now.

The American Health Club Industry Has Reached a Fork in the Road...

It's important for all of us to realize that American health club owners now have a choice of two directions to go:

A. We can take the wrong path at the fork and continue our industry dependence on the Churn. Eventually, our industry will succumb to this problem. Keep in mind that Churn dependence has helped keep our penetration numbers stagnant at the 42 to 45 million range for the past five years (now 77 million)!

or

B. We can take the right path at this fork and find a way to grow our membership by tapping into the percentage of the American population not currently doing business with us. By taking the right path, through targeted and focused efforts to build Trust and relationships with the non-member population, we can more significantly grow our total industry membership further, and we will significantly reduce our long-standing industry dependence on the Churn because we will be attracting more non-members to our clubs.

"Features" Marketing vs. "Benefits" Marketing

It's important to know that the Churn process is partially caused by the use of time-worn "Features" marketing that fails to differentiate and does NOT make the advertised club stand out from all the rest. Instead, our industry should focus on "Benefits" marketing, which is essentially all about what the customer needs and wants and how your club can deliver those results, not what your club has.

"Features" marketing essentially attracts people who are much more likely to be current members of other clubs, thus the Churn continues.

An example of "Features" marketing is an ad that says something like, "We have 25,000 pounds of free weights, 25 treadmills, etc." You might as well save your money with such ads because nobody cares how many pounds of free weights and the number of treadmills you have but you and the company that sold the weights and treadmills to you.

"Benefits" marketing will attract the right target... the unfit, non-exercising people who've finally decided to change their lifestyle through the establishment of a regular exercise program but are not currently health club members.

An example of "Benefits" marketing is an ad that says something like, "Our Medical Fitness Association (MFA) Certified staff is standing by to help you develop your new exercise program so you successfully achieve your fitness goals. We CAN help, and we DO CARE about YOUR results."

It's important that everybody knows and understands that our continued dependence on the Churn will do nothing but lower the average number of members in clubs across the land. This is not something I've dreamed up. This is a fact, and the numbers are changing as I speak. According to IHRSA statistics, in 2000, the average number of members per club was over 1,900. Now (2009), it is less than 1,500 and falling (Currently, 55,000 clubs serving 77 million members equates to 1,400 per club).

How has that happened, you may ask? It has happened because our industry continues to build new clubs in places where they are not needed. They are not needed because an adequate supply of clubs, many already struggling, are already there. Therefore, the average number of members falls because the new club principally gains their memberships from other clubs, rather than attracting the unfit, non-health club members. This, in turn, drives down the average number of memberships in all the other area clubs as well.

TRUST is the Ticket!

To break our industry dependence on the Churn, we must build relationships of Trust with more and more non-member Americans. We must identify and reach out to people who are not doing business with us. We must convince them that we truly care about them, their goals and their results. We must convince them that we are more professional than their Grandfather's health club was. We must convince them that we have a passion and deeply-held desire to help them.

We must not sell them a bill of goods. If we can't walk the walk, we shouldn't talk the talk. We cannot fail to deliver results for them. We must have a deep, deep desire and passion to deliver the results we promised them when they joined, and we must build a culture in clubs so that all individual members of the staff are unified as one team on the same page with a focus and passion for delivering member results.

Look at it like this. This will be a lifetime challenge. The movement to use Trust to defeat the Churn and move towards attracting the 150+ million eligible, non-member Americans will not happen overnight, but it will produce results once you define a plan for your business and begin to act on it every day. And, I mean every day. The keys are innovation in "Benefits" marketing, producing results for your members and dedication to this challenge.

Therefore, this speech (and now, cover story entitled TRUST) is intended to stimulate an industry-wide discussion, and then, an action plan on the topic that is of great and crucial importance as we choose which direction to go at this fork in the road. That topic is Trust.

How to Build More Trust

Here's a list of ideas to help you get started in building more Trust within your community:

1. 1. Sit down and write down every idea you can think of that will help you introduce your club to people in your community who are NOT members of a health or fitness club.
2. 2. Go through your membership lists and find members who are involved in church and synagogue organizations, charity events, fundraisers, etc. Contact them and discuss how your club facilities might be used to help the causes these folks are involved with. Communicate in person and by phone. Make sure each of your communications states how your club benefits its new members (with weight loss, increased energy, better sleep, etc.) and offer to speak to their groups to provide health and fitness ideas that will help them. You know the benefits of regular exercise, now reach out for speaking opportunities to share what you know.
3. 3. Get involved in community efforts to help the sick and the underprivileged. Start by picking one or two good causes and take those under your wing.
4. 4. Keep your eyes and ears open about what is going on with the competition in your area. If you get wind that a competitor could possibly close, you should be the first to approach that club owner to see if you might provide him with an alternative to putting his members out in the street. Make every effort to build an alliance with as many clubs in your area joining together as you can arrange so not a single member of the closing club gets left out. You will be amazed at how much doing this will build the Trust of the citizens in your community and how this positive word-of-mouth will lead to more new members for your club. You can expect to gain at least two or three new members per exiled member you take in during the years that follow.
5. 5. Review the operation of your club business, and if necessary, consider change. If you currently use Retail Installment Contracts, consider changing to Month-to-Month membership dues agreements where there is no penalty should the member decide to quit. This is a great advertising tool. The words "No Retail Installment Contracts" are magic to many consumers. For a 12-month term, charge a reasonable upfront enrollment fee, the first month's dues, and at worst, require a 30-day written notice for cancellation. Then, leave it at that... Whatever you do, do not put your club into a position where you end up suing a member over money. That is the kiss of death, and for every dollar you might ever collect by suing a former member, you will lose $100 over time because of the ill will against your club in the community. You will be amazed at how negative word-of-mouth can travel and hurt community Trust of you and your club.
6. 6. Throw monthly member appreciation parties. If you have not done so already, establish a monthly member appreciation party. For example, a great time is the last Thursday evening of every month. Be sure you have the party on your monthly club calendar and website. During the month, provide your members with printed invitations to give to their friends and broadcast the invitation via email a couple of times a month. Make audio announcements in the club on the Monday, Tuesday and Wednesday nights before your monthly party. Make this a lifelong habit, and be sure to give a Welcome Speech during each party where you thank your members for being members and welcome their friends as guests in your club. You should say Thank You verbally every month, year-in and year-out, without fail. Give EVERY friend of your members who attend a free, one-month Trial Membership (Of course, make this only for new guests to your club). This is PR 101 folks, and if you're not hosting monthly member appreciation parties, you should be. The cost in time and dollars will be recovered many times over during each business year.
7. 7. Speaking of appreciation parties, you can go further and host periodic events to show appreciation for police officers, fire fighters, nurses and other first responder professionals, etc. This, in turn, will connect you with each of those departments, hospitals, etc., providing another great source of membership leads.
8. 8. Do what Red Lerille does. Get out and speak to community organizations like the Chamber of Commerce. Do like Red does and present yourself as the expert you are. In essence, share your club mission at Chamber of Commerce luncheons, breakfasts and other gatherings. Host the monthly "Chamber After Hours" events at your club once a year, and be sure to attend the Chamber After Hours events each month as they are excellent networking opportunities.
9. 9. Join and support the Better Business Bureau (bbb.org), whose slogan is, "Start With Trust."
10. 10. Be nice, nice, nice and nice! Remember that success in the health and fitness club industry requires friendly relations with thousands of people! Every one of them could make or break your business. Treat everybody that you and your club deals with, including your employees, ethically and fairly, in a friendly manner and as if that single individual will determine the fate of your entire business... because they will.

• • •

To summarize and close, let me say this. Our goal with every edition of Club Insider we've published since November of 1993 is to help you make your club better and more competitive. Through learning, and acting on what you learn, you can change the future of your health club business for the better.

Back to Edition