You can pay for AdWords and spend thousands on a social media campaign and still struggle to increase footfall at your facility. Despite all the advancements in technology, word of mouth is still your most effective marketing tools. A member referral programme is an age-old, low-cost way to rake in new meat to your fitness centre. 92% of consumers trust recommendations from family and friends over every other form of advertising.
So how can you use word of mouth marketing to increase revenue and improve customer satisfaction?
What is the return?
Obviously, new members are what we’re after, but referrals, specifically, can prove to be astonishingly lucrative. According to Harvard Business Review, customers obtained through referrals are more faithful and more valuable than regular customers. The study reviewed 10,000 accounts in a large German bank over a period of three years. It found that, on average, referrals are 18% more likely to stay with the business. They also spend about 16% more (amounting to €40 each). When considering both of these factors, the company earns about 60% on its €25 referral award. Referrals begin their gym journey with a higher level of trust than someone who has no prior connection with your service. This means that they are happier to spend money on your products.
To reward the referrer or the referree?
You might think that you can get away with rewarding your current member and bypassing your new client, but overall a method that sees both parties benefit works best. Giving discounts to all involved makes them feel like a team who have worked together for their prize.
How generous should you be?
The first step in creating an effective gym referral programme is to create a great offer that incentivises both the referrer and the referree. The reward given out should always be in line with the reward your business receives, ie: a possible gym membership. To find a suitable figure, you need to calculate the profit margin of each individual membership, ie. what is left over once rent costs, instructor costs, towel service, water etc have been taken away.
For example, if your profit margin is 50%, the reward you offer needs to be significantly lower than this. A 10% membership discount for both customers would still leave you with a 30% profit increase from the new sale. You need to calculate a figure that leaves you confident your margins are healthy but one that is also a significant reward to the customer. Alternatively, you could waive the initial joining fee or throw in free merchandise and PT sessions.
Once you’ve devised a plan, it’s time to tell your members. You can do this via whatever means of communication you normally use. This can be email marketing, push notifications (if you have an app), in-house posters, or verbally, when members check in at the reception desk.
Read more: CRM: What is it and do you need a system in place?
The try before you buy model is enticing to potential customers. Of course, having the trusted view of your gushing pal is persuasive, but it doesn’t beat smelling the sweaty chlorine air for yourself. Offer members three yearly guest passes and encourage them to bring new people into the club.
Move in for the kill
Without looking like a tiger ready to pounce on its prey, be ready and eager to settle the sale. Some consumers will sign up having never set foot in your gym, but they’re the easy sell. Those that utilised a guest pass may be a little fussier and more cautious with their investments. Assuming that your guest checked in upon arrival, your sales team has already had a chance to greet them and obtain their contact details. Aside from plying them with alcohol, your guest will be happiest and most willing to join immediately after their visit, so try to tap into their spontaneous side. Organise a casual chat in the cafe or reception area. Using a friendly, moderate approach will be most effective.
If they leave without joining, simply send them a gentle reminder a day or two later, so you remain on their mind. Apart from that, you have a trusted side-kick in your current member: their friend.
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