Membership stability is the cornerstone of any club’s success. Especially in turbulent times such as those the country experiences in a recession, clubs need to ensure that the combination of value and prestige in membership, along with both financial and emotional investment in the club, make the experience worth continuing, even with escalating costs of membership.
Membership experts often discourage the practice of discounting because it’s not usually a long-term, sustainable solution and may contribute to instability of membership. Entrance fees are essential, and in tough times, whether financed, spread over time or deferred, the long-term stability of a club requires such an investment. Members not only need reasons to join, but they also need reasons not to leave. Successful plans vary from market to market and club to club, and it is essential to avoid cookie cutter solutions to unique problems. However, the underlying fundamentals of successful clubs are similar, and stability is one of the most critical elements.
Determining the Lifetime Value of a Member
Clubs now compete not only with each other, but also with a variety of other activities and providers of activities found within the club itself, as well as with those outside the confines of the club environment. Furthermore, whether entrance fees exist or not, the club represents a commitment in the form of dues that many competing activities don’t have. Members can chose to dine at different restaurants or play golf at the many fine daily fee courses, and clubs have to compete against the reduced cost of those options, as well as with many other activities, such as kids’ sports, and more family friendly activities like hiking, biking and other outdoor activities, attending sporting events and visiting attractions.
To many prospective members, it’s all about the value. They want things like first-class practice facilities, quality fitness facilities, childcare and more family activities and programs. In order to command extra dollars, the value provided by these kinds of items must be excellent. In addition, today’s consumers demand quality. Not only does the golf course have to be in top condition, but the food and service also has to surpass the competition. The club as a whole needs to be presented in a way that makes members proud, so they will want to show it off to guests. Excellence is the only acceptable standard.
This does not mean that every club has to be an Augusta National or Pine Valley. However, once a club identifies its market niche, it needs to fill it well. Too many member-owned clubs succumb to club politics and fail to achieve the level of quality demanded by both members and the marketplace. It is this quality and corresponding value that ultimately determine a club’s success in both membership development and member satisfaction/retention.
Determining the lifetime value of a member is a useful tool in membership retention. Once a club knows the value of a member, it will likely be more apt to do everything in its power to keep that member, so as not to lose that valuable form of revenue.
To determine the lifetime value of a member, a club needs to first calculate the average lifespan of the membership, from when a member joins to when he or she resigns. Most clubs already know this figure or can conduct some simple research to determine it. Next, a club needs to calculate the average amount spent per member (including on golf and other activity fees, food and beverage expenditures, etc.). All of that information can then be plugged into a simple formula.
The following example shows how to calculate the lifetime value of a member:
Example:
$30,000 + ($300 x 12 x 15.5) + ($400 x 12 x 15.5) = $160,200
Initiation fee = $30,000
Monthly Dues = $300/month
Average lifespan of a member =15.5 year
Average amount spent on food/beverage and other fees= $400/month
Membership dues account for a good portion of revenue at country clubs and city/athletic clubs. To combat the decline in membership and retention rates, more and more clubs are taking aggressive steps to develop and strengthen their membership marketing departments. But, in order to be successful in establishing a focused strategy for combating the membership challenge, clubs must have an effective marketing membership staff in place.
To ensure member retention, members must want to take advantage of all that a club has to offer. Effective marketing of club services begins with a dedicated full-time membership marketing staff member or department, depending on an individual club’s needs. Thirty-three percent of country/golf clubs and 44 percent of city clubs have a full-time membership marketing director on staff, according to a McMahon Group report. In that same report, it was also noted that only a small percentage of clubs still have a waiting list for membership.
While financial pressures are real, and it is more difficult to retain and attract members than ever before, most clubs have not adjusted their thinking toward membership development. The reactive marketing strategy of the past is no longer appropriate for most clubs, and it is vital that they engage their members in the new member recruitment and retention process.
NCA’s publication Membership Marketing: Best Practices for Private Clubs offers resources for club leaders for creating or revising membership marketing programs. Visit the online store today at www.nationalclub.org.