The art of discounting is to increase sales in a limited amount of time by slashing prices. This technique is common in the retail industry and often associated with a used car lot. However, in the private club industry, a discount marketing strategy doesn’t work. Sure you could possibly welcome a number of new members in a short period of time, but does this technique really benefit the club? Let’s take a look at four main reasons why your club should avoid implementing a creative discount marketing program for your private club.
Increase your churn risk.
Your churn, or resignation, risk is the possibility your current members will decide to resign from the club within a specified period of time, typically during that fiscal year. Those new members who were attracted by the dollar signs are only looking for a cheap promotion, and typically will resign from the club when the competitor down the street introduces the next “great deal”. If your program has an end date on discounts the club will again see a drastic increase in churn when the perks of the deal fade.
A true marketing program takes into account who the potential members are living within your target market and what’s the demographics of your current membership. If your marketing plan is designed to recruit the types of members not living in your target area or worse attract those you don’t fit your club’s culture, it will fail. Discount programs typically don’t attract the right clientele. These members are here for the deal and will soon resign leaving the club with the same problem they had to begin with. Discount marketing is simply “kicking the ball down the street”. You may relieve your problems temporarily, but they will return, exponentially.
“Cheapening” the brand of the club through discount marketing.
One of the hardest things to control is the perceived value of your club within your target market. Let’s face it, to those of us not in touch with the private club industry, negative media on the decrease of avid golfers and doors closing at some private clubs has shed a spotlight on the volatility of the industry. Adding fuel to the fire of a struggling industry by discounting your prices will take years to recover. Unless someone is looking for a good deal and not a long-term membership, why would anyone join a stressed private club? Maintain the integrity of your club and don’t implement these brand-busters.
Negative effect on the confidence of the current membership.
Current members are fickle people. They want the club to adopt a good marketing plan to improve membership levels; however, they don’t want to participate in the recruitment efforts by inviting their friends. They want to increase the number of members to stabilize dues and eliminate assessments, but they don’t want too many new members where it will impact their tee times or require them to make dining reservations. But the one thing you can guarantee all members do not want – to implement a discount program – ultimately lowering the cost for the new members to join and shouting to the market they are members of a struggling club. Not to mention the effects discounting will have on those with a refundable membership that is based on the new member revenue.
Discount marketing plans place a negative buzz throughout the membership no matter how successful they can become. The club could welcome the best members possible and fill the membership through the discounting program, but the current members will label these as the “cheap” members. That stigma will stick with the new members, cliques will form and the experience for both the current members and new members will decline. And the experience is what drives retention.
The actual financial impact of a discount marketing program.
When private club officials concede to the concept of discount marketing, they have the mindset of desperation and the thought more bodies paying dues is all we need. As I analyze the marketing history of my clients, I’ve reviewed various types of programs with slashed pricing on the dues and initiation fees. Some clubs will completely discount the dues while others implement a credit which can come off the monthly dues or usage. Majority include reducing or even eliminating the initiation fee. Let’s examine how this will affect the bottom line.
Although amounts vary, a common discount is a 20% credit off the current dues structure for the new member. In programs which emphasize membership participation by also rewarding sponsoring members a dues discount of 20%, the club is now down 40% from the new dues revenue. In addition, these programs often disregard the integrity of the initiation fee by discounting it roughly 40% as well. If you welcome 50 new members from this discounting program, your financial gain is only 30 new members or 40% off. If you hired a consultant to perform this program, you’re paying the consultant a fee on top of that which lowers your financial gain to approximately 20 members. I have a feeling majority of clubs already gain 20 new members every year. So why run this program? Your cash flow and capital fund are telling you not to do it.
As you know, private club marketing has been focused heavily on pricing for years. Give them a good deal and they’ll be members for life, right? This quick-fix strategy implemented by many clubs throughout the years could be a key player in the struggles of today’s private clubs. Successful clubs focus on branding, member experience, stabilizing dues and increasing initiation fees, not discounting.
If you’re still relying on the out-of-date strategy of discounting, you might have symptoms of cheapened brand perception, negative comments, and feelings from the current membership regarding the club or an increase in resignations all resulting in financial struggles. Trash the discount strategy and you’ll soon feel an improvement of the club’s overall health.