The topic of offering discounts to attract new customers consistently comes up, especially this time of year as we enter the holiday season. Whether you are a Gym, Studio, or Event Producer, it’s tempting to offer discounts to get new business to walk through the door, but what type of business does this attract? Does offering discounts lead to new long-term customers, or do discounts lead to single serving or drive-by customers? If you answered with long-term customers, please keep doing whatever you are doing. If you answered with drive-by customers or don’t know what the answer is, there are a few things to consider when offering discounts.
Are you equipped to handle a surge in business? Having a significant amount of additional business mean employees need to work more hours or more employees need to be hired. Are you able to accommodate either of these options? If the increase is temporary will you be able to scale back down after the surge?
Will you be able to convert these new customers to paying the full rate? If not, will these new customers be profitable for you or will they speed up the demise of your business? At the risk of stating the obvious, gaining additional customers that you are losing money on is not a healthy path for your business.
Will you offend any of you loyal long term customers by offering discounts to new customers or will you be able to handle offering the discount to everyone? Since gaining a customer is much more difficult and expensive than keeping a customer, you don’t want to do anything that will annoy your existing customers. Will offering a discount to new customers do that? Can you afford to allow existing customers to take advantage of a discounted offer?
Will offering a discount change the perception of your brand? Are you the premium price brand, like Apple, or the low cost leader, like Wal-Mart? Both have been very successful with their model and are among the most valuable companies in the world, but have very different identities. If you are the premium brand, will offering a discount reinforce or change the perception of your brand in a way you are comfortable with?
One of the things that seems to be consistent across gyms is accounts being behind, especially this time of year. As an owner you have to keep overdue accounts under control in order to avoid paying for things your athletes are paying for and driving yourself out of business. Control starts with having a policy regarding overdue accounts. It could range from having a policy that prevents anyone that is behind or a certain dollar amount behind from participating to requiring a card on file, but regardless of the option you go with you must apply it consistently. The final part is applying it consistently to everyone. Firmly enforcing the option you choose will let your parents know you are serious about the business side of things and give them faith you’ll be around for the long run.
Letting an athlete get behind puts you in a bad position. If the athlete quits or you throw them off with an overdue account it will pretty much ensure you won’t be collecting what’s due. To mitigate this, the sooner the decision is made for the overdue account to no longer participate the better it is financially. On one hand you are no longer increasing how much you are owed and on the other hand you are no longer helping a family rack up debt they can’t handle. If you let the athlete continue with an overdue account, you are not just giving your service away, you are actually paying someone to take it. If you are paying fees, but haven’t collected the money from the athlete, you are paying everyone else in the industry, uniform companies, event producers, choreographers, music producers, but you haven’t paid yourself. You cannot stay in business this way.
I heard several reasons explaining why some athletes don’t pay. If you choose to allow this please understand the impact of doing so. On the positive side you usually get better athletes and can compete with closer to the maximum number of people allowed, increasing your chances of placing well. On the negative side you can offend the families that are paying, causing them to leave your program. Of course what is done is your choice, just make sure the decisions you are making are helping you accomplish the goals you have set.
Jay Goltz wrote What Satisfying Picky Customers Can Mean to a Business in response to Paul Downs’ article about The Very Picky Customer. Goltz points out the difference between no growth, average growth, and exceptional growth over time can come down to how a business works with challenging customers.