Considering the cost of advertising, competitive forces, and the general operating costs of a membership-based business, you’ll want to make sure your membership structure is optimizing your growth potential.
Membership strategies fall into one of three categories: Casual, ongoing and term. Here we’ll outline the advantages and disadvantages of each.
This membership allows prospective members to pay as they go. Membership fees are usually paid by the class or by the month.
Advantages: The casual membership is an easy sell. If the prospect is interested, there is little to consider in making his or her decision. You don’t need to develop a renewal plan, which can save hours of paperwork and follow-up.
The billing procedure to manage this system is simple in theory: “You don’t go, you don’t pay.” Again, reduced paperwork.
Disadvantages: The member does not give the business his or her commitment. Member commitment is essential to maintain a strong, active member base, especially during seasonal periods of low attendance. Your member revenue is often unpredictable and unstable. While you may enjoy reduced paperwork, you will be hindered by the lack of the vital statistics that paperwork provides.
This is a quantum leap from the casual membership. With this option, the member joins a program for a specific period of time. Payments are generally paid by month, quarter or year until the term is paid in full.
Advantages: The facility now has a membership agreement where members promise to attend class and pay membership fees for the term length. The term membership dramatically increases retention by helping to keep student attendance strong. The result is a more stable active membership base and monthly revenue.
Term memberships also establish an accounts receivable balance that increases the net worth of your business. This gives you an advantage in obtaining business loans, and negotiating power if you want to sell your facility.
Disadvantages: Term memberships are a harder sell. Your ability to sell effectively will require a professional presentation and some sales skills.
Term agreements also require a renewal strategy to keep members from becoming “one-time enrollees.” Renewals require time and additional paperwork, and create other sales conferences at which the members may decide not to continue!
This type of membership is a combination of the casual and term concepts. Ongoing memberships do not have pre-determined expiration dates but still establish member commitment. Member fees are most often paid monthly.
Advantages: Ongoing memberships are easier to sell because they do not require you to enroll members in a “long-term” contract. Instead, members have continuing memberships with a built-in cancellation notice clause. This notice (usually 30-90 days) instills enough commitment in members to keep attendance consistent and your monthly revenue stable.
No expiration means there is no need to spend time on renewals or paperwork.
Disadvantages: Members have the privilege to cancel their memberships, with notice, if not satisfied with the service. You must focus on quality instruction and exciting classes or everything you gain from increased enrollments will be lost in frequent drop-outs.
Ongoing memberships are non-expiring, which reduces down payment opportunities from renewals. You may need to adjust your rates to compensate, or institute an annual registration fee.
Most self-billing systems are “pay-as-you-go,” which requires no member commitment, negatively impacting retention. In contrast, full-service billing companies such as Member Solutions provide various membership strategies (not necessarily long-term contracts) that increase retention.
Billing companies enforce policies that membership-based business owners want but feel awkward establishing because of the existing member relationships.
When members of self-billing schools miss class, they can fall behind in their payments, leading to more absences and eventually attrition.
This domino effect is more prevalent in these facilities because attendance is directly associated with how member payments are paid.
With a full-service billing company such as Member Solutions, tuition is handled separately from attendance. Members who miss class have the same responsibility as those who attend to pay a “scheduled payment.” Full-service billing companies create motivation for students to quickly return to class.
What membership structures do you use in your facility?