Gym operators are losing out on thousands of pounds of additional revenue (sometimes tens or hundreds of thousands), by having the wrong conversation with recurring payment providers.
Sarah Pearce, Service Enhancement Manager at Harlands Group, explains how changing the conversation with direct debit service providers, may deliver a 300% return on investment, directly to the bottom line of your gym or leisure centre.
“It’s counter-intuitive economics,” begins Sarah. “I actually look forward to existing clients or potential new customers, challenging our fees or comparing them to our competitors. On paper, we can be more expensive on a transaction by transaction basis. However, most gyms are not looking beyond the fees and we quickly realised that the way we operate, and our unique process means the additional revenue we can deliver for clients often more than covers the cost of our fees, as much as three times over.”
That’s the crux of The Harlands Effect – generating additional revenue, which eclipses the cost of processing a gym’s membership direct debits each month. Harlands have perfected their processes over 20 years turning their secret sauce into a science. A tried and tested delinquent account collection service and adding extra functionality to allow members to manage their payments more easily adds substantial revenue to your bottom line, especially during the seasonal peaks and troughs.
For example, let’s say that a privately-owned chain of gyms with 20,000 members is paying an annual fee of circa £65K to collect £3.3m of membership fees per year. Often gyms will see a rejection rate of between 3-8% every month when they attempt to collect membership subs. Low cost gyms have a higher rejection rate and more premium gyms a lower one. Our processes would expect to lower the rejection rates by around half. Even if the rejection rates are 3% then this would mean a reduction in failed payments by over £100k, with a rejection rate of 6% then this figure is doubled to £200k!
Even with small and medium-sized trusts, who are often charged with running local authority-owned gyms and leisure centres, rejection rates can be between 2-4% but as high as 7%. Most recurring payment providers will simply shrug at rejection rates and state it’s just the nature of the business. They will focus on the transaction cost – it’s simple, you have 20,000 members and they will charge you a small fee for each transaction, but they may not help you collect failed payments.
“At Harlands, we work very closely with our clients, we’ve been in this business for over 20 years and over that time, we’ve developed processes that can reduce rejection rates dramatically, and if an account falls into delinquency, we offer a service to collect unpaid fees at No Cost To Our Client,” continues Sarah.
“In a recent case study with a client, Harlands managed to collect an additional £214K in membership payments, that’s a return on investment of over 300% on the transaction fees they paid us.”
These figures get larger still if the gym sells a committed membership as the Harlands processes will ensure much more of these contracted payments are collected – Usually this will increase the amount collected by over 10% on these memberships.
The majority of recurring payment providers do not offer these processes and rely purely on their submission fees. Gym Operators need to change the conversation and forecast how halving rejection rates will impact on their bottom line and find the right partner to help them.
Harlands’ deep industry insight and their commitment to understanding the data around every client, doesn’t just impact on successful membership collection. Their approach can also surface invaluable insights into a gym’s marketing efforts. Seeing a spike in new joiners looks great on paper, but often the revenue doesn’t keep pace, particularly around promotions. The Seasonality of fitness is well documented, with spikes in January and dips in the summer and in the build-up to Christmas.
Harlands strives to become a trusted partner and with the Harlands Effect, can have a dramatic impact within 6 months of working with a new client. To see how the Harlands Effect can impact on your bottom line, try the Harlands Effect ROI Calculator. Simply enter your membership prices, and how many new members you sign-up each year.
“The amount that we have been able to recover has allowed us to continue our reinvestment back into the facilities,” states Rachel Rinkcavage, corporate sales manager, BPL
Henk Sariman of Anytime Fitness also states, “It’s crucial to us that our members pay on time, every time. By working with Harlands we’ve definitely seen more members paying arrears.”
Can you afford NOT to change the conversation?