Whether you are stuck with outdated equipment that does not match the expectations of your members, or, you are handling member Direct Debits in-house as you have always done, failure to embrace change could be hindering your performance.
The 2019 State of the UK Fitness Report from LeisureDB revealed that the UK health and fitness industry is performing well. It highlighted that over the 12-month period to end-March 2019, the industry saw increases of 2.9% in the number of facilities, 4.7% in member numbers and 4.2% growth in overall market value. The industry is worth £5.1 billion (up from £4.9 billion in 2018) and there are more than 10 million members – 1 in every 7 people in the UK is now a gym member.
Health & Fitness Market Growth Brings Challenges
With growth brings challenges, the number of facilities across both the private and public sectors has risen, driving up competition. Much of the growth seen has been in the private sector, while the public sector has consistently seen more closures than openings over the past couple of years, according to LeisureDB reports.
Out Of Facility Activities & Digital Fitness Services Growth
Beyond this, the past few years have seen significant growth in both out of facility activities and digital fitness.
For example, Parkrun celebrated its 15th anniversary in 2019 and reported that it expects to see 1 million runners each week by 2024. This demonstrates the popularity of free community based out of facility activities.
While, The Guardian reported that digital fitness services, like FIIT and SWEAT, are growing in popularity. In August 2019, it reported that the FIIT app has been downloaded by 150,000 users who’ve taken a combined 500,000 live classes since launch in April 2018. While the SWEAT app has seen 35 million workouts completed since 2015. Apart from the likes of Peloton, these services tend to be cheaper than a standard gym membership.
With competition strong both within the traditional health and fitness market, as well as from out of facility activities and technologies, it’s more important than ever for operators to embrace change to better attract and retain members.
Cost Pressures Rising
In an interview with Sports Management, CEO of Community Leisure UK (previously Sporta), Cate Atwater raised concerns over the strain on public services to achieve the same or in some cases more, despite lower financial investment: “The challenges are significant. Every public service is under pressure, and in leisure we’re in a race to the bottom driven by procurement practice.”
Atwater also cautioned that public services and leisure trusts are solution focused with in-house delivery and therefore as services are reduced, cut or pressed too far they could reach breaking point. Atwater advises: “Focusing on partnership, collaboration and building trust and co-ownership, etc. We believe that if we can all support local authorities to make those kind of decisions that include cost effectiveness – then the required outcomes for communities will be achieved.”
Diverse Member Demands & Needs
Much has been made of the potential of the ‘silver pound’ – the generation aged over 55 who hold around 70% of the UK’s wealth. The Moving Communities: Active Leisure Trends 2019 Report from the ukactive Research Institute and Data Hub showed that only 11% of leisure centre members are 55-64 and just 3% are over 75.
Coupled with the government mission to ensure people can enjoy at least an extra 5 years of healthy and independent life by 2035, catering to the needs of this generation is important for operators. Particularly those running leisure centres.
While more is being done to promote activity to this audience, Huw Edwards, CEO at ukactive told Health Club Management that “it’ll take years of targeted engagement to achieve meaningful results.” In the same article, Ed Hubbard, Principle Consultant at DataHub/4global, suggests that operators need to engage different age groups in this audience in a tailored way “if we’re to rebalance this segment we need to use data and insight to engage participants in a targeted, personal way.”
A tailored approach is clearly needed to engage and cater to the tastes and needs of the over 55s, meanwhile, research from Leisure-net published in Health Club Management magazine shows operators should also look closely at Gen Z (those aged 16-24).
The research showed that compared to the rest of the population, Gen Z are strongly influenced by time, motivation and direct costs. Amidst the rise of Instagram fitness influencers, relatable public speaking athletes and the compelling storytelling used by big brands like Nike, Adidas and Reebok, Gen Z are increasingly interested in getting active. A quarter of Gen Z are in contemplation or pre-contemplation mode when it comes to getting active.
With cost a potential barrier, Health Club Management reports that Gen Zers are more open to using a local leisure centre. Although, this audience is more influenced by the range of facilities and equipment available than other groups calling for an all singing, all dancing but cost-effective offering.
Mike Hill, Director of Leisure-net, explains: “They (Gen Zers) are picking up knowledge online about the exercises they want to do and the kit they need to do it, so their expectations are higher and they’re prepared to shop around and move around, using their online skills to find the best deals and make comparisons.”
Competition for this potentially increasingly lucrative group is heavy from both more traditional players, such as budget gyms, as well as new cheaper digital fitness services, including FIIT and SWEAT.
Increased Regulatory & Security Requirements
GDPR came into force in 2018. It puts pressure on all operators in both the UK and Europe as a whole. With fines of up to 4% of annual global turnover for the previous fiscal year or €20 million, whichever is higher, operators need to ensure personal data collected and stored securely with the valid consent of the owner.
Operators need to consider, not only the collection and use of personal data for membership management purposes, but the collection and use of other sorts of data – including:
- IP addresses and cookies used for online identification
- Genetic and biometric data used to measure athletic performance and/or health
In addition, operators also need to be able to implement an individual’s right to be forgotten – erasing all data.
With much of this data used across systems, and vital to understanding how best to target and tailor operations towards the differing needs of local communities, careful analysis of how data is to be collected, used and stored is required. This creates increased pressure on operators and has the potential to slow down the ability to launch new initiatives.
On top of this, PSD2 (the 2nd Payment Services Directive an EU regulation designed to harmonise payment services in the European Economic Area) puts pressure on health & fitness businesses, particularly where recurring card payments are used for membership payments.
Strong Customer Authentication (SCA) was due to come into force across the European Economic Area (EEA) in September 2019. The Financial Conduct Authority (FCA) has announced that it will take a phased implementation approach and the rules will not be enforced until March 2021. SCA does still apply for businesses taking payments from and within the EEA.
SCA means that members setting up or making card payments online will need to identify themselves in 2 of the following ways:
- Something the cardholder knows (e.g. password, PIN)
- Something the card holder possesses (e.g. secure key)
- Something they are (e.g. fingerprint, retina scan)
Choosing Direct Debits for recurring membership payments over cards may avoid the need ensure the requirements of PSD2 are met, but this method is not without guidelines and rules to protect member details.
Break The Status Quo & Outsource Member Direct Debits
As the 2019 report from LeisureDB shows, public sector operators are at particular risk as the market changes. Along with some more established private operators, these organisations tend to be tied to existing ways of working, including managing member Direct Debits in-house. This approach could leave operators at risk and unable to meet changing market demands.
Reviewing how member Direct Debits are managed and embracing change in this area can be a significant step to putting your organisation in a position to take on current and future challenges.
Benefits of outsourcing include:
- Earn optimal revenue on member payments with daily collections and a proven, specialist approach to Direct Debit management. This can reduce payment default rates to ensure maximum revenue is collected. This valuable income can be invested back into your operations – whether you want to launch new programmes to better engage older members, or invest in new equipment and facilities to attract younger members
- Reduce administration workload for your team by taking away the need to set up member Direct Debit payments and chase up defaulted payments. Free up time in your organisation to focus on proactive actions to ensure you are delivering on your objectives
- Make it easier for new members to join with a secure and customisable joining capability facilitating signups at anytime online as well as in facility. Especially when catering to younger people, like Gen Zers and Millennials, it’s important to make signups available online and to ensure the process is as smooth as possible. For existing members, it’s important to make managing payments easy and outsourcing can give you the benefit of member access to an online membership payments portal for managing payments, as well as to a specialist contact centre
- Protect member data and your organisation by outsourcing to a provider who is an FCA authorised payments institution. Such a provider will be operating with strict procedures in place to ensure security of your member data, as well as always ensuring you and your members are treated fairly. This can ensure your member Direct Debit collections are managed to standards that would may not be possible internally