It has long been known in the health club business that referrals are the best available source of leads and usually account for 50 percent to 70 percent of a club's business. There are a number of reasons that contribute to referral success. For one, when a referral walks through the doors, it is likely that he or she has already heard good things about the club. Second, it is common for people to want to find an “exercise buddy” and, therefore, have selfish reasons for referring friends to the club. Third, even in situations where a salesperson has obtained a referral name from a member, when that person is called and the salesperson identifies the referring member there is a greater likelihood for rapport to be established. Regardless of how it happened, statistically a referral is more likely to join than someone who knows nothing about your club and is usually at lower customer acquisition cost than other forms of marketing. These are just two reasons to focus on obtaining member referrals.

There are three primary sources of member referrals. One is when a referral happens on its own and the prospect-referral calls or visits the club without having been encouraged by a salesperson. The second is called a point of sale referral where the new member is asked for referrals at the time of his or her enrollment, usually having been given an incentive for providing more names. The third is called an existing member referral and is the result of some sort of referral campaign or program that the club is running and offers gifts or potential prizes for the member-referrals. Of course, the goal of every club is to maximize point of sale and existing member referrals and consider referrals that contact the club on their own as a bonus.

The challenge for most clubs is to find ways to proactively get members to give more referrals. Unfortunately, a combination of bad experiences (like MCI's famous “Friends & Family” campaign that left consumers gun-shy about giving out names and phone numbers) and an increasingly hectic society where people have seemingly less time and more stress has resulted in a gradual decrease in the number of referrals clubs have been able to obtain over the past decade. As a result, most club operators are always looking for new and creative ways to boost any type of referral.

CASE STUDY: TYPICAL BAG PROMOTION

The Body Express club in Bondi Beach, Australia, is particularly good about encouraging member referrals. First, the club has an attractive point of sale referral program that is supported by professionally printed materials (registration form and guest passes) and salespeople who are fully trained to give a proper and compelling presentation. In addition, the club runs regular existing member referral programs.

In June 2003, the club's existing member referral promotion was “refer five friends and receive a gym bag and up to five months of membership for free.” Therefore, by simply providing the club with the names and phone numbers of five friends who lived locally, the member would receive an attractive gym bag. In addition, for each referral that joined the facility on a regular membership, the member would receive one month of membership for free (up to five months). Furthermore, as an incentive to the referral, the joining fee was discounted to just $50.

Although giving out an attractive gym bag as a referral gift isn't anything new, how Body Express planned on giving out the bags was going to be different. Typically, a club would only give out the bag when a referral joined. In fact, Body Express had done many promotions in the past where the member only got the gift or incentive when a referral joined but had been disappointed with the previous results.

Therefore, in an effort to get more referrals, club management decided to make it easier for members to get the bag. But making it easier for members is one thing; ensuring the potential for new membership sales still needed to be determined.

As a result, management needed to look at some specific club statistics.

  • The club's closing percentage (65 percent).
  • The club's average lead acquisition cost ($22.75).
  • The club's average customer acquisition cost ($65).
  • The cost of the referral gift ($17).
  • After taking all of these factors into consideration and projecting the number of referral names that would be obtained at $3.40 each (the cost of the bag divided by the five names obtained), Body Express calculated that with proper follow up and sales skills, giving the bag away in exchange for just referral names had the potential for greater success. The assumption, of course, was that even accounting for bogus names and referrals that had no level of interest, a large number of names would be obtained, resulting in more appointments being set, ultimately meaning more sales.

    PROMOTING THE REFERRAL CAMPAIGN

    In an effort to give the referral campaign the best response, Body Express did a number of things for promotion. First, a mention about “Getting a FREE Gym Bag” was prominently displayed on the cover of the club's monthly newsletter, which was mailed to 1,200 current members. Second, an attractive flyer that detailed how the promotion worked was inserted into the same 1,200 newsletters. Third, large colored signs were posted throughout the facility. Fourth, reminders about the promotion were given at the check-in process and announcements were made in the fitness area and before group fitness classes. Finally, and fifth, the club hired a telemarketer to make follow-up calls to members at home. The total cost of the flyers and the telemarketer was $907.30 (not including the cost of the mailing since the newsletter was going out anyway).

    With all five promotional efforts, after the one-month promotional period was over, the club gave out a total of 20 gym bags and received a total of 100 names. To say the least, they were disappointed with the results because they felt it was a strong promotion (and easy for the members).

    THE E-MAIL FOLLOW UP

    Unhappy with the response to the campaign, Nicky Wyborn, the club manager, decided to try a new approach. The club had been collecting e-mail addresses for members for some time and she decided to send out a short and simple e-mail reminder. She sent out the e-mail on July 1 (which was technically the day after the promotion ended). See the sidebar, “The E-mail.”

    THE RESULTS CALCULATIONS

    Within just 24 hours of sending out the e-mail, the club gave away 16 bags, representing 80 referral names; within one week they gave away another six bags. Therefore, a total of 110 names were obtained after just one follow-up e-mail that didn't even have an expiration date on it. Of course, the cost was almost nothing and only one member requested to be taken off the e-mail list.

    At first glance, the e-mail campaign was more successful than the other five promotional efforts put together. (The club spent $907 to get 100 names vs. spending virtually nothing to get an additional 110.) Unfortunately, it is impossible to completely separate the two because we really don't know if the e-mail campaign would have worked had it not been for the previous 30 days worth of promotional efforts.

    What can be said without a doubt is that following up with a simple e-mail cut the referral name acquisition cost of this campaign in half, bringing it from $9.07 per name down to $4.32 per name.

    WHY IT WORKED

    Nicky Wyborn, stated three reasons as to why the e-mail seemed to work so well:

  • The e-mail was easier to reply to rather than filling out a flyer and remembering to bring it back to the club.

  • The member had the address book right in front of him or her at the computer.

  • There was immediate gratification reinforced with the statement, “Simply e-mail us back and we'll have your bag waiting for you at the front desk.”

  • Perhaps another reason is that e-mail is so simple to “click.” The member reacts to the offer before he or she has time to overanalyze how their friends might react to giving out their names.

    Regardless of the reasons, this simple example shows the power of e-mail technology. Unfortunately, many clubs don't even collect e-mail addresses, and those clubs that do, often don't do anything with them if they are obtained. Of course, out of every adversity comes the seed of an equal or greater benefit. This adage certainly holds true for e-mail technology and your facility. Take the time to put a system in place for collecting member (and prospect) e-mails and slowly begin to make use of the technology in small ways, with the potential to greatly increase your communication and promotional effectiveness.

    THE E-MAIL

    Dear Louisa,
    Extended till Friday!!
    Just wanted to send you a quick e-mail to remind you of our great bag give-away in June.

    All you do is choose five people who may like to try the club for a week for free. We call them up and invite them in (we also offer them a complementary session with one of our trainers).

    Just for giving us the names and numbers, you get a great gym bag. If any of your friends decide to join (and there's no obligation), you get a month of free membership per person.

    To make it even easier for you, why not just reply to this e-mail with five names and phone numbers, and your bag will be waiting for you at reception on your next visit!

    Kind regards,
    Nicky Wyborn, club manager

    PS. Thanks for choosing Body Express to help you get/stay fit and healthy!