You would think that the worst recession since the Great Depression would drive companies to take great care of their members, yet the opposite appears to be true. As Jena McGregor wrote When Service Means Survival, “….. [many] companies are stretching budgets in ways that can make things tougher for customers” (March 2, 2009, Business Week). She went on to say “…the best performers are actually doing more to safeguard service…” and provided several examples.

What continually amazes me, and Jena infers, is how few companies “get it.” Get what? Not only is striving to “knock peoples’ socks off” each time they walk in your door the intuitively right thing to do if you want to be successful in any business, there is a HUGE difference in the top and bottom line performance of a club that is unwaveringly committed to consistently achieving member loyalty. The model described below makes that clear. As the old adage goes, making money should not be the mission of any club; rather, financial results is the “report card” that reflects how well it serves its members. As Jeffrey Gitomer makes clear in his book “Customer Satisfaction is Worthless; Customer Loyalty is Priceless”, the difference between customer satisfaction and loyalty is significant:

Member Satisfaction Means minimally meeting member expectations; there is no memorable “WOW” experience; the member does not feel valued or special; and there is no assurance the member will stay (he/ she will be more price sensitive and consider competitors’ offerings).

Member Loyalty Means exceeding member expectations; delivering a memorable experience that WOW's the member; proactively referring others they know; the member feels valued (like the most important person in the world); the member will be a long-term customer, less concerned with price.

Gitomer’s book re-affirms both my business experience and what I’ve read over the years regarding what exceptional service is all about. The question that needs to be answered is “How do you drive a Member Loyalty-Centric Corporate Culture?”

1. It must start with an unwavering commitment by club ownership and senior management.

2. Hire people who have an ingrained ("in their DNA") passion for serving people exceptionally well.

3. Develop and train all staff who interact with members on "best practices" based on members' wants, not the club’s convenience. Everything that impacts a member experience, whether written, verbalized or an action taken, must be in terms of the member’s needs. Ask yourself: “If I were a member, what would WOW me?” Then survey your members regularly and ask them the same thing. Think about a time when you received exceptional customer service - how did it make you feel? How did it affect your shopping habits at that store? How many people did you share it with? Wouldn’t you want your members to feel the same way each time they interact with your staff?

4. Don’t allow staff to use the word "policy," as 99% of the time upon hearing that word, a member knows he/ she is about to be given an excuse as to why his/ her need will not be met. There is other language employees can use if a club can't comply with a member request. Train employees on how to innovatively problem-solve to say yes vs. giving excuses for saying no.

5. Coach staff to view angry members as an opportunity to convert them to members for life: teach them how to use “mirroring” to diffuse anger, then go the extra mile to exceed their expectations.

6. Ask for examples of “memorable experiences” and “exceeding member expectations” at every staff meeting, making them part of the club’s lexicon. Develop metrics that hold employees accountable for achieving them, and give “purposeful recognition” and rewards to those who do.

7. Don’t cut expenses that negatively impact quality service delivery for short-term financial gain. That will cost the company much more in lost revenues and profits over the long term.

Mike Chaet, long-time club industry consultant, used the word “experience” five times in an article he wrote in a Spring 2007 club industry publication about how independent club operators can compete with the big chains. He wrote: “There are numerous examples that illustrate the willingness of consumers to pay a premium for a better experience…..millions of people pay $3.00 or more every day for a cup of Joe. Why?......’The Experience.’ It’s all about the way people feel when they walk into Starbuck’s - happy, comfortable, special.”

The very significant revenue and bottom line opportunity derived from managing a member loyalty-centric business comes from a variety of factors: (1) it is far less expensive to keep a current member than acquire a new one; (2) positive word of mouth by loyal members generate far more new members than cold calling and other lead generation efforts - and is free; (3) a negative member experience will be told to at least 10 people (oftentimes many more), resulting in potential lost new members; and (4) the lifetime $ sales value (“LSV”) of a loyal member can be as much as 20 years, plus the cumulative LSV of all new members he/ she refers. Significant sales are at stake each time a member is acquired or lost, depending on whether the member has a memorable experience (expectations exceeded), OR barely satisfied (or worse), expectations unmet. The following example makes this clear:

Assumptions: Financial Model Calculating the LSV of One Loyal Membership Billing Unit

1. A club has a member loyalty-centric corporate culture

2. A loyal membership billing unit remains active for just five years

3. The membership unit pays $1,024 ($64 dues; $21 misc./ mo.) annually in Y1, increasing 3% in Y2 - Y5

4. The member refers just one new member in month one of Y2 - Y5 (four total)

5. Those four referred members also spend $1,024 per year (plus the 3% increases), and each also provides four additional referrals in Y2 - Y5 (20 total), on a staggered basis over a 13 year period

The actual revenues generated by one loyal member(ship) unit in this model, including the 20 additional referred memberships, equals $130k over the 13 years - almost 24 times the $5,437 the one membership unit pays over the five years! Conversely, if the club strays from its member loyalty focus, it will lose members and associated referrals at a huge cost. Examples: (1) if it loses just 12 new members per year it otherwise would have had due to “poor to average” member experiences, lost revenues approach $1.6 million (12 x $130k); (2) if it loses just 36 new members per year it otherwise would have had, etc., the lost revenues exceed $4.6 million; (3) and if this happens to be a club chain with 50 clubs, and is losing 36 members per year it otherwise would have had, etc., the lost revenues are over $233 million! Email me at hwasserteil@gmail.com and I’ll send you the (excel) financial worksheet. Plug in your average annual sales per member; the numbers may stagger you!

The incredible power of viral marketing in Malcolm Gladwell’s well-known “Tipping Point” makes a strong case that there “….is a magic moment…..idea, trend, or social behavior [that] crosses a threshold, tips, and spreads like wildfire …so too can a small but precisely targeted push cause …the popularity of a new product…” In this new social networking era, members who find that rare member loyalty-centric club company that consistently exceeds their expectations, will spread the word virally via Facebook and Twitter to hundreds, if not thousands of potential new members, far faster than even Malcolm could have envisioned. That is the new, yet to be fully documented, opportunity for that special club company that is laser-beamed focused on member loyalty.

What memorable experiences are your members having on a daily basis? And does it make them tell their friends? If the answers to those questions are not “incredible” and “absolutely”, your company does not have a corporate culture dedicated to achieving member loyalty. Lead one, or help build one using the seven guidelines above, and you will achieve both your mission (whatever it is), and financial results beyond your wildest dreams - you can take that to the bank!

Howard Wasserteil is a former athletic club entrepreneur and IHRSA board member looking for a return to the club industry, helping a club company build a member loyalty-centric corporate culture. He can be reached at 952.288.5567 or hwasserteil@gmail.com.