Generating revenue and being profitable in the fitness industry can be a challenge. Margins can be tight, competition is fierce, and there are always new trends and fads to consider. While the primary revenue source is often membership dues, most facilities need other revenue streams to be profitable and reach their full potential.
Adding these ancillary services can’t be done haphazardly. Various factors must be considered when determining what products and services will provide the best ROI and be worth adding to a facility’s arsenal. Here are some things to consider when exploring new revenue streams for fitness clubs.
1. Know your demographics
Before exploring new revenue streams, you must understand your organization’s demographics. Examine who your current members are and decipher their needs and interests. Conduct surveys and focus groups to gather feedback on what members might want. Why guess when you can ask?
At our club, we had the opportunity to add a Silver Sneakers program. It seemed like a no-brainer. It flopped. We thought we knew our demographics but didn’t read the room correctly.
Although our primary members were slightly older, they tended to be far more “fit” than their peers. As a result, they had no interest in “age-appropriate” programming. As a matter of fact, some were even slightly offended that we suggested the program to them. Had we done some surveying, we would have found that while Silver Sneakers is a great program, it wasn’t for our members.
The bottom line is that the more a club understands its demographics, the more likely it is to be able to add ancillary services that will be successful.
2. Keep an eye on trends
It is essential to watch industry fads to understand what is trending upward and what is headed in the opposite direction. Organizations such as Athletic Business provide fantastic resources focused on industry trends. Not only can understanding trends allow an organization to add appropriate ancillary services, but it also helps to attract new members, retain current members and differentiate from the competition.
A few years ago, obstacle course racing, including Tough Mudders and Spartan Races, began taking off. We saw this trend and became one of the first facilities to offer specialized training programs for people who wanted to train for OCR. Because we paid attention to trends and took advantage of this one, we created a program that was a great source of ancillary revenue and gave us a huge differentiator.
Combining demographic research with knowledge of trends provides an organization with a more precise picture when deciding what ancillary programming to add.
3. Start small when possible
When adding new ancillary services, starting small and testing the waters is the ideal approach. Investing a lot of time, money and effort into a new program or service that doesn’t work is disheartening.
Consider starting with a trial period to gauge interest and gather feedback from your members. You might also consider partnering with local businesses or instructors to offer new classes or programs without taking on the entire financial risk.
Years ago, we debated adding small group training to our list of services. It wasn’t the popular program it is today, so we weren’t sure it would work. There was also a fear among our personal training team that it would cannibalize one-on-one personal training business.
Ultimately, we decided to start small. Instead of launching a full-blown offering, we tried just one group twice a week. Incidentally, we had one of our trainers run it. It was a huge success and led to us creating a full-blown SGT department outside of membership and one-on-one personal training. It was our third-largest revenue stream. It also didn’t cannibalize one-on-one personal training; it became a feeder for it. We started small and tested the waters with the members and the personal training staff.
It is important to note that starting certain things in small ways can be challenging but not impossible. If you were thinking about adding massage chairs, which would enable you to charge an additional fee from members, perhaps ask a sales rep if the facility could try one for a few weeks. When considering new things, always try to find ways to start small if you can.
4. Diversify your offerings
One of the most significant mistakes facilities make when adding new revenue streams is focusing too much on one area. While it’s essential to have core offerings — memberships, group X classes and personal training — diversifying your offerings can help you attract new members, keep current members engaged and generate ancillary revenue. It also prevents you from putting all your eggs in one basket, which is good general business practice.
Our facility offered all the typical services associated with a regular gym. When looking to attract more members, we decided to try a run club, which turned out to be a huge hit. We had members who joined solely for that and never stepped foot (no pun intended) into the gym. They just met for the weekly outdoor runs.
Conversely, we had people join the run club who had never worked out inside a gym but subsequently gave it a shot and loved it. On the trend side, facilities are adding more mind-body offerings such as meditation and mental health services, as well as technology offerings such as digital training and fitness tracking. Think outside the box, strategically, as to what various products or services you could add that could attract a new demographic, differentiate your facility, and reinvigorate and encourage current members to spend more money.
Adding ancillary services requires careful consideration of various factors to determine the best ROI and thus which products and services are worth adding. Knowing your demographics, understanding trends, taking a small-steps approach, and diversifying your strategy are four great ways to increase the chances that what you add will succeed dramatically.
Additional factors must be explored: overall market demand, feasibility, cost, resources and impact on member experience. By taking a thoughtful and strategic approach, fitness clubs can successfully add new revenue streams to increase overall revenue and profitability.