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How (and why) to work out your Customer Acquisition Cost

By Nan de Bruin

Published 10 May 2021

Jamie Owens, Director of Fitness Partnerships at Hussle is our guest in this episode of FitNation Lunch & Learn. Hussle is the first marketplace for fitness in the world and was formed in 2009 based on two key principles; increasing participation in physical activity and generating revenue for operators.

Jamie talks us through exactly how (and why) to work out your Customer Acquisition Cost (over 50% of gyms they surveyed didn’t know theirs!). We will also discuss how to choose the right marketing channels for your business and how fitness membership models are changing.

Watch the webinar recording by clicking on the play button and read the transcript below.

Alex von Hagen: All right. Welcome, everybody, and thanks for taking the time to join us for another Fit Nation Lunch and Learn. Today, joining us out of the UK is Jamie Owens. He’s the director of Fitness Partnerships at Hussle. And in this session, we’re going to focus on how and why to work out your customer acquisition costs, the loss of sleeper members, and how that’s going to change the membership model long-term. And how you can think practically and creatively to succeed during your reopening season? I have a feeling there’s going to be a lot of actionable insights in today’s session. So hope listeners have their note-taking devices ready. Without further ado, Jamie, thank you for taking the time to join us today.

Jamie Owens: My absolute pleasure. I’m very happy to do it. It’s something I love to talk about. So I’m really, really pleased to be involved.

Introduction

Alex: Perfect. All right. Well, always a good spot to kick off. Maybe you could tell us a little bit about your background and what you do.

Jamie: Yeah. Sure. So without giving away my age, I mean, I’ve been in the industry for a long time. So I mean actually 20 years I’ve been in the industry, so I’ve always been an operator. So I come from kind of that side of the fence. So I’ve worked for brands like Esporta, Virgin Active, Nuffield Health. So I’ve always kind of worked in clubs. I’ve kind of had operational roles from general management, right up to kind of regional and national roles. So I kind of joined Hussle about a year and a half ago. I met Hussle as a client. So kind of understood their proposition from a client perspective and took on the role with them of Director of Fitness Partnerships as you’ve already mentioned. So my remit is basically to work with gyms and bring them onto our platform and I also take ownership of our corporate offering, which is essentially offering fitness as a benefit to workforces up and down the UK. So my role ultimately is around generating opportunities for gyms. So it’s a really nice role. I bring revenue and direct membership to our gym partners that we work with.

Alex: Nice. Yeah, definitely things that are more than needed right now as well. So I think it’s an important role for sure. And Hussle, maybe you could tell us a little bit more about the company and the mission of what you guys are all about.

Jamie: Yeah, sure. I mean, look, our mission is really, really simple. So we kind of stand for two things and that’s we want to engage with more customers and give customers more opportunity to access fitness. So we want to try and get more people active. That’s our kind of customer element. And from our gym supply, operates relevant, we just want to support them by helping them grow revenue and grow membership. And as you’ve alluded to right now post COVID, they need help more than ever to kind of regrow membership volume. So hopefully we can help them with that.

Differences Between Fitness Marketplaces and Aggregators

Alex: Cool. All right. As I said, yeah, definitely an important thing for the industry right now. And before we started recording, we were talking a little bit about the differences between fitness marketplaces and aggregators. I think there’s maybe some people may have a wrong impression about what you guys do. So maybe if you want to describe some of those differences and then how you guys approach things.

Jamie: Yeah, no, absolutely. So it’s a really, really good question. So I think the term aggregator is quite a broad term. And basically, it just describes the service that it gives customers choice. So kind of one place to go where you’ve got lots of choices and we see this like in lots of other sectors. If you get your phone out, I’m sure you’ve got loads of apps on there where there are dozens of different aggregates services, which offer people choice. So I think unfortunately in fitness the term aggregator is maybe seen as a negative. For what reason? I think there’s been maybe pockets of detractors out there and they kind of done their best to kind of create this negative sentiment towards it. But I mean aggregators for one of the best terms in fitness have been around for quite a while now. I think the debate is, you know, I think people are pretty bored of it and aggregators, if you want to call us that we’re a complimentary service and we’re here to stay, we’re adding value.

And I think that you know, if you think about aggregators in any sector, they’re basically just variations of helping customers access what’s on those platforms. So we really see ourselves as just a marketing partnership, but that’s probably an easier way to kind of explain it. And I think that if you think about a marketplace and that’s certainly how we term ourselves in its simplest form, it’s a place where suppliers go and congregate, and then that enables customers to go to that one place and have a choice. And that’s ultimately what we’re trying to do is just engage with customers, provide them with more choice. And I think being able to do that we create market scale, and that enables us to have lots of really cool conversations with big brands and help our gym partners to get more customers as a result.

So market scale is really important because if you think about the fitness space in the UK, one gym brand might only have 200 clubs and they won’t cover every single postcode up and down the country. So when you talk to a big brand that we work with, like Revolut or Vodafone or someone like that, it’s unlikely that one chain can have the coverage or the variation of facilities to appeal to that broad consumer base. So we’re able to do that. So by creating market scale, by putting everyone together in the marketplace, we can then bring more and more customers to the platform. And as a result, just bring more people into gyms, you know, as per what we stand for the star is exactly that. It’s being able to get more people into venues one way or another so. And I think what’s really, really interesting is if you look at fitness as in isolation, there are lots of different types of operators out there.

You know, I’m sure if you put a premium operator like a David Lloyd or an Equinox and when you also look at a budget operator, very, very different, but you would still call them a gym. You know, so we’d still say they’re gyms, but I’m sure one of those operators would feel very differently about them being put in the same bucket. So it’s the same for us. It’s the same for fitness marketplaces or aggregators or whatever you want to call us. Every service is different. And I think that what I would say from an operator’s perspective is find out which one works for you and it might be more than one. But make the partnership work for you rather than kind of making a decision based on feeling.

Alex: Yeah, I hear you. Okay.

Jamie: [Crosstalk 09:02] probably.

Why should gyms choose this model?

Alex: No, no. That’s fine. Yeah. I was going to ask like you, there’s some good content in there for operators to consider and as of this recording, the UK gyms have been open for just under a month. So, a lot of countries aren’t there yet as well around Europe, especially. So why should a gym or gym operator, gym chain operator considers this model right now if they hadn’t previously?

Jamie: Yeah. So I think there’s loads of push and pull on this, right. So there are lots of reasons why people are more interested now. I think that circumstances now where operators are kind of being a bit more pragmatic in their approach around why they should engage with marketing channels, marketing partners like us. You know certainly in the UK, we’ve seen quite a lot of cost reduction pulled out of marketing budgets. We’ve also seen lots of headcount reduction around kind of central support functions. So I think the operators need to look at other ways to attract customers in. So that’s probably a reason why now’s a good time. I think as well that we’ve evolved, marketplace models have evolved and we’ll probably talk about that a bit later on and maybe some of the things that we’re doing now to really try and support the gyms.

I think, I mean, probably if you go back over the last five or 10 years, there has been a bit of a disconnect, a bit of a mismatch between what maybe operators wanted and what services like ours were providing. But I think, you know, the gap has closed. Like that’s the benefit of time is that we’ve kind of come to understand each other and what benefits we provide better. And I think, now we’re probably more aligned than we’ve ever kind of been before. And as gyms reopen in the UK and they have been already since the start of this month, there’s been a bounce-back which is fantastic. You know it’s really, really good to see the gyms kind of trading really, really well. And we saw this kind of at the end of lockdown, one zero, you know, kind of when gyms reopened in August and there was a really, really strong bounce back at that point because of pent-up demand was built while people couldn’t get into the gym.

And then what we saw was really good volumes of usage coming back through, and I think those customers were probably the ones that were queuing outside the door before. They would kind of missed it and they were absolutely not worried about the risk of going to the gym over the reward of actually being there and seeing the benefits. So I think that’s great. But what I also think is that on the flip side, the volumes of membership have been impacted. So in the UK, anything up to 50% of the membership has been cancelled, which is huge. We know that is absolutely massive. And that will include what we’ve called, like sleeper members. So that kind of like, you know, not really using it, but continuing to pay their subscription and those members have been churned. Like they’re the ones that have gone. And I think that gyms always churn members anyway, and apologies if I’m kind of teaching you how to suck eggs, but yeah, each month a gym will churn a volume of members. That’s just natural attrition.

Alex: [Crosstalk 12:20] matter. Yeah.

Jamie: Exactly. But what’s really been the problem is that during the lockdown periods, obviously, gyms have been unable to fill the pot. So they haven’t been able to acquire members to kind of balance the books around churn. So the position that we’re in right now is that they’ve reopened, they’re all in the same place in terms of they need members and they’ve got to try and accelerate bringing members back in and everyone’s in the same position. So what we’ve done around kind of supporting that, and I guess sort of touching on that evolution piece is we’ve launched a new product of our own call a Membership Conversion Service. So what that means is that we’ve always known that our customers kind of, there was a halo effect to them being introduced to the gym. So we knew that our customers ended up joining the gym directly, which is great. And what we wanted to do was just make that process a lot slicker and kind of less clunky. So in the pilots that we’re kind of rolling out at the moment, we essentially, we proactively try and convert customers that land on Hussle into direct joiners to the gym, which we’re the only marketplace providing this service. It’s something that we’re really excited about. I know people say game changer a lot. We feel it could be a real game-changer because we know that gyms need to grow membership and their budgets are kind of less.

So hopefully through our service, we can start helping them regrow their membership. So yeah, so we were able to kind of create the scale, create the customer engagement, bring them onto the Hussle platform and then proactively try and push those that were going to join into membership as soon as we possibly can. So that’s kind of our goal if you like, is just to really be authentic and support the gyms out there with more members, you know, that’s kind of it. And I think there will still be people that kind of require flexibility and that’s what a lot of our customers come to the platform for. So I think there still will be the need maybe more so now than ever of using multiple venues. Maybe one day at work, one day at home where that kind of split of time is a little bit more even now in the kind of the new working ways. And there’ll be more customers that may be wanting to get fit in other ways. So Peloton subscribers, you know maybe people that have fallen in love with running or working out from home, those types of customers will still want to use gyms kind of in a lighter touch way. And I mean, that’s where models like ours can really, really help to give those customers a route into the gyms, which they won’t get otherwise.

Alex: Yep. Okay. I would definitely say I fall into that category. I’m a Corona biker, I think. I’ve taken up road cycling since the pandemic and I don’t see myself giving it up once the gyms are back open here in Holland, but that being said, like, I definitely will be balancing my workouts between being out on the bike a lot more and then being in the gym just depending maybe on the weather of the day.

Jamie: Yeah.

Alex: But I see that a hundred percent and I think it’s definitely clear how you guys are helping get members back into the gyms. And it sounds like you guys are also helping them understand a lot more from the data perspective and like the business side of things. One thing that we were talking about, I don’t want to steal your thunder on this stat, but it’s really going to transition into like the meat and bones of what we’re going to talk about today and that’s customer acquisition and lifetime value. You had mentioned that you guys surveyed something like 600 gyms and 50% of them, more than 50% of them did not know their cost of acquisition and the lifetime value of their members. So for those maybe who are listening, this is actually one of the questions we had from some audience members. What are customer acquisition costs? What is lifetime value and why does that matter for operators especially today?

What are Customer Acquisition Costs (CAC) and Lifetime Value (LTV) and why does that matter?

Jamie: Yeah. Okay. So let’s pick them off one at a time, right. So like customer acquisition costs so that’s basically exactly how it sounds like what it costs the business to bring that customer through the front door. So there are lots that get lumped into that cost. So you’ve got things like marketing spend. So whether that’s leaflets or mailers or whether they do kind of like above-the-line activity, like banners and radio, all that kind of stuff. So any money they invest in physical marketing. You’ve also got the cost of the resource. So, they may have employees that are sales teams or membership consultants. So their wages, the commission that we pay them when they hit their target, et cetera. So that also is part of the cost. Any kind of money they spend on presenting the club photography, social, all that kind of stuff. So all of that kind of forms part of it. And then on top of that, you’ll have like the promotional cost. So when you see a gym, do a no joining fee offer or pay nothing until next month or get your first month free, all that kind of stuff, that also forms part of the acquisition cost because that’s revenue that you’ve given away, that’s not budgeted to do. In some cases, they may budget if they know that promotion’s coming, but most of the time that is another cost, which the business wasn’t expecting. So that’s how you kind of figure out what your CAC is, what your customer acquisition costs.

LTV is basically lifetime value. That’s what that means. So that’s a bit of multiplication. So understanding what your average yield is and understanding what the tenure of that membership is. So keeping it really, really simple. If it’s 30 pounds a month and the average stay is 10 months, 300 pounds would be the lifetime value of that customer. So it’s, try and understand how much you need to invest in order to see that LTV kind of figure come back to you. And you have to be really, really close to it. I mean that’s the challenge. And I think the other challenge is kind of from a data perspective gyms aren’t typically really good at kind of maintaining that information and having all of the team engaged in the importance of why they need to keep that information as well. So yeah, that’s kind of a quick sort of top line of what those two figures mean.

Alex: Okay. Yeah. And if we can start to get more actionable this is an audience question from Tom. He is coming in from Maximum Fitness Center in the US. So he’s asking basically how does a gym operator who doesn’t know their CAC or their LTV, how do they find that out starting today, if possible?

How to find your Customer Acquisition Costs and Lifetime Value today?

Jamie: Yeah. Cool. So, I think the first thing would be to kind of look at the historic data, would be a really, really good start point. So if you’ve got a bit of a kind of a line in the sand and you can drawback on that information that gives you somewhere to start. I think, go through all of your costs. So set a time period up. So maybe do that over a quarter or over a year. You know it depends on how good your data is to go kind of back on and then just work out which costs were related and which resources or activities were done to acquire customers. Then you can identify the customers that are required during that time period. So again, historic data is really, really important. And then basically you’re just, it’s a division. So you’re dividing cost investment versus customers that came through, and that’s going to give you your cost of acquisition. So it sounds quite simple. The challenging bit in there is the data. So if you’re not in the fortunate position where you’ve got that good historic data, then you need to get really insanely close to it from this point onwards. And then it might be that you just use a month as a start point to kind of start tracking and monitoring what that kind of looks like. And then moving forward, I think doing it quarterly would be the best way to do it. I mean because there are lots of different seasonality elements to membership, as you probably know. And I suppose at the minute there is a bit of a danger of the numbers being skewed because you’ve got that kind of bounce back, you know that pent-up demand. So that’s why if you’ve got historic data that’s probably the best thing to do.

And I think for lifetime value, you’re going to need to look at the data for now. Now, these numbers are going to be slightly skewed because as we talked about before, the sleeper element of membership is going to potentially muddy the water a little bit on what LTV looks like now. What LTV looks like from this point will be probably a little bit different from what it looked like over the last two years, but at least it gives you a start point. So you need to look at the average tenure of your membership, work out the average yield that they’re paying, and that’s going to give you a number to work from right now. And then I would absolutely from this point forward, start tracking those numbers again, just to see if there’s any fluctuation in the LTV of the membership as well.

Software to Acquire the Data

Alex: Got it. Yeah. And what would you say the best ways to keep on top of it outside of just a manual spreadsheet, like, is there any software that comes to mind for you guys that say this is the way to go with the job?

Jamie: I think there probably is. I mean, I think there probably are some software houses that you can engage with. I mean we use lots of, we’re promoting tools that we use internally. We use the so-called Tableau which is good for us because you can plug lots of data sources into it and it’s very configurable. So it kind of works for our model. I think really basic is you need to make sure that the team and they’re the ones that ultimately input the information. So they need to be really, really close to it. So you need to kind of get that culture going within your facility of the importance of tracking and monitoring all this information. If you care about it, they’ll care about it and you’ll get a better result. So an element of it is going to be manual. I’m not against Excel spreadsheets in any way, shape, or form. So, I appreciate that software comes with a cost. So what’s really important is the quality of the data you’re able to obtain and put into that. And that’s a full team job, you know. That’s so important that everybody has ownership and buys into the importance of kind of tracking the data and keeping it there. But it doesn’t need to be overly complicated because I already kind of said to you working out LTV and the cost of acquisition is not tricky. You just need the information and to make it kind of relevant.

Industry Benchmark for a Good Cost of Acquisition and Good Lifetime Value

Alex: Yeah. Okay. I got you. I got you. And would you say in the industry, there is of course a lot of different verticals between the budget sector, the boutique sector, PTs, but would you say there’s an industry benchmark as far as like what good cost of acquisition and good lifetime value on a percentage base, what that looks like?

Jamie: Yeah. That’s a really tough question to answer actually. I think that [inaudible 23:17] at this time and what I would say is like, if you imagine that like, well, what we’ve created now is like most gyms are kind of having to grow. So everyone’s in the same position where they’re in a growth kind of mindset right now. So what I do know is that kind of benchmark for growth companies in any sector is a three to one ratio. So basically the LTV is three times bigger than the cost of acquisition. So that’s a good metric to work from. That’s probably a good starting point. So, you know, putting that into context for our conversation, if your membership is 30 quid a month, 10 years, 10 months, 300 pounds means you can afford to spend up to a hundred pounds on activities to win that new customer.

Now a hundred pounds may sound like a lot of money right now and there would probably be people watching this thinking, there’s no way we spend anywhere near that. But once they factor in all of the costs that I talked about before, they might be surprised by the level of investment that goes into them currently on acquisition costs. And then if you go back to that three to one ratio, if you’re bigger than that, if you’re five to one, something like that, then you should spend more money because you are doing well. So you should put your foot down and go faster and invest more money and acquire more members. That’s a really good thing to be. You’re kind of getting into the unicorn zone there. You could get on with it. You know, if it’s less than that, if you’re not a three to one, if you’re two to one or even worse, one-to-one, you’ve got some challenges. So you should probably think about cutting your investment down and then try and kind of better understand maybe there are some challenges elsewhere around proposition or pricing or whatever that may look like. But basically, three to one is kind of is where you should be, if you’re better than that, spend more, if you’re worse than that, stop spending money and find out what the problem is because you’re kind of wasting it.

Alex: Okay. Yeah. Hoping a lot of our listeners, if they’re figuring this out right now, or if they’re listening in and just good positive reassurance that they’re in that plus three range, hopefully, we can help them get there with some of this content. On that note, how would you say gyms could positively impact these two metrics that we’ve been hammering in on?

How can gyms positively impact cost or acquisition and lifetime value?

Jamie: Yeah, I think post-COVID all operators probably have to be quite honest now and look at their business.

Alex: Yeah.

Jamie: There’s lots of stuff in the press. Isn’t there? In terms of fitness is kind of much more on the radar now, people are more into well-being than they’ve ever been before. But then there are also articles saying that there’s an increased number of people inactive since locked down as well. So there is kind of conflicting news pieces out there around kind of what the market looks like. I think that to answer the question, costs that are left out are things like resources, right. So things like managing social media, like making creative look good, maybe even staff costs. You know we talked about that marketing kind of a bit earlier. I think that’s a challenge. That’s going to be a challenge for operators. I think from a lifetime value perspective that they need to factor discounts in because it’s competitive now. I’m really surprised in the UK now the gyms have reopened, like quite how aggressive some of the operators are being on their offers and trying to acquire customers now. I didn’t see that coming. I’ve got to be honest. I thought people would be taking the cash and just kind of, you know knowing that the demand was there and really just trying to maximize it at this point. But it’s not, it’s really, really competitive. And I think that probably boils down to the fact that everyone needs to regrow their membership. So, I think that lowering their kind of acquisition costs will help.

How can gyms drive member growth with a reduced marketing budget?

Alex: Yeah, on that note, we’ve acknowledged that gyms they’re going to have decreased marketing budgets right now. I think most businesses do. All right. So how do you feel that gyms can continue to drive member growth even with a decreased marketing budget that we realized that they have?

Jamie: Yeah. So I mean as we touched on before, certainly in the UK market, this is an area that’s been impacted. I think that investment around acquisition spend has reduced. No, that’s absolutely clear. We know that speaking to a lot of the operators within our network. And then also, as I said, the resource element has been reduced as well. So you kind of, you can’t have this scenario where you’ve got kind of less output and you’re expecting at least the same result, if not better. So, I think my view is that there’s still the bounce, right. So you’ve still got this post lockdown bounce, which is great and they should definitely maximize that. But right now, as I said before, like fast go faster, now’s the opportunity to put your foot down. So for me, they should just not hold back. They should throw everything at it right now because demand is never going to be higher than it is right now.

We actually were looking at this last week in an internal meeting and we just looked on kind of Google Analytics just to see kind of how big the search was on fitness right now and it was actually at the same level as pre-COVID, like golden quarter level. So, the volume of people searching gyms in the UK was on par with January 2019. So it’s kind of never been bigger right now. So what I would say is now is the time to really kind of put your foot down and maximize all the channels available to you to try and get as many members right in. And I think September will be an interesting period for us in the UK because we’ve had a few months of the gyms being reopened September is like the second biggest acquisition month in the year. So by that point, that kind of bounce back would have maybe slowed down a little bit. And what we’ll find is that September will be the first, like kind of real big month for gyms in terms of the budget that they’re expecting to do and we’ll understand where we are at that point.

I think kind of moving forward, there are a couple of things to consider. I think operators need to have a really open mind about how they reach new customers, try new things ultimately. In the UK, we’ve kind of been stuck at 15% of the population joining the gym and it’s been that way for, you know, nearly the whole of the 20 years that I’ve worked in gyms.

Alex: Yeah.

Jamie: So it was kind of something’s not quite working for everybody. So what they need to think about is how they can convert customers into members and try and be a bit more open as to how customers are kind of getting into their venues. And I think secondly, focus on what you’re good at. So stick to the knitting is a saying that we have in the UK and then partner with people that have got expertise in an area that you kind of need it. So that way your business resource can just focus on delivery execution. It’s like working with third parties to bring customers in enables a venue to just focus on excellent customer service. Just making sure that when the customer comes in, they’re on a pedestal and they’re just absolutely looked after.

A good example of that might be, we’ve seen a lot of the UK that brands build their own digital provision, like, so they spent a lot of time, effort, and money in trying to build their own branded digital solution. When they could have just partnered with someone that was already in that space and maybe save the money on something that it was maybe had a bit of a better return for them, for one of a better term. So, yeah, I think there’s that kind of the customer has choice. So I think sometimes brands can be at fault for trying to own that customer in and outside of the venue where maybe the smart thing to do is just share that customer with lots of other partners.

Alex: Yeah. Got you. Okay. And hey, switching gears a little bit here. One of the other topics we wanted to discuss was the role of the sleeper member moving forward. And so yeah, talk to us about your perspective on sleeper members and how that role of that member has changed or is it going to continue changing as a result of the pandemic?

Jamie’s Perspective on the Role of Sleeper Members

Jamie: Yeah. So this is quite a contentious subject, right. So I think my personal view is that I don’t think like a customer that I tolerate that model in fitness anymore, to be quite honest. The only way and I suppose what sleeper is about is it’s kind of like low usage, low engagement. So they’re not really, and that kind of almost goes against everything that I stood for as working in fitness and I’ll probably touch on that in a little while. But I think that if you think about the Netflix kind of model where it’s kind of like a negligible amount, so if I don’t use it much, it’s okay, I’m rolling on. In fitness, really the only beneficiaries in that space are going to be the budget operators.

So I think the only kind of operators that will have a sleeper membership or a low usage, low engagement will be the ones that are really, really cheap. So a branded chain, a mid-market, or a premium operator is not going to be able to kind of attract that type of customer. No one’s going to pay good subscription value to not use it. So, I think the customers will just be a bit savvier now to it. As to whether there should be sleeping members or not, I think unfortunately over the years, I think that these kinds of members have been a big part of underpinning the model, in terms of the financial model. I think some gyms have kind of relied on that, having members that didn’t use it. If all the members turned up at once, you know gyms would be in pretty…

Alex: [Crosstalk 33:37] issue. Yeah.

Jamie: Be queuing around the door, right. So yeah, I think what’s going to be really important is gyms kind of diversifying their offerings and being able to offer different types of products which appeal. So what they need to be able to do is engage people more in like the physical activity, have a bit more of a varied approach and be able to attract these kinds of low usage, but maybe high engagement customers. So let’s move away from the sleepers, but let’s find a way of engaging customers that don’t necessarily want to come into the gym the whole time. I mean we’ve got to customize the memberships and we’ve got to focus on that. We’ve got to kind of put the customer at the front of what we’re doing. It could be that the gym, as I mentioned before, not owning that customer, but providing a part of that customer’s overall kind of wellbeing hub, if that makes sense.

Alex: Yeah. And I think for some operators might have to file this one under a hard to swallow pill that they’re going to have to start re-shifting their business model to these people who just weren’t using their service altogether. You’ve touched a little bit on whether there should be sleepers moving forward and I think that’s always going to exist to an extent, but maybe it’s just a matter of how much we rely on it or not.

Jamie: Yeah.

Should gyms still account for sleeper members?

Alex: I mean, do you think, we’ve talked a little bit about lifetime value, so should gyms still account for X percentage of their members to be that sleeper category? And if so, do you think that there’s a certain amount?

Jamie: Yeah. You know what? I think that’s really risky. So I think to build a model based on like a percentage, obviously presented would be really, really risky. I think as I mentioned before, I think the only way a customer will tolerate that sort of paying for something they’re not really using is if there’s that model around, kind of high engagement, low usage bit. And that’s going to come down to whether or not it’s sustainable for that gym to offer options for a customer to have a lighter touch variation of membership of some description. So I think that they’d be better to kind of put their efforts into coming up with a solution and kind of prioritizing that and trying to find different ways to appeal to people that want low usage. Rather than, maybe thinking about how much sleep revenue they’re going to generate.

Alex: Yeah.

Jamie: I mean don’t get me wrong. In 10 years’ time, it might be different. But I think right now we’ve got this scenario where they’re gone and we need to find a way to kind of replace them with a more engaged customer. And that’s probably what I’d say. But yeah, I definitely wouldn’t assume that it’s going to be as it was before.

Alex: Yeah. Okay. I think that’s that rise of the digital-only membership that I think a lot of operators are looking at right now is you have a member card, well, you don’t actually have a member card, but if you did, it just wouldn’t even gain you access to the club, but you still have access to their products, to their environment, to their digital interactions. And if that’s at 25% of what it takes or the membership costs to actually get into the physical club, well, that can be exactly how you’re talking about. Maybe have that digital-only membership, it’s going to be not someone who doesn’t visit you all the time, but they’re still engaged and you’re still able to have them as a dues-paying member for hopefully a long time.

Jamie: Yeah, absolutely. And I’ve seen the emergence of some sort of initial talks of having more of like health membership, sort of health subscription. So I know that there are some businesses in the UK that are thinking about ways where it might be more around health rather than fitness and maybe inviting customers to come in for a health check once a month and maybe touchpoints, less kind of gym orientated. But more, it’s just that engagement piece, right. Because if you can engage people and they’re kind of happy to have a lighter touch, then that could be something which kind of appeals to some of the operators. It’s just finding other ways to keep customers sticky to their brand. They’re not going to be looking to use it two or three times a week or they’re not happy to pay them for not using it like they used to.

Why is the Hussle model relevant to consumers?

Alex: Yeah. And so we’ve talked a lot about why operators should be looking at a brand like Hussle right now. But from the consumer side, why do you think a model like Hussle is relevant for consumers right now?

Jamie: Yeah, you know what? Personally, I think it’s been relevant for a long time and that’s from my own personal experience, that was a big pull for me coming over to the business. I think that flexibility it’s been available in all different other sectors and all different other ways other than fitness. You know, I think that kind of 15%, as I mentioned to you before that kind of a small number of people that joined the gym, I think that was just down to inflexible options for people. So I think it’s more relevant now because well, lots of reasons, I guess. I mean, I think that giving people more choices, that kind of working environment changing. You know half at home, half at the office, you know, that’s really, really important.

I think the fitness industry has gone through a lot of acceleration around their thinking, around customers wanting and we talked about that the digital emergence then kind of pivoting towards having options that people can work out from home. Going back even like two or three years ago, there wasn’t really any sort of gym brands out there that would have been encouraging their customers to work out from home. So I think that’s a positive of this is that, you know, gyms are starting to see that there’s kind of other ways that they can engage with customers outside of their rigid membership products. And I think that gym operates certainly was [inaudible 39:37] and they’ve got lots of energy and passion around this.

Like we all do, they want people to increase participation. They want more people getting into venues and getting fit. And I think that’s certainly one thing that everyone’s united on in our sector is wanting to get more people fit and access to fitness. So I think what people are realizing now is there’s more than one way of doing that, whether that’s digital or whether that’s working with things like ours, products like ours to be able to give customers more choice and more flexibility. So yeah, I think for the customer, it’s super important. It’s super relevant right now because now more than ever, they’re needing that flexibility and not being tied down to one venue, one contract.

Alex: Yeah. And I think that’s actually, you shed a good light on the inflexibility of it. It’s always about that 15% penetration rate, but all along when maybe we should have been looking at the 85% who weren’t members of the gym and why not, and how we can start to cater to them. And I think services like this and a lot of other things on the market will hopefully start to shift that trend. And it is also, you know, you can start to break this into a few different categories. There’s going to the gym for fitness, but then there’s also just physical activity, right. Just being around, moving, just doing something, being a little bit active. And I think that we can do as an industry or as a sector a lot more to get people physically active first and then that sort of graduates them into maybe getting that gym membership down the line.

Jamie: Yeah. Definitely. Absolutely.

Future Fitness Trends

Alex: And I would say a lot of the data that you guys have at Hussle probably allows you to spot some general fitness trends. We’ve talked about a lot of them already. You know maybe predicting what customers are going to be interested in say in the coming one year, two years. Could you share some insights on what you guys expect to see coming down the pipe?

Jamie: Yeah. Okay. Definitely. I think there’s probably a few trends that we see from kind of data between lockdowns and definitely on reopening now. I think the first one’s around that kind of peak piece. I guess the peak and off-peak usage and I know this from kind of being in clubs myself. But there was always the kind of sets, especially when you looked at the geographical location of clubs, your kind of city center clubs, your residential clubs, and so on. It was always, there’d be certain times where it was dead and other times where it was dead busy. You know that kind of after-work five until seven, you kind of knew when the busy periods were going to be. And it kind of felt like, yeah, I mean, it was such a waste having these facilities just empty during certain periods of the day.

So I think that that peak, off-peak bit is starting to level out and that’s more about people’s kind of work home flexibility as well. So starting to see that usage is more sort of leveling out. There still are going to be those peak periods because we’re creatures of habit and a lot of the time you like to go to the gym when you go. But we’re certainly seeing that start to level out a little bit more. So I think usage during the kind of the off-peak periods if you like is definitely one of the things that we’ve seen. I think there’s a huge shift away from kind of where people are working out. And again, this is in line with office and home working. So we see that a lot with the operators as well.

Operators I speak to, the kind of the real city center venues, they’re quiet. They’re really, really quiet because people aren’t venturing into town. You know they’re not working from the office. As a result, the usage is really, really low. And then on the flip side, you’ve got kind of like the residential areas are kind of the ones that really, really booming. So they’re seeing people that are coming in that weren’t before. Maybe those people who had joined the gym near work are actually joining the gym near home. But what that does mean is that those gym brands that are scaling they’re focusing on those areas now as well. So brands that may be kept to the town center, like the kind of city locations, they’re starting to branch out now into the residential areas.

So you’re going to start to see much more competitive environments now out in the residential areas where kind of like the bigger players are opening gyms next to the leisure centers, next to the independent gyms that we’re kind of enjoying a bit of peace and quiet out on their own. So I think lastly, people’s need for multiple venues we’re seeing that increase. So having flexibilities to use one-day work, one day at home, that’s on the up now because people’s time is more evenly split about where they are. So I think those are probably the three things, the peak and off-peak piece, where people are working out and their need to have more venues to access.

Alex: [Inaudible 44:26] Necessity being the mother of all invention here. It’s like, they’re making those kinds of changes. So that’s from the operator side. From your guys’ side, from Hussle, I mean, have you guys made any or at least publicly shareable changes in light of the past year that you want to highlight now?

Highlights of Publicly Sharable Changes

Jamie: No, definitely. And I touched on it earlier. So when I came to the business as someone who’s worked in the sector for years, I was challenged to bring an operator mindset to the business. So what I felt was that there was an opportunity for us to really support the gyms much better and certainly help with some of the halo effects of the relationship and the big one was around the membership piece. So what gyms thrive on is membership. That’s their lifeblood. It’s their kind of biggest revenue line. So if we were able to help gyms to kind of grow membership, I mean, I didn’t obviously expect there to be a global pandemic after joining. So I think that the hope was always that we could help gyms, but now it feels like there’s a need for us to help them more than ever. So our kind of Membership Conversion piece is probably, we definitely see it as a real game-changer for us and the partners that we have. So, it kind of really bridges the gap around kind of serving them up customers, but then also providing a clear stream of joiners.

And that’s super important to me is that we’re kind of seen as a real value-added partner and we’re really kind of helping them in the right way and on the club’s terms. So if we can help them with regrown membership and once they’re up to a sustainable level, keeping that kind of topped up. That’s probably the biggest thing that we’ve done differently is that I don’t want to call it pivot, I just want to call it, we’ve kind of focused in on something we were okay at and what we’re doing is being really, really clear and transparent and trying to be really great at it. So that’s what we’ve done differently. We’re really excited about that. We’re piloting it right now. So right now we’re in the process of piloting this. We picked half a dozen towns that where we have a good supply right now and we’re focusing on those clubs first. And what I would say is if anyone in the UK is listening to this and you’d be interested in finding out a bit more please, please get in touch. It’d be great to kind of explain how the process works with you and see if there’s any opportunity for you guys to get involved too.

Alex: Nice. Yeah. As we start to turn the corner here and wrap up today’s session, I was going to say, I mean, I think it’s definitely mission-critical work, what you guys are doing for a lot of operators in the industry right now, and moving forward, the fitness industry, it is going to be more important than it ever has been before. It’s always been an important one, but now that we realize how important public health is, this is really where it’s kind of our time to really step up to the plate. So I think it’s really great what you guys are doing.

Jamie: [Inaudible 47:22].

Where to learn more about Jamie and Hussle?

Alex: Awesome. Well, Jamie, yeah, always a good ending question here. Where can people go to learn a little bit more about yourself and also Hussle Mission?

Jamie: Oh yeah. So in terms of me personally, hit me up on LinkedIn. So you’ll find me on LinkedIn, Jamie Owens. You’ll see the Hussle branding everywhere. So yeah, by all means, drop me a line, connect and I love talking, right. You’ve probably guessed that over this conversation, but yeah, I’m always happy to talk about the sector. I’m super passionate about it. So hit me up there. And in terms of Hussle, so hussle.com is our website. There’s a forward slash list my gym, which is where you would go as a supplier looking to get involved. But yeah LinkedIn or Hussle.com, but it’d be great to hear from anyone. Always happy to talk.

Alex: Fantastic. All right. Well, Jamie, yeah, really, really appreciate the insights from today’s show. I think there’s a lot of actionable stuff for people who tuned in for today’s episode. Yeah, this has been another episode of FitNation Lunch and Learn Webinar. Hope you all enjoyed it and we’ll see you next time.

Jamie: Cheers.

 

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