Enrollment Fees or Not?

Wendy asks the following questions:

"We're considering the complete elimination of our enrollment structure. What are your thoughts on enrollment and are we making a smart decision?"

My immediate response is "It depends," but that is the kind of smart a$$ response you probably don't want. LOL. So, let me answer in a bit greater details but still starting out by telling you that I can only discuss general strategy with you, as I don't know the specifics of your situation. With that disclaimer stated, let me get to it.

There are both pros and cons to enrollment fees. The pro is that it acts as a qualifier for new members. That is, you are more likely to get a serious buyer because someone who is concerned about "sticking with it," may not want to pay the fee, hence won't join. (We'll talk about how that can also be a con in a minute.)

Another pro to enrollment fees is that there is a ton of research that shows undeniably that members who pay more up front stay longer.

Yet another pro to enrollment fees is that it brings the club valuable, and often necessary, revenue that helps to keep the club in good working order and helps to pay commission structures for the sales staff.

Now, let's play devil's advocate. One con to an enrollment fee is that it creates some level of barrier for the customer. Let's face it, people don't understand enrollment fees--"What is this for," and most salespeople can't give them a good explanation, often saying such horrendous things as, "The club needs to make some money too." These kinds of "no-thought given to what falls out of my mouth" comments make me want to be sick! But, I'm digressing here; back to the cons.

Another con can be if you have competitors in your marketplace that don't charge an enrollment fee and they use it against you with prospects.

A third con (and there may be more but these are the ones that come to my mind immediately) is that an enrollment fee can create a barrier for the salesperson--i.e. some salespeople don't perceive the value of the enrollment fee themselves and it literally creates a mental block for them, which is transferred (even unconsciously) to the prospect. This can kill a sale.

When you are considering eliminating your enrollment fee what you really need to ask yourself is a lot more than the simple pros and cons. You need to ask yourself what you want to accomplish with the elimination and then analyze your market to determine if in fact you will gain an advantage.

Personally, I love enrollment fees. I believe in my product and I know from an economic standpoint that the revenues I take in from enrollment help me maintain the quality of the club that my members enjoy. It also gives me some wiggle room for times when I do want to run a promotion and/or discount.

That said, the health club business is entering a stage of its' lifecycle where it is "commoditized." What that means is that more and more clubs are strictly selling on price and this is driving down membership dues. Unless your model is lots and lots of members with little service, most clubs cannot win in a price war with a competitor. In fact, no one wins because the operators often put themselves out of business and the members don't get the service or experience they want.

My last word on the subject for now is remember this: Once you remove your enrollment fee you will be hard pressed to get it back so think very, very carefully before doing it.

Hope this helps. Casey