EMV stands for the three companies that created the technology ? EuroPay, Mastercard, and Visa. In a standard credit card transaction, the merchant types the amount, you swipe the magnetic strip on your credit card, then scrawl your signature on a receipt. The main problem? That magnetic strip contains static data that can easily be stolen and passed around, increasing the likelihood that your gym-goers will be vulnerable to fraud during a point of sale (POS) transaction in your gym.

With a chip-based credit card, this process changes. Rather than swiping a strip, you slide the chip into a terminal and type in your PIN code. Like the magnetic strip, the chip contains data. However, the chip’s data isn’t static ? it changes every time you use it. This makes it substantially more difficult for scammers to take advantage.

Why Do We Need EMV?

Despite being one of the most technologically advanced nations on the planet, the USA leads the world in credit card fraud. While other nations such as Canada and Australia have reduced credit card fraud by moving to EMV technology, the USA continues to see instances of credit card fraud rise. To put it bluntly: we’re moving in the wrong direction, and EMV can change that.

The Effect on Gym-Goers and Other Consumers

When people come to your gym, they want to be focused on their workout. When they’re doing squats, they need to be thinking about the mechanics of the movement ? not about whether or not they’re going to have to deal with their credit card company. Consumers expect businesses to take care of them, and by introducing EMV, another layer of protection will be added to the payment process. It’s estimated that roughly 70% of consumer credit cards will support EMV by the end of 2015 ? your gym can’t afford to be left behind.

The Effect on Your Business

Naturally, you want your consumers to be as safe as possible ? but switching to an EMV system has other benefits. First, you’re protecting yourself. With the change in how POS transactions operate, the liability of who’s responsible for credit card fraud will shift to the least compliant party. If you don’t have an EMV system, that’s going to be your business.

To be compliant, you’ll need to change the POS hardware in your business. As a gym owner, your goal is to keep your customers safe. You want them to perform exercises using the correct posture, and you want them to keep their bank accounts safe as well. EMV helps you do that.

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If your answer to the above is: 1) the one that sells the most memberships; 2) the one that retains the most memberships; or 3) the one that sells and retains the most memberships?in all three cases ? SORRY CHARLIE!!!!

Increasing statistical evidence from Fitness Business Council independent-club quarterly and annual surveys points to the fact that the most profitable health clubs are consistently:

• THOSE THAT PRODUCE THE HIGHEST PERCENTAGE OF ANCILLARY REVENUES TO TOTAL REVENUES (otherwise known as AR2TR).

A glance at FBC?s last six (6) quarterly reports and the 2013 end-of-year report shows that clubs which regularly produce more than 24% ancillary revenues also regularly produce double-digit net profit margins (total revenues-total expenses/total revenues).

While there remains one exception to the above rule?that being the low-price ?fitness-only? clubs like Planet Fitness TM or clones?which generally offer no services other than a workout in a well-equipped but minimally-staffed facility ? even those facilities are beginning to see gradual diminishing of profit margins, often due to the fact that they produce extremely low annual ancillary income.

The converse is also statistically true (as any 20-year-plus industry veteran can tell you): those clubs which predictably produce lower-than-20% AR2TR are the most likely to fail.  At the end of our country?s last severe economic pullback (the recession of 1991-1994), 9% of existing health clubs had closed their doors.  Of that number, greater than ¾ of the clubs that closed produced less than 18% ancillary revenues (inflation-adjusted for 2014: 22%).

Why is ancillary revenue so important to a club?s success?  The answer here is rather simple: with the exception of the afore-mentioned low-price, relatively-low-payroll operators, the vast majority of clubs make absolutely no profit in the first year on membership sales!  Add to that fact the alarming news that annualized Member Retention is once again trending downwards (at last look, only 62% versus a less-than-2-years-ago-high of 68%)?and even a casual observer recognizes the need for what has been aptly named ?the monetization of members.?

Recent polls support the premise that the higher-the-price club, the greater the percentage of ancillary revenues produced by that club.  Interestingly, third-quarter 2014 data shows that clubs priced under $50 monthly (for single membership) not only have the highest annual member attrition (well over 40%) but also produce less AR2TR in direct relationship to lower prices!  (The weakest ancillary revenue percentage ? 15% – is reported by the $20-$29 membership price range.)

Time to re-think your business? long-term strategy?  Should you concentrate not solely on membership sales?but also on selling those members additional services once they?re inside your doors?

(Michael Scott Scudder is Founder/CEO of Fitness Business Council, the independent club business network.  Michael can be contacted at 575-751-1212 or mss@fitnessbusinesscouncil.com.  For your PDF copy of the 3^rd Quarter FBC Business Results Report, click Michael?s secure Dropbox link.

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Recent United States demographic information has startled business owners across the country?not the least of which are health club operators.  A massive age-population shift is right around the corner.  Will your club be prepared for it?

• Latest government statistics say that ? on January 1, 2015 ? 45% of the 315 million Americans will be age 50 or over!
• By 2017 ? less than 3 years away ? 1 of every 2 U.S. citizens will be over age 50.
• Every Baby Boomer is now over age 50.
• Industry statistics indicate that ? within less than 2 ½ years ? 50% of national health club members will be over age 50.

So what?s the big deal?  Well, the big deal is that most club and gym advertising, marketing, and exercise programming is geared to age 35 and under!  In other words, fitness facilities are acting as though their own member demographics haven?t changed in 20 years.

Add two other facts to this mix.

• 75% of all U.S. wealth and discretionary spending is controlled by consumers over age 55.
• The average 50-plusser has 6 times the discretionary buying power of the average 30-year-old.

What these numbers mean to you.

Club Owner ? is that you will very soon have either a massive opportunity in your competitive marketplace or you will suffer a colossal bummer!  The choice will be yours.

For those who seriously want to engage with the best-potential-buyer market we have seen in over 35 years in our industry, you will have to quickly get on the ball with several segments of your business.

• ADVERTISING: You?ll have to go where they are (and it isn?t newspapers, direct mail, radio or TV).  You?ll need to learn ?interactive smart site? marketing, email strategizing, and app/social media campaigning.
• SALES: They don?t like high pressure, ?buy now deals,? and club tours.  You?ll have to get smart with ?interview selling? and ?personalization? approaches.  This group doesn?t like ?locked in contracts? ? they like no commitments until they?re customer-satisfied.
• EXERCISE TRAINING AND COACHING: Give them your run-of-the-mill orientation of two trainings on equipment and they?re gone.  You?re going to have to learn ?outcomes management? if you?re going to keep this group coming back and referring their friends.
• PROGRAMMING: Think ?group, group, group? ? from on-boarding these new 50+ members into GEX classes to Small Group Training sessions to ?clubs within the club? which may include social programs, nutrition counseling groups, investment clubs, and a lot of other ?lifestyle-type? events which will add value to membership.

The track record of small training studios ? whose principal clientele is Baby Boomers ? proves that this group will spend a lot of additional dollars for experiences that they value.

Now your job becomes creating the value.

Michael Scott Scudder is Founder/CEO of Fitness Business Council, the independent club business network.  Michael can be contacted at 575-751-1212 or mss@fitnessbusinesscouncil.com.

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