Why Automated Payments Have Become a Necessity in Subscription-Based Businesses
Case Study: Fitness Clubs
By Laura DiBiase
When it comes to managing a client-facing business, there is no shortage of important factors needed for day-to-day operations to run smoothly. In addition to ensuring that your services are the best of the best, managers need to work around the clock to meet the continually rising expectations of customer service in this day and age. Although passion and commitment to a client-facing business are crucial for success, at the end of the day, every business is only as successful as its last paycheck, which can be especially tricky with payment options for subscription-based business models.
Subscription-based business models have become increasingly popular to the average consumer, whether it be your Netflix, Spotify, or Amazon account. Among the most infamous and long-standing subscription-based businesses is undoubtedly fitness clubs. Although some boutique gyms do offer different payment options (pay by class, etc.), the majority of fitness clubs have always relied on the subscription model: pay a monthly fee for unlimited use of the facility.
However, as fitness clubs—like many other businesses—have modernized to adapt to new technology and opportunities for their members, traditional payment methods have become an unnecessary headache for club owners.
Managing payments by hand or with primitive billing resources ultimately draws their attention away from their priority of making their facility the best it can be for their members. Furthermore, mismanaged billing affairs can be devastating in terms of properly budgeting your cost of business or for your clients directly.
By using a prolific payment provider to automate payment procedures, establish recurring payment plans, and offer numerous channels for payment options online, fitness clubs can benefit in the following ways
Minimize Hassle for Management and Members
Automated billing plans eliminate the most stressful (and important) element of every client-facing business: collecting payment. Whenever money changes hands, businesses can be susceptible to a wide variety of compromises. What’s more, leaving billing procedures to loose regulation can often result in missing payments or inconsistent revenue streams.
Setting up recurring payment plans takes away the immense burden on management to individually track down members to settle their bills, leaving them free to prioritize their other responsibilities that make a fitness club operate.
Cardknox prioritizes easy client self-management of recurring payments through its client portal. This allows clients to establish a name for their payment schedule, the time frame, number of payments, amount, and any other pertinent payment information. They can also make the recurring schedule active or inactive with the click of a button instead of relying on club management to do so.
On the client end, recurring payment platforms relieve the stress of remembering to pay dues on time. To ensure this, Cardknox utilizes an account updater tool that scans and updates any expired card information on file. This feature works in tandem with recurring payments as a failsafe that prevents lost sales.
Create Stable Revenue Streams and Predictions
The fitness club industry is naturally very susceptible to unpredictable client behaviors: how individuals prioritize attending the gym can fluctuate dramatically. We’re all human, sometimes working out can fall behind other priorities and sometimes we lose motivation.
As a result, fitness clubs run the risk of losing members on a pay-as-you-go set-up. For example, if members are lacking motivation, odds are that they will stall, take weeks off, or potentially switch gyms at any given time.
Additionally, loose payment dates mean that members will all pay their subscription fees on different dates that align with their individual member details or length of contract. With payments coming in erratically or not at all, owners are left with inconsistent sales and extremely unstable revenue projections.
In terms of budgeting, this inconsistency can quickly snowball into a budgeting nightmare. Not only can this hinder clubs from making informed financial decisions for future costs, but it can be equally misleading when considering your monthly expenses, profit, and overhead.
Establishing recurring payments provides much needed financial stability to make informed decisions for your business. You can automate payments to take place on the same day every month or on a schedule that aligns with varying membership packages offered at your club. Either way, you will have a clear idea of when payments will be collected, which will help you plan for your future.
This can also help you set conservative margins that protect you from lost costs if members decide to terminate their memberships, or churn, which is one of the industry’s largest risks.
Speaking of churn, the model of recurring payment plans can be your first line of defense in maintaining member retention. By putting the responsibility of collecting payment on your business instead of the client, you will inherently set the dynamic that the customer only needs to get involved to end their payments as opposed to giving them.
In addition to us humans being unreliable, we can also simply be lazy. While members terminate contracts for a wide array of reasons, a leading cause can be lacking the motivation to go to the gym in the first place. Recurring payments could motivate members to make it into the gym since their payment already took place. This simple change in psychology can have a tremendous impact on maintaining business in addition to protecting your sales.
With new digital protocols like tokenization and PCI compliance, you are protecting your members from security risks that accompany antiquated payment practices. This will allow you to safely store and handle member information with a minimized threat of being compromised.
By encrypting payment details for online portals, credit card details will be hidden with a designated token to ensure that actual payment details will be kept private. This doubles in importance when collecting payments from different payment channels (mobile, online or in-house).
Boost Revenue through Secondary Spend
In essence, the more convenient it is for your members to purchase products or services, the more likely they are to do it.
Fitness clubs as a whole have dramatically expanded their offerings to their members apart from access to their facilities. These offers can include anything from private training, workout gear, healthy snacks, and beyond. These offerings are commonly referred to as secondary spend.
In fact, many clubs now rely on secondary spend to make up a considerable margin of their monthly revenue instead of relying on membership dues alone. As an added benefit, the IHRSA 2018 Global Report cited that fitness clubs that utilize secondary spend tend to have higher rates of client retention, as this figure can often correlate with a member’s connection with a fitness club.
In order to maximize profit from these offers, fitness clubs need sophisticated payment options to allow their members to buy conveniently. This means allowing them to book classes or private training online or via a mobile app that is linked to your club management software. You also could provide for online purchases that can be easily collected at the front desk.
Similarly, in-house purchases should also favor accessibility since many people tend to not bring their wallet with them to the gym. Therefore, providing as many channels as possible will enhance your sales.
Furthermore, Cardknox’s open API can easily integrate with club management software to compose detailed reports of client spending records by consolidating records from different sales channels, regardless of which method they choose to pay.
As a business owner in 2019, let technology take care of the stressful back office procedures so you can focus on why you opened this business in the first place. Whether you own a fitness club or any other type of subscription-based business, automating payments is a win for both you and your customers that will help you make your business the very best it can be.
Ensuring reliable and streamlined payment processes are the backbone of ensuring the success of a fitness club. The value and convenience of automated billing, reliable revenue reports, and protection of sensitive payment details are truly indispensable for both protecting your business and enabling it to thrive.
Laura DiBiase is a Marketing Specialist for Perfect Gym Software. She is a native born Los Angeleno recently relocated to Warsaw, Poland who spends most of her time at the gym, on an airplane, or online shopping.