Over the past few months, Hussle has been testing a new Membership Conversion Service (MCS) which has been built with fitness operators and is designed to support the upsell of single gym memberships to customers that would most benefit.
The service was conceived during a series of roundtables with fitness industry stakeholders during the Summer of 2020 to better understand how Hussle could be of most assistance to gyms and health clubs.
Key Points
- Hussle ran an A/B test with almost 2,000 gyms and health clubs to assess the level of customer demand for single gym memberships across the Hussle marketplace
- Results demonstrate clear incremental customer demand for single gym memberships
- Hussle has built a basic version of the Membership Conversion Service (MCS) which is now live with 100 pilot gyms enabling them to acquire new members from the Hussle marketplace
- As a low-cost new joiner channel, Hussle has developed a commercial model with operators which guarantees new member revenue of x5 the commission cost (CAC:LTV ratio of 1:5)
- Hussle is now inviting more gyms to join the pilot and provide feedback on this new joiner channel
Context
The feedback from gym operators was that although they always had strong anecdotal evidence of Hussle customers converting into full members of their clubs organically, they wanted to understand what more Hussle could do to support this process in future. this was especially in circumstances where Hussle may have secured high potential commercial partnerships to bring new customers into the fitness industry.
In the context of high member attrition through Covid, a reduction in resource across most operators, and an expected ‘post-bounce’ plateau in member growth post-lockdown, the concept clearly had merit. But would there be customer demand within the Hussle marketplace?
A/B (Split) Testing
To assess this, Hussle ran an A/B test to understand the level of customer demand for gym membership alongside the legacy day pass options and premium-priced multi-gym passes.
An A/B test (sometimes referred to as split testing) is a randomised marketing experiment whereby two or more versions of a variable are shown to different segments of website visitors at the same time. The reason for carrying out an A/B test is to learn which version has the maximum impact before deciding which option to go with.
In the case of the membership conversion service, Hussle ran an A/B test which showed 50% of website visitors the gym listing page on the Hussle marketplace which included a direct membership option (Group A), whilst the remaining 50% of website visitors were not shown a direct membership option (Group B).
Over the course of 2-weeks, this test was carried out with almost 2,000 gyms and health clubs across the UK which provided enough data to make the test highly statistically significant.
Within Group A (website visitors that were presented with a direct membership option), 31% of customers selected the direct gym membership option, whilst 20% of customers selected the premium-priced multi-gym pass and 49% of customers selected the day pass option. In addition, the overall volume of transactions increased significantly.
This data demonstrates clear and incremental demand for gym membership options from customers within the Hussle marketplace.
In Group B (no membership option presented), 77% of customers selected variations of the day pass options available, whilst 23% went for the premium-priced multi-gym membership and overall transaction volume was lower.
What this demonstrates is that customers in Group A who selected a gym membership would otherwise not have made a purchase or they would have chosen a day pass option. This also indicates that single gym membership options generate very little cannibalisation of demand for the premium-priced multi-gym pass – not surprising given that the premium price point on a multi-gym membership places it above that of a single gym membership by design.
In terms of market size, this is good evidence to suggest that the customer segment willing to pay a premium for multi-gym access is consistent at around 20-23% regardless of the presence of single gym membership options within the marketplace.
This data also supports the anecdotal evidence provided by gym operators during roundtable research that they have seen customers join their clubs having initially visited their facilities through Hussle – most likely customers that originally visited their club with a day pass via the Hussle marketplace.
Whilst organic conversion is clearly a positive benefit for gym operators, the mandate given to Hussle was to professionalise this service so that a clear user journey exists between the Hussle marketplace and gyms acquiring new members.
Establishing this journey would reduce the resource requirement within a gym needed to convert members, it would minimise the ‘drop out’ rate of customers in the sales funnel, it would enable automated customer communication linked to activity, and would provide conversion data and insight to help gyms better understand how potential members view their proposition.
Minimum Viable Product
With the A/B test successfully concluded, Hussle then built a Minimum Viable Product (MVP) of a basic new member journey for customers to join gyms directly having found a club they wish to join via the Hussle marketplace.
The MVP is deliberately a very raw, basic version of what the membership conversion service will ultimately look like. It does not have all of the functionality that operators would expect from a fully mature service. But it does provide a basic journey that works and leads to new members for participating gyms.
The MVP was been rolled out to 100 gyms around the UK and customers are now able to join these gyms seamlessly.
From a gym operator perspective this provides a new member on a highly cost-effective basis as no marketing investment is required. The customer acquisition cost (CAC) comes through a commission to Hussle for the new member only at the point a new member is generated.
Commercial Considerations
Although the tenure of the new member is not yet known (that data will take months to understand for obvious reasons), Hussle has collaborated with gym operators to find a commercial model which works for all parties.
In previous articles, The Side Hussle has explored the key marketing metrics for a fitness business around customer acquisition costs (CAC) and lifetime value (LTV). For a fitness business looking to grow efficiently, the ideal balance of these metrics is to generate a customer lifetime value which is x3 larger than the cost it took to acquire the member.
Any ratio which is lower than this is too expensive for efficient growth, whilst any ratio which is higher than this is a low-cost new joiner channel which deserves further investment.
As the lifetime value of a member sourced through the Hussle marketplace is not yet known, the most logical commercial model was to agree a fixed CAC:LTV ratio which has been set at 1:5, or in simpler terms, a 20% commission.
This means that the revenue an operator generates for a member sourced through the Hussle marketplace is guaranteed to be x5 greater than the cost of the commission.
Next Steps
Hussle is now working to add more fitness facilities to the membership conversion service pilot, especially those willing to engage in a strong feedback loop to help optimise the service.
This will include feedback on the type of members generated, operational improvements that can be made, the sort of data and insight that would be useful, and any other ideas that make the membership conversion service work more effectively.
To find out more about how Hussle could provide you with a low-cost, new member joining channel, click here.