membership unleashed by les mills april 2012

LES MILLS INTERNATIONAL © 2011

MEMBERSHIP UNLEASHED FUTURE OF FITNESS

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THE FUTURE OF FITNESS CHALLENGES § LES MILLS white paper highlights

big challenges we face if we are to survive 1.  Aging obese markets 2.  Fitness Seekers want other options 3.  Play drives activity 4.  Activity must offer something more

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Health & Fitness facility attendance has become the biggest adult “sport” in the Western world. Bigger than football, tennis and golf combined �


FUTURE CHALLENGES AND OPPORTUNITIES 1.  The number of people who fit our

current offerings is reducing reflected in a population that is aging and suffering from obesity

2.  Fitness seekers want better quality products, more control and mobility, and ultimately more choice in how they exercise

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3.  “Play drives activity” with growth in two distinct areas: §  Blends of game, sport and dance will offer fitness

and activity that are driven by fun, pleasure and sociability

§  ‘Exergaming’ consumers will seek fitness and activity as a game driven by enjoyment.

§  Technology will evolve this segment into ‘exertainment’ with rich sensory experiences, and eventually virtual realities that involve movement, social networks, escapism and new experiences.

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FUTURE CHALLENGES AND OPPORTUNITIES


FUTURE CHALLENGES AND OPPORTUNITIES 4.  Activity offers ‘more’…

§  ‘Relationships and community’, in which people seek communication, connection, and shared experiences

§  ‘The search for meaning’, in which people place emotional, social and spiritual integrity at the core of their beings

§  Low-tech solutions like returning to nature, opting out or disconnecting

§  New techniques like proactive medication

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THE PROBLEM – ACQUISITION IN A COMPETITIVE MARKET

•  Big-box operators with large range of products at low price point •  Low service operators at even lower prices •  Skeptical customers viewing price as the only point of difference

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THE PROBLEM – RETENTION OF SMALL POPULATION

•  >16% of the US population go to a Health and Fitness facility •  About 15M new memberships sold per year and 12M quit •  Nearly 1:4 leave within the first 12 months of joining •  Average length of membership is 67 weeks*

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*For those paying monthly, without a contract


STANDARD APPROACH FIRST PRINCIPLES § The goal is to grow earnings - EBITDA •  Grow revenues •  Cut costs

§  When EBITDA is #1 guiding principal: •  Revenues are revenues •  Costs are costs


§  If all revenues are treated as equal, and acquisition is hard you try to supplement membership dues with other products and service

STANDARD APPROACH

EXECUTION


STANDARD APPROACH §  If all costs are treated as equal,

management looks to trim variable costs like payroll, training and and services EXECUTION


§ Results of cost cutting: •  Members notice •  Generates negativity •  Club less appealing •  Total savings are minimal

§ Results of supplementary revenue sources: •  Division is created between ‘cost’ and ‘revenue centers’

•  Members resent add-on costs •  Additional revenues are minimal

STANDARD APPROACH

CONSEQUENCE


§ All revenues are NOT created equal: §  membership dues are an annuity §  Incremental revenues comes from

membership revenue

§ All costs are NOT equal §  Reduced member experience causes

increase in attrition and decrease in referral

§  Any revenue loss occurs at the margin which directly impacts the bottom-line profit

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REVENUE AND COSTS

REALITY CHECK

$1 $17


THE PROMISE §  An integrated method that insulates you from:

•  Big box competitors •  Bare bones competitors •  Seasonality

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A NEW MENTAL MODEL Profit maximization is OLD Purpose maximization is NEW


EarningsMembershipEngagementFacilitation

1. Member Retention

2. Member Acquisition

1. Relationships

2. Results

MEMBERSHIP GROWTH STRATEGY


THE MECHANICS OF FACILITATION § During the on-boarding phase, you need the new member to exercise

regularly at least ≥ once a weekly, exercise productively and ensure they develop relationships with a broad range of staff

§ Once a member has settled-in, you need them to exercise consistently at least ≥ twice a week – and you need to ensure that they develop relationships with other members


1. Member Retention


1. Relationships

2. Results


THE ECONOMICS OF FACILITATION § Facilitation takes many forms – each with a different cost-effectiveness profile:

•  Front Desk staff contact with guest and members •  Membership staff enrolling a guest •  Spotting a member in the weight room •  A one-on-one personal training session •  A small group training session •  A group-fitness class •  An educational event •  A social event


1. Member Retention


1. Relationships

2. Results


THE PROBLEM WITH FACILITATION

§ Typically Health and Fitness facilities are not engineered to enable facilitation: •  Department ‘silos’ with often with a less-than-positive view of one another •  This is a consequence of the ‘profit center’ versus ‘cost center” approach from

management

§ As an example; PTs and Group-Fitness instructors are often Contractors – meaning that, outside of structured sessions, facilitation is the responsibility of: •  Front Desk Staff •  Membership Staff •  Fitness Floor Staff •  No one at all


1. Member Retention


1. Relationships

2. Results


MSG > ENGAGEMENT > MEMBERSHIP § Not surprisingly, the primary driver of membership is engagement : •  To keep a member, ensure that: visitation frequency ≥ once weekly •  To add a member, ensure that: visitation frequency ≥ twice weekly

§  Instead of trying to sell memberships, focus on prospect engagement •  Use an initial trial to create buy-in


1. Member Retention


1. Relationships

2. Results


MGS > FACILITATION > ENGAGEMENT § We must appreciate that health and fitness facilities are not always

engaging, special effort is required. § Engagement comes from: Relationships, Results and Environment


1. Member Retention


1. Relationships

2. Results


MGS > FACILITATION > ENGAGEMENT §  Relationships always develop in two phases:

• Member-to-staff relationships • Member-to-member relationships

•  However member-to-member relationships lock-in established members and lock out new ones

• Without trained facilitation by staff, only a small % of members will engage


1. Member Retention


1. Relationships

2. Results


MGS > MEMBERSHIP > EARNINGS


1. Member Retention


1. Relationships

2. Results

§ Membership = Earnings § Membership growth potential is almost open ended

LES MILLS INTERNATIONAL © 2011 23

MEMBERSHIP UNLEASHED PRACTICAL STEPS


FACILTATION MEMBERSHIP ONBOARDING

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§ “Every year the industry sells millions of memberships to men and women who, though they earnestly wish that they could become regular exercisers, have not yet developed the discipline or habit of regular exercise IHRSA Guide to Retention 2007

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FACILITATION CHALLENGE


MEMBERSHIP ONBOARDING § People join to get results and

motivation BUT they stay because they make friends

§ The membership consultant can be the first powerful relationship

§ Membership team must build real solutions versus hard sales.

§ A high quality member onboarding process focusing on attendance during the first 12 weeks is essential

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§ Best practice: § Pay Membership and Personal

Training Commissions based on usage during first 12 weeks of membership.

§ 21 visits in 90 days

MEMBERSHIP ONBOARDING


EXAMPLE

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EXAMPLE


FACILTATION ACTIVITIES

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PEOPLE CAN GET AN EXERCISE SOLUTION ANYWHERE. BUT NOT MOTIVATION.


THE ROLE OF MOTIVATION

§  “Motivation is a trigger that ignites membership. Understanding and leveraging the members motivation affects retention”

IHRSA Guide to Membership Retention


§ The five major categories include: •  Membership/Front Desk (1 member) •  PT (1-3 members) •  Small-Group (4-12 members) •  Large Group (12+ members) •  Events (unlimited)

FACILITATION THAT MOTIVATES

LES MILLS INTERNATIONAL© 2011

FACILTATED EXERCISE - MAKE IT SOCIAL

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Group Fitness Training Small Group Training Personal Training Event Training

FREELANCE PROGRAMS

CYCLE

STRENGTH

STEP

DANCE

SPORTS

MARTIAL

MINDBODY

SENIORS

FREELANCE PT PROGRAMS

SOCIAL EDUCATIONAL

EVENTS


BRANDED FACILTATED EXERCISE MODEL

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Group Fitness Training Small Group Training Personal Training Event Training


PERSONAL TRAINING § A great way to increase the quality of on-boarding, results and connection between member and to staff

§ Can be a good source of revenue §  Increase income opportunities and

career opportunities for GX instructors § However:

–  Best facilities only have ≥10% of members using PT on regular basis vs. 30%+ in GX

–  Connection is with a single staff member: if the member is unhappy with the PT or if the PT leaves potential to lose the member

–  Typically no or low prescription of other forms of exercise such as GX ,which is more social and more holistic

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§ Considerations •  Match new clients with PTs carefully •  PT Manager should check regularly with

customers to confirm if they’re happy with their PT. Make it a formal part of the process.

•  Offer short term courses •  Encourage PTs to teach GX •  PT can generate revenue for a facility but

its impact is relatively small

PERSONAL TRAINING

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SMALL GROUP TRAINING § Currently the holy grail of the

industry § Everybody wants successful SGT

programs –  Allows more people access to PT –  Increases $/hr for PTs –  Builds relationship between members…

they make good friends. –  Brings back the spirit of sports teams

§ Challenges: –  Best facilities only have 3% - 4 % of their

members doing SGT –  As yet, no one has really made it

successful

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GROUP EXERCISE. THE MOST POWERFUL SOURCE OF MEMBER MOTIVATION

WHICH CREATES COMMUNITY AND EXCITEMENT IN FACILITIES.

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GROUP EXERCISE

§ Many facilities worldwide are being hurt by low-budget competitors.

§ At the same time, there are successful new business models emerging eg: –  Pure Yoga and Pure Fitness

(Asia and US) – Group Ex-only, charging $165 per month in New York

–  Exhale Spa (US) - $195 pm for classes

–  Soul Cycle and Flywheel (US) - $32 per class

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POWER OF GROUP EXERCISE § Retention

•  90% of exercisers prefer to exercise in a group

•  Group exercise is cited as the biggest influence (40%) on how long people stay a member of a club

•  GX member retention rates are higher than other member retention rates, on average

§ Acquisition •  60% of people rate GX classes as

the #1 important service offered by a fitness facility

•  Satisfied Group Exercise members refer people 3 times more than other members

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IHRSA/HCD/Les Mills (March, 2009) IHRSA Consumer Report USA (2011)

Micheal Scott Skudder (2010)


THERE IS ABSOLUTELY A COMMERCIAL CONNECTION BETWEEN GROUP EXERCISE ATTENDANCE AND

LONG-TERM PROFITABLE FACILITIES.


SMART GX PROGRAMING § Prospects and members usually

need 3-5 types of training to cover their basic needs

§ Make sure you have at least one great program you can recommend in terms of quality, experience and consistency in each of these categories –  (21%) Strength –  (19%) Cycle –  (14% Mind Body –  (12%) Dance –  (9%) Martial –  (25%) Cardio/Fusion/Other

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Les Mills Scoreboard Global Report (April , 2011)


Power

Perfection Renewal

Sociability/Fun

BARBELL

ACTIVE SENIORS

MINDBODY®

CYCLE

GX NEEDSCOPE MODEL Co

nfor

mity

/Affi

liatio

n

High Energy/Challenge

NICHE DANCE

SIMPLE DANCE

CORE

MARTIAL ARTS

BOOTCAMP SPORTS CONDITONING

STEP

Essence Research ( 2004)


THE BOTTOM LINE IS. GROUP EXERCISE ATTRACTS MORE MEMBERS, WHO ATTEND MORE OFTEN, REMAIN LOYAL AND ATTRACT

NEW MEMBERS THEMSELVES.


ENGAGEMENT ENVIRONMENT

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§ 70% of Members rate “Ambience of the Studio”… as an “Extremely Important or Important” driver on their attendance

ENVIRONMENT EFFECTS ATTENDANCE

Neilsen Research ( 2008)


ENVIRONMENT. CREATE MORE A COMPELLING AMBIENCE.

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§  Les Mills World of Fitness, Auckland*, New Zealand §  12,000 members – current membership NZ$110 per month §  5,000m2 / 53,500 ft2 Fitness Only Club §  2,000m2 / 21,500 ft2 Group Fitness Area §  4 studios – largest is 700m2 / 7,500 ft2 §  Over 150 classes per week §  50%+ of total attendances §  65 part time Instructors §  9,000 + Group Fitness visits per week §  M’ship retention rate 80% (IHRSA formula) *City of 1.5M people with 175 health clubs


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Inexpensive effects – photo blow-ups


ENGAGEMENT RELATIONSHIPS

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THE CHALLENGE

§ “Most of us aren’t really health clubs, were not even clubs. We’re just places where people come to lift weights and run on a treadmill”

Michael Scott Scudder

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ENGAGEMENT DRIVES ATTENDANCE

§  12% of all cancellations would

be avoided if all new members attended the facility at least once per week during the 1st calendar month after joining

§  FIA Top Ten strategies for Winning the Retention Battle

§ High Attendance Correlates with High Retention

§  IHRSA Guide to Membership Retention

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ENGAGEMENT DRIVES ATTENDANCE Example §  2000 members § Average EBITDA 18% § Average Retention 50%

Strategy §  Improve Retention by 12%

Outcome § Members 120 @ $600 §  Increased Revenue $72000 §  Increased EBITDA 5% (23%)

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ENGAGEMENT FOCUS § More people through the door more

often … §  EBITDA and membership are not invalid,

but only a consequence of great facilities and member attendance

§  Attendance should be the key metric but is currently one of the least measured by facility owners & managers

§ Member Attendance is ultimately the biggest driver of membership and profit, and as such, it should be our biggest indicator of risk to financial success

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RELATIONSHIPS SUSTAIN ENGAGEMENT

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§  “Facilities with strong member-to-member connections have higher retention”

IHRSA Guide to Member Retention


ONE MORE THING. SUCCESS STARTS WITH ENGAGED STAFF.

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HAPPY, ENGAGED AND LOYAL STAFF MAKE HAPPY, ENGAGED AND LOYAL CUSTOMERS.


ENGAGE YOUR STAFF § Why should your staff care

about your business and challenge themselves every day?

§ To unleash company performance and profit, you need to unleash staff performance, motivation and loyalty.

§ People need to be engaged in an inspiring and meaningful purpose, something bigger than them

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ENGAGEMENT FROM ENDEARMENT § Latest research shows that

companies can profit from passion and purpose

§ Endearment is based on self-knowledge, candor and maturity -- three essential elements of integrity -- in interactions with others.

§  In return stakeholders place uncommon trust in their companies and products and fall in love with them.

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ENGAGE STAFF WITH THE BIG PICTURE §  By 2030, 50% of the USA population

will be obese (>30% BMI) §  Traditional health care is failing §  By 2016 the cost of the American

health system will have doubled to $4.1 trillion per year*.

§  It seems that our health is deteriorating at almost as quickly as these costs are increasing.

§  Need for a preventative focus §  Health and Fitness facilities are

effective preventative health care *2006 US Treasury report

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HEALTH AND WELLNESS AND OUR ROLE IN THE FUTURE § The world is facing a great holistic

health challenge and our industry is perfectly positioned to play a big part in the solution.

§ We are the exact opposite of the cigarette and junk food companies, and we have an intimate relationship with a large percentage of the world’s wealthiest, most influential people.

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VALIDATING STATEMENTS §  “We are warriors in the battle

against inactivity and over consumption” LMI Instructor Creed, 1998

§  “Creating life changing experiences every time, everywhere. One class at a time, one participant at a time” Les Mills Advanced Instructor Module 2011

§  “You have to find a way to make people fall in love with fitness” Les Mills, 1968

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STAND FOR SOMETHING. CREATE A CAUSE, NOT A BUSINESS...


§ Lifestyle Family Fitness (Florida) teen fitness initiative

•  FREE 2-Month Summer Membership

•  Teens can utilize all equipment & participate in group exercise classes

•  Hourly restrictions in place (i.e. non-prime time)

•  Remember…teens have parents & they grow-up to become paying adults

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CHANGING THE PERCEPTION OF OUR INDUSTRY


MEMBERSHIP EVENTS

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GROUP FITNESS EVENTS. ORGANIZING GREAT WOW EVENTS IS THE BEST WAY

TO CREATE MOMEMTUM, ENCOURAGE MEMBER MOTIVATION, BUILD ATTENDANCE, COMMUNITY,

RETENTION AND GROW MEMBERSHIP 78


Experience

Membership Sales

Les Mills GX Events typically drive 10-20 New Memberships

THE MEMBERSHIP EXPERIENCE CURVE

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When you host GX events, you are selling non-members an experience, not a membership – this makes selling so much easier


Experience

Months

THE MEMBERSHIP EVENTS MODEL

Program 1 Launch Event

Quarterly Re-launch

Event

Quarterly Re-launch

Event

3 6

Program 2 Launch Event

9

80

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THE RESULT § As the number of staff/member-to-member relationships increases, so does

retention §  With better new-member retention, you have more money to spend on acquisition § With more compelling offers, sales becomes easier


1. Member Retention


1. Relationships

2. Results


MEMBERSHIP UNLEASHED HOW LES MILLS PARTNERS GO FROM GOOD TO GREAT


1. THEY IMPLEMENT THE LES MILLS GX SYSTEM


2. THEY USE THE RIGHT PROGRAM SOLUTIONS


3. THEY COMMIT TO REGULAR WORLD CLASS INITIAL AND ADVANCED INSTRUCTOR TRAINING


4. THEY USE THE NEW CLUB PERFORMANCE TOOLS


5. THEY IMPLEMENT A ROBUST GX REPORTING SYSTEM


§ Point of sales training that leverages group fitness as a key membership sales tool

§ Les Mills has formulas for hosting launch and relaunch events, on 3 different budgets, that are proven to: – enhance member retention and

acquisition – deliver significant ROI – transform group exercise into a profit

centre

6. THEY HOST BROADWAY CLASS GX EVENTS


7. THEY LEVERAGE THE NEW US CONSUMER LES MILLS PUMP INITIATIVE §  Beach Body LES MILLS

PUMPTM Home DVD §  Biggest marketing initiative

since the global launch of BODYPUMPTM in 1997

§  Multi Million $$ Infommercial §  Massive consumer drive of

new members to sites with LES MILLS Programs

§  US launch May 2012


§  THE AVERAGE LES MILLS LICENSEE FACILITY HAS 500 MORE MEMBERS PER CLUB THAN THE GLOBAL AVERAGE

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(1) Scoreboard Round 1 and 2 (2) Scoreboard Round 2

GX POWERED BY LES MILLS FROM GOOD TO GREAT


§ THE MAJORITY OF LES MILLS™ PARTICIPANTS WANT TO CONTINUE TO TAKE LES MILLS™ IN NEXT 12 MONTHS

AC Nielsen (2010); IHRSA Consumer Report USA (2011



§ LES MILLS GX MEMBERS ATTEND THEIR FACILITIES ALMOST TWICE AS OFTEN

AC Nielsen (2010); IHRSA Consumer Report USA (2011



§ THE MAJORITY OF LES MILLS™ PARTICIPANTS WOULD ABSOLUTELY OR STRONGLY RECOMMEND LES MILLS™ PROGRAMS TO THEIR FRIENDS AND FAMILY AC Nielsen (2010); IHRSA Consumer Report USA (2011)




§ LES MILLS LICENSEES TEND TO HAVE HIGHER % OF CLUB ATTENDANCE PARTICIPATING IN GROUP EXERCISE (1) Scoreboard Round 1 and 2 (2) Scoreboard Round 2

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§ LES MILLS CLASSES ATTRACT HIGHER TOTAL CLASS ATTENDANCE THAN OTHER CLASSES, ON AVERAGE (3) Scoreboard Round 1 and 2 (4) Scoreboard Round 1

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§ THE AVERAGE LES MILLS LICENSEE ATTRACTS AROUND 600 WEEKLY GROUP EXERCISE ATTENDANCES THROUGH THE YEAR(3)

(3) Scoreboard Round 1 and 2 (4) Scoreboard Round 1

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Schedule a Membership Growth Strategy Review Create an action plan for the transition to Membership Growth Strategy

No Cost, No Risk, No Obligation

YOUR NEXT STEP


PARTICIPANT FEEDBACK FROM PREVIOUS SESSIONS 1.  Non Commission Model 2.  Sale People emotionally attached 3.  Accountability for Prescription 4.  CXWORXS 5.  What keeps your club open? 6.  What is your Value? What is on your mind? 7.  Abundance of daily drama – Seek Wellness 8.  Keep people ‘connected’ regularly 9.  Attendance = Membership 10.  Members Surveys 11.  Staff Engagement – Get staff taking the Group X

classes 12.  Staff training pays for it self, Purpose, Autonomy,

Mastery and Scalability 13.  Consumer – Holistic View 14.  Fitness has become a luxury not a necessity

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15.  Restore Mothers who gave up everything for their kids 16.  People leave their Trainer and Instructors not the Club 17.  Team Training could be a great tool to engage the

College segment 18.  Clubs should collaborate better with Physical Therapy

Clinics to break the cycle of chronic illness 19.  Model required for small studios 20.  How do we create community when we operate in silos 21.  Club Culture – How to build this 22.  Global perspective “refreshing”t 23.  Engagement is key – Foster culture with corporate

account 24.  Look after home/community/obesity war 25.  Equity small club (1500 membership) Beach Club 26.  Get the members together 27.  Difficulty gettting people together 28.  Group Exerciser is thre heartbeat of the Club

membership unleashed by les mills april 2012

Education

les mills

gx powered

mgs

standard approach

scoreboard round 1

visitation frequency

fitness seekers

fitness facilities