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Compensation in Health Club Membership Sales - Does Your Method Match Your Vision
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Compensation in Health Club Membership Sales - Does Your Method Match Your Vision
by Geoff Hampton
Are your club's goals of member satisfaction being attained? If not, how your membership sales staff is compensated may be the problem. Health club sales specialist Geoff Hampton shares his thoughts on the two operational philosophies in our industry and how each attracts a different type of employee and, ultimately, leads to member satisfaction or dissatisfaction.
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To help ensure that it has satisfied members, loyal, high-performing employees and a successful business, a club needs to pay its membership sales staff in a way that reflects the facility's mission statement and vision of success. The two basic operational philosophies in our industry each attract a different type of employee and have different track records for member satisfaction. With the age-old attrition-driven philosophy, the sale is all that matters. The second is the widely spoken of, but rarely attained service-driven philosophy.
The preferred method for determining how much commission to pay staff is based upon realistic expectations of sales by the individual, factored into the level of income that will attract the type of person that the facility needs to attain a certain level of performance.
Attrition-Driven Clubs
Under an attrition-driven philosophy, sales commissions are the driving force behind everything that the club does. Member service is spoken about as though it were important, but the bottom line for an attrition-driven business is securing the initial investment. By accessing either state Attorneys' General websites or Better Business Bureau websites, it is easy to identify attrition-driven facilities because of the number of registered complaints. The landscape is littered with former members who bought into an attrition-driven sale and then left the club with a bad taste in their mouths.
Commission Structure
In an attrition-driven business, commissions are the primary source of remuneration for membership sales staff. The higher the commission structure, the more savvy and self serving the membership sales representative. When an enrollment fee is paid and there is a remaining contractual value (monthly dues), the commission on the enrollment fee is high. The commission on the remaining contract (for example: enrollment fee plus first month's dues leaves an 11-month contract, if the membership is annual) is reduced, because there will be a certain level of attrition.
Because cash collected at the time of the sale results in a higher rate than the balance of the unpaid membership, it encourages paid-in-full sales. But a club should balance its paid-in-full memberships to its monthly memberships based on a realistic business plan. Typically, monthly sales are much more desirable, as they guarantee monthly income and enable accurate budgeting and forecasting.
So, while a salesperson in an attrition-driven club is more motivated to collect enrollment fees and sell paid-in-full memberships, a better approach for the club's success is to rely on monthly sales and retain its existing members, as well as attract new ones. This is one telling example of how sales compensation that conflicts with a club's mission statement can damage the long-term success of a facility.
The preferred method for determining how much commission to pay staff is based upon realistic expectations of sales by the individual, factored into the level of income that will attract the type of person that the facility needs to attain a certain level of performance.
In other words, if your area of the country requires a compensation level of $50,000 for good membership sales representatives, then that is the beginning point of the mathematical equation. By working from that number and factoring in what the person can sell with a strong effort, the correct percentage can be derived.
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There are dangers in hiring a self-oriented sales staff member. This kind of person is likely to not be a team player and can often only see their own point of view - not qualities that would benefit your sales team…
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The preferred method for determining how much commission to pay staff is based upon realistic expectations of sales by the individual, factored into the level of income that will attract the type of person that the facility needs to attain a certain level of performance.
Straight commissions
Typically, straight-commission employees are not included in club benefit packages. This unfortunately will turn away a lot of great people who have strong interpersonal skills and who could be outstanding membership sale representatives. Most straight-commission formats tend to attract disingenuous individuals with self-focused function. In other words, the facility is of little importance to them. An individual with this type of business function is, therefore, counter productive to the business missions statement and vision of success.
One of the most common results of hiring a self-focused rather than a team- or facility-focused person is chaos. There is little-to-no true sense of "team" in their actions. Other staff members typically become embittered by this type of individual.
The opportunity to develop an effective staff team is dramatically diminished by the lack of cooperation and aggressive interactions exhibited by many straight-commission membership sales representatives. Furthermore, this type of membership salesperson is also usually convinced that "their way" is the only way. This makes them difficult to coach. Because they are focused on themselves and not the vision, they are also typically disloyal. Looking at their employment stability can illustrate whether this is true for an individual. Another warning sign is when the person shifts the blame for their short employment to their previous employers.
Service-Driven Clubs
Under a service-driven philosophy, the customer is the most important aspect of the sale. The sales options are not limited to one or two membership selections, but include programs and membership options. This is a quantifiable technique for putting the customer first.
Compensation
The type of compensation in this type of scenario is predominantly salary based. Basing compensation through a stronger salary tends to attract individuals who are goal-oriented and who possess strong team skills. These types of individuals are usually eager to learn and willing to "do whatever it takes" to attain the goal. The staff at a service-driven club is usually in sync and the sense of camaraderie is strong.
One of the most common results of hiring a self-focused rather than a team- or facility-focused person is chaos. There is little-to-no true sense of "team" in their actions. Other staff members typically become embittered by this type of individual.
Ideally, a facility's commission structure should be revised to be a "bonus" structure. Under this structure, the salary will assure individuals that the business is committed to their success, and the bonus is a reward for exceptional performance.
Benefits.
The type of person drawn to a service-driven business usually commands a strong compensation package and, if the person performs as is expected, then benefits will only serve to develop a strong sense of loyalty to the employer.
If you have any question about setting up a membership sales remuneration system or anything else related to effective sale management, please feel free to email me at Geoff@GeoffHampton.com.
About Geoff Hampton
Read more about Geoff Hampton and read his articles.
Go to About Geoff Hampton.
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