How to Prevent Losing Members to Cheap Discounts – DSP 207

Many float centers rely on memberships, usually monthly, to help maintain a steady flow of income throughout the year. Sometimes that’s not enough, like during slow months, and a steep discount can seem really attractive for filling up float tanks. What’s the best solution to making sure that you aren’t cannibalizing your own sales with discounts and potentially losing members?

Graham and Ashkahn share their tried and true approach to this nuanced question and share some excellent examples of how Float On rewards its members without losing sales during discounts as well as throughout the rest of the year.

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Transcription of this episode… (in case you prefer reading)

Ashkahn: Okay. Hey there everybody.

Graham: Hey, welcome here.

Ashkahn: This is Ashkahn.

Graham: I am Graham.

Ashkahn: And we got a question.

Graham: Which is, “If I want to run discount that’s cheaper than my membership, how do I make sure that I keep my members? I’m afraid I’ll lose them to the steeper discount.”

Classic.

Ashkahn: Classic.

Graham: Good instinct.

Ashkahn: Classic problem.

Graham: Yeah, probably would.

Ashkahn: Yeah, it’s a tricky one you have memberships and then, like we once a year run a crazy sale or something where we’re doing a pretty steep discount. And often that is actually a better deal than what some of our members, not all of them, but probably our best best bang for your buck membership plan is I think ten to stay under our yearly.

Graham: Like if you do a yearly membership.

Ashkahn: Or like, yearly pay.

Graham: So which is our yearly membership is pretty much, we call it a membership but it’s really a package

Ashkahn: It’s a huge bulk package.

Graham: Yeah, you pay like 1800 dollars and you get 52 floats, all at once. Which comes out to about 35 dollars a float. It’s like, 1860 for those of you who are calculators and check my math. We won’t go below that, but for our regular monthly membership that’s at 54 dollars, and once a year we run a discount that usually treads below that 54 dollar point.

Ashkahn: Uh-huh.

Graham: So the goal here, to elaborate on the fear, the fear is that members will see this cheaper price, realized they’re getting hosed, and possibly just drop their membership and buy a bunch of those in bulk. Anytime you do a thing someone’s like, “Oh hey I can buy the next six months of floats for cheaper than I’m paying for my membership, I’ll just do that.” And they ditch the membership. And the fear there is that you’re losing that recurring revenue even though you’re still making sales and you’re still selling floats, which is what you wanted to do with your sale offering. Perhaps you would have made more money had that member just stayed on board, and maybe they would have stayed on more months, even after the six months for floats to be bought, if they had continued to have their regular subscription-based membership. Basically it’s the idea that subscription is more stable than one-off sales, so anything that diverts a subscription pay over to just doing a one-off purchase is probably not the best decision for your business, so that’s kind of the fear.

Ashkahn: And how do you get around from it?

Graham: Bribes. Like, legitimately, you just bribe your members.

Ashkahn: Yeah, we try to just basically do especially nice things for our members around that time.

Graham: Foot massages, every member who comes in gets a great foot massage.

Ashkahn: Breakfast in bed. Yeah, so often when we do a big thing like this what we’ll toss members a free float. And almost a single free float tends to, if you were to recalculate how much they paid that month with that free float mixed in, often it almost always brings the number down to a place that will get closer or will go lower than your deal that you’re offering for that day. So if it’s two float a month or four float a month, our prices would usually kinda balance out like that.

Graham: For example, right now we have a one float a month package for 54 dollars, people can buy other floats for that same 54 dollar price. So if they get a free float, it’s kinda like they’re getting two floats a month for 54 dollars, or they’re paying 27 dollars per float which, again, 27 is going to be well below where we end up doing a discount. Just that, I like mixing in some non-monetary things too. We’ve done different presents for members around that same time. We’ve delivered free floats inside of nice double-layer water bottles. We’ve given members t-shirts, along with free floats.

Ashkahn: Yeah, cool t-shirts, we custom-made a Thanksgiving-type t-shirt that wasn’t just our logo on a t-shirt or anything like that.

Graham: Maybe we’ll throw up that design in the show notes so you guys can see it, “Tanksgiving” t-shirt.

Ashkahn: Yep, that’s what we called it.

Graham: Yeah, things like that, that also don’t have a set monetary value. Even just a handwritten note from one of your managers or a staff member who interacts with the member the most can be a really nice gesture.

Ashkahn: And we have other ongoing things, like members get free Kombucha at our place, they get a discount on our retail, there’s other perks that come with being a member. And we also give members gifts for no reason sometimes. Like, not tied to when we’re about to run a discount or something like that. Hopefully what we’re trying to do there is establish in people’s minds that having a membership with us is like you’re part of a cool club or something. It’s not a simple math equation in terms of, okay, floats are like two dollars cheaper right now I should cancel this and start buying a bunch of these. There is a higher value or better experience towards being a member in our place.

Graham: For sure. I do think that ultimately, no matter how much of that stuff we did, building value outside of the price, if you’re offering a discount that’s 15 dollars cheaper per float than what your membership is, if you’re not giving those members something at that moment, you’re probably gonna lose members to people buying cheaper floats. It’s just gonna happen, you know? That is the goal, the more attractive you make your memberships year-round the less it’s going to matter. If it’s a five dollar price between membership floats and your offer, and you take really good care of members on an ongoing basis and every time they come in they get something for free, they probably won’t really care either at that point, you know?

So there you go, you’ve got bribery. It’s absolutely the right answer in this case!

Ashkahn: Cool.

Graham: Yeah, I think that’s it, it’s pretty much what we do to avoid this whenever we do it. There is also just never running discounts steeper than your membership.

Ashkahn: And we really don’t that often.

Graham: Once a year.

Ashkahn: We’re talking like once, even our Christmas, we usually run a December deal, it doesn’t get cheaper than our memberships do.

Graham: And for this exact reason. It is kinda annoying to give out one free float per member that you have if you have a lot, like 250 members, you know?

Ashkahn: We do think if we’re ever running a big deal, like a public sort of thing like that, the first thing we think about is okay, is that more or less than our membership and how do we deal with that. And when it’s more than your membership it’s kinda great, because your members are like, “Pshaw, I get better than that just with my membership.”

Graham: Yeah, yeah.

So there you go. Some thoughts to chew on there, and swallow, and then digest.

Ashkahn: And then-

Graham: Alright that’s it!

Ashkahn: That’s the end of that! You guys have more questions you want us to chew on over here you can send them to floattankssolutions.com/podcast and we’ll answer them.

Graham: Yeah, we’re your boys.

Ashkahn: Yeah. Talk to you later, peace.

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