When you are assembling your club’s marketing budget, it’s important to determine how much each of your members is worth. The best metric to use is the Lifetime Value (LTV) for each of your members. This is the total amount of revenue you expect to earn from a member during the length of their membership at your club.
If you have a $35 monthly membership fee and the average member remains a member of your club for 10 months, then your LTV is $350. Keep in mind that this does not include ancillary revenue sources such as merchandize, personal training and spa services.
Now that you have determined your LTV, you have a starting point to build the rest of your budget.
How much should you spend to acquire new members?
Now that you know your LTV, you need to ask yourself how much can you spend to acquire new members while remaining profitable. Using the LTV example from above, if your LTV is $350, and you spend $100 on marketing and sales to acquire that member then you’ve made $250. Your marketing and sales strategy had a positive Return on Investment (ROI).
Let’s examine a hypothetical direct-mail campaign for a club whose LTV is $350 per member. This club spent $20,000 on an extensive direct-mail campaign that earned 15 new members. This club had a Customer Acquisition Cost (CAC) of $1,333 per member, which results in an ROI of -$938. That’s not a typo--while the club acquired 15 new members, they lost almost $1,000 each to do so.
To ensure effective marketing, you only want to spend marketing dollars on activities that generate a positive ROI. With the number of digital tools available, you can see how easy it is to measure ROI of digital marketing tactics, such as email campaigns or social media advertising. You can calculate exactly how much you paid to acquire each member for each digital tactic. Calculating the ROI for traditional marketing tactics is much more difficult. Can you measure how many members joined your club specifically because of a new billboard or TV advertisement? If a marketing method’s success isn’t measurable, then you should debate whether or not it’s a method worth pursuing.
Now that you know how much you should spend to get new gym members, what are the marketing tactics you should invest in? Find out in the Ultimate Guide to Club Marketing Budgets: