Posted By Clod on July 20, 2012
When clubs are small, it is easy to make decisions by the “seat of our pants.” We use one half of our brain for logic and the other half for emotion. When my emotion says one thing and my logic says another, I usually go with my heart … life turns out to be much more fun that way. But when I make a business decision, I at least go through a number of rational steps. (This is my way to confirm my emotional inclination with reason … although I still haven’t convinced my wife the RX7 or 300ZX convertibles were sensible purchases.)
As club owners, these rational steps mean using professional business tools available to us. One of these tools, the Owner’s Opportunity Model, identifies four alternative strategies: market penetration, market development, opportunity development and diversification. Within each strategy, there are a number of components you can control called the six Ps: promotion, programs, people, product, place and price. Using this model correctly will show which strategy employs the least risk, and when it is time to take a chance.
With market penetration, the club owner is saying, “Let’s keep doing pretty much what we have done in the past.” You’re deciding to take a low risk and sell what you have now to the same kind of people that currently use your club. It’s all right to experiment and make minor adjustments with regard to promotions, programs or staff with this strategy. For example, if you tried a new direct mail campaign, hired a more professional desk manager or added another series of aerobics classes, these would be considered market penetration.
Penetration is effective as long as your memberships are growing at an increasing rate. However, once growth begins to slow down, you need to begin plans toward market development.
With market development, the club owner is saying, “Let’s take the club we have and go after a new target market.” You’re taking a moderate risk and selling what you have now to new target markets.
If your memberships are still growing, but less than 5 percent a year, it’s time to adopt this strategy, which requires moderate adjustments to promotion, programs and people. In addition, minor changes are usually required in either or both your product or place. For example, in order to attract a very young tennis market, you might add a tennis pro who specializes in juniors, block off afternoon times for tennis camps, run television spots during Saturday morning cartoons and purchase several special junior racquets. In this example, you have made modifications with your programs, promotion, people and product.
Continue using market development as long as memberships from these new markets are coming in at an increasing rate.
Figure 1 shows how membership growth is related to these strategies.