One Time Fees Ep 188

Summary Notes


In the Gym Secrets podcast, the host discusses the strategic use of initiation fees and discount offers to enhance customer acquisition and retention in businesses, particularly gyms. He explains that larger initiation fees can make subsequent billings more 'sticky', increasing customer commitment. The host shares insights on how these fees can be leveraged to pay sales commissions and create attractive discount offers, which, while seeming substantial, actually reduce the overall discount given. He stresses the importance of these strategies for covering initial onboarding costs and justifies higher upfront charges by detailing the extensive support new clients require. Additionally, the host encourages listeners to spread the word about the podcast to support entrepreneurs, and teases upcoming content on monetizing free offers in his new ebook.

Summary Notes

Gym Secrets Podcast Introduction

  • The podcast focuses on customer acquisition, increasing customer spend, retention strategies, and shares experiences and lessons from the fitness industry.
  • Speaker B introduces the podcast and its purpose.

Welcome to the gym Secrets podcast, where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons that we have learned along the way. I hope you enjoy and subscribe.

This quote sets the stage for the podcast, outlining its main objectives and inviting listeners to engage with the content and subscribe for more insights.

Importance of Initial Fees

  • Speaker A discusses the relationship between initial fees and customer retention.
  • Initial fees can make subsequent billings more secure or "stickier."

The larger the discrepancy between the initiation fee and then the subsequent billings, the stickier the billings become.

This quote highlights the idea that high initiation fees relative to regular billing amounts can lead to increased customer commitment and potentially lower cancellation rates.

Speaker A's Morning Update

  • Speaker A shares their excitement about developing new frameworks for a book on customer acquisition.
  • The frameworks include eight ways to ethically monetize free offers and four ways to monetize discount offers.

Good morning, everyone. Hope you guys are having an awesome start to your day. I'm making a badass one of the next frameworks for the book on acquisition on how to make different offers. Pretty cool. I'm actually really excited.

Speaker A provides a personal and enthusiastic update on their progress in creating valuable content for readers interested in customer acquisition strategies.

Discount Offers and One-Time Fees

  • Speaker A is currently working on discount offers and their role in business models.
  • One-time fees are common in various businesses and have multiple names such as activation, initiation, enrollment, or service fees.

And so one of the ones, the ones I'm working on right now is about discount offers. And so one of the things that goes hand in hand with discount offers, one of the ways to use them is a one time fee.

This quote introduces the concept of one-time fees as a strategic component of discount offers, which can be an effective tool in customer acquisition and retention.

The Role of One-Time Fees in Sales Commissions

  • One-time fees can serve as a direct commission for salespeople in the fitness industry.
  • LA Fitness is cited as an example where salespeople retain the initiation fee as their commission.

So way back when, I know that in LA fitness at least, I'm not sure if they do it at 24, but I'm pretty sure they follow the same outline, which is they usually give the salesman that fee. So whatever the salesman is able to collect on the initiation or the enrollment fee is actually their own commission.

This quote provides insight into the practice of using one-time fees as sales commissions, offering a real-world example from LA Fitness and suggesting it may be a common practice in the industry.

Economic Justification for One-Time Fees

  • The cost of signing up a new customer is low, making one-time fees a significant source of revenue for salespeople.
  • Without the one-time fee, commissions on regular contracts would not be financially worthwhile for the sales staff.

Because it's so inexpensive to sign someone up, if you can't get the initiation fee, then it's not worth your. Like, they don't want to pay commission on a $25 a month contract.

This quote explains the economic rationale behind one-time fees from the perspective of sales commissions, emphasizing their importance in making the sales process profitable for individual salespeople.

Initiation Fees and Membership Stickiness

  • Initiation fees can increase the perceived value of a membership.
  • A high initiation fee relative to monthly fees can make memberships "stickier."
  • Stickiness refers to the likelihood of customers maintaining their memberships.

made the initiation fee. Now here's some of the benefits of the initiation fee when you have a big initiation fee, and the larger the discrepancy between the initiation fee and then the subsequent billings, the stickier the billings become.

This quote explains that a significant initiation fee, especially when it's much larger than the regular billing amount, can make the recurring payments more likely to be maintained by customers.

Example of a Successful Membership Model

  • A friend of the speaker owned a tanning salon chain.
  • A membership model of $100 down and $10 a month was the stickiest.
  • The normal rate was around $19 per month.
  • The salon had a large customer base of over 4000 members.

And so, for example, a friend of mine owned a chain of tanning salons, and he saw that the stickiest membership that he ever created was $100 down $10 a month.

This quote provides an example of a successful membership model where a high initiation fee paired with a low monthly rate resulted in high customer retention.

Benefits of Initiation Fees

  • Initiation fees have a high-profit margin.
  • They can be used to pay salespeople.
  • They allow for attractive discount offers on the first month.
  • They enable businesses to sign up customers for recurring memberships effectively.

Number one. Number two is that it also allows you to give really cool discount offers. So you could say 88% off your first month.

This quote highlights the benefits of initiation fees, such as the ability to offer significant discounts for the first month, which can entice customers to sign up for memberships.

Advertising Compliance and Offers

  • Compliance in advertising is essential.
  • Businesses must disclose fees clearly to customers.
  • Attractive offers can lead to successful conversions into recurring memberships.

Obviously, you always want to be a compliant advertiser, put the stuff on your thank you page, et cetera, disclose, et cetera.

The speaker emphasizes the importance of advertising compliance and transparency in disclosing fees, which is crucial for building trust and avoiding legal issues.

Discount Strategies and Member Acquisition

  • Offering a large discount on the first month can be a powerful acquisition strategy.
  • Even with a discount, the initiation fee ensures revenue from new members.
  • The strategy can lead to a quick transition into regular pricing for memberships.

But 88% off seems really attractive, right? But when the person comes in the door, you can still have a one time fee and you're compliant.

This quote discusses how offering a substantial discount on the first month can be appealing to potential customers, while the initiation fee guarantees revenue and compliance with advertising standards.

Understanding Discount Strategies

  • Discusses the impact of presenting discounts in different ways.
  • Highlights how a seemingly large discount percentage may not reflect the actual monetary savings.
  • Emphasizes the psychological appeal of higher discount percentages to consumers.

"The 88% off, if you look at it from a pure number standpoint, would be you're making 124 instead of 200. So you're really only giving like 30% off if you were to factor those two pieces together rather than 88. But 88 is obviously a lot more attractive than just saying 30% off your first month."

This quote explains that an 88% discount is not as straightforward as it seems. When breaking down the numbers, the actual discount equates to roughly 30% off the original price. The speaker is highlighting the difference between the perceived value of the discount and the real value, noting that consumers find a higher percentage discount more appealing.

Podcast Promotion and Support

  • The speaker requests support from the audience to help spread the word about the podcast.
  • Emphasizes that the podcast does not run ads or sell products, and audience support is crucial.
  • Encourages listeners to leave a review to assist in promoting the podcast and potentially impacting others.

"Real quick, guys. You guys already know that I don't run any ads on this, and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers."

This quote is a plea for support from the listeners, highlighting that the podcast's mission is to assist entrepreneurs without relying on advertisements or product sales. The speaker emphasizes the importance of word-of-mouth promotion and reviews to reach and help more people.

The Concept of Onboarding Fees

  • Introduces the idea of charging an initial onboarding fee to cover the additional costs associated with new clients.
  • Justifies the onboarding fee by explaining the extra time and resources required at the start of a service.
  • Uses the fitness industry as an example where new clients need more guidance initially.

"And the thing is, you can make that one time fee whatever you want. And one of the ways that I justify that within the context of selling is that you can also call it an onboarding fee, but it's essentially saying you're going to cost our company more time to get you going than you will on every subsequent month."

The speaker is explaining the rationale behind charging an onboarding fee, which compensates for the additional effort required to integrate new clients into a service. This fee is framed as a necessary charge to offset the higher costs at the beginning of the client's journey, which is particularly relevant in service industries like fitness where initial education and setup are needed.

Initial Costs and Savings Explanation

  • Explaining higher initial fees for services due to one-on-one time required to bring customers up to speed.
  • Once the customer is trained, ongoing costs are reduced, and these savings are passed on to the customer.
  • This pricing strategy can be positioned as a benefit, as it avoids continuous high fees.

"In the beginning, you're not going to know how to do anything. And so it actually going to take a lot of one on one time with us to help you get up to speed. Once you're up to speed, you cost us significantly less to continue to maintain."

The quote explains the rationale behind charging higher initial fees for services that require personal training or onboarding. The initial investment of time by the service provider is significant, but it decreases over time, leading to lower ongoing costs for the customer.

Business Costs and Customer Service

  • Businesses incur costs when dedicating time and resources to new customers.
  • These costs can detract from servicing existing customers, affecting overall business efficiency.

"All of those are costs that you incur as a business that is taking away from the servicing of other customers."

The quote highlights the trade-off businesses face when allocating resources to new customers, which can impact the quality of service provided to existing customers.

Discounted Offers and Acquisition Strategies

  • Discounted offers can be used as a strategy for customer acquisition.
  • Explains that initial fees can be a way to recoup the costs of customer acquisition and pay commissions.

"Those fees are 100% pure margin, and it's so that they can recoup the cost of acquisition and pay commissions to the person who sold you."

This quote illustrates how businesses use fees not only to cover initial service costs but also to ensure profitability by covering acquisition expenses and paying sales commissions.

Upcoming Ebook Release

  • Anticipation for the release of a new ebook.
  • The ebook will include infographics on frameworks for acquisition.
  • It will discuss five ways to use discounted offers and eight ways to monetize free services or products.

"I have four other ones, and then I have eight different ways that you can monetize free. So very excited to release that it's going to be the new ebook infographics on frameworks for acquisition."

The quote announces an upcoming ebook that will provide strategies for customer acquisition and monetization, which the speaker is excited about.

Engagement and Feedback Invitation

  • The speaker encourages listeners to engage with the content through comments or likes.
  • There is also a lighthearted request to refrain from sharing negative feedback.

"If it is, drop a comment or a like. And if it wasn't, then just don't tell me."

The quote is an invitation for audience engagement, asking for positive interactions and humorously suggesting that any negative feedback be kept to oneself.

Closing Remarks

  • The speaker concludes the conversation with well-wishes.
  • Indicates an intention to reconnect with the audience soon.

"Anyways, have an amazing day. Catch you guys soon. Bye."

This quote serves as a friendly and casual sign-off, wishing the audience well and signaling the end of the current interaction while looking forward to future engagements.

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