winter 2009 mcmahon club trends - cybex international · winter 2009 ® club trends™ me m b e r s...

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R E T E N T I O NQUARTER 1WINTER 2009

®

Club Trends™

MeMbership retention: It All StArtS HereWelcome to the first edition of McMahon Club Trends™. Our goal is to provide you with valuable information about what is happening in the club world throughout the year. McMahon Club Trends™ is published quarterly on a subscription or individual basis.

We have called upon our Ph.D. survey research professors, Jim Fisher and Paul Boughton, to provide in-depth analysis on the major issues affecting the club industry. Both Jim and Paul are working with the McMahon Group survey database that has been continually updated and extended over the past 20 years. Bill McMahon, Sr. and Frank Vain are providing analysis and input on each subject matter.

The inaugural edition of McMahon Club Trends™ focuses on the big issue of membership retention in a challenging economy. Future editions in 2009 will focus on membership recruitment, club

communications, the new role of golf in private clubs, etc.

Each edition of McMahon Club Trends™ costs $295. However, you can save money and order an annual subscription (four editions) for $950. This first edition is provided to you at no cost.

We hope you take advantage of the wealth of information we will provide in this publication. This is the type of information that club leaders must have to assure successful clubs.

For more information on McMahon Club Trends™, please visit our website at www.mcmahongroup.com.

We hope you find this information useful, and as always, we invite your input.

Very truly yours,

McMahon Group, Inc.

IN THIS EDITION

ARTICLE PAGESShifting Ground............................................2-5

Beyond the Crisis: Building Your Club’s Value .......................6-15 Trends: Mega & Otherwise .......................... 7 What’s Next for the Boomers? ................... 11

Holding the Fort: Retaining Club Members .......................16-22 Family Activities: A Case in Point .............18 Best Practices: Dining Innovations ............20

Developing a Plan for Success ......................23

McMahon Club Trends™ Team ...................24

McMahon$295

Comprehensive Research on Strategic Issues Facing Private Clubs

© Copyright 2009McMahon Group, Inc.All Rights Reserved

M E M B E R S H I P

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The de-leveraging of the U.S. economy that began early in 2008 will have a profound long-term effect on the American consumer and, by extension, the private

clubs that serve them. As we have seen after signal events like the 1980’s tax law changes or the recession that followed the stock market crash and terrorist attacks of 2001, these cyclical dislocations cause substantive lifestyle modifications that ripple through society, ultimately establishing a “new normal” environment.

For example, the 17% decline in total U.S. annual golf rounds from 2001 to 2002, as recorded by the National Golf Foundation, is not surprising given the loss of household net worth and the somber attitude of the period. What is startling, however, is that golf rounds never did return to 2001 levels throughout the strong economy of 2003 to 2007, just as most city clubs never recovered from the massive fallout in

their ranks that occurred when corporations stopped funding memberships when they were no longer a deductible business expense.

In each case, these events triggered a change in behavior that had lasting impact. Clearly, private clubs are social institutions that must be responsive to the ongoing shifts in attitudes and lifestyle preferences in order to stay relevant and viable, or pay the price.

The new reality of 2009 and beyond demands that club leaders have a crystalline understanding of what makes their club attractive to prospects and a laser-like focus on the key drivers of member satisfaction. Traditional pillars of membership like bankers, financial advisors and automobile dealers all face hard sledding going forward. It could be a long time before these industries are once again major contributors to the membership and revenue picture at clubs. Therefore, in

by Frank Vain & Bill McMahon, Sr.

Shifting Ground

© Copyright 2009, McMahon Group, Inc.Printed in the U.S.A.All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher.

While the publisher believes the information was accurate at the time of publication, changes may have occurred since then. The publisher has taken all reasonable steps to verify the accuracy of the content in this publication, but McMahon Group shall not be responsible for any errors or omissions.

For more information about our other publications, newsletters, or consulting services, please contact us.

McMahon Group, Inc., 670 Mason Ridge Center Drive | Suite 220 | St. Louis, Missouri 63141 | www.mcmahongroup.com Tel: 314.744.5040 | Toll Free: 1.800.365.2498 | Fax: 314.744.5046 | E-mail: [email protected]

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a world where membership is funded from personal after-tax dollars, the ability to retain an ample supply of members will come from delivering extremely high levels of satisfaction and value. This can only be achieved when a club understands the marketplace in which it operates and the attitudes of its members.

Why People Join Clubs

Much has been made of the golf industry’s challenges over the past decade as a plethora of new high-end courses flooded the market in anticipation of the growth in rounds that never came. In the case of most private country clubs, blaming the decline in membership to changing golf course supply is an over simplification of the membership dynamic. At most clubs, golf is something that the members enjoy, but in and of itself it is not a justification for membership. The people that choose to be members of a private country club are seeking associational benefits, what economists call Social Capital first, and recreation second. This is why time and again survey results show that the food and beverage operation and attending social events are the most important activities at a club. As you will see in the data that follows in the body of this report, the importance of dining has steadily increased among members since 2001, but the satisfaction gap has not narrowed. There remains much work to do on this front.

In order to have the greatest chance of sustained success in the ever-changing world, clubs must adopt and adhere to policies that proactively change the culture of the club from the male and golfer dominated profile of the past to that of today’s more diverse gender, racial and ethnic makeup of the target market. Country clubs must continue to provide an excellent golf experience, but they must also offer a variety of activities and services in addition to golf. This is a strategic response to the greater emphasis members and prospective members now place on these once less important areas.

If clubs are going to remain a vital part of our society in the future, they must offer their members a quality experience in a number of activity areas, have creative programs that facilitate the growth and development of social capital and adopt use policies that reflect the modern society that they serve. Facilities and programs that are driving growth in the country club segment include informally-styled indoor and outdoor dining areas, innovative social events that are fun for all ages, fitness facilities and wellness programs, family-friendly resort-style swim complexes, actively-programmed tennis operations, and a variety of family and children’s activities.

Shifting Ground

M E M B E R S H I P

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Knowledge Is Power

The essential function of club leadership is to identify the type of club that is needed to satisfy the desires of their target membership and to employ a management team that has an unrelenting pursuit of excellence in execution. As such, it is necessary to complete external and internal scans so there is a factual understanding of the world in which the club exists. In less complex times, it was acceptable for club Boards to focus on maintaining the status quo. It is now the case that if the club is not steadily evolving in response to market and member needs, it risks falling behind the demand curve, perhaps to the point of total demise.

The first order of business for club leaders is to understand everything they can about their primary market area, generally defined as a ten-mile distance or twenty minute travel time radius from their front door. As shown in the body of this report, nearly three-quarters of a club’s membership is going to come from this area. A failure to offer a membership experience that is in agreement with the primary market area – either to the high or low sides – will lead to a disconnect that undermines the club’s ability to sustain an appropriately-sized membership. This is so important that some clubs would be well served to consider ways to encourage development on any excess land they may own. It would be especially valuable if this could be the sort of housing that would appeal to downsizing Baby Boomers.

Accurate knowledge about your market will help clarify the type of programs and services that will be most successful at your club. For example, there is a direct link between the

amount of travel time required to participate in any activity and the demand for that activity. If a member is going to play golf for four hours, they will give little thought to the amount of time it takes to drive to the club. If a member is going to have an à la carte meal or workout for an hour, however, travel time becomes paramount. You will want to develop your programs to fit the geography of your club. Is your club a drop-in neighborhood center or are members traveling longer distances?

Modern technology makes it easier than ever to collect data on the composition of your market area by total population, family status, income level, and other pertinent factors. Smart leaders will have this data at their disposal and they will use it in their decision making.

Membership Satisfaction

A happy, very satisfied, loyal membership is the primary goal of all private clubs. And since loyalty increases almost exponentially as members move up the satisfaction ladder

Shifting Ground

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from “satisfied” to “very satisfied,” it is essential to identify the barriers or missed opportunities that dampen satisfaction. Understand the differences here. “Satisfied” members are generally in agreement that the club is on the right track and the quality of the experience is pleasing to them. They are also telling you that there are some issues – many times quite small – that prevent them from having an over-the-top experience.

Since the most highly satisfied members will spawn all sorts of derivative benefits (think increased usage, membership referrals and financial support), you want to drive more members to this peak level. As the matrix in this report shows, a clear understanding of the markets and members allows a club to create the optimal experience, which in turn leads to loyalty. In 2009 and beyond, loyalty will be crucial for all clubs.

In order to achieve and maintain this position where 1 in 3 or more members is “very satisfied,” it is imperative that clubs adopt a member satisfaction measurement program that can link action strategies to improved performance. Focus groups, written and on-line surveys, and quality assurance programs are just some of the modern feedback mechanisms effective club managers will use to identify opportunities for improvement.

Putting together a successful member satisfaction program is a sequential process in which the club obtains member input to identify current satisfaction, prepares action plans in response to the feedback and implements changes. The process then comes full circle to the point where satisfaction is again tested and the objective comparison with the initial findings indicates the level of progress that has been achieved. This assures that the adopted changes were truly corrective measures and identifies any shift in priorities or needs.

Despite the extreme nature of the challenges that exist, most private clubs rely only on subjective opinions to gauge the quality of their club’s operation. The lack of quantifiable data on the members’ satisfaction with the golf course or the dining program is a huge knowledge gap that exposes the club to loss of revenue or, worse, membership defection. Since clubs look to be engaged in a long-term battle for market share, every defection is a significant blow. Satisfaction is the direct result of specific experiences that members have with a product or service.

An objective measurement process will assure that the leadership has an accurate assessment of the club’s performance in all critical areas, assuring the best possible membership experience. Success will depend on taking a long-term view rather than a short-range perspective.

Shifting Ground

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Introduction

Private clubs are feeling the pressure. Part of that pressure is brought to bear by the current economic situation—entire business sectors are under siege,

many individuals and families are apprehensive as their levels of income seem increasingly uncertain, and nominal wealth is gyrating along with our highly volatile markets. In this environment, it is hard to chart a clear or confident path forward. As the old saying goes, “Prediction is difficult, especially of the future.”

At the same time, the current and pervasive sense of crisis should not prevent us from seeing new opportunities. We have heard it said that the Chinese ideogram for “crisis” is itself composed of two symbols: one for “danger” and the other “opportunity.” Whether this linguistic equation [crisis = danger + opportunity] is correct or not, there is more than a little truth to the insight that crisis necessitates a clear-eyed appraisal that is itself capable of engaging the challenge of the moment and turning it to one’s long-term advantage.

New Directions

A number of dramatic and far-reaching trends are re-shaping the future of private clubs. Simply put, private clubs are all about social ties. Country club membership, in particular, has allowed participants to maintain and expand social networks that are important across all kinds of activities and interests, whether family-oriented, professional or recreational. Indeed, for a broad range of affluent individuals the country club has provided both backdrop and anchor for the lifestyle choices that define the values and aspirations that engage them as members of the larger society.

But this society is changing. And clubs must change accordingly.

On the one hand, clubs are, by their very nature, collections of people who share similar interests and backgrounds. Such bonds of similarity can preserve important values and lubricate the gears of social interaction. But on the other hand, clubs must avoid insularity and the market myopia that will develop if their perspectives are not broadened.

Clubs must squarely face the challenge of renewing themselves. This means adapting to the requirements of

current and potential members by delivering new and improved services in a premium environment defined by first-class amenities and facilities.

If you don’t, others will; in fact, we see their efforts all around us. Competition is intense for the kind of experiences being demanded by these shifting lifestyle segments. Many different organizations and businesses are trying to peel away customers for food, for golf, for fitness and for other recreational and leisure choices one transaction at a time.

Beyond the Crisis: Building Your Club’s Valueby Jim Fisher, Ph.D. and Paul Boughton, Ph.D.

“Clubs must squarely face the challenge of renewing

themselves.”

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Trends: Mega and Otherwise

When it comes to demographic and lifestyle dynamics, the club’s leadership must develop both the sensibilities and analytics that clarify the club’s mission and purpose. Here is where McMahon advises decision-makers to look most closely when charting their club’s future:

Diversity: » Old categories constructed around race, ethnicity, religion and sexual preference are loosening their grip on modern sensibilities, reflecting the demographic diversity that will only increase in the years to come. Requirements of existing members will reflect this increased diversity as the conduct of business embraces new forms, new leisure pursuits assert themselves alongside the traditional ones, and lifestyle choices express themselves in dress, entertainment, and dining. New members must be sought as the “usual suspects” dwindle in their relative number.

Single Living: » Over 40% of adult Americans are single and well over half of these are women. A comparable percentage of households are headed by unmarried men or women—over 50 million households in total. And then a very significant number of unmarried and single Americans are 65 and over, about 15 million. How many social activities offered by country clubs unconsciously exclude those members that fall outside the traditional model of a husband-wife couple?

Age Segments: » McMahon has maintained its database of private clubs for nearly 20 years. For most of this time, the age distribution has been relatively stable. We applied a useful rule-of-thumb that the membership “pie” was divided into four more or less equal portions. Now, that distribution has skewed toward the older cohorts. What does your membership look like alongside the larger generational profile of the U.S.?

Living Long/Living Well: » As the Boomers continue to age, the number of older Americans will dramatically swell. The over-85 segment will continue to be one of the fastest growing segments of our population. As for the Boomers, they continue to lead active lifestyles and can be expected to adapt the realities of aging in new and interesting ways. Of course, significant health problems can plague large segments of the population: obesity, diabetes and heart disease chief among them. Increasingly, public policy, business organizations and non-profit programs are seeking to address these health challenges. Diet and exercise are likely to increase in importance in the years to come. Country clubs have, over the past decade, worked to bring their own programs and services into the vanguard of 21st century health and fitness trends, but much remains to be done.

Locating Your Club’s Success

The progressive club manager and Board member should be acquainted with the important demographic changes that are re-shaping our society and, by extension, the marketplace. [See above: “Trends: Mega and Otherwise”] Any history of the United States would not be complete without recognizing our nation’s penchant for movement. Americans have embarked on massive migrations, searching for better opportunities, richer experiences and new places.

So it is now, as we “abandon traditional growth centers, creating the greatest population re-distribution since the Dust Bowl…. Florida retirees are heading north, African Americans are moving to the suburbs in record numbers, and empty-nester suburbanites are moving back to the city.” i

As clubs assess where potential lies and attempt to zero-in on new opportunities, they should recall that time-tested principle of so many retail and real estate ventures: location, location, location.

Few considerations are more decisive for a club’s overall health than the affluence of the neighborhoods in its orbit.

Beyond the Crisis: Building Your Club’s Value

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McMahon’s experience confirms that the major factor contributing to the health and utilization of most country clubs is the concentration of club members living within a 7-mile radius (see Chart 1). Another benchmark is that, in general, one private club is distributed across 25,000 households in an area (which corresponds to a total population of about 100,000). ii Ideally, 70% of club members should live within this defined served-market area. And, of course, the upshot of all this is simply that the affluence level of the population within this locale will strongly determine the economic health of the club.

So managers must stay closely attuned to how the shifting patterns of residential living are changing the profile of its members, both today and tomorrow. Managers and Boards must be clear about where future growth will come from:

How can our existing market be further penetrated and »expanded? How can new segments, say, those outside the club’s »geographical “sweet-spot” be attracted? What is the role of our activities and services as we »pursue our membership objectives?

The Facts on the Ground

If clubs look closely at their membership composition, what they are likely to see are smaller segments of users that make up important affinity groups, which essentially represent clubs within the club. Despite common membership in one club, their interests and usage patterns are likely to diverge. So, too, do their expectations and satisfaction.

Members are, by and large, satisfied with their clubs. They are invested in them financially and emotionally. But here is the key question: How many are really delighted with the club? How many value that membership to the point that they are steadfastly loyal and promote the benefits of membership to their friends and associates? McMahon has closely monitored satisfaction levels of club members and also examined perceptions of value that members hold. The results may surprise you.


0%

10%

20%

30%

40%

50%

42%

27%

20%

11%

0 to 3 4 to 7 8 to 15 Over 15

Members’ Miles from Club to Home

Miles

% o

f R

es

po

nd

en

ts

Chart 1Source: McMahon Group Survey Database

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We ask memberships to indicate their satisfaction on a five-point scale: “5” is very satisfied and “4” satisfied (“very dissatisfied” anchors the scale at the other end with a “1”). If we take the 5’s and 4’s together—the so-called “top two boxes”—we find that well over 80% of club members are satisfied with their membership. But only less than half of this number (or about 1 in 3 of all club members) are truly satisfied with their club. McMahon has discovered (and other research findings corroborate) that managers must manage to that top category—nothing less than 5’s will do in order to truly cement a member’s connection to the club, to expand the club’s profile in the larger community and to attract new members.

If we peel back the numbers further, we find that satisfaction levels vary significantly by age. And herein lies a potentially serious problem that may grow only worse with the passing of time. Chart 2 shows that younger members are less likely to be satisfied with membership and correspondingly (see also Chart 3) are less likely to attach value to that membership.


Age of Members

0%

5%

10%

15%

20%

25%

30%

35%

40%

25%

33% 34% 35%

Under 46 46 to 55 56 to 65 Over 65

Overall Club Satisfaction

% o

f R

es

po

nd

en

ts*

Chart 2

* % of Respondents who are “Very Satisfied.”

Source: McMahon Group Survey Database

0%

5%

10%

15%

20%

25%

12%

17%19%

20%

Under 46 46 to 55 56 to 65 Over 65

Good Value for Cost of Membership

Age of Members

% o

f R

es

po

nd

en

ts*

Chart 3

* % of survey respondents that “strongly agree” they receive good value from club membership.


M E M B E R S H I P

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It would be a misguided conclusion to link these issues of satisfaction/dissatisfaction solely with generational differences. While golf and dining remain signature offerings of the best country clubs, the importance of other activities has steadily advanced here in the 21st century (see Chart 4).


1 2 3 4 5

Children’s Activities

Fitness

Family Activities

Social

Golf

Formal Dining

Dining

3.012.86

3.623.57

3.313.11

3.603.35

4.344.34

3.994.22

4.514.27

2008

2001

Importance of Club Activities


Importance Scale(5 = Very Important to 1 = Very Unimportant)

Chart 4

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At the same time as a club works to build its appeal among younger members, it must continue to cultivate the highest levels of satisfaction and loyalty among that group that will increasingly define its core membership, namely, the Boomers. This great bulge in the U.S. population distribution represents nearly 80 million people, and its evolving pattern of living and spending has re-shaped a broad spectrum of institutional and economic realities. These Boomers are likely to continue their redefinition of the societal landscape with a special focus on how aging will intersect with work, leisure and the pursuit of happiness and meaning. As the first among the Boomers are now spilling into their 60’s, we assume that many will be playing more golf, but what else? [See below: “What’s Next for the Boomers?”]

What’s Next for the Boomers?

We know that the Baby Boomers are an economic juggernaut that will only grow in significance over the next decade. Experts forecast that Boomer expenditures will account for fully 40% of all U.S. spending by 2015 (Source: McKinsey Quarterly). Part of this is attributable to sheer size (45 million households), but much of it has to do with affluence—although this is unevenly spread among the Boomers. But nearly 25% of Boomers (over 10 million households) represent the core market for country clubs: those with incomes significantly greater than $100,000 and a net worth in excess of a million dollars.

The Boomer story, however, is not all about money. No other generation has quite had this one’s flair for innovation, creativity and optimism. When novelist F. Scott Fitzgerald offered that “there are no second acts in American lives,” he could not have imagined the Boomer phenomenon. As leisure time expands and nests start to empty, the Boomers will be open to all sorts of new experiences and lifestyle changes. Here are some important dimensions of the Boomer story that are likely to intersect rather directly with the fortunes of private clubs:

More single living. » In part a legacy of higher divorce rates, we expect that almost half of Boomer households are likely to be headed by single persons. Greater need for social connectedness. » With greater numbers of singles and with traditional sources of community, such as neighborhood and religion, waning in influence, many Boomers are likely to be searching for new sources of community—and this can mean a new openness to the appeal of a country or city club.Increased cultivation of interests. » Individual pursuits like cooking, cinema, and, yes, golf will assert themselves as important organizing principles for not only leisure, but bigger aspirations linked to personal development.

This is a big opportunity for clubs; but it is also an opportunity for other institutions, organizations and businesses. Clubs must recognize that the prospect of belonging to an engaged and active community is a value-proposition with real resonance. Young members are a key to the future of private clubs, but real opportunity exists now for those targeting this 45- to 65-year-old age group.


M E M B E R S H I P

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Gender Issues

Gender distinctions are another important factor impacting priorities and usage patterns among club members. For example, men and women as membership segments are reverse images of one another when it comes to the relative importance assigned to golf and dining. Over three-quarters of all men say golf is very important, while only about half of the women assign such high importance to golf. Conversely, about 70% of women say that dining is very important, while significantly fewer men (57%) rate dining this high.

When we combine gender with age in our identification of key segments that determine the health of a club, we find a powerful driver of club strength. Increased participation of women in the workplace and their ascendance, in many


instances, to key leadership positions means growing influence and even decisive control over important lifestyle choices, such as club membership, that frequently entail a significant allocation of discretionary income. Couple all this with the growing incidence of single-person or single-headed households that are themselves female-identified, and you find a substantially different calculus emerging as it relates to valuing the benefits of membership. For starters, a premium - even exceptional - golf experience will be less likely to attract and hold members than it once did. Young women, typically busy and balancing a variety of responsibilities, will assign value to a club membership that offers optimal engagement for a time-constrained lifestyle. This likely means less golf, but more emphasis on casual dining, fitness and, in many cases, family programs.

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Putting the Pieces Together

One size no longer fits all…if it ever did. Clubs must claim a clear identity without losing their appeal to the different segments that define their membership. The objective is not to forge a grand compromise, but to assemble the right offering that can then be delivered in a targeted way, tailored to meet specific member requirements. It is a tall order for club leadership to fill: strategic clarity coupled with great execution. A sound strategic plan—subject to more-or-less continuous re-examination and updating—provides the horsepower, but management must keep things on track with a steady hand at the wheel.

Going forward, managers will need to become adept at extending what heretofore has been a value proposition largely organized around golf and dining. McMahon’s performance grid (see Chart 5) has charted how the club’s “product portfolio” offers several avenues along which to enhance their members’ total club experience. The emerging diversity of club membership doubles the challenge: opportunities in services beyond golf and dining can no longer be missed and, at the same time, the value boundary is being pressed outward as member expectations increase and competition intensifies.

3.6

4.3

3.6

3.4

3.7 3.7

3.6

3

4

5

Satis

fact

ion

3.7

Social

Golf

DiningFamilyTennis

Children

Swimming

Fitness

3 4 5

Value Boundary

SIGNIFICANT ENHANCERS QUALITY DRIVERS

PRIORITY IMPROVEMENTSMISSED OPPORTUNITIES

Satisfaction vs. Importance Performance Grid

Importance

Satisfaction vs. ImportanceImportance Satisfaction

Dining 4.5 3.7Golf 4.3 4.3Fitness 3.6 3.6Club Social Functions 3.4 3.6Family Activities 3.3 3.7Swimming 3.1 3.7Children’s Activities 3.0 3.4Tennis 2.8 3.6

Chart 5



Importance Scale5 = Very Important4 = Important3 = Neutral2 = Unimportant1 = Very Unimportant

Satisfaction Scale5 = Very Satisfied4 = Satisfied3 = Neutral2 = Dissatisfied1 = Very Dissatisfied

ExcellenceThreshold =

4.0

M E M B E R S H I P

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Take-Aways: Segmentation, Positioning and Differentiation

Here are the foundational elements you need to build your club’s value:

Renew and adjust your market focus. A club’s form and function should start with the membership’s needs and requirements. Successful clubs are clear about who their members are…and are not. Some focus tightly on location, others on activities, and others on professional or social affiliations. This article has offered a closer look at demographic and lifestyle segments. At least two important findings emerge:

Building demand among the younger generations (the up & comers) will be key to a healthy “future”;1. Boomers remain critical to “current” success.2.

Establish your value proposition. Successful organizations know what they are about and have distilled their essential offering to its simplest, most powerful and most accessible form. What does Disney deliver? Fun family entertainment. Nike? Authentic athletic performance. Clubs must similarly stand apart in a way that is meaningful and attractive to their members and the larger community. The precise recipe may differ. Some continue to hold their position at the high end with an enduring appeal to a social or professional elite; some continue to offer golf that is truly exceptional and not easily matched. But as full amenity, family-oriented clubs become the norm, careful planning and attention will be required as programs are enhanced and facilities improved for optimal impact.


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Measure what you manage. Careful assessment of needs and measurement of satisfaction is the glue that holds together the virtuous cycle of planning, execution and evaluation. The best managers are frequently the best listeners; and so, managers should have at their disposal a variety of listening devices—both formal and informal, and both qualitative (like focus groups) and quantitative (like surveys). Club managers are similar to other service providers and the best among them will closely monitor how those services are delivered and whether service levels are consistently high and at a level that meets or exceeds members’ expectations. Marriott Hotels surveys its customers continuously and McMahon sees more of its own clients relying on quality assurance programs to gauge how they are doing on a daily basis.

No doubt, the pressure is on clubs to maintain their reputation as delivering the very best across a broad range of lifestyle activities. The challenge is to squarely face the shifting needs and expectations of its members, preserving the best of its traditions while creating new standards of excellence.

“2008 Future Trends & Issues: A Private Club Perspective,” National Club Association, p. 5.i. Source: The National Golf Foundation.ii.


“McMahon sees more of its own clients relying on quality assurance programs to gauge how they are doing on a daily basis.”

M E M B E R S H I P

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Holding the Fort: Retaining Club Members

Introduction

It’s official. The economy is in a recession and many private clubs are feeling the impact. This impact is reflected by a decline in membership and a decrease in member usage

as reflected, for example, in a decrease in dining covers. In addition to the effects of a difficult economy, clubs are faced with increased competition, changing population demographics, and cultural and lifestyle changes that have been accelerating over the past decade.

In this climate of change, most private clubs are losing members. More than 50% of clubs have fewer members today than in 2001. While most attrition is due to death, illness or re-location, an increasing concern are those who drop out because of financial issues and a failure by the club to fully meet the needs of various member segments (see Chart 1). Indeed, a major reason given by members when resigning from their club is “non-use.” Thus, one of the major challenges ahead for private clubs is better membership retention by achieving more membership use.

by Jim Fisher, Ph.D. and Paul Boughton, Ph.D.

0%

2%

4%

6%

8%

10%

5.6%

South

North C

entral

Northea

stWest

250 & Belo

w

251 to

500

Over 50

0

$5,000

& Under

$5,001

to $1

0,000

$10,00

1 to $

20,000

$20,00

1 to $

50,000

Over $5

0,000

9%

4.5%

6.3%

8.3%

6.5%

4.8%

8.5%

7.3%

8.2%

5.9%

3.7%

Average Annual Membership Attrition

Region Number of Full Regular

Members Initiation Fee

Av

era

ge

An

nu

al

Att

riti

on

Pe

rce

nta

ge

Chart 1

Source: McMahon Group General Manager ’s Survey Database (prior to summer 2008)

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Building LoyaltyThe concept is simple, but not always easy to execute. Loyalty is a function of knowing what members want and need, and delivering services that meet those wants and needs with a very high level of satisfaction. Merely being satisfied is not sufficient. What is required for true loyalty is moving members into the “very satisfied” category. McMahon’s data shows that only about one in three club members is “very satisfied.” The challenge to retaining members is to move this percentage to a much higher level—doubling it, in many cases, as the best clubs usually achieve.

We will take a look at two areas that we regard as critical to improving club member loyalty: family orientation and dining. These are areas that are increasingly important to club members and are essential to creating high levels of satisfaction and maintaining current levels of membership.

Family OrientationMany recognize that clubs need to become more family-oriented, and we see that a focus on family and children’s

activities is now an important emphasis for club programming. But what does the data say about how clubs actually measure up in creating this family orientation?

Among the clubs surveyed by McMahon in 2008, we find that not quite half of all members feel that the club fulfills its primary purpose as a “family-oriented, full-service club with activities for children.” This is only a slight increase over levels measured in 2001. There has, however, been a growing gap between what members think their club’s purpose is and what they believe it should be. Overall, 57% of members believe the club “should be” a family-oriented, full-service club, compared to 48% that think it “currently is.”

But what is remarkable is the difference in that gap perception across age ranges. Chart 2 shows that for the under-46 age group there is a stark difference on this issue between what currently is and what should be the primary purpose of the club. This gap declines with age, and for the over-65 age group there is virtually no gap at all. A similar pattern emerges when different age groups are asked whether the Club’s family orientation is “fine as is,” or should be more or less family-oriented.


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Under 46 46 to 55 56 to 65 Over 65

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Primary Purpose of Club Is as a Family-Oriented, Full Service Club

Age of Members

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Chart 2


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The conclusion is that the gap between desire and action is getting bigger, not smaller. Reality must catch up with aspirations. While managers are acknowledging the need for increasing and improving upon family activities, clubs have a lot of work to do. This will continue to be a critical issue. Closing the perception gap between “what is” and “what should be” remains essential to long-term member retention. See the sidebar on the left for some ideas on what top clubs are doing with family activities.

Dining Is Becoming More Important

Dining is a signature offering at most clubs, and has become increasingly important to club members. Overall, 63% of the 2008 survey respondents say dining is “very important” compared to 50% in 2001. This percentage is relatively consistent across all age groups. However, there is a significant difference in the percent of women rating dining as “very important,” (70%) vs. men (57%). Dining is also another area of the club where there are large gaps between expectations and perceptions. While assigning great importance to dining services, only 24% of members are “very satisfied” with their experience.

Further, there is increased competition for the dining dollar and shifting dining preferences. While the formal dining room still has a place at some clubs, it is not the focal point it once was. Instead, members of all ages are demanding more casual and informal dining settings, with outdoor dining becoming increasingly popular, particularly among younger members.

Family Activities: A Case in Point

Among the 2008 winners of the Excellence in Club Management™ Award was Chuck Scupham of the Skokie Country Club. During his tenure as General Manager, Chuck has strengthened the Club’s appeal to families through a mastery of what we will call the four P’s of family orientation: Personnel, Planning, Programming and Persistence.

One of Chuck’s first actions as the new Club Manager in 2003 was to hire a pool director. Since then, the Skokie Swim Team has gone on to win five consecutive country club championships. There are currently 155 members on the swim team; pool usage has skyrocketed; and, not incidentally, pool snack bar sales have climbed dramatically.

In 2006, a comprehensive club survey identified junior programs, particularly golf, as an area for improvement. This in turn led to the management team planning a comprehensive junior sports initiative. A key element was an ambitious program, with two four-week sessions; each day included instruction in tennis, golf and swimming and then concluded with lunch. The program was expanded in 2007 and continues to run at nearly full capacity.


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Overall dinner covers at country clubs have declined from a high of over 20,000 per club in 2002 to 13,600 in 2007.i In general, we find that 40% of club members will choose to dine at the club in about one out of ten of their “dining out” occasions. When we look at those who eat out for dinner even more frequently, say, over three times a week, the club’s market share declines even further (see Chart 3).

Decline is not inevitable. Top clubs are finding ways to increase patronage and revenues. Here are a few creative ideas from recent winners of the 2008 Excellence in Club Management™ Awards.

At North Hills Club in Raleigh, NC, revenue in the grill room has tripled in the past three years. The child-friendly atmosphere is communicated from the get-go as the kids menu is attached to an Etch A Sketch® drawing toy. The Club also provides a family-themed night with child care provided. Adults get to dine as a family and then enjoy social time with friends while the kids are supervised.

At the Detroit Athletic Club in Detroit, MI, benchmarking trips to selected restaurants in New York and Toronto helped identify the latest in service and food trends. A secret shopper program was instituted to measure performance and identify areas of weakness, and an innovative use of the parking lot across from the Detroit Tigers’ stadium was developed as a party and tail-gating dining venue during game time.

At John’s Island Club in Vero Beach, FL, food and beverage has shown a steady increase, growing 14% in the past three years. They have been able to maintain market share in the formal dining room with enticing daily menus, organically grown local produce and the freshest seafood available. Further, to draw members to the dining room they have created a series of events prior to dining hours, such as special wine tastings, speaker presentations, book reviews, and live entertainment.


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Members’ Club Dining Loyalty

% Dining Out Occasions at Club

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At Skokie Country Club in Glencoe, IL, there has been a focus on improving the casual and outdoor dining venues. For example, the club offers two large terraces with an elevated view of the golf course: one with a full menu option and the other with a more casual bar menu and atmosphere. The pool snack bar at Skokie now has a small, well-designed full-service kitchen with an air-conditioned area providing comfortable dining on even the hottest summer days. During the 90O+ days between Memorial Day and Labor Day, food and beverage revenues fully reflect the emphasis and investment that the Club has placed on this oft-neglected dining option.

Doing More

Clubs must constantly compete with local restaurants on the basis of food quality, service, and atmosphere. Building loyalty is the key to keeping members coming back. The drivers of loyalty require clubs to thoroughly understand what members want and then exceed those expectations. This cements the bond of loyalty.

Best Practices: Dining Innovations

New Culinary Trends: Stay abreast of the current food fashions, but don’t miss what stands behind some of the hottest food fads. Here’s what we see as enduring trends—expectations that will continue to influence the diner’s choice for some time:

Food perceived as having healthful benefits; »Fresh, locally produced food; »Ethnic foods that offer flavor not easily »duplicated at home;Premium foods and entire meals that can be »served up conveniently and quickly - even taken on the road or eaten away from the club;After enough years, chef change is necessary. »

Members Want More Menu Variety: A predictable or dated menu will not hold members. Menu diversity can be signaled in a variety of ways:

A smart design: » make it a fun and interesting read—update frequently;Real choice: » new entrees combined with old favorites; invite consideration without overwhelming the diner;Amplify and project: » off-menu items, web tie-ins, hand-written menu board all testify to a passion for food.

New Settings: As formal gives way to more casual styles, we find many clubs seizing new approaches to serving food. Among the innovations we see:

Monthly sunset cookouts; »Dinner at the 10 » th tee;Summer dinner dance under a tent; »“Best Tables in Town” (invite area celebrity »chefs to cook).


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So, the key question becomes: What would entice your members to dine at the club more frequently? Perhaps surprisingly, for clubs surveyed in 2008, the leading dining enticement is “more diversity on the menu.” This is followed by lower prices, improved food quality, and improved service (see Chart 4). Each club manager should be obtaining this information from their own dining room patrons. This should be an ongoing process, allowing management to gauge how various initiatives are gaining traction…or not.

Next, let’s consider how to go about creating this exceptional experience of “delight.” We are all familiar with brands or services for which customers have a fanatical devotion (e.g., Volkswagen Beetle, Starbucks, Nordstrom). When it comes to loyalty, there are at least three types of people; those for which:

Loyalty is driven by emotion: » People love the product/service. They will go out of their way to find it and will pay a premium price to have it.

Loyalty is deliberative: » The product/service purchase is frequently re-assessed on the basis of quality, price, service and other factors. Patronage goes to the provider who delivers the most value.

Loyalty is driven by habit: » The product/service is familiar and comfortable and simply easier to re-purchase or to maintain the status quo than it is to re-assess.


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What Would Entice You to Eat at the Club for Dinner More Often?

Chart 4Source: McMahon Group Survey Database

“Perhaps surprisingly, for clubs surveyed in 2008, the leading dining enticement is

‘more diversity on the menu.’”

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Making It Happen

All three of these loyalty types are likely to be found among different members of your club. The first two require close attention. The deliberative process, in particular, requires constant vigilance: a laser-like focus on product quality, service and atmosphere is essential. But emotional loyalty also requires attention and resources. Club employees should be trained in the nuances of what it takes to create “delighted members.” Here are some suggestions:

Engage your members: » High service expectations do not preclude vigorous participation by members. Most club members are discriminating consumers and this in turn requires giving them information and letting them make choices. It also includes listening, paying attention, and being responsive to what the member is looking for. A good opportunity to put this philosophy in place might be the wine list.Encourage complaining behavior: » Members who have a problem and are encouraged to complain are much more likely to remain members than those who don’t complain. A complaining member tells you there is a problem and gives you the opportunity to fix it. Eliminate defensiveness. Ask for feedback – “How can we improve our service?” – and then act on it and reward it.

Recover quickly: » No matter how good you are, sooner or later something will go wrong. How the customer responds to the problem will depend upon how the problem is resolved. A gracious, quick and complete response to problems that arise can go a long way toward developing a strong sense of loyalty.Deliver enchantment: » The new. The unexpected. People like surprises, but only if they are in a positive direction. It’s the little things that make people think, “Doggone it, these people really care!” For example, At North Hills Club, they created “Li’l Member” baby bibs with the club logo on them and sent one to each new parent upon the baby’s birth. It’s a great promotional item and creates an excellent bond between the Club and the member.

Changing ExpectationsManagement must be attuned as never before to changing member expectations. Successful clubs will take action to not just meet, but exceed those expectations. Private clubs must offer an experience that separates them from the many competitive options available to members. Clubs that adjust to changing conditions will flourish. Those who fail to adapt will fall further and further behind.

2008 Club Operations and Financial Data Survey Report, Club Managers Association of America.i.


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R E T E N T I O NDeveloping a Plan for Success

As can be seen in this report, private clubs face many challenges today. It is increasingly difficult to attract and retain members due to increased competition, changing lifestyles and a difficult economy. In order to succeed,

clubs must offer their members a quality experience in each of the activity areas, as well as a programmed environment that facilitates the growth and development of social capital. Very few members are ever going to be able to analyze their membership in a private club on strictly economic terms. They decide to remain members only when there is a combination of a vibrant social network and quality facilities and programs.

There are five areas where top private clubs – those that have at least 90% overall member satisfaction and 33% or more very satisfied members - tend to excel against their peers. These are:

Clarity of Mission and Purpose:1. The top clubs have a clear sense of their mission and purpose, and there is strong congruence among the membership that this is the type of club they want now and in the future.Quality Facilities:2. A club’s facilities are outward signs of the quality of the club and the vehicle through which they live their mission. The appearance and condition of the amenities at successful clubs have the look and feel that encourage use and engender a sense of pride among the membership. They allow the programs to flourish. Food and Beverage Excellence:3. This typically challenging area of club operations is a success story at top performing clubs. The vitality of a club depends on a vibrant social network and the food and beverage operation plays a critical role in drawing the membership to the club for personal use or member events. Excellent Staff and Service:4. People join private clubs for a special experience. This happens mainly because a well-trained and friendly professional staff offers a personalized level of service to the membership.Sound Leadership and Communication: 5. The leadership at top clubs knows the bounds between governance and management, and they keep the membership abreast of the operational and strategic issues at the club.

In today’s fluid environment, these five areas can serve as a signpost for club leaders. Putting in place processes and plans that identify the club’s strategic direction and developing action plans that lead to measurable improvement in each of these areas will improve the chances that your club will succeed in the future. As the case studies from winners of the McMahon Group/Club and Resort Business Excellence in Club Management™ Award included in this report show, excellence is only achievable when there is a real understanding of needs and an effective response on the part of the management team.

Private clubs are complex service businesses that are expected to consistently perform at very high levels. Effective Boards and managers recognize that it is imperative to spend the time and resources to have an intimate understanding of member desires and satisfaction. This provides the data necessary to plan and customize the services and programs, so they are on-target for individual members as well as various member groups; i.e., regular members, juniors, seniors, families, women, etc. In addition, private clubs must understand that if they want to perform at the highest levels they must compensate their staff accordingly, and they must fund the types of training programs that puts an innovative and responsive team at the members’ disposal. While fiscal responsibility is a must, price and efficiency are not the hallmarks of a service business, member satisfaction is.

Leadership is obviously a key to delivering the kind of excellence and satisfaction discriminating club members expect. Boards and management working together must be able to articulate clarity of purpose by developing a Strategic Plan that defines important club objectives and delineates an appropriate application of resources. Once the plan is established, it is important to communicate its priorities effectively to the membership and to implement the programs and policies that will deliver the targeted experience.

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670 Mason Ridge Center DriveSuite 220St. Louis, MO 631411.800.365.2498314.744.5040Fax: 314.744.5046www.mcmahongroup.com

Comprehensive Research on Strategic Issues Facing Private Clubs

Jim Fisher, Ph.D.Saint Louis UniversityMarketing Professor

Paul Boughton, Ph.D.Saint Louis UniversityAssociate Professor of Marketing, Emeritus

Bill McMahon, Sr., AIA, OAAConsultant & ArchitectChairmanMcMahon Group, Inc.

Frank VainConsultantPresidentMcMahon Group, Inc.

Bill McMahon, Jr.ConsultantVice PresidentMcMahon Group, Inc.

McMahon club Trends™ teaM

®

Jim Fisher is a Professor of Marketing at Saint Louis University, where he also serves as the Shaughnessy Fellow at the Emerson Ethics Center. He did his undergraduate work at the University of Illinois (A.B. ‘75), received his Masters from Yale University (M.Div. ‘78), and returned to the University of Illinois for his doctoral studies, receiving that degree in 1988.

His published research has focused on household spending patterns and social class influences on buyer behavior. He has consulted with a wide variety of businesses and organizations, primarily on projects involving the use of survey research to measure customer satisfaction. He has also worked in the areas of financial services, telecommunication, and the leisure and hospitality industry.

Paul Boughton possesses a BS Degree in Mathematics from Kansas State University and an MBA and Ph.D. in Business Administration from Saint Louis University.

Paul joined the faculty at the Business School in 1983, after nearly 20 years of corporate experience in marketing. His areas of expertise include market research, strategic market planning and organizational buying behavior.

Paul has been published in a number of journals and has presented a variety of papers at conferences around the United States. He a member of the Alpha Mu Alpha Marketing Honor Society.

Bill McMahon, Sr. has been Chairman of McMahon Group, Inc., since 1983. He has been instrumental in making McMahon Group the top private club consulting firm in the country. Bill is unique among club consultants in providing an integrated strategic planning and architectural approach to solving club problems. His personal involvement with his own clubs in St. Louis has allowed him to bring unparalleled experience to each client.

Frank Vain joined McMahon Group in 1988 and has more than twenty years of experience in the management and development of hospitality properties including private clubs, athletic clubs, resorts and restaurants. Through use of specialized services including membership surveys, strategic planning, operational analysis and facility long range planning, Frank assists clubs in developing individualized strategies for their unique situations.

Bill McMahon, Jr. has been with McMahon Group for over ten years participating in all aspects of the business from strategic planning to facility improvement programs. Bill is the Editor of McMahon Club Trends™.

2009

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