America Online and Body Express. At a glance, they mightn’t appear to have a lot in common.
America Online (AOL) is the Internet service provider that recently acquired Time Warner – the world’s biggest media company – in a $US165 billion deal.
And Body Express is a boutique gymnasium, in Sydney’s Bondi Beach.
Look behind the scenes, however, and you’ll discover that these businesses share one common feature – their promotional strategy!
In 1993, AOL embarked on a promotional strategy that was to see its subscriber base grow from 300,000 to the 24 million subscribers it has today.
This promotional strategy was deceptively simple. AOL gave away free computer disks containing start-up software and free time on the AOL service. (Our own OzEmail has subsequently emulated this strategy.)
Initially, these start-up disks were given to readers of computer magazines, but the response was so favourable that AOL began distributing them in all kinds of magazines, and even inserting them in cereal boxes and frozen steaks. Between 1993 and today, AOL ‘carpet-bombed’ the United States with a total of 250 million start-up disks!
Our own Justin Roff-Marsh had just returned from a US trip when he met with Jamie Hayes to discuss the promotion of his gym. As the two talked, it dawned on Justin that there were similarities between Body Express and AOL.
Gyms had, in recent years, become a commodity item – as had Internet service provision. Body Express was selling an 18-month membership, with fees debited monthly to members’ credit cards – as was AOL. And Body Express was in a position to provide valuable added services to lock-in members once they utilised them – as does AOL. (AOL uses services such as e-mail and it’s instant messaging and calendar services to provide member lock-in.)
Considering the similarities, it made sense for Justin to suggest that we borrow AOL’s promotional strategy.
A free 30-day membership
Fortunately for us, Jamie Hayes is a contrarian. He hadn’t survived 22 years and seven gym start-ups by playing by the rules! Accordingly, when Justin suggested that we might promote his gym by ‘carpet bombing’ Bondi Beach (the suburb, not the strip of sand) with offers of free 30-day memberships, he just managed to retain his composure.
We proposed a classic sampling campaign, with a twist. While we would give away free 30-day memberships, we would ask respondents to join as permanent members – and register for Body Express’s monthly billing program ($49 a month for a minimum of 18 months). However, we would not charge them for their first month’s membership – and we would allow them to opt-out of their membership at any stage during that month without penalty. (This is exactly how the AOL offer is structured.)
Jamie quickly got excited about this strategy. He could see that the offer of 30-days’ free membership was an irresistible one. But he could also see that the offer was structured in such a way that it would attract only those people who were prepared to at least seriously consider Body Express membership.
He also quickly realised that, if he could compel new members to visit regularly over their first month of membership, they would be highly likely to stay on as members. And, while those new members who didn’t make use of the gym were unlikely to stay on, they would incur minimal service costs during the 30-day trial period.
Gym visits: about as enjoyable as body piercing!
Gyms have been trying to make sampling campaigns work for years. In fact, prospective gym members expect to be given a handful of free visit vouchers prior to joining.
Unfortunately, as Jamie had already discovered, traditional sampling campaigns do a very poor job of signing-up those members who haven’t already made up their minds to join!
The reason why is deceptively simple. A sampling campaign will fail if the people who trial the product on offer have an unsatisfying experience.
The nature of the gym industry is that one visit (or even a handful of visits) to a gym seldom constitutes a ‘satisfying experience’ for anyone other than a committed exercise buff.
The fact is that a first-time gym goer will tend to notice results only after two or three weeks’ worth of gym visits. And, until these positive results become noticeable, gym visits are about as enjoyable as body piercing.
Gyms have developed two techniques for coping with the problem of ‘delayed gratification’. Some gyms ignore the less committed, and focus on serving only hard-core exercisers (body builders). Others provide distractions to ease the short-term pain (cafes, audio-visual entertainment, child-minding services and a calendar full of social events).
Each of these techniques has its own shortcomings. The body builder niche is a very small market. And, non-core services tend to distract gym goers from the activities that will ultimately yield results – which further delays the positive reinforcement that these health results provide.
Adding (relevant) value – and creating lock-in
Jamie had already developed his own theory on the best way to handle the problem of ‘delayed gratification’.
We suggested that our sampling campaign might be an acid test for this theory.
Jamie explained that, in the main, people join gyms to lose weight. (Not to pack-on muscle or expand their social networks.) "Exercise is an essential component of an ongoing weight-loss program, but it’s easier to get quick results from dietary modification."
"Unfortunately, most gyms don’t bother to give their members dietary advice. In fact, most gyms simply don’t recognise that they are in the weight-loss business."
Jamie’s suggestion was to provide new members with a personal coach during those all-important first 30 days of membership. This coach would have two areas of responsibility. The first would be to provide new members with dietary assistance. And the second would be to provide the training and the motivation required to ensure that new members commit to regular exercise regimes.
We agreed that the combination of the 30-day trial period and the personal coaching program would provide the lock-in that this sampling campaign needed.
We also acknowledged that personal coaching sessions and a free eating program would make Jamie’s offer all the more compelling!
Spreading the news
Justin suggested that we promote the Body Express sampling campaign with a simple three-fold, envelope-size brochure.
He insisted that this brochure should feature a punch-out membership card. He explains, "A free 30-day membership is one hell of an offer. I felt that a punch-out membership card would provide believability and a sense of immediacy."
And, to our delight, Jamie asked if we could emulate the bright, high-energy feel of the AOL campaign.
As well as a punch-out membership card and a lime and orange colour scheme, the resulting brochure featured a detailed description of Body Express’s five-step weight-loss program and clear explanation of the conditions of the offer. (We wanted to be sure that prospective members understood that they would need to provide their credit card details to qualify for their free month’s membership.)
In April 1999, 10,000 of these brochures were distributed into Bondi Beach letterboxes.
Jamie remembers, "We had eleven new members join that very day. Within seven days, your campaign had provided us with exactly 68 new [trial] members!"
"Of those, half survived that critical 30-day period – providing us with exactly 34 paying members."
He explains that this result was remarkable for a number of reasons. "For a start, I’ve done a lot of letterbox drops – some more successful than others – but I’ve never experienced a response like this before. I doubt many gym owners would believe that it is remotely possible for any kind of campaign to provide an established club with 68 [trial] members in one week. Furthermore, to have 50% of trial memberships convert into paid members is just incomprehensible!"
A glimpse at the numbers behind Jamie’s campaign provides an insight into his happiness. It cost Jamie $1,694 to print and distribute 10,000 of these brochures. If we amortise 25% of our creative costs on this first distribution, that provides us with a campaign cost of $2,432.
Because this investment yielded 34 new members, Jamie’s cost per new member was $72. Each new member committed to a minimum of 18 months’ membership at $49 a month (debited to his or her credit card). This means that each member provides Body Express with a minimum of $882 revenue. (This does not include income from personal training, drinks and accessories, or future membership renewal fees.)
Jamie makes it clear that there was a lot more to the success of this campaign than simply distributing 10,000 brochures and waiting for the new members. "I worked closely with the JRMA team throughout the creative process. In fact, when Monique provided me with a mock-up of the finished brochure, I took a trip to the local shopping centre – clipboard in hand – and asked shoppers for their feedback.
"I also resolved to treat new trial members as we would all other members. We exchanged their temporary membership cards for real ones on their first visit, and we even banned the use of the ‘T’ [trial] word!"
Jamie is committed to rolling out his new campaign as fast as his internal systems (and his cashflow) will allow. Our next step will be to test his offer in other media –starting with newspapers and broadcast fax.
He’s also committed to his relationship with JRMA. In addition to regular strategy sessions with Justin, he’s already had Monique Lewis redesign his corporate identity.
Jamie now keeps a close eye on America Online’s promotional activities. After his success with their subscriber-acquisition program, he’s keen to see what clever ideas they come up with next!