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Questions businesses and clubs should never stop asking


The article Private Clubs: To be or not to be - a business (which appeared in the January 2012 issue of eClub News) generated much attention and commentary among subscribers and far beyond. Apparently, a few nerves were touched and the article managed to summarize many of the frustrations and challenges club executives have been aggressively wrestling with over the last few years.

Given the tremendous amount of feedback, it seemed appropriate to look further at the concept of operating a club like a business.

A recent presentation conducted by McGladrey professionals at the Club Managers Association World Conference featured a list of questions first offered on Forbes.com. These are questions "a business should never stop asking." If clubs desire to operate like businesses, it seems logical to conclude that these questions could be applied to the club environment. In this and the next couple of issues of eClub News, the meaning and relevance of these questions will be explored.

The original list of questions was:

  1. What is our purpose for existing?
  2. Who is our target customer?
  3. Why does anyone need what we're selling?
  4. If a need exists, is it enough to support a profitable business?
  5. What are our competitors up to?
  6. Can you reduce expenses without harming the product or brand?
  7. Do we have the right leadership and structure?
  8. Do we have the right employees?
  9. How will we continue to drive revenue?
  10. How are your employees holding up?

The first three are addressed in this article.

1. What is our purpose for existing?

While this is a rather basic question, its answer provides the building block for every decision made at the foundation of a club and throughout its lifetime. A core component of why most businesses operate is to yield a profit for their owners or shareholders. Private clubs exist to allow individuals to socialize and enjoy common pursuits—be they sporting, dining or other. Private clubs can memorialize their reason for existing with a well thought out and actionable mission statement.

A mission statement defines the club's purpose and primary objectives. Its prime function is internal – to define the key measure or measures of success. Its primary audience is the leadership team and members. A mission statement should describe what the club does, with whom or for whom it does it, and, in broad terms, how it does it.

While sometimes difficult to distinguish from mission statements, vision statements also define purpose, but in terms of a club's values rather than bottom line measures. Values are guiding beliefs about how things should be done. Vision statements communicate both the purpose and values of an organization. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with members, a vision statement shapes an understanding about why they should belong to the club.

Recall that the list of ten questions is comprised of those that a business should never stop asking. When was the last time your club seriously addressed the question of why it exists? Is it probable that over the last 5, 10, 15 or 20 years the reason may have shifted? If so, consider the impact of that shift on the club's offerings in terms of amenities or membership types. When was the last time you reviewed the appropriateness of your mission or vision statement?

2. Who is our target customer?

It might appear obvious that if the time is taken to answer this first question fully, then the answer to the second one must be apparent. All too often, however, private clubs miss the mark when asked who their target customer is. With the increased economic pressures of the last few years, the immediate response to this question often describes the types of members that a club is hoping to attract. In doing so, clubs ignore a basic rule of marketing—regardless of the type of business or industry one is in, keep the current customer happy. Private clubs have already captured many target customers—current members. Constant catering to their needs and expectations should be given at least as much marketing attention, if not more, than trawling for new members. Consider whether the club knows its current member. With that comes an understanding of the amenities in which they are truly interested and knowledge about what keeps them engaged and returning to the club.

Clubs need to examine closely the effectiveness of their marketing department. Yes, department. In any business, marketing is a core function and often focused on ensuring customer loyalty. What best practices has your club's marketing department borrowed from the corporate world? Marketing is a continuum deployed throughout all areas of operations to ensure a consistent focus on the customer/member and it requires the combined effort of every team member. For example, does the club's golf professional realize his/her value to the mission is maximized when he/she is actually playing with members and interacting? Does this individual embrace all of the promotions the game has been endorsing, such as Tee It Forward and Golf 2.0 to drive participation rates? If not, consider why.

Applying this thought process across all amenities and service offerings can often lead to a few surprises about how well or poorly the club knows its target customer.

3. Why does anyone need what we're selling?

The private club industry has to done itself a disservice by proclaiming "we are in the dues business" for the last several years. That is simply untrue. Hotels are in the room night business because that is what they sell. Private clubs do not sell dues. They sell life experiences. Dues are only one method, albeit the most prevalent method, for patrons to pay for those experiences.

The focus on the dues dollar leads to a discussion about something every club definitely tries to sell—memberships. In response to the second question, clubs were urged to focus on keeping the member they have. While the same focus is needed when considering this question, the response here is expanded beyond the current membership. Consider how often questions are raised about why anyone buys a membership. Assuming a pool of individuals interested in the life experiences a club has to offer, why would anyone choose a particular club instead of a competing facility?

A recent industry survey suggested that being "well managed" was the most important factor to new members, above all of the amenity offerings. Successful clubs have long accepted that they need to maintain or add to their amenities in a way that keeps life experience offerings relevant. That acceptance, to a large degree, would make many such clubs indistinguishable to potential members. Not surprisingly then, prospective members have begun to measure and analyze how and where they spend lifestyle experience dollars in favor of places where they yield the greatest return like they would other investments. Clubs are realizing they need to have effective "investor relations management" to ensure that strategic financial communications reach those potential members. Financial statements have often become as important a marketing document as any of the colorful glossy brochures showcasing the golf course or the pool at sunset. Like for-profit businesses, clubs can take a proactive role in how financial information is presented to potential members. Every financial statement tells a story. The question becomes what the end to the story will be and whether the club has a good story teller.

Frequently clubs do not even know if prospects routinely ask financial questions beyond the obvious costs of membership. This is because the requests for financial information can go to a number of people—membership personnel, general manager, chief operating officer, controller, treasurer or even the club president. Ensuring that the club has a tightly defined and adhered to process for handling such "investor relation" inquiries can be the key to a prospect joining the club rather than a similar amenity rich club across town.

A couple of McGladrey professionals were recently asked to participate in the board retreat of a prestigious club in the Carolinas. The club had performed some excellent market research on competing communities, including joining fees and annual total costs of membership. While the joining fees for the club were second highest out of the ten or so nearby communities, the annual total cost of membership was the lowest. In fact, the payback period (i.e. how quickly a new member would break even by paying the higher joining fee at the club) was only 18 months. Therefore, a new member would enjoy significant cost savings from that point on. When the McGladrey team pointed out the shorter payback period and asked if it was being marketed that way, the board realized they had been missing one of the major sources of value members found in the purchase process—affordability.

As these questions are already beginning to demonstrate, many of the issues faced by businesses every day are relevant and applicable to the private club industry. Remember to watch for next month's issue of eClub News for more specific parallels. For now, remember to continue asking these ten questions.

In This Issue

A look at the 85th CMAA World Conference

Questions businesses - and clubs - should never stop asking

Getting Back to “Normal”

Best practices for improving board governance

Corporate culture: Creating guardrails against unacceptable behavior