Know the competition

Throughout the history of the private club industry, clubs have been unique in their willingness to share information and insight with one another. As most are not-for-profit, clubs often lack the financial motivation to win over the competition. Nonetheless, clubs do compete with each other. Especially in regions with high concentrations of private clubs, the added membership for one club is one less available membership in the market. While this observation is not likely to be read as earth shattering, it offers a foundation from which to build a focus on competition as seen through a wider lens.

As club management increasingly turns its collective attention to commercial businesses for insight, it also must appreciate the importance of understanding competition—both direct and indirect.

This is not to propose clubs abandon their conventional willingness to share and learn from the operations of others in the industry. Instead, the lesson lies in a recommendation to respect the forces that vie for the attention and resources of current and potential members.

The term direct competition refers to a virtually identical option that satisfies an identical need. When walking down the bread aisle at the supermarket, the shopper can choose from an ample variety of brands selling white bread. One might be sliced more thickly. One might have a more appealing package. And one might bring back fond memories of turkey sandwiches served in a childhood home. Regardless, these breads are virtually the same and satisfy the shopper’s want or need.

For many clubs, the club down the street or on the other side of town is the bread next to them on the supermarket shelf. Such simplification might be off-putting at first. After all, every club has a unique identity. One just redesigned its clubhouse and another has a more challenging course. But just consider the way one bread manufacturer might feel about being forced to realize its vitamin enriched, long shelf-life bread is considered the same as its competition after spending millions to develop its new bakery process.

Such differences must not be overlooked or minimized in their importance. In fact, they are of the utmost importance in the face of direct competition. They lie at the center of all communications and ultimately the very identity of the club. They are used in strategies of differentiation to help the member market choose one over another and remain satisfied with the purchase decision long after paying the initiation fees. Nonetheless, they do not exempt a club from the pressures of operating in a competitive market.

Indirect competition is an equally or, some might argue, stronger force of competition for private clubs. Such competition satisfies the same need held by a buyer but through a different solution. It could be argued that varying degrees of indirectness exist among product categories. A term used commonly to identify indirect competitors in the business environment is substitutes.

The supermarket shopper from above has a need: to make sandwiches for his children. While any of the brands of white bread might do, his attention is today pulled by any number of substitutes. Many might consider rye or whole wheat as alternatives, but the position of a substitute becomes even clearer when such options as bagels, rolls and tortilla shells are considered. The shopper will be able to satisfy his need of making a sandwich while selecting a rather different answer.

The tortilla shell for many clubs is the nearby public course. While others might find their bagel in a high-end health club that offers personal trainers along with a steam room and group classes. These substitutes offer similar elements of athletics, fitness and sociability as the club through an entirely different design.

As alluded to already, the substitution of an indirectly competing offering can be even further removed from the expected solution set of offerings. The sandwich maker might opt for raw ingredients under a whim to bake his own bread. He might also wander down the frozen meal aisle and notice frozen meals for children that include miniature sandwiches that thaw in a lunch box.

Meanwhile, a club might find its members spending less time at the club and more time at the movie theater, a destination shopping mall, bowling alleys, skating rinks, public parks or beaches. While the McGladrey team will be among the first to remind clubs of the differences between the dining operations of a private club and a restaurant open to the public, both serve delicious meals that satisfy a need for a communal eating experience without having to prepare the meal at home. Ultimately, any activity that attracts a member away from the club while satisfying one or more of the appeals of the club experience is an indirect competitor.

Understanding the mere number of options members have is critical to operating like a business. Clubs will never be able to build an experience that eliminates the appeal of every outside activity. They cannot house every form of entertainment without increasing fees beyond what members would pay. Furthermore, the mere fact that some experiences are outside of the club is part of their appeal (e.g. being part of the latest fad and having the ability to relate to the experiences of other non-members). This also does not exempt clubs from the need to understand the competition and make proactive business decisions to minimize the potential losses to these market forces.

Meanwhile, clubs that appreciate these lessons will find the opportunities are endless. After all, a bread company might not be able to create an entirely new business unit that manufactures premade frozen sandwiches. It can, however, explore becoming the supplier to a company that does.

The time has arrived for clubs to know the competition, both direct and indirect, and to make strategic business decisions that look to the long-term success of their organizations.