Late in 2023, I was interviewed for a show on the BBC about the growth of indoor climbing. Hannah, the host asked me "What will be the next thing that will grow the industry?" I suspect she thought I would talk about tech, or climbing boards, or private equity or something. I said one word "Sales." And I hold to that. Our industry is very behind in this area. If owners/operators can start to take strategic control of their revenue vs. what I call a "open the doors, turn on the lights and hope for the best" approach, our industry will grow.
So let's talk about the 3 levers briefly. This is a wildly simplified concept but hopefully makes a pretty multi-faceted and complex topic more digestible and actionable. In today's blog, we will be focused on the second lever:
Increase pure volume of customers, transactions or units sold
Increasing the average transaction amount
Increasing the lifetime value of your customers/members
Lever 2 - Increase Average Transaction Amount
OK, so if you have figured out how to increase pure volume, you want to begin thinking about how to increase the average transaction amount for all those customers. So what exactly does this mean and what does it look like?
Increasing the average transaction amount is done by collecting more dollars every time you have a transaction. The three main ways you are going to do this are by:
1 - Increasing prices of existing offerings (harder to do)
2 - Selling more things per transaction
3- Adding more higher price point items into the mix and selling them more often
A great example of this that we all encounter regularly is at the grocery store. When you stand in line to checkout, you are bombarded with magazines, candy, drinks, lip balm, and whatever else. This stuff sits there for one reason only: to increase the average transaction amount. Let's say your grocery store has an average transaction amount of $200. But you introduce the right targeted products at the checkout and you end up selling $4 more per transaction. That's a 2% increase. Might not seem like a big deal but let's look at it at scale. Whole Foods has reported 600 customers per day in some of their locations. So let's use that number.
600 transaction x $200 = $120,000
600 transaction x $204 = $122,400
$2,400 per year for simply putting Kombucha in front of the customer is a pretty good return. The customers are already there. So there is almost no cost to making that $2400 besides the stock itself sending that money straight to the bottom line. Now imagine what that might look like across Whole Foods' 500+ locations in the US and UK. (Its over $1.2mm) Hopefully this little exercise illustrates how selling chalk, classes, food & beverage can be a BIG deal for your business.
How to Increase Average Transaction Amount at Your Climbing Gym
A decent baseline for revenue outside of access (Day pass, rental gear, etc) is about $2 per check in. So in that Whole Foods example, if your Day Pass is $20, a decent baseline would be an additional $2, totaling $22. This probably about a bottle of water per check in (or something similar). For members, if you are collecting $89 per month, how much more are they giving you? Are they taking classes? Are they buying their climbing gear from you? Are they signing up for events or personal training? Let's run a couple scenarios:
DAY PASS USERS
-- Day pass $20 + $2 = $22.
Now imagine if you could develop and validate an intro class for all of your new guests, even if it was 30min and was a $10 add-on.
-- Day Pass $20 + $2 + $12 = $34
NOW WE ARE TALKING.
MEMBERS
-- Membership $89/month + $2 per check in (let's assume they are checking in 2x week/8 times/month) = $105/month
Now imagine if you had programming, events, retail and the sales tactics and staffing to conduct the upsells. What if on average between all those things you could sell another $39 per month per member.
-- Membership $89/month + $105 + $39 = $144
NOW WE ARE TALKING
So What is needed? Here are some recommendations on things to be considering:
1 - Retail that fits your member and customer base. And having it in stock
2 - Programming that isn't the run-of-the mill stuff. Identify what your customers want and need and knock their socks off with kick butt programming and events.
3 - The right sales tactics and resources to make the upsells. This includes training and incentivizing teams and individuals.
If you are looking for a target, here is a good one: At least 25% of your members should be giving you money in addition to their monthly billing every month. And they should be giving you at least $25 on average. These types of metrics have been instrumental in the fitness industry to driving growth and it's high time our industry started adopting them.
Considerations
1 - Can you collect and report on the data? Most of the common POS systems in our industry are woefully bad at reporting (See here to see what systems I like and why), and without the right reports it is hard to know if you are successfully moving the needle.
2 - Do you have a good way to validate just what the heck it is your customers want, or are you guessing? Build good practices around testing and iterating products and programs to deliver on what your customers want, need, and will pay for.
In the next blog, we will cover lever number 3 in detail. Increasing Lifetime Value.
Rise Above works with clients on building their ability to take strategic control of their revenue. It's an important skill for the growth and success with any climbing gym. Let's talk about we can put that control in your hands.