Applicant E.V. Krasnov
Dr.Sc.Econ. A.I. Vorob'ev
Plekhanov Russian Academy of Economics, Moscow

Keywords: fitness, fitness club revenue structure, fitness club revenue flow.

The fitness industry continues to grow rapidly [1, 2]. Russia keeps pace with world trends. Thus, for instance, in the estimation of the President of "Alex Fitness", Russia's largest fitness club chain, the fitness clubs market in Russia will grow twofold in the coming years, and twofold more later on [3].

Along with the market growth and increasing competition, the issue of fitness club management becomes even more relevant [4, 5]. The amount of the member card sales income in most fitness clubs is approximately 60-80% of the sales revenue. It is the main item of income [6].

The ability to predict the member card sales revenue is the background for proper sales plan development for all fitness club departments. It is one of the fundamental conditions for financial well-being of the club. To ensure efficient club management in terms of competitive market, it is necessary to consider not only the amount, but also the structure of income. The research on this topic stands out for its relevance and significance.

The paper contains a brief study of the structure of the fitness club member card sales revenue (membership) on the example of a particular club. The study was focused mainly on the consideration of the structure and flow of the member card sales revenue depending on seasons, as it is the sale of member cards which is the main item of income in the revenue structure of most fitness clubs. Due to the article format it is difficult to present a detailed analysis of the revenue structure and flow. We demonstrated a feasible approach to the analysis of the revenue structure basing on the fitness club indicators within one calendar year (2013). The obtained data characterize the operation of the specific fitness club and cannot be completely recommended for other clubs. Table 1 contains the data on the amount and flow of the fitness club revenue in 2013.

Table 1. Amount and flow of fitness club revenue in 2013.

As seen from Table 1, the yearly average member card sales income amounted to 62% of the sales revenue. Such a comparatively low ratio of the member card sales income in the revenue structure is associated with the low member card sales level of the specified club on the background of provision of qualitative and popular additional fitness services (additional services). The member card sales level was deemed to be unsatisfactory, requiring a rise, preventing from getting the estimated profit margin. The member card sales income trends are diagramed in Figure 1.

Figule 1. Income trends in annual sales of member cards and additional services.

Upon analyzing the indices of the member card sales income, presented in Table 1 and Figure 1, we studied the structure of this income. For this purpose we singled out the following types and sub-types of member cards: "morning" ("short", "medium", "long", "morning") and "full time" cards ("short", "medium", "long", "morning"). A client with "morning" (var. "day-time") member cards can visit the club from opening hours till 5 P.M. (variant - till 4 P.M.). Using the "full time" member cards one can visit the club anytime during the operating hours. Since outside office hours are the most popular training time, the "full time" cards are much-in-demand and thus cost more. The "short" ones are 1-4-month cards, the "medium" ones are 5-9 month length, the "long" ones are 10-12 month length. This differentiation into the "short", "medium" and "long" cards is due to different behavioral models of consumers of the member cards mentioned. Moreover, besides their price, sales of the cards of particular types, depend on seasonality (seasons). In summer, the demand is smaller compared with the autumn and spring months. In some clubs there exist a gym membership system (limited club visits) rather than a member card system (unlimited access). In regards to the club under discussion, access is based on the member card system.

Tables 2 to 4 present the data on the revenue structure of the member card sales in 2013 with the differentiation into "short", "medium" and "long" cards. In order to keep a record of the cards of different duration belonging to the same sub-type (for example, 1- and 3-month cards), they were calculated as months, and then total months sold by the cards of a particular sub-type (group) were considered.

Table 2. Structure of annual "morning" card sales revenue

As seen from Table 2, the overall ratio of the "morning" cards of all types ("short", "medium" and "long") in the yearly average card sales revenue amounted to 20.6%. It is the "short" "morning" card sales that prevail (12.2%). There is a significant increase in all the sub-types of "morning" cards compared to the previous calendar year. The "long" card increase is especially pronounced. At the same time, of all the sub-types of "morning" cards, it is the "short" ones which financial contribution is the most substantial. Those are 1- and 3-month cards.

Table 3 presents the structure of the annual "full time" card sales revenue.

Тable 3. Structure of annual "full time" card sales revenue

Based on the data from Table 3, it is obvious that the number of clients, who prefer these very cards, is increasing, if compared to the previous year. It is a good sign for the club, as it means the boost in consumer confidence and the formation of more significant and lasting financial flows. At the same time, the "short" "full time" card sales revenue decreased compared with the previous year. When comparing the average price of the month in the "full time" and "morning" cards, it is seen that the price of the month in the "full time" cards is higher by about 20%. This totally correlates with the common practice of a much higher price of the "full time"

cards, as mentioned above.

As seen from Table 3, the overall contribution of the "full time" cards to the card sales revenue amounted on the average to 79.4% per year. The "long", one year, card sales prevail by the number of months bought, though they slightly decreased compared to the previous year. The largest increase, if compared with the previous year, was observed in the "medium" cards (306%). As a rule, those are 6-8 month cards.

In order to study the level and flow of the all-type card sales revenue, let us refer to Table 4.

Table 4. Structure of annual card sales revenue (final values)

According to Table 4, in 2013 the increase in the member card sales revenue equaled 19%. The increment is not small, although it falls several percent behind the intended value. It is to be noted that qualitative changes have occurred in the structure of the cards sold over the past year (the number of cards with longer duration is increasing).

The sales flow can be estimated by the amount of income by months, presented in Table 4 and Figure 1, from the perspective of the general idea of its changes during the year and determine significant deviations in work of the club being studied (for instance, sharp deviations in the income level flow at the end of May and October) [7]. Upon detection of significant deviations from normal indicators typical for the given category of clubs, or from target indicators, the reasons were analyzed. The data on the card sales structure, presented in Tables 2, 3 and 4, complemented by the information on the cost, quality and type of the member cards sold, as well as taking account special promotions and marketing activities for clients, make it possible to determine the reasons of the income level flow deviations from the member card sales and exercise control over them. When analyzing the summary table, we detected a certain regularity between the averaged price of the month for the card and the number of member cards of different types sold during the year. Figure 2 displays the comparison of the average price of the month and total months of the membership sold (the period when the member card is active and the client is the member) during 2012.

Figure 2. Comparison of average price of month and amount of months sold in 2012.

As seen from the graphic chart in Figure 2, the amount of sales decreases with the increase in the average price of the card, which is typical for the whole year, except for the high demand period at the beginning of the season (August in our case), when, the amount of sales increased regardless of the higher average price of the month. Figure 3 illustrates the comparison of the average price of the month and total months sold (calculated with due regard to the duration of all the cards sold) in 2013.

Figure 3. Comparison of average price of month and total months sold in 2013.

The sales flow, presented in Figure 3, is slightly different from that of the year 2012. It is not a deviation, but it testifies to the development of the club and reflects the effects of external and internal factors (for example, the result of administrative impact in the form of implementation of some new types of cards, price adjustments due to seasonality, promotion, etc.) on behavior and work of the club.

Having analyzed the graphic charts, presented in Figures 2 and 3, it was concluded that the member card sales income level, and the way the main factors affected it, can be forecasted if this dependence is generally expressed by the following formula (formula 1):

I = Nm х Ap х k, (1)

where:

I (income) - member card sales income;

Nm (number of months) – number of months sold (all or particular types of cards);

Ap (average price) - average price of the member card (or a type/sub-type of the card) calculated as month;

k - coefficient of seasonality (reflects the contribution of the seasonal factor, can be calculated and forecasted on a statistical basis and taking into account the individual coefficients of the club);

Therefore, if we know the member card sales income level for several months and use the formula 1, we can forecast the income level for the coming period very accurately at different average price of the month and with due regard to seasonality. It is possible owing to the fact that all the components of the formula can be measured or accurately predicted relying on statistics. In some cases, 3-4 month statistics is enough to make modeling with the use of this formula more effective for the club administration.

We calculated the "fair" price of the month of membership for the club under discussion (the price which the majority of clients accept as fair for the provided services and are ready to pay). This price was equal to 950RUB per month. All marketing actions were conducted by the club with due regard to this indicator and relied on it. Significant excess price was substantiated by the enhancement service package offered in addition to the card or seasonal factors.

Conclusion.

The proposed approach to the consideration of the structure and flow of fitness club member card sales revenue on the example of specific club resulted in the following conclusions:

The validity of the differentiation of fitness cards of different types ("short", "medium" and "long") was confirmed. Owing to such a differentiation it can be accurately analyzed the segment where an increase (for example, based on the promotion results) or a decrease of the indicators was marked, and control the sales flow using local marketing actions and price adjustments.

Using the formula 1 given in the paper the member card sales income level can be modeled depending on the price of the cards. It is important to develop a range of adequate offers for the clients of the club according to the price and duration of member cards.

Owing to consideration of the average price of the month of membership for various types of club cards and their level of sales during the examined period, the "fair" price for the club services can be calculated to attract and retain clients.

We detected consumers' hypersensitivity to the level of prices on this local market. Even a 50-100-ruble difference in the price of the month of membership was perceptible for consumers and significantly influenced their behavior.

To maintain the club at a competitive level on the market and assure its cost effectiveness, it is necessary to regularly monitor the fitness club revenue structure, as well as the structure and flow of the member card sales income and the return on sales of additional services, consider the effects of controllable influences (promotion, etc.) and other significant factors (seasonality, competition level, etc.) on these indicators on the part of the club.

It is to be noted, that the performance indicators of fitness club, stipulated above, characterize the operation of the specific fitness club on one of the phases of its development and cannot be recommended as optimal for all fitness clubs. Herewith, the proposed approach to the analysis of the structure and flow of fitness club member card sales revenue was proved efficient and can be recommended for most of commercial and public fitness clubs.

References

1. Alex Fitnes: istoriya brenda ili brend-istoriya? (Alex Fitness: history of the brand of brand history?) Fitness expert № 03 Aug/Oct 2014, P. 38–40.
2. Krasnov, E.V. Effektivnost' deyatel'nosti fitnes-klubov Rossii (Operating efficiency of Russian fitness clubs). Teoriya i Praktika Fizicheskoy Kul'tury. – 2013. – № 11. – P. 58–60.
3. Krasnov, E.V. Tsiklichnost' khozyaystvennoy deyatel'nosti sportivno-ozdorovitel'nykh klubov (Cyclicity of economic activities of fitness clubs). Teoriya i Praktika Fizicheskoy Kul'tury. – 2013. – № 12. – P. 62–65.
4. Sport i fitness. Global'noe i gosudarstvennoe upravlenie. Menedzhment. Marketing" (Sport and Fitness. Global and public administration. Management. Marketing)/ A.V. Orlov, E.V. Krasnov. – Moscow, 2012.
5. Effektivny fitnes-klub (Efficient fitness club). http://onfit.ru/school/chto_takoe_jeffektivnyi_fitnes-klub
6. The IHRSA Global report. The state of the health club industry, 2012. – 109 p.
7. The IHRSA European Health Club Report. Size and Scope of the Fitness Industry, 2013 – 128 p.

Corresponding author: ev_krasnov@mail.ru