A Local Dilemma – Part 1

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localadssmall.jpgI recently joined a new gym, and to make sure that I go, I signed up for some training sessions with the intent to go three times per week for as long as it takes until I actually like the gym. For my wallet’s sake, I would like to hit that point sooner than later as each session costs more than the month’s membership. If you too don’t particularly like the gym, and don’t mind a non-deductible version of therapy give it a try. Today marked my eleventh visit – I know this because I track my cpw (cost per workout), about long enough where I became a familiar face to this relatively small, by big box standards, i.e. Bally’s, Gold’s, and Sports Clubs, but brand new, clean and not so packed gym. That last part makes the experience an even better one for me but not so much for its owner, a former gym manager at big clubs who wanted something nicer and more intimate. As the owner of a single chain – figure 20,000 sq. ft. at 30/year and fifty machines averaging 5k a pop, some staff, utilities, audio / visual, etc., and he has committed more than a million dollars for his first year of business. Given that I doubt his status as independently wealthy or heavily backed, I suspect he does not have the money to start a widespread TV campaign similar to the big chains. Assuming 400 paying member at 50 to 70 per month, he earns almost enough to cover rent under my assumptions. He certainly doesn’t earn enough, including training sessions, to truly make money.

All of which explains why the proprietor asked me if I knew people that might like the gym; he likes those there and given that people often have like friends, they would make for the best members as opposed to local but still mass marketing where as I interpreted it, one could acquire new customers but at a higher cost per acquisition and generally with a lower return, i.e. they stay a shorter amount of time. Having all the gadgets I need and then some (anyone want a last generation iMac or a t-mobile sidekick?) referring people for entry into a raffle for a new iPod didn’t do anything to increase my desire to refer people. The marketer in me couldn’t help but put myself in his position and think about what I would do to attract more members. As not just a marketer but a direct marketer, I start thinking about that which promoted my thinking – a bounty per referral. An entry into a sweepstakes might not motivate you either but it embodies the essence of affiliate marketing. If he had said, for each member you refer, you receive either this in compensation or a discount to your dues, all of the sudden it is affiliate marketing as we know it. The larger chains think somewhat along those lines. Golds Gym for instance offers members varying discounts based on the number of friends they refer. If a member refers three new, Golds will give the referrer one year free.

If Golds Gym will give one year free for three new members, that suggests to me that they will gladly pay a CPA of 33% COGS for a new member. Here is where being a direct marketer can hamper one’s desire for people to people referrals. I like my gym, but assuming a similar revenue share, referring one person would net me a few hundred dollars per year if that person stayed on that long and the referral came in cash not in soft compensation. It would take referring 10 members before it even started to get interesting and referring one quarter of the current members before it got exciting. Not having a network of 100 people locally that would join a gym or even 20, the challenge he faces goes from mentally intriguing to daunting to “Next.” It puts a new light on the challenges of opening up a truly small business. And, selfishly, I want this local business to succeed as I have found a product that I like and want continued. Until I put myself in the position of the owner or more accurately one that doesn’t want the owner to go under, I didn’t give the challenge of local advertising, or more specifically local customer acquisition, much thought. It’s the same situation that individual mortgage brokers faced until the lead aggregators came along.

The gym (or insert any undeveloped local business) could advertise on Google as well as improve their natural search; currently he appears in the Google Map listings that show on top of the organic results, but not in the organic results. Given the geographic area, i.e. the number of people and psychographics of a user, the query volume is low, so straight search could work, but it would no doubt take time. It would also mean retooling the site to be more lead generation friendly. What good does it do to send people to your main home page where a strong call to action often doesn’t fit, or if it does fit, companies don’t often build them with that in mind from the get go. Now, it becomes almost cost prohibitive for them to retool, and that even brings up another challenge in itself, where to find the right design talent.

Here is why Google sits at an advantageous situation. At the moment, one way or another it means using them, but it also shows the opportunity. You might need them, but they don’t offer what you need – both organically or via advertising. CitySearch and perhaps more so Yelp will in time also drive traffic and become the new Yellowpages. None of this, though, will come as consolation to the local business who, for now, must find a solution more offline, or do they? In Part 2, we look at how a company has potentially solved this very problem of local lead generation for, of all people, the local gym owner.

Editor
DM Confidential
www.dmconfidential.com

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