Service contracts are becoming (and rightfully so) a thing of the past. With the exception of a small set of rather loathsome industries (wireless phones, cable tv providers, etc), it’s not hard to find a service provider that will do business with you without locking you into some silly contract.
So why is it still so prevalent in the fitness and martial arts industries? There are a number of reasons, but none of them benefit your customer.
While you see a number of organizations espousing their innovative and disruptive approaches, none seem to want to disrupt one of the most basic traditions: the contract.
We’ve chosen a different approach.
Our philosophy is simple:
We want to earn your business every time you walk in the door.
If we know that there’s no guarantee that we’re going to get your business again next month or next class, it ensures that we’re working our asses off every class to earn your business.
We want you here because you want to be here.
We don’t want students on the floor with a “might as well” mindset because they already paid for it. They make for bad students, bad training partners, and bad brand ambassadors.
If you’re not here, we don’t want your money.
This isn’t that far off from theft in our minds. If we aren’t providing a service to you, you don’t need You to be paying us. While “free money” is great, it’s not the way we want to run our business. Full stop.
What about retention? Don’t you lose students in droves every month without a contract?
No. First, we work hard to keep their business. Second, it’s psychologically easier to re-up every month knowing that you’re under no obligation.
What about a predictable revenue stream?
They’re helpful, but they’re not critical. Lots of businesses and industries operate on models where the monthly run is not always predictable in the way you’re use to. In actuality, you can still predict revenue without contracts.
And is yours really that predictable? How much of a hard-liner are you about your contracts? Do you let people out for injuries? Random hardships? Moving? If they’re easy to get out of, there’s no reason to have them in the first place. If they are hard to get out of, shame on you.
How does it affect sales?
It’s infinitely easier. The pitch becomes “try it for a month” and then you have that whole month as a sales pitch for the following month.
The barrier to entry is so much lower when they’re not looking down the barrel of a contract. And, if you’re running a quality program, getting them to stay will be trivial.
Most importantly, you get to enter into a relationship with your customer that isn’t immediately tainted with you talking them into a commitment that really isn’t in their best interest.
Simply put, we think contracts are a detriment to our industry and what we, as a business, hope to accomplish. There’s no better way to demonstrate that than by eating our own dog food to show everyone else it can be done.