The document discusses how customer relationship management (CRM) can help leisure operators sustain and increase customer acquisition, retention, and loyalty during difficult economic times. It analyzes a study of six leisure operators that found CRM provided benefits by building long-term customer relationships. Effective CRM requires an integrated approach involving customer data collection and analysis, business process changes to improve customer experience, and employee training. The document also identifies gaps in how leisure operators currently apply CRM and opportunities to better measure customer lifetime value.

1. T
he leisure industry’s ability to sustain
and increase acquisition, retention and
loyalty of customers in the current
economic climate is now more important than
ever. The public sector is under pressure to
reduce spending and increase income, while
maintaining or improving the services that are
being offered.
However, the health and fitness industry
has recently realised what a great opportunity
a variety of CRM (customer relationship
management) processes can provide for
the business. CRM is a platform to increase
income and reduce expenditure by building
long-term relationships with customers.
A recent study of six leisure operators
nationwide helped to reflect the value of CRM
within the industry. The operators consisted
of two local authorities: two trusts and two
private facilities.
Chen et al (2003) have encapsulated the
essence of CRM. They focus on the entire
business, relying on three key components:
1. An effective IT system to collect and
mine data, to enable a richer segmentation
of the market;
2. Business process re-engineering to
enable a more customer-centric organisation.
CRM is characterised as an integrated
approach to managing customer relationships
with re-engineering of customer value through
better service recovery and competitive
positioning of the offer; and
3. People: commitment from top
management to an ongoing company-wide
education and training program to boost
employee motivation and retention.
Key areas of CRM
The gaps identified in the health and fitness
industry highlight a lack of understanding as to
the benefits of CRM. As an industry, we focus
on retention and develop strategies to increase
retention, either with off-the-shelf products or
internally-developed systems. CRM has to be
treated as a holistic tool that engages with all
functional departments.
To understand the value of CRM to the
health and fitness industry, the following areas
were investigated:
1. Definition
2. CRM strategy
3. IT
4. Marketing
5. Business process re-engineering
6. People
7. Metrics
Definition
Delivering CRM was important to an
understanding of the depth to which CRM
existed within the respective organisations. The
responses received from operators varied from
The customer
is right
Enticing and retaining customers
is the aim of every leisure operator.
Tarzem Shoker explains how to
apply theory to practice
always
Customer relations
feature
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2. Membership Database:
n Hot Prospects
n Prospects
n Blow Outs
Lapsed Members
Low Users
High Risk
Interaction
Complaint Response
Segmentation
Attendance
Facility Use
Customer Profile
Customer Lifetime value
aCQuISITION
ReTeNTION
lOyalTy
➨ ➨
n Integrated software
n Data collection
n Data interagation
n Segmentation/Profiling
n Methods of targeting
n Structure of organisation
n Customer journey
n Impact of functional depts
n Flexibility to adapt
n Training and development
n Recruitment
n Barriers
n Culture
n Leadership top down
CRMBPR
PeOPle
IT
figure 1. Conceptual Model:
essential Components of CRM,
adapted from Chen et al (2003).
figure 2: IT impact on the three key phases within the health, fitness and leisure industry.
citing ‘quality service delivery’ to a response
showing more diversity of CRM: ‘It’s bringing
together how we relate to our customers.
It’s the relationship that we have with our
customers, our members.’
Strategy
The CRM strategy reflects the diversity of
each organisation with depth and breadth of
processes applied to the business. The strategies
expressed by the operators varied from
prescriptive to emergent to entrepreneurial. The
majority of respondents defined their strategy to
acquire members and deliver customer service;
this has been a natural process for the industry
to follow, but it displays only a few pieces of
the jigsaw. The ability to service and build
meaningful relationships with their customers
has been harder. CRM strategy must be part of a
cultural approach to embed a customer-centric
philosophy that involves all functional areas.
Marketing
A detailed segmentation of the market is an
area that the operators were shallow on. The
majority of respondents have recognised the
need for further segmentation of their market.
To help increase profitability, the
identification of specific customer groups
and customising the marketing messages will
help to reap dividends. The organisation ‘gets
to know their customer’ and service their
needs better once they are in the facility. The
servicing of the market requires a flexible
approach rather than a prescriptive one,
enabling the customer to experience a personal
service. Sport England classifications have
been cited by half of the operators as a tool
they will be using in the near future, which if
used correctly will assist in understanding their
markets more closely.
Information technology
For all of the operators, information
communication technology (ICT) plays
an integral role to assist the business. This
includes transactions, membership sales and
appointments, bookings, stock control, data
collection and providing a website.
A key area of ICT is to collect and mine data
with successful outcomes. All too
often numerous amounts of data are collected
that do not assist in any form of business
decision-making. The three key areas for a
health and fitness operator are acquisition,
retention and loyalty.
Business process re-engineering
For most, there has not been a radical change in
thinking on how to deliver the service among the
operators. Instead, a greater focus on creating
the right culture has been more important.
Business process re-engineering (BPR) does
not necessarily require a change to the whole
organisation, but a review of all processes and
procedures is needed to ensure that the service
from front of house as well as back of house is
being delivered efficiently and effectively.
People
The senior management are key. They are
looked upon as the leaders who live and
breathe the vision and values. This will
ensure employees are motivated to deliver
the correct level of service. Most respondents
had senior management involvement at
some level; the level of contact in some cases
was unclear.
One operator had the director leading
training sessions, with regular visibility
within the organisation. Support from senior
management can come in different forms:
training, audits, walkabouts and feedback
to employees.
A thorough and targeted recruitment
process can ensure that employees have a
significant impact on the revenues of the
business. Interaction with customers, building
rapport and getting to know them can create
a sense of loyalty for the customer.
It may be that this loyalty is to the individual
employee rather than the organisation, and
this is where building and measuring brand
equity can be very difficult within the
health and fitness industry. Such loyalty to
employees undermines the effort put in to
build brand reputation.
Metrics
Customer surveys and audits are a popular
means of assessing the level of service among
the operators. Standard metrics employed
by the operators focus on sales, retention
and attrition, which is reflected by various
key performance indicators relevant to
the organisation.
The measurement of customer equity
made up from value, brand and relationship
equity and customer lifetime value (CLV),
as illustrated in figure 3 and table 1, shows
significant gaps within the industry.
Operators do not measure CLV, which
is linked to the relationship with long-term
customers. The benefit of this would enable
The public sector
is under pressure
to reduce spending and
increase income while
improving services
cusTomer relaTions
feaTuRe
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3. figure 3. Components
of customer equity.
CUSTOMER
EQUITY
VALUE EQUITY
BRAND
EQUITY
RELATIONSHIP
EQUITY
Individualise marketing messages
Improve customer service efficiency
and effectiveness
Customise products and services
Improve pricing
Improve sales force efficiency and
effectiveness
Integrate offerings across channels
Target profitable customers
organisations to develop offerings that are
specifically designed to keep the customers
financially engaged. Figure 3 illustrates the
antecedents of customer equity, and table 1
the CLV model.
Understanding CLV is a very powerful tool;
it helps to evaluate customer acquisition as
well as selecting optimal service levels for
different customer groups. The respondents
need to be concerned with their future
revenue and profit streams associated with
ongoing satisfaction and retention of their
core and profitable customer base (Harvard
Business School, 2007). The longer the
customer is retained, the less of a cost
they are to the organisation, meaning
increased profits.
The health and fitness industry has evolved
considerably over the past 30 years, and the
physical facility is no longer a unique selling
point. Even delivering customer service
excellence is not enough. CRM means different
things to different organisations – just as
customers are unique, companies are unique.
References
n Anton, J. (1996) Customer relationship
management: making hard decisions with soft
numbers, Prentice-Hall, New Jersey.
n Chen, J.I, et al (2003) Understanding
Customer Relationship Management (CRM),
people, process and technology. Business
Process Management Journal; 9,5; ABI/
INFORM Global pg 672.
n Harvard Business School (2007) Customer
Lifetime Value Calculator
http://www.harvardbusinessonline.com/
flatmm/flashtools/cltv/
n Richards, K. et al (2006) Customer
relationship management: Finding value
drivers. Industrial Marketing Management 37
(2008) 120-130.
Table 1. Customer lifetime value model
what you put in... what you get out...
Observed churn
rates
Value of current
customer base
Customer acquisition
cost
Time required to
recoup customer
investments
Number of
customers/segments
ROI on customer/
segment
investments
Gross margins by
segment
Size and profitability
of customer
segments over
time; sensitivity
to marketing
investment plan
Customer transition
probabilities across
segments
aBOuT THe auTHOR: Tarzem shotter has
worked in the health and fitness industry for
nearly 16 years, most of which has been spent
in the private sector. he is currently working
for guildford spectrum leisure complex, and
has developed crm solutions for guildford
spectrum supported by the research from
Dr melvyn hillsdon.
cusTomer relaTions
feaTuRe
32 n april 2010 RECREATION
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