Josh: Alright, welcome to the Gym Heroes Podcast. Today, we have Mike Arce. Mike, can you give us a little bit of your background in business?
Mike: Yeah. So, I actually I was in the fitness industry for about a decade prior to getting into the marketing world. So, from age about 19 all the way until about 29, 30 and then from there, I got into business so I started doing a lot of SEO and AdWords and marketing for all different businesses, not just gyms. In fact, I didn’t niche until 2016 into gyms So, we’re working with dentists, real estate agents, doctors, lawyers, all that. I got real bored with it because I didn’t have a passion for anything other than marketing business and fitness. So, in 2016, we merged and we exclusively built a business to help gyms and fitness studios succeed. So, that’s been now seven years. Just crazy to think that it’s already been that long.
Josh: Excellent and through that business, you’ve worked with tons of gyms. What do you believe are the fundamentals that gym owners should have down in order to scale their businesses?
Mike: Well, there’s a lot of fundamentals within the main fundamental, like we believe there’s four pillars that every business, not just fitness but any business should really get nailed down. And the first one is people that includes leadership, getting the right people in the right seats, doing the right things right and making sure we’re a cohesive team working together well. Next is sales which includes marketing, branding, PR, obviously sales. Next is money which is out of the top five reasons why business go out of business. Two of those five reasons are because of mismanagement of money. So, really knowing how to look at money, make decisions based on it and fourth is strategy. This is, here’s where we’re going. Here’s why we’re going there and here how we set goals and priorities along the way per year, per quarter, per month in order to make sure we’re getting there on time. You get those things nailed down. Those are the fundamentals and then from there, we can start getting fancy within each one of those.
Josh: Absolutely. Drilling down more I guess into processes. Sales is a mystery to a lot of operators and I gather that you really like sales and you believe it’s an important aspect of growing any business really, but especially fitness businesses. What’s something that any gym owner can do that automatically increases their closing rates for prospects that walk through the door?
Mike: So, there’s we have an entire certification like a course university for sales training. And there’s a handful of things that you can do to get immediate impact. I would say the easiest one that people can start doing right away is being able to when they first have their meeting, they do an intake meeting which is every gym should be doing. That’s you got your intake form. You got all the questions you ask, injuries, allergies, all that stuff. But in those questions, you’re also having questions around possible objections that you already know are going to come up. Whether objections around the spousal time, money, whatever. So, all these things we know are going to come up.
So, what we’re doing is we’re actually overcoming the objections in the intake process. And then as we’re going through the rest of the demo all the way up until where we’re actually presenting program options. We’re actually preselling or we’re planting seeds that help us combat these objections that are going to come up or won’t if you do this right. So that we can actually just go right to sale. People that do this right, right away, notice usually a three to four X increase in conversion rates and its literally clockwork. We’ve not seen anybody start implementing this that wasn’t doing it right, that didn’t see a drastic increase in sales closing.
Josh: Yeah, so you mentioned preselling, what goes into preselling versus like selling, selling because I know a lot of people are not even familiar with what that is. Like they’ve never even heard of trying to sell someone before they’ve sat down and started to talk about programming options.
Mike: Yeah, we do it in regular life. We just don’t tie it together but if you and I want you to go to a restaurant. I really want you to like it because I really like it. I might say, oh man, Josh you’re going to love this steak here. This steak is amazing. Get the rib eye though. The rib eye is the best one. It’s like this. It’s juicy. I describe it. Or, oh you’re going to love Game of Thrones. You especially would love Game of Thrones because I know you love this and that’s what this is about. So, we presell all the time before they actually go do the thing. We’re doing the same thing here. So, I say, Josh based on you, I know you’re a stake lover or based on you, I know you love fantasy type series. Same thing here. Based on your goals. Based on where you’re wanting to go. This thing whatever it is. The workout or the style of workout or the progression or the supplements or whatever it is. This is exactly what people with your goals really work well with. You especially are going to get a lot out of this.
So, there’s certain things we could do called pre-selling that we do all the time in business but also what’s really good is when you’re looking at the intake form and one of the options in there might be how many days per week are you currently working out and now, they go ahead and circle how many those are. Well, we already know now how many times it can. So, if they add on the time, you’re already working out this many times and if they say, not currently working out, then, say, what days are you available to work out. And then they circle those. Almost every time variably they’re circling three to four different options, right? And so now, I’m sitting down at so it looks like you’re able to work out every Monday, Wednesday, Friday, and Saturday no matter what, yes? Okay, perfect. That’s a great start. That’s actually all we really need. If we can get that done, now that we’ve got that Josh, when we get down, I don’t have a time. Well, you already said, well, first off, it’s not even going to come up because it led the time.
Mike: Well, a lot of you that we fear getting. The best part about it is you don’t get them when you overcome them in the beginning and you continue to reference throughout.
Josh: Great. So, then we got preselling and that’s very clever because most people aren’t doing that and that’s something that they can change immediately to help them. What are the good steps of a good sales process behind in front of or after the pre-selling process?
Mike: Well, the preselling happens from the moment you find out what their goals are all the way up until we’re ready a program. So, there’s nothing really before or after as that’s encompassed. It’s happening throughout.
Mike: But there’s a few things that are very important. And some of them are simple and they’re fundamental stuff that anybody would be like, oh yeah, of course. But you’d be surprised how many people Don’t do it. If for owners or managers that are listening right now, if you’re ever assuming that your people are doing everything in the sales process the way that you’ve designed it to be. Send in a shopper, tell a friend, a family member, something like that to go in, pretend to be a prospect, and get their intake or input and say like, this is what’s supposed to happen. Let me know how it goes. When they come back, you’ll be surprised. A lot of the stuff that you thought would be happening isn’t happening even on the phone call. So, I would say first thing is when the phone call comes in, or take it back before that. The lead comes in. You got to call these leads within five minutes of them coming in.
There’s a 900% decrease in the likelihood of you getting somebody on the phone if you wait longer than 5 minutes. There’s a study published by MIT and HubSpot actually kind of made that study big. This is about 6 years ago but it’s still maintained generally true because the phone’s still in their hand. 92% of the activity is happening on mobile. So, somebody seeing an ad on face Book, 92% of the activities on mobile. So, if that lead was just submitted, the phone’s probably still in their hands which is where you want it to be if making the call to the lead, right? Okay. So, number one, call them right away. Number two, when you call, this sounds fundamental, Josh, but I have a franchise, I’ll give you an example, all the stuff I’m about to tell you, as fundamentals it is, I’m about to explain to you, I got a franchise as a lot of studios, a lot of studios, and they were saying that They weren’t able to convert a lot of their leads.
I said, give me a list of your franchise locations So, I got this list and I was like, I’m going to call as many as I can. I literally called it if I had a nickel. The concept was if I had a nickel for every deal that you should have booked but you didn’t, I’ll go until I get a dollar, right? So, basically, 20. Now, anytime they booked somebody, then, I take a nickel out, right? So, now, we’re getting for alcohol as many as I need to. It took 21 calls for me to find 20 people that didn’t do it right, that didn’t book me. So, when they, first off, out of the 21, 11 didn’t even answer the phone. This was 3 o’clock on a Wednesday. That’s step one in making a sale, right? Be available.
Mike: Step one, 11 didn’t answer the phone. Out of the 11 that didn’t answer the phone, 2 called me back. I left voicemails for all of them. Two called me back. So, if you’re not checking on your front desk or salespeople that should be doing this, I would encourage you to do because they were all surprised. All these owners, they thought they had this up. Okay now out of the 9 that I did get on the call, 2 of them answered the phone like this. “Hello?”. Grace as it sounds. Stuff, right? But this is a big franchise. That’s a that’s a big public company, right? And they’re doing this, okay? So, now I keep going, okay. Of all those people, they all overtalked. None of them half of them didn’t even know my name. None of them really asked me about my goals and what I’m really looking for and when it came down to the end, Josh, I was such a good lead. I said, is it okay if my wife comes too? They were like, yeah, Absolutely, nobody asked what my wife’s name was and then when I said, that sounds great. Well, let me talk to her and find out when would it be a good time for us to come in. Is it okay if I give you a call back? They all said, yeah. Nobody, one.
Other than that, one, which I count as the one out of the 21, right? One of them went and actually booked me, right? All the, the other said, yeah, just give us a call back whenever. Of those, one person called me back. One called me back. I had two sales form and I was excited. So, the point is, before you even get the person in the studio, are you doing the right things in the sales process to get them in the studio? Yeah, we all know those things should be done. There’s not one person that’s listening to me right now that goes, none of this is groundbreaking. No, it’s not. That’s the worst part is that this done and you don’t even know it. So, I would definitely recommend shopping. We shop our clients for our clients and we’ll actually go like, hey, listen to the recording. Let me know what you think and they’ll be like, I can’t believe this is happening. Yeah, change that. Just that alone and watch sales rise, right?
Okay, now once we get them in the door, well, actually, before that, when you’re booking them, you always get them to bring a friend. It’s better to get to sales versus one any day of the week. So, hey, Josh. It looks like the class that you chose. Actually, it’s one of our most popular instructors. This class is fire. It’s great. People love it. Usually, it’s booked but there’s actually two spots open. So, you’re getting one of them but I would recommend bringing a friend to this one. I think they’re going to have a lot of fun. Who did you want to bring with you? You’ll be surprised but out one out of every three people bring another person. One out of every three. So, if you’re talking, you’re booking people in a month you actually just book forty, right.
Mike: So, that’s another way. The next thing is show rates. Get the credit card. Use a credit card to confirm appointment. A lot of people don’t like doing it. They say, oh, people aren’t going to like that. You know what’s funny? Everyone says that and when we get them to do it, they go, my book rate, my show rate is literally like 95 to 100%. Of course, it is and guess what? Out of like 20 people, maybe one of them is going to have an issue to where you’re not going to get their credit card. About 5 or 7 of them are going to actually give you like a push back where they’re going to say why do I need to give you my credit card. In which you just respond with, oh, it’s just because it’s class, its reservation based so we have these spots reserved for our members. But we’re giving it to you so there’s no charge. It’s 100% on us the only time. You get charged if for some reason you don’t make it and even if you can’t make it just give us a call ahead of time so we know we can open up to a member. Make sense? Yes. Okay, great. So, Amex, Visa, Mastercard, I’m ready when you are. That’s it. Ready to go, give you the card. From there alone, you’re going to see an increase in show rates.
If you just fix all that, Josh, before they even walked into your gym, that alone, you’re going to see an increase in sales and then, there’s a plethora of stuff you could do once they’re in the door as well. That’s a whole, we’ll go down a rabbit hole if you want for that.
Josh: Yeah, so some of our listeners, actually, a lot of our listeners, they operate yoga studios, martial arts schools. Will this work if somebody’s calling for a jiujitsu class and you say hey our classes, they fill up quick, we only have maybe 16 spots per class, but we have an extra spot, you should bring a friend? You think that would work too?
Mike: You mean like is the martial arts studio able to do it or does what will it work if they are able to because if they’re able to do it. Yes, it works. Bring someone.
Josh: Yeah, it just as long as they’re able to do it there’s open spaces and because this is thing that I don’t hear often from martial arts owners.
Mike: Yeah, but you have to sell it though. So, what you can’t say is like hey there’s actually a spot because that sounds boring, right? You got to say like hey this class that you’re picking. This is one of the more popular classes. This instructor is incredible.
Mike: He’s one of Ace ranked out there. So, I’m shocked that there’s an extra spot. I would definitely recommend bringing a friend. It it’s going to improve your experience. Who would you bring with you? So, you do have to give it a reason. Oh, the selling point isn’t there’s an extra spot.
Josh: That’s awesome. So that’s a really useful clarification. Sell the sizzle on the steak. Make the class sound enticing and then ask. Do you have a friend you want to bring? Because we have that extra spot.
Mike: Right. You got to make it look like this is a very wanted. Look you got two pizzerias right next to you. One of them is got to line out the door and the other one that nobody in. Which one are you going into? Logically we should just go into the one that we get a slice right now but why would people wait for 20 minutes instead? Because you’re sold right now that this is worth it because it’s that good.
Josh: Yup. Evidence by all the people that want to give in. Absolutely. Well, so what you said that pre-selling should get you pass most obstacles or most objections. But if objections do pop up later in the sales process, how do you manage objections?
Mike: Well, first you have to find out what the real objection is because most time we’re overcoming an objection that’s not real objection. And usually, an objection comes up because we did it a pretty poor job in the sales process. So, I want you to imagine two people on a date, right? Jack and Jill. And if Jack goes and picks up Jill for a date. Is there a chance Josh? That just on the car ride to the restaurant alone based on what Jack did, how we talked, whatever, that Jill already made a decision like, why am I on this date? I shouldn’t be here, right? Like this, they’ll, they’ll never be another date. She’s already made a decision, right? Early on.
Mike: Early on and let’s say he did okay there. They get to the restaurant. I mean, there’s so many opportunities for him to lose the sale down the road, right? Before the drinks come, before the appetizers come. Maybe he makes fun of the fact that she wants to be a vegan and she’s annoyed by it or he just talked about how awesome he is for 20 minutes or how he suggested she shouldn’t get that drink and she’s whatever it is, there’s plenty of opportunity for him to lose the sale. He got the sale from the beginning because no one goes on a date for no reason unless you’re into get miraculous, right? So, same thing goes, no one walks into a gym just because they got nothing to do. We got lots of things to do in our life, right? I’m here because I want something that I could provide. So, the sale is yours to lose from the beginning and now, it’s just about not losing the sale.
Now, go back to Jack and Jill. If let’s say Jill already made the decision early on or anywhere throughout that she’s not going to be with Jack. There’s no second date. Jack goes at the end of the night, walks her to the door and goes, ‘Hey, I had a lot of fun. We should do this again next week.’ Now, Jill not going to straight out say no I don’t like you. She’s going to give a make-believe objection. Because she doesn’t want to hurt his feelings. So, she’s going to say something like oh you know next weekend’s kind of tough. I actually have you know a final for math. I got to study for and I’ve really got to zone in.
Now he overcomes the objection marvelously. And he says something like, ‘Oh really math? I’m actually a math tutor at the university. This is great. I can help you.’ That’s a great little, right? But that’s not why she actually doesn’t want to go. Has nothing to do with the math, right? So now she comes up with another objection. And she goes, ‘Oh you know what? It’s just I have my way of doing it and so like I have a weird way of learning. I got a learning issues. I got to do it like my way or it doesn’t work.’ Okay, well what about the week after? ‘Oh, I got a family coming into town.’ Right? So, there’s always another objection. The reason is because we’re not even overcoming the real objection. And that’s where you hear people say, ‘Oh, you know what? I don’t know. I think I need to talk to my husband.’ Okay. Well, ‘Hey, let’s get your husband on the call or why don’t you bring your husband in or whatever the object or rebuttal or overcome is, right?’ But then from there, she goes, ‘Yeah. Well, also it’s tough because we’re going to be going out of town for the next like month and I don’t even know when I’ll be able to do it. Oh, no big deal. We could sign you up and freeze your account for a month. Yeah, but also with finances, right?’ There’s always another objection. Because we’re not tact the actual objection.
Here’s a real objection. I don’t want to use my money in exchange for what you’re giving me. That’s it. That’s the real thing. I’d rather have the money in my account than in yours for what you’re going to give me. And we know that’s true because you can’t afford it can’t be true. Right now the average American had $53,000 in credit card debt in 2019. Now the most recent is $7,100 in credit card debt.
Josh: Wow. Yeah.
Mike: More than 80% of that credit card debt is on non-essentials meaning we don’t even need it it’s wants, right. Sushi, hot tub, whatever. It doesn’t matter, anything that’s not necessary more than 80% of that. What that means Josh is that people don’t buy what they need they buy what they want, and so throughout the sales process we’ve got to do what we can to get people to want something. Not make it feel like it’s something that they need. If we can get them to truly desire and want it and we’re doing that by tying it to their goals which is remember they’re here because they want something. We just got to make sure that showing that this is it. We are that thing. And we got to plant seeds. We’ve got to overcome objections throughout and we’ve got to tie everything that we’re talking about to their goal and the why behind that goal throughout that hour.
You do that, you’re going to do much better. Being a better date is practicing how to be a better date is way more valuable than practicing how to overcome objections where the girl says she doesn’t want to go on a second date.
Josh: Absolutely. Speaking of that, what are some words and phrases you should avoid saying during that process?
Mike: Weak words. So, anything that is gray. No black and white. My most hated word. We don’t use it in our company. It’s not used in my house is the word try. We don’t say it. In fact, every year teachers call because I got 4 kids. Some of the youngest ones they don’t know how to explain it. They just know they’re not allowed to say the word. Teachers will call and I have conversations with them. And they say Mike your daughter seems to believe that try is a curse word and that she shouldn’t say it. And I said, ‘Yeah, it is curse word.’ And she goes, ‘What do you mean?’ I explained to her how it creates weakness in language and how it can cause people to find her as weak as well. She goes, ‘Yeah, but isn’t the word tri applicable in some places?’ And I said, ‘It is. All curse words are applicable in some places. Doesn’t mean you use them.’
So, certain words like try, right? Hey, we’re going to try to get you there in the next three months. I want to see if you could try to be in here three to four days a week. We try to help people get in the best shape of their lives. No. We’re going to get there within 3 months. I need you here at least three days a week. Goal is four. We get people in the best shape of their lives. We speak passively but what happens is when we speak with uncertainty, it creates uncertainty. Josh, if you invited me to a party, invite me to a party. Just let’s role play real quick. Invite me to a party this week.
Josh: Hey, I’m having a party this weekend. You want to come?
Mike: Yeah, I’ll try to make it. What do you already know is going to happen, Josh?
Josh: There’s basically a 10% chance you’ll actually be there.
Mike: Okay, now let’s do it again. Ask me again.
Josh: I’m having a party this weekend. You should come.
Mike: I’ll be there. Now how you feel now?
Josh: I feel confident.
Mike: Right. The words I chose created certainty in you. Because you knew I was certain, right? So, when I go and I hear some of these sales pitches. ‘Yeah, so what kind of stuff you’ve been trying to do and talk about what you’re trying to get to. What are some of the goals that you’d like to be at? Give me an idea of where you’d like to be.’ That’s all-weak language. Try, maybe, could be, should be, probably all these types of words. They create lack of certainty but the truth is we need them to have max certainty in four areas. They have to have max certainty in the modality. Meaning the style of fitness that you run. Yoga, cycle, whatever. That max certainty that this will help you get to my goal.
Number two, I have to have max certainty that your company is the one that’s going to execute this the best. The way that you do yoga or in the way that you do cycle or Pilates or whatever. I have to believe in your philosophy in it. I have to have max certainty in the sales person. Whoever’s talking to me, I have to believe that they are confident that I can get to my goal. I believe that. My max certainty in their perspective of what we’re going to get accomplished here. And lastly, this is the most important one. A lot of people ignore it. They have to have max certainty in themselves. They have to believe that this is going to be different this time. I’m not going to quit like I’ve always done. I’m not going to get lazy. I’m not going to make excuses. This time is different. I’m going to get it done here. If we can get max certainty in all these, it’s very, very hard have them walk out without an agreement. Unfortunately, when you start using words, I try probably maybe perhaps kind of or 3 to 5, 2 to 4, it’s so unclear. They can’t see it. They don’t believe it. They don’t buy it.
Josh: You almost give them permission that giving them wiggle room linguistically gives them permission not to show up not to put the effort in and to close themselves off.
Josh: Absolutely. That sounds a lot like that you’re exhibiting a sort of positive social influence in the way that you talk and that helps people actually to make their up their minds better.
Mike: Well, of course an example I use if you and I were a basketball player as on a team. Championship game, teams worked all year to get here and you and I let’s say on paper we’re equal. We’re the best two on the team by far, but we’re equal on paper. Same percentage of shots made, turnovers, all that stuff, right. So, now here we go end of the game down by one we call a timeout it’s our ball. We got to make a big decision here on what play we’re going to run, okay? Who’s going to get this ball? Only one of us can. Get in the huddle says, Mike, Josh, you two are the best players on the team. I’ve counted on you all year. What should we do?’ And you say, ‘Coach, give me the ball I’m going to try to make this shot.’ And I say, ‘Coach, give me the ball I will make this shot.’ Who’s coach giving the ball to?
Josh: The certain one.
Mike: Exactly. Now in reality you and I have the same odds of making this shot, right? Like we’re equal. One word, one word made a championship decision happen. Yes, that’s how powerful it is. Don’t we discredit it in our sales process we’re being a little silly.
Josh: Absolutely. So, switching gears to marketing now. Paid ads are really expensive. SEO in local business, in local areas seems like it’s up and down. Some people have good progress with it but others seem like they don’t get that much traffic. What marketing channel should gym owners on a budget be focused on when they’re trying to grow their businesses?
Mike: So, we’ll talk to the budget ones. I got a couple good ideas for people to get business on a budget. But first, when you say paid ads are expensive. What does that mean to you?
Josh: Well, Facebook, you used to be able to get leads for pennies on the dollar but now you’re spending 10, 15, 20, 30, even more than that to gain a lead.
Mike: Right. So, let me ask you a question. What’s a good deal for a sandwich? Let’s say at Jimmy John’s or Subway or something. What’s a good deal on a sandwich? It’s a deal.
Josh: Yeah, probably price. $5 or $6.
Mike: So, if all of a sudden, Subway started giving out sandwiches for 10 cents and they did that for a year and then all of a sudden, sandwich went back up to $5, $6. Is it expensive or is it you’ve been spoiled and you didn’t take advantage of it the way you should have over a few years? Because in no time in history were people getting leads for pennies on the dollar.
Josh: Yeah, that’s probably true.
Mike: Let me really break it down for you. It comes down to two numbers. When making decisions on how much we spend on marketing and is it worth it, it’s just two numbers. CAC, LTV. That’s it. CAC which is customer acquisition cost, the amount of money I pay on average in order to acquire a customer and LTV, Life Time Value. The amount of money a customer is worth to my business. So, if I am buying, let’s say this calculator for a dollar, so I can sell it. If I sell it for two or three, I’m making a profit. If I sell it for 50 cents, I’m losing money, right? So, we just need to make sure the LTV is larger than the CAC, but we actually have to look deeper, really quick. Can you plug in my? I need a charge. But we actually need to look a little deeper Josh. Hold on one second. There’s mine right there. You just got to this isn’t live right? Or anything so you can cut.
Josh: No, it’s not live. We can edit it out. I’m taking a note of the time stamp.
Mike: Yeah, that’s it. Pull that out of there. And then just go under the desk and then you’ll be able to grab it and then just it’ll reach all the way over yeah. It’ll reach all the way. As far as my flash should have plugged this in.
Josh: But all good. That’s why we do, that’s why we edit and post.
Mike: How we would have made it fun. Okay. So, let’s go back. But even though really what matters is that the LTV is higher than CAC, I like to see more at minimum of four X on that number. Some people can easily enter fifteen X which is great but I’m going to show you how this works. So, let’s say the average member at the gym pays a hundred and fifty dollars a month. What we need to know is how long we keep that average member for and if we know that, then we know what their lifetime value is, right? Because we just multiply how much they pay per month. Multiply by how many months they pay us. A lot of you have a hard time coming up with that number. How do we determine, how many months somebody stays with us and especially with like if we’re young generally two years old, three years old, that data’s off?
Here’s how you do it. Most people at least know what their attrition is, which is the percentage of people they lose on a monthly basis. So, let’s say we started February with 100 members, easy numbers, and of those 100 members, we lost 6 of them, okay? We have a 6% attrition. Now, let’s say when we look back at previous months, we’ve averaged about that. About a 6% attrition over the last 6, 7 months, right? That’s what our attrition currently is. What that means is we lose 6% of our active members on a monthly basis. So, how to figure out how long somebody stays with you is very simple. You take the number one, you divide it by six percent and what you get is 16.66.
One divide by 6% is 16.66. What that means is your average member stays for over 16 months. So, if your average member pays you $150 a month, you multiply that by 16.66. that means your average member is worth you, let me see here, times the 16. The average member’s worth 2400. Now, let’s say we’re wanting a 10X return. That means we want to acquire members for 2400 divided by 10 which is $240. We don’t want to spend more than $240 in order to acquire a member. If we want a 10 X return which is fantastic. Right?
Mike: So now we go if I spent $2400 in marketing, I should have at least gotten ten members. Then I can make sense of it. Right? But in reality, it’s even less than that. So, the point is we want to go, okay, is my marketing working? Well, if I spent $5,000 on marketing efforts and I got 20 members from that, I paid $250 to acquire a member. That is a great deal. Now, how do we make that a better deal? Because what I care about is that CAC, that CAC dropping, as low as possible. So, there’s several other lines in the water you can do outside of paid ads and we teach all that in our portal, but let’s just go on the simplest one. The one that can just fraction it all the way down right away. Anyone can start doing it today. So, when you sign up a member, on average, our gyms that work with us, they get an average of over 2 referrals at the point of every sale. Our best average seven referrals at the point of every sale. I’m not even kidding. That’s our best. That is one guy though. That’s our best. Next best after that’s 3s, okay? So, but if we can get two to three referrals at the point of every sale, think about what that means to the business, right?
So, let’s say you sign up 30 members of the month and on average you got three referrals from each one of them. You just got 90 new leads from those 30 members that you didn’t pay for because you didn’t pay for them, anything that happens from it automatically drops your overall cost per acquisition down, okay? So, now to these 90 leads, let’s say, even though the referrals who should close higher. Let’s say we only convert one out of every three of them which would mean we got another 30 members. So, we had 30 now, we got another 30 then from there we get another three referrals from each one of them. We got another 90 referrals and then we get another 30, and that keeps going. That’s all from the same one cost that 250 acquisition cost and that first cut is 125 and then it keeps going, down keeps going down. The best gyms we work with are paying not just pennies and a dollar for a lead Josh, they’re paying pennies and a dollar for a member. Because next month we got more leads coming and we’re going to do this again. So, it’s infinite return times infinite return and every month we keep doing that over and over and over again. Does that make sense?
Josh: Yeah, it makes total sense. And I think that there’s a lot of especially martial arts instructors that have never thought about it that way. They’re worried about what does it cost right now immediately. That looks like a high number, but they’re not thinking about how long do these members stay and how much are they worth to me over the 10 years of that stay.
Mike: Absolutely and here’s the best part. People that join a gym because they came via referral have, I can’t remember the exact words over 20. Over 20% increase in retention. Meaning you’re keeping them for over 20% longer than the average person. So, what that means Josh is that’s going to improve your customer, your lifetime value for your customers, right? Which means now it’s at a $2400. It’s actually going to be more like three grand or higher which means you have ability to spend even more money than your competitors to acquire customer because you understand this concept, you win. Here’s a way to look at it. We have a phrase in our business. “Amateurs add, professionals multiply”. You’re never going to lose customers by division. You’re going to always lose it by subtraction. We lost 2 members today. We lost 4 members today.
So, if you add members, yeah, we added three members today. We added four members and you’re losing; you’re going to hit a plateau. But if you’re multiply, we added 3 members which means we got 90 more leads and we’re going to add 30 more and then we’re getting more leads on a regular basis. You’re playing multiplication to get and you’re only losing its subtraction. That’s how gyms grow as fast as they do. That’s how the average gym in our program grows by over 88% per year in the first 12 months, because of that.
Josh: Excellent. So, we’ve talked about how to keep that customer acquisition cost continuing to go down and the lifetime value of your members to go up. One way I think you can do that also is to find ways to keep your marketing cost as low as possible. Artificial intelligence seems to be all the rage right now in that area. So, how have your gyms been leveraging AI to help them with their marketing?
Mike: Well, first, we’re using it. Number one, we’re using, it’s funny I had a person come up to me and they said why should we pay you more if you’re using AI to make it easier for you to get things done. Like should we pay you less now, shouldn’t our price go down? My response was in 1850s, the clipper was created for barbers.
Mike: So, they don’t have to use a scissor anymore so they get things done better and faster now, because they have clippers. Now would you rather pay more money for the guys still using scissors taking longer to get you out and giving you a worse haircut or would you pay more for the money using the barb, the clippers so we can do a better haircut and get you out faster? What would you rather have? In my world, if you’re using an agency that’s not using AI, you’re spending too much money already Because that agency is using a human brain as opposed to the combination of human and artificial intelligence. You’re spending more money for something to take longer to get done, longer to get tested and optimized and probably not done as well versus working with a company that’s leveraging these tools. I want to work with people that are using them. At this point, for all my vendors, if you’re not using AI, like, like, I’m going to pay more because it’s going to take to do it.
So that’s number one. But number two, we’ve got people using AI internally, like their gyms, for stuff like, yeah, marketing campaigns. Stuff like Chat GPT can create Facebook ads for you really, really well, and you can tell it to use NLP, Neuro Linguistic Programming in the ads. You could tell to use scarcity, urgency, you could say use rarity, science. We can even say, let’s say I’m promoting a Pilates studio. I could say, “In the ad, use three stats around Pilates, that would be intriguing to someone interested in joining a Pilates studio”, right? You can do all that stuff. You could say, “Write it in the voice of Ryan Reynolds”, right? So, it’s got a little humor to it and wittiness.
Mike: You could do all that stuff, right? You could do it for landing page. You can do it for text messages, for voicemail scripts, email scripts, sales scripts, overcoming objections. Overcoming objections one I don’t think is that great but what I will tell you is you could use it for other stuff like what’s my LTV and it’ll ask you questions in order to give you the answer. They’ll say like, ‘Well, what’s your average dollar per member per month’, right? You say ‘$150’. Great. ‘What’s your average attrition?’ You could say, ‘How do I determine my attrition?’ It’ll tell you. It it’s like talking to a computer like a human, but that knows everything. See with Google, it’s different. You have to like sift through articles and learn how to decipher it and do it yourself. Here, you’re talking to someone that’s already done all that. So, it’s amazing.
Slogan ideas at our conference “GSD.com” we just had this weekend. I said, ‘Okay, let’s come up with some slogan ideas. Who here wants a slogan? So, bunch of studios raised their hands and I said, okay, how about yours? So, I went ahead and typed in the type of studio they are, what they want to be known for, the unique value proposition, and then it gave, I said, give me 10 slogan ideas. They gave me 10. Now, out of the 10, 3 were good, seven were not that good. But here’s the deal, Josh, they happen in seconds. If a company was going to sit in a conference room table to come up with slogan ideas, how long would it take for them to come up with 10 where 3 are good? How long? Half hour, hour, maybe longer.
Mike: Seconds. The hardest part is the white piece of paper, the blank page.
Mike: But now I got 3 ideas. Oh wow, these are pretty good. So, then I write, ‘Give me 10 more ideas similar to 2, 5, and 7.’ And now it gave me ten more ideas similar to those. And I just kept going until we found one. In a matter of minutes, they had a slogan. And they loved it. And it was better than anything they ever thought of. I got people to come up on stage and said who wants a song? And Josh, not kidding. We put the type of person, studio, all that and in a matter of seconds, there was a rap song written. We played it over the karaoke version of Beastie Boys Intergalactic and we wrapped it on stage live at our conference and it was cool. By the time you want, I have E-roll of it I’ll send it to you. You could loop it over.
Josh: Yeah, definitely. That’s so funny. Okay, so high tech should definitely be using it but in the wake of COVID I I’m hearing one of my friends is like a Parson rep guy. I’m hearing that a lot of like in-person events are really making a resurgence right now. Some of them are as popular as they’ve ever been. So are there effective reliable offline marketing tactics that gyms can use to grow as well.
Mike: Yeah, so philanthropy is great. So, one of the things that I don’t think a lot of people know this but Josh, how much do you think it would cost to feed a child in a starving country for a month? What do you think it costs?
Josh: For a month? $20 maybe. I don’t know.
Mike: $5 to $7, right? Through companies like Feed My Starving Children or Feeding America, right? About $5 to $7 dollars to feed a child for an entire month. So, the hardest thing is getting referrals for no reason, right? Because if I were to say to you, let’s say we’re friends and I say, hey Josh, why don’t you come to my gym workout with me? It’s pretty cool. Maybe I can get you there but if I were to say like hey man the gym that I go to they’re running this really cool promo they’re wanting to feed 300 children in starving countries for an entire month and what we’re doing is every person we bring in they’re going to feed a child for an entire month on your behalf.
So, I’m looking to bring in like 10 people myself so did you want to come down with me. So, now what happens Josh is we’re bringing in you say you want leads right leads at pennies on the dollar, right. But in reality, what you’re saying is if I got a lead for 10 bucks, you’d probably be pretty happy right, 10 bucks probably pretty good.
Mike: But what if you show, not a lead, not a book, but you got to show from a referral for $5 to $7. $5 to $7, right? So, you can have events where you can have people come in like a closeout member appreciation or you can just encourage people to come in and do the workouts with their friends or hybrid of both with a mission. We’re looking to feed 300 children by the end of this month, right? Or by the end of this quarter. Or by whatever, right? And you have like a thermometer thing that you can keep coloring every time more people come in. So, people can see the impact and be driving and highlight the people that are getting the most people in. John’s brought in 16 people. Who’s going to be number one? I got a special gift for whoever’s the number one, right? Whatever it is or even whoever is the number one, I’m going to match whatever they did. I mean, think about it. Now, you’re paying $10 to $12, $14 per show. It’s great. So, there’s unique ways that you can really get a lot of people in the studio. I think people overthink it. Just get people in the There’s a lot of cool ways to get people in the door. Just get people in the door. What can we do to get people in?
Josh: Excellent. Let’s say that you found yourself at a like a local event, a fair, or like something for the summer or we do, there’s lots of events around here. We’ll do like a something called Autumn Treasures where a lot of vendors will show up and there’s all kinds of things around us. It’s themed around the fall time and that and there’s thousands of people that come through there. Let’s say that you have a presence there. You have a booth. What are some ways that you can leverage that presence and ensure that you capture as many quality leads as possible.
Mike: Yeah. So, this is not a bad thing to do but because it’s not something you can do on autopilot, we spend very, very, very little time talking about this in our program, we spend the majority of stuff of our time talking about something you can do every day, right? Like, because, as if it’s predictable.
Mike: However, to answer your question, a lot of it’s make noise. So, if you’re going to have a booth, be the loudest booth. Be the one that’s got the at it at all times. So, whether that’s having some sort of like a putt thing and a person who gets the farthest putt wins or some sort of contest like there’s one where you could hang. Whoever could hang from this bar for the longest wins and you have the records so people can see what the records are. One minute 58 seconds so everyone’s kind of lining up to do it.
Mike: The point is draw attention. Get people to your booth. Remember the pizzeria example, right? You had two booths. One of them’s got a packed house around it. The other wide open with you people just sitting there not talking to anybody, which would you want to go up to? So, you got to make a lot of noise and then when you’re there, you got to get a lot of excitement around what you’re doing and get people to come in for something free where you can leverage philanthropy again and say, ‘Hey, what we’re doing too for everyone that actually comes in and does a workout, we’re going to feed a child for an entire month. So, are you open to help and feed a child for an entire month?’ Yeah, awesome. Well, let’s get you in. That’s it, right? So, that would work well but again, I spend more time working on things that I know I could do on a daily basis if needed.
Josh: Excellent. Cool. So, you you’ve touched on your service a bit throughout the course of this episode. You have a coaching program that you work with gym owners in in multiple ways. How does your coaching program work with gym owners?
Mike: Did I plug my business quite a bit? I’m sorry. I did that.
Josh: No, no. No, you’ve mentioned that you work with people. I was not.
Mike: I purposely did it. Okay, so with I’m being very transparent. No, I love what we do and I believe very much in what we do. The average gym in our program within the first days of working with us increases our monthly revenue by $8,300+ in their first 30 days, right? In the first 60 days it’s over 16 grand. The average owner program sees an 280% return on their investment within the first year and over 88% growth in their revenue within the first year. So, I love what we do. I believe in it. The top 10 franchisees at any franchise are usually in our program, okay? Our program is designed to help fitness studios grow. Our tagline is where the best gyms go to grow. That is can be confusing but really the idea is I want to work with the best or people that want to be the best. That’s it.
If there’s somebody that’s interested in kind of like just teaching classes, making a little money off of it, it’s just going to be hard to be the best gym. You might have a great life but you just may not be the best gym. That’s what we’re looking to work with. So, the people in our program, they’re movers, man. They’re movers. At this conference that we just had, we had hundreds of gym owners and they’re all working together. They’re sharing stuff. They fly to each other’s studios. They learn their sales teams get together. I mean, it, I don’t even call it a program. It’s like a league, man. Like, this is a league where these players play. So, we have two main components to our company. That’s it. First is this program 360 where it’s this mastermind, this league where we do a ton of training and we let you in in a lot of the insight secrets to some of Best of the best you’re doing. So that’s 360. It’s a whole business so I call it 360.
The next is the marketing side. Yeah, like even though we’ll show you how to do a lot of the stuff you can do yourself in 360. If you just realize it’s more worth your time to just pay a company some money to do it for you. We’ll do the marketing for you. Which, by the way between you and me it is. Like you shouldn’t be running a Facebook ad in house. Not unless you have five to ten locations and you have one person doing it for all of them but if you have less than that yeah outsource it. It’s a lot cheaper and you get it done better, faster. So, those are the two components and then, we’ve got the number one conference. We do it every quarter called GSD Con and every quarter is a different theme. So, we just did people last weekend. The next one is sales, the one after that’s money, and the next one’s strategy, which your first question earlier, you asked, what do you think of the fundamentals to be successful? Those are the four pillars, and we have a conference for each one of them throughout the year.
Josh: Excellent. So, if my Listeners are not motivated to reach out. I don’t know what would motivate them to reach out but if they do and I hope they do, where can listeners find you? Where can they reach out at?
Mike: Alright, so there’s three spots and they’re good spots. So, make sure you get a pen if you’re listening. Number one, I was going to get the first one out of the way. It’s easy. “LoudRumor.com”. “Loud Rumor”, like I heard a rumor, okay? That’s any of our company. We’re with over 2,400 studios worldwide, over 50 franchises. We’re the best of what we do, okay? The next thing is “GSDCon.com”. “GSD like get shit done. That’s literally what it stands for. So, “GSD.com:”, that’s the conference. The third one is the GSD show. Get shit done but like you Josh, I’ve got a podcast and I don’t know about you but I listen to quite a few podcasts throughout my week.
Mike: So, I any listener should be listening to yours and mine to just get more perspective and a well-rounded approach to be able to grow their gyms.
Josh: Excellent. Well, thank you so much for coming on and I hope we can actually do this again sometime.
Mike: Me too and maybe we can flip it around. We’ll see.