Stay On Target

If you have answers for these (and other) questions, congratulations you've done your homework. However, if you don't know the answers, it's time to seek a demographic analysis of your target region. "Demographic research is extremely important, particularly with marketing strategies," says Jim Smith, president of Seattle-based Peak Performance, International Fitness Networks. Demographic research is also extremely important to pricing structures. The information compiles through demographic studies can help you determine how much you should charge for a membership.

According to statistics reported by Smith, U.S. residents usually won't spend more than 1.3 percent of their annual household income on a club membership. "So if someone has a total household income of $50,000, they usually won't spend more than $650 a year on a club membership,' Smith explains. 'It's not a cardinal rule, it's a general rule. If your club charges $800 a year for membership, you'll want to be targeting households with income of $60,000 a year or higher.'

In addition to providing a useful pricing tool, demographic information can help you determine which types of services you should offer. For example, let's say you're looking into adding older adult programming. It would be helpful to know what percentage of your market's population is over 60. If 40 percent of the residents in your area fall into that category, activities geared toward seniors are likely to be a worthwhile investment.

Income and age are only part of the whole demographic picture. You can also get information on everything from education level to buying habits. It's up to you to decide which types of information would best serve your interests.

Once you've pinpointed the type of information you want to know, the next step is obtaining it. List brokers, whose function is similar to that of a travel agent, can get you moving in the right direction. 'They broker lists through various mailing list companies and have a pretty good knowledge of what's out there," Smith notes. "It's just like finding what airfares and hotels are available.'

You can also go directly to the mailing list companies themselves. You can find them by thumbing through the phone book. These companies provide lists broken down by specific factors, such as age and income.

'You can call the list company and say, 'I'm interested in getting mailing lists for these ZIP code areas,' " suggests Smith. 'You'd ask, 'Can you tell me how many households there are between the ages of x and y with income levels of blank?'" The companies will then do a search using the criteria you provided, then call you back with the results. Many list companies won't charge you for very basic information. However, as the data becomes more specific, the rates increase accordingly.

 "If your club charges $800 a year for membership, you'll want to be targeting households with income of $60,000 a year or higher." Jim Smith, Peak Performance.

Demographic companies such as National Decision Systems, Claritas and CACI can provide you with studies priced according to degree of detail. Generally, the reports range from about $75 and $300. 'A higher-end study breaks down all of the buying habits; it gets into an extreme amount of detail,' according to Mike Connors, president of the club consulting company Optimal Fitness Systems International (Longmeadow, Mass.). 'It tells you almost anything you'll ever need to know, such as drive time, income, age breakdown, schooling systems and transportation. A $75 study will give you the nuts and bolts of the market without getting into those specifies."

More detailed studies are especially helpful when you're developing programs, while less in-depth analyses aid in broad feasibility-type studies. 'If you just want to gather information to a show a bank, broader studies offer numbers, and banks look at numbers," adds Connors. Business owners who don't want to pay a mailing list company may be tempted to turn to their local chambers of commerce for information - without recognizing some of the pitfalls associated with that approach. First of all, the market you represent may be drawn from small sections of three separate municipalities, yet the information from the chamber's records reflects only one town. And the town may stretch 10 miles, but your market only spans five miles. '

Also, the chambers tend to paint a pretty rosy picture because they're trying to get more business,' Connors claims.

Business owners also may go to that old standby, the U.S. Census Bureau, for demographic data. You can access very basic state-by-state census information on the Internet by visiting http://tiger.census.gov. But be warned: The last census was in 1990. The information will probably be more accurate after next year's census. "If you're located in a very growing area, the census information would be off by quite a bit," warns Connors. "There are a lot of booming areas, such as South Carolina and other Southern states, that have changed significantly since the 1990 census. It's my understanding that you can't get the same amount of information from the Internet that you can from a demographic company." Another option open to club owners is doing a demographic survey themselves. However, because of the time, money and effort required to compile the necessary statistics, experts don't recommend this approach. 'Clubs don't really have the capabilities or resources, nor is it necessary for them to go out and survey the market," Smith says. 'There's so much secondary research available.'

Hit the Banks!

If you're up for a bit of reading, you can locate this research in your local public library. Go to the reference desk and ask for an encyclopedia on ZIP code demographics. Most libraries will have one. 'Major public libraries would have all the demographics for every ZIP code in the United States," Smith reports. 'Going by ZIP code breaks it all down to a fairly refined geographic area.' The volumes should include information on the following specific categories: age, income, percentage change in income over time, number of families, age distribution (e.g., 0-4 years, 5- 9 years, 85-plus, etc.) and education. 'You can get information such as percentage of people over 25 years of age with a college education," Smith explains. If an excursion to the library set in your future, consider taking advantage of local media outlets. You could call radio and TV stations and newspapers, and ask them for the type of information you'd find in a library. 'Typically, they'll have a wealth of information - the demographics of the whole market area," Smith insists. 'They're usually happy to give it to you because they're hoping you do some advertising with them. It's fast, it's easy, and it's free."

Once you have the information, you'll want to pay particular attention to age and income statistics. 'My other big one would be education,' says Smith. 'Generally, you will find a parallel between education and income. But I would say income is more important than education. If your club's located next to a major university with a lot of degrees, you might overlook that most of the residents are 24 years old with no income.'

However, in some instances, education takes priority over income, depending on the market. For example, if tennis is a significant source of revenue for your facility, education level will be a more important factor, according to some experts. 'There just seems to be a high correlation between white collar occupation, high education levels and tennis,' contends Steve Wild, president of Libertyville Tennis (Libertyville, Ill.) 'You could live in an area with a lot of high-income blue collar workers, but they're not necessarily candidates for tennis."

Family Programming

In addition to income and education, age can reveal a great deal about your marketplace, especially when it comes to children. 'I was doing a consulting project for a group of clubs and doing demographic analysis of their area, and noticed that approximately half of the entire population was under the age of 16," Smith recalls. 'We're talking about a giant family market. That tells [club operators] to put in a very extensive child-care center, as well as children's and youth sports and fitness programs. The whole key to that market was having programs for the entire family." After you've gathered information about age, education, income and other factors, you can refer to the data when putting together advertising and direct mail campaigns. And, thanks to the proliferation of computers in the club industry, target marketing has become even simpler and more cost-effective. Aside from pulling background information on your own members through your computer database, you can add a mapping software component to your system that tracks complete demographic information for any area you choose. Club operators who purchase mapping software - a good mapping program should cost you no more than $300 - tend to purchase data for a specific area. 'I buy data for Wake County, Ill.; I take the information from the membership database and I export that to the mapping program," Wild offers. 'What you get is the equivalent of a pushpin map for all of the addresses on your database. I can see where the highest concentrations of my members and my competitors' members live."

The mapping system generates a variety of information, such as highest congregation of large income families, individual's with master's degrees, individuals between the ages of 35 and 45, and more. 'You can section off the map to look at whatever portion you choose," says Wild. 'For every address you're exporting in, you can put a little red dot. That shows you a concentration of members and where they are in relation to your club."

In other words, the map tells you where you should be directing your marketing efforts and where you'd probably be wasting your time. 'It helps with my mailers, and I can buy media advertising a lot more effectively with mapping software,' Wild attests. 'You can narrow your targeting down to the street level and make your dollars stretch further." Not only can mapping unveil new markets, this software can also confirm beliefs about existing ones. 'It can reinforce what you've always thought about your market so you can stay on the right track with media buys and marketing," Wild says.

Once Is Never Enough

Health and fitness clubs that explore demographic research should not stop after a single study. Demographic research is an ongoing process. You won't keep a finger on the pulse of your market unless you follow up your study down the road.

How often you revisit demographic research depends on the dynamics of your particular area. "If you're in an area with a lot of change or a lot of new business or residential development, then you're going to want to stay up on it pretty frequently - maybe once a year,' advises Smith. 'If it's an area that's stable without a lot of change, every couple of years would probably be fine.' Some club owners may do one demographic study, then stop because they assume the area they studied hasn't changed. It's seldom wise to make assumptions about your region. "Sometimes people will get too many stereotypes in their minds about their area,' asserts Smith.

"Any time you can reduce uncertainty in marketing, the better off you are." - Steve Wild Libertyville Tennis

For instance, Smith was performing an analysis for a club - whose demographics changed, unbeknownst to the club operators. There was a section of the town the owners assumed was inhabited by families outside the facility's target income bracket. However, that area had undergone heavy development, which brought an influx of upwardly mobile families. The club operators hadn't noticed and incorrectly believed that the area remained unchanged. 'When I did the analysis, I noticed there were a lot of high-income people and developments and a golf course, so I asked [the club operators] about them," Smith remembers. Mey said nothing. I pointed out that there were about 3,000 people in that area with income over $100,000. 'The new residents lived five minutes from the club, and the club never sent them any direct mail materials,' Smith continues. 'There will be times when you can find unidentified pockets, so it's important to stay current with changes."

The Home Test

Demographic research may lead you to new members, but don't forget about your existing customers. Demographic research often begins at home, and many club management software systems allow you to record basic information about members. -Me first thing you want to do is poll your members," suggests Connors. 'Ask them what radio stations they listen to, their ages, how many kids they have, whether they need child care and other things along those lines. From that you can get a very basic demographic picture." Gathering data about current members will give you the information you need to keep them, while gathering data about potential members will give you the information you need to win over new customers. Through this market research, you generate hard numbers and facts about those most likely to frequent your facility, and, consequently, lower some of the marketing risks associated with running a business. 'Any time you can reduce uncertainty in marketing, the better off you are,' believes Wild. 'If you spend $200,000 on marketing, the only thing you're sure of is that you spent $200,000. Accurate demographic figures help bring it closer to a science."

Cioletti, J. (1999, February). Stay on Target, Club Industry, pp. 27-32

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