Company Background
The Edge Gym & Fitness Club is an upscale, exclusive workout facility catering to discerning men and women located in Woodbridge, New Jersey. Founded in 2004 by entrepreneur and personal trainer Mike Hughes after being a private personal trainer for more than 10 years. Over a five year period, Hughes brought in both his private and new clientele, growing the business to 160 paying members. However, with a high-class facility, top-of-the-line workout equipment, fully-qualified instructors and trainers, Edge Gym's profits were too slim and the business operated at a loss for its first two years.
Early Stages of Marketing
Edge Gym's first customers were private clients that Hughes brought in by announcing his new gym. For the first year, memberships grow solely by worth of mouth. By year end, Edge Gym had grown to 55 members. In 2005, Hughes launched a web site for the gym and started advertising in local news papers. Marketing investment for the website and news paper ads in 2005 were ,000, which only rendered 45 memberships for the year.
Referral Program
Realizing that selling exclusivity is difficult challenge, Hughes hired McAfee Marketing, a local marketing firm in the Woodridge area. "The problem was, I couldn't advertise everywhere-word-of-mouth was more important than blasting our message all over town." James McAfee, president of McAfee Marketing, recommended a referral program with an incentive to gain free membership months. The program structure was for every 10 referrals, the referring member would get 6 months of free membership. Members who chose to become part of the referral program were given classy magnetic signs to place on their private vehicles advertising Edge Gym.
Refinement and Growth
The referral program was a success bringing in 50 new members within the first 2 months of launch. Total cost of the campaign including the car signs, was only ,500. McAfee refined the campaign to lower cost as well as updated the gym's web site to include a sign up page, making it easier to track referrals. The refined program used car stickers instead of magnets, which were distributed to all members via a direct mail campaign. These stickers were very classy and included a website URL and a unique member number for the referring member. Website visitors sky-rocketed, which ultimately led to increased membership.
Conclusion
Marketing a luxury product or service requires more creativity and cleverness than mass marketing. The referral program maintained exclusivity and tapped an existing group of luxury buyers, who would in turn tap their own circles who were also likely to be in a similar demographic. By utilizing car signs, the program grew awareness for the gym and it also generated a sense of community for the luxury buyers. The campaign was run over a 1 year period and resulted in 450 new memberships.
Recommendations:
Maintaining exclusivity in marketing campaigns for luxury buyers proves to be effective in retaining existing customer base. Make sure marketing campaigns don't cheapen your brand.
Creative approaches to distribution of marketing materials can lower the costs of campaigns. Try simple solutions such as the car signs used in the campaign on this case study.
Referral programs turn your existing customer base into a highly targeted marketing distribution channel. In the case of luxury buyers, referral systems allow you to tap into your customer's existing circles with similar socio-economic demographics.
Launch pilot programs with a small marketing investment. Learn from the pilot program and refine to increase ROI.
Partner with an expert marketing firm or consultant to increase your return on marketing investment.
