When a business is driven only by dollars, the results are rarely beneficial to customers. For years, this had been the case at Bally Total Fitness.
Numerous customers have accused the national health club operator of misleading sales and membership cancellation practices. Some, due to questionable sales tactics, unwittingly found themselves locked into a multiyear contract. Additionally, the company has been the subject of various accounting controversies dating back to the early 1990s, which include illegal billing, cancellation, refund, and debt-collection practices. To make matters worse, the SEC in 2008 filed financial fraud charges against the company alleging that in 2001, Bally overstated stockholder equity by $1.8 billion and understated its 2002 and 2003 net loss by more than $90 million for each year.
Naturally, these unscrupulous practices came with a steep price tag. The company, which operated 440 facilities at its peak, filed for Chapter 11 bankruptcy protection in 2007 and again in 2008. Subsequent to these filings, the company sold off many of its facilities to competitors. LA Fitness, for example, acquired 171 locations in 16 states for $153 million. Today, Bally is a fraction of its former self, with only 60 facilities.
While Bally can't erase its dark history, a new focus on customer service might help improve the health of its customers as well as its business.
In an interview with CRM, Bally Total Fitness Senior Vice President and Chief Information Officer Guy Thier discloses Bally's efforts over the years to revamp its customer experience and service strategy. It's an evolving process—one that this quarter includes a rollout of new features, amenities, and mobile capabilities at its clubs across the country. But Thier was clear about one thing—the evolution will be all about experimentation. And for Bally, which continued to face class-action lawsuits even after the LA Fitness deal, starting from scratch to rebuild its image will be the first true challenge. Here are excerpts from our exclusive interview:
CRM: When did Bally decide, "We need to do things differently" or very possibly go out of business?
Guy Thier: The strategy began about 18 months ago, which was just before the first phase of selling off some of our clubs to LA Fitness. Bally used to sell three-year contracts to become a member, which was essentially taking out a loan to join us, and we became a banker as opposed to a provider of fitness services. So we definitely wanted to change that entire mindset. We no longer sell contracts of any length. The memberships are all month to month. The extent of our customer service back then was to be customer service agents. The only time you heard from us was if you were delinquent, and it was only by telephone. We've rebuilt our contact center to be member service–oriented with true support of members, whether they want to freeze their membership, cancel, inquire about amenities, or whatever the case may be. Plus, we changed from just supporting telephony to supporting email [and] chat, and we are monitoring social media now. We are responding to entries on social media now through Twitter, Yelp, and other outlets. We actually have our field personnel respond to members in a public forum [and say], "Thank you for your comments. Here's exactly what we're going to do to solve your issue," so that it's apparent to everybody. We're making a commitment as a company to resolve the problem.
CRM: What has been the biggest shift from the Bally of yesteryear to today?
Thier: First, we're moving from a sales culture to a service culture. Second, we're enabling…our club staff to truly solve a member's problem when they're in the club. Up until we implemented Sword Ciboodle [a contact center customer service company acquired by KANA Software last July], if you had any kind of issue when you walked into the club, our club told you to call the call center and let them resolve it. It was really altering that conversation to be more like,"How can I help you? I can help you right here for the vast majority of issues." Again, it's a culture change plus a technology shift. Third, we're trying to extend the relationship between Bally and its customers when you're out of the club instead of only when you're in the club. Then, when you do come to the club, it's the culture shift of having a conversation with you, being warm and welcoming, as opposed to [having the attitude of] "Oh, you're not here to buy from me, so I'm not going to [service] you." All of that relates to a new culture and a new set of channels to relate to the customer…beyond the few hours a week they're in the club.
CRM: When did Bally begin its technological overhaul?
Thier: The contact center rehaul was about two years ago. It went live in the first quarter of 2011. We had pieces of it go live over the fall of 2010, but 2011 was when we had all of the channels in place. That allowed us to do a lot of different things—the 360-degree view of all conversations with a member was available so that anybody in the company could see what the interaction was like with the member, what their history was, and what concerns they've had. Any correspondence we've mailed or emailed to the member is available to everybody so we can better solve a member’s issues.
CRM: How are you talking to customers on social media?
Thier: We don't have social media rolled into KANA yet. Right now, we're just using [Salesforce.com's] Radian6 to monitor social media entries and then respond, but [in a] future phase, [we] will be able to relate the social media comments back to a specific member and tie that into all of the member correspondence.
CRM: Which customer service channels are lead- and service-heavy?
Thier: The heaviest channel is still the telephone. From a member service perspective, it's still the telephone, followed by email. Chat is much lower, maybe 10 percent of the level of email. From a lead generation standpoint, our Web site generates about 40 percent of our leads, and the mobile version of our Web site probably generates 5 percent. In addition, we sell about 5 percent of our memberships over the Web site. So for the most part, people want to come to the club, touch it, and feel it, before they make the purchasing decision.
CRM: Has Bally looked at the mobile member?
Thier: Most of our mobile focus has been [on] functions for employees for use in the club, which has really helped augment the strategy of making the relationship stronger between employees in the club and members. There are a number of iPad apps that we created that allow any [employee] in the gym to see a photograph, along with some key information, for anybody who's walked into the gym in the last hour. [This allows the employee] to understand the [customer's] relationship with Bally, so that [they] can go up and have a conversation. Say [a customer] has been a member for two years. [An employee might ask] "How are your goals coming? Have you lost the weight to schedule or are you getting fit according to plan?" So it really augments the target of switching from a sales culture to a support culture. The second major app on the iPad was to be able to sell a membership on the iPad. The previous Bally experience for membership purchase [was that you would] get dragged into an office and beat up until you bought a membership. Part of the purpose behind the sales application on the iPad was to create a better relationship again. As you're touring the gym and you get to the point where you're ready to buy a membership, we can just sign you up right there on the iPad. You sign the contract on the iPad and you swipe your credit card on the iPad. It all feels much more transparent and open, and is much more of an interactive sales process than having a salesperson sit behind a desk at a computer.
CRM: Did you have any help going mobile?
Thier: We had two consultants for our mobile sales process, which we implemented in June 2011. We had used the user experience group Manifest Digital as a firm for a number of years for our Web site and other interactive media. Then Magento helped us build out the code.
CRM: Are there any loyalty elements to your mobile strategy?
Thier: We have a text-based loyalty program, so there are QR codes around the club, which you can scan with your phone or text a number to enroll in the loyalty program. The offers for that program are different depending on your situation. Once we get a critical mass of people on that mobile loyalty program, we'll start geofencing. When you appear at some destination within our geofence, you'll get a text from us either with an offer or a reminder about Bally or some [message] like, "Hey, we miss you, you haven't been in the club in X number of days." We are working on geofencing, [which is scheduled for] Q1 of [this] year, and I just haven't decided if I'll do it around our competition's gyms or our gyms at this point. We also have a mobile app in partnership with a company called PumpOne. They have a nice suite of exercise videos and the ability to build exercise plans on a mobile device or a Web site. All of our members have access to that service for one month free, and then there's a fee to continue with them.
CRM: Speaking of loyalty, the fitness industry can be notorious for customer churn. Has this been an issue?
Thier: We do member satisfaction surveys on a regular basis. Our member satisfaction scores have steadily been improving since we've been moving to this culture. As far as member churn goes, part of the challenge is the members who quit are the members who don't come to the club. If they don't come to the club, they don't get to experience the change in culture. It's going to be a bit of a [challenge] because we have members who haven't been to the club in six months, so they haven't experienced all of the changes. We're struggling with, "How do we get that message out to those people to come back into the club, and experience the new Bally?"It will be about saying, "You are a member, take advantage of what you're paying for," as opposed to, say, you don't come to the club and you realize there's this credit card fee you're being hit with. It's quite a bit of a challenge there, but I feel the members who are taking advantage of the club and coming in are seeing a big difference, based on our satisfaction scores. For those people, the churn is much lower.
CRM: What about competition from other gyms?
Thier: The most successful competitors right now are probably the low-price competitors like Planet Fitness, so what we're shifting to is actually a new model, which is still in its infancy in the fitness industry. We just happen to have clubs that have amenities. And we now have a cost structure that would allow us to support matching that low price. We're introducing that new concept in a couple of our markets, where it's the same price as at Planet, but you get so much more. You get a pool, you get access to group exercise classes. You have personal trainers, and all of those amenities that don't exist in those competitive models.
CRM: Did you have more members before or after the remake of your strategy?
Thier: It's tough to compare membership then and now, because we've sold off a bunch of clubs, but right now we have 400,000 members.
CRM: What's next for Bally?
Thier: I think the future is really the low-price model with all of the extra amenities, along with a truly changed culture of really being interested in every member and making sure they meet their fitness goals as opposed to some way of selling [them] something else. We're trying to be creative as to what comes with your membership, like the access to that mobile app where you have the ability to build your own fitness routines off the mobile app. Or the access to free personal training sessions and kids' care. And I'm starting to look at what other ways we can make the gym experience more convenient for our members through the use of technology. So in some cases, we've put QR codes on the gym equipment, and we have this concept called circuit training, where you go around and spend a minute on each of 10 pieces of equipment. [By scanning the QR code, you hear] how to use each piece. We also have juice bars in some of our clubs, so one of the apps we're working on is when you're getting close to finishing your workout, you can order your smoothie ahead of time and [it] will be ready when you're ready for it. So I think there are a lot of good things coming to enhance the member experience. Eventually, I want to get to the point that when you walk in the gym, you're essentially "swiping in" as a member through geolocation.
Fast Bally Facts and Stats
- Once Upon a Time: Bally wasn't always in the business of fitness. In the 1930s, Bally Manufacturing Corp. built gunsights for B52 bombers. Over the decades, the company expanded its reach into gaming and amusement parks. Because it foresaw long-term potential in the fitness market, in 1983 Bally acquired Health & Tennis Corp., followed by Life Fitness just one year later, officially marking the corporation's foray into fitness.
- Real Results: Using Sword Ciboodle (now KANA), Bally was able to eliminate many of its manual customer service processes, and cut average call handle time by 12 percent within the first three months of using Ciboodle One agent desktop. New member service representatives were able to achieve full productivity three weeks faster using the desktop.
- Virtualizing Training: Bally's new virtual trainer application (virtualtrainer.ballyfitness.com) gives members step-by-step instructions for 750-plus workouts, as well as full-length fitness videos and an option to build their own workout.