We had the chance to talk with Colby Watkins, Director of Strategic Initiatives and Integrations at Daxko, on three crucial steps to retaining revenue at your club.

Short on time? Here are the takeaways:

1. 1 in 3 people will terminate their membership following a card decline. For that reason, it’s important to catch card declines before they happen so you can retain more members.
2. Card decline reasons can vary from invalid or expired cards to insufficient funds (NSF) and beyond.
3. To be proactive in preventing card declines at your club, track cards that are about to expire and reach out to members.
4. To be strategic in preventing card declines, know when and how to take action. Pay attention to what your members are receptive to, and be intentional about how you choose to communicate.
5. To be persistent in preventing card declines or recovering failed payments, you need to communicate quickly. The most successful recovered payments happen within the first two weeks, and it can ultimately take up to 7 outreaches to recover declines.

As a followup to this webinar, we are offering a free Revenue Retention Analysis report that will help your club evaluate the current impact of declined payments.

Christy Brown: Welcome everyone. We’re going to give everyone just a couple of minutes to join, and then we will get started. In the meantime, go ahead and chat and where you are joining us from. We’d love to see.

All right. We’re going to go ahead and get started. Some people are still trickling in, but we will hop in. Hi, everyone. I’m Christy Brown with Club Automation and the Gains team. I am so excited that you’ve joined us for today’s Revenue Retention workshop. Before we hop in, just a couple of bits of housekeeping. Everyone has been muted to cut down on background noise, but please feel free to send in questions via the chat or the Q and A. We will have time dedicated at the end to answer those and Colby can answer them throughout the conversation as well. With that, I will go ahead and jump in.

Everyone, we are so excited to join us. We recognize that at your club, every dollar counts and really represents an opportunity to reinvest into your members so that you can outrival the best. Unfortunately, staying on top of payment declines is a necessary evil, and it can be an enormous task to really have a strong grasp on it.

We have Colby Watkins, our Director of Strategic Initiatives and Integrations here today to talk us through some steps that you need to be taking in order to prevent card declines, how to manage those that you can’t prevent, and we are going to dig into his three-step plan. Colby, thank you so much for joining us.

Colby Watkins: Absolutely. Thanks for having me.

CB: A little bit about Colby: He has been with the team at Club Automation for six years, specifically the Gains team, which is our internal payment processing team. Like we said, he’s the Director of Strategic Initiatives and Integrations, and before that, he worked as an accounts receivable manager, and he is our experts in all things payments.

We’re excited to hop in. So first, can you kick us off, Colby, by telling us a little bit about what trends you are seeing related to credit card usage at clubs and how it’s impacting membership?

CW: Yeah, absolutely. I don’t think it’s a surprise to anyone that cash and checks have been declining over the past several years. That has not been helped with the COVID pandemic that we saw last year with the close association with transmission of the illness, consumers have opted to use credit card and contactless forms of payment. That has increased now, and an average of 91% of transactions are now done through a credit card, card-not-present, e-commerce means, basically any other way that ties directly to their bank account that doesn’t involve that physical transaction of cash or check.

CB:  I know that with an increase of membership drafts, there is an increase of declines. What are you seeing on how that impacts membership?

CW: Absolutely. When you have a card on file, or a set, recurring draft, you’re not getting that guarantee of that cash in hand or that deposit amount physically going into your bank account. So, you really are trusting the member to have these transactions go through successfully.

That does not always occur. Around 8% to 9% of recurring drafts do come back as declined for any number of reasons, and that can ultimately lead to conversations around recovering those funds, notifying them of their decline and then can lead to, ultimately, termination of their membership or cancellation of their subscription.

CB: I know that membership terminations have been impacted drastically over the last year, obviously. What are we seeing in terms of what the current status of membership terminations is compared to last year?

CW: Yeah, absolutely. We definitely saw an increase of holds and cancellations over the course of 2020. Members were choosing to… well, not even choosing to, were oftentimes instructed to stay in lockdown. Don’t go out. Don’t be in large crowds. Don’t go into facilities that are enclosed.

That ultimately led to a high influx of folks requesting to have their memberships put on hold. We also saw an increase in offering. So, folks would basically keep their memberships active, but then pay later once this ultimately subsided and they could return to the gym because folks do want to take advantage of fitness facilities. They want to work out. They want to stay healthy. It’s not their choice that they have to avoid that activity.

Folks are eager to get back into the gyms and back into rec centers and doing what they love doing and improving their lives. We are starting to see that ramp back up in retention and circling back.

That did lead to a hefty increase in cancellations, especially over the summer, which I’m sure a lot of listeners right now are familiar with that experience, but I believe we’re starting to turn a corner with member behavior.

CB: Yeah. I think when I look at this graph, it’s just a wild ride to track compared to 2019.

We realize that there were so many factors influencing a member’s decision to terminate, especially within the last year, but we know with that stat, with the 1 in 3 whose cards decline and will terminate, that is a definite cause of termination. How can we be intentional about tackling what we can control?

There are many factors we can’t, many that we’re working through, but this is one that we can control. With that, I want us to talk a little bit about, okay, we’re saying manage declines. If someone isn’t necessarily an expert in payments, a decline is probably just a regular decline.

Colby, can you walk us through and give everyone a deeper understanding of the different reasons that a card may decline? Because I think that’s going to influence our recommendations and steps to take.

CW: Absolutely. To start with, there are two types of how a decline can occur. One is through point of sale, a member hands you their card, you swipe that payment or enter that payment information in, and you see that it declines in your system. They’re right there in front of you. You can notify them. “Oh, I’m sorry. This didn’t go through. Do you have another means of payment?” That conversation can happen in the moment. That is probably not the most common experience you have with declines, especially in the club space.

It’s often that you are storing a billing method on that member’s account, and they have agreed to a monthly or bi-monthly or annual draft. There’s this understanding that you’re relying on them that these payments will go through successfully and in exchange, they’re getting uninterrupted access to your facilities to work out and enjoy all the amenities.

That is essentially what we’re seeing the most of. You’re drafting those cards on file and that you get that list of, depending on the size of your enterprise, it could be a pretty long list of numbers in cards on file that decline, and along that list could be a myriad of reasons.

We see things from invalid card number or expired card data. Essentially, there’s something erroneous or outdated with the card information that’s preventing that transaction from going through successfully that might require reaching out or contact with the member, or other actions taken, as opposed to something like insufficient funds, which is a temporary state on the member’s account.

The time that the draft occurred, there were not enough funds available in the account. There’s nothing wrong with the card information itself. If there were funds available, it would go through successfully. Another set of actions might be more appropriate to recover that that lost revenue.

Then we have other non-provided declined reasons. Sometimes this can result in just a simple network error. Maybe there was an issue with the processor, the transfer of information there. Sometimes it can just be simple technical issues that are also temporary in nature, but you don’t really know the reason behind that because it maybe just gives you the reason “Declined.”

Those can be a bit of a mystery but knowing the underlying reasons that may result there will be helpful in addressing these declines in the most prescriptive way that you possibly can. It’s not a one size fits all when it comes to a failed payment.

CB: Yeah. Talking through percentage of declines, of how many are coming from invalid, insufficient, or other, that can vary based off of your clubs, so it’s important to have that understanding. Can you talk a little bit about that?

CW: Yeah, absolutely. This can really depend on the communities that the club serves, the demographics that played here, the types of billing methods, whether it’s credit card or debit card or bank draft, that can all play into the best way that you want to address these decline items with your members.

This can also play into the best ways to communicate with your members, whether it’s person to person, sending a physical letter, providing a text, which maybe sending a text out might be more useful with a younger demographic, but then also phone calls and emails.

These are all ways that can have varying success depending on your member demographics, so really understanding the community you serve and those types of groups that are really making up the consumer population can really help you drive your decision making and how you want to go about retaining this revenue and resolving these decline items.

CB: Well, let’s hop into the three-step plan, because I’ve mentioned it a couple of times. The first item we have is Be Proactive. We dig into what our customers should be thinking through and doing in order to be proactive in their approach.

CW: Yeah, absolutely. Declines are a problem. They’re an issue. No one likes declines, and declines are not helping you grow your business.

There are things you want to prevent, so preventative actions to keep declines from occurring is always going to be the first step you want to take. Just like healthcare – preventative healthcare keeps you from going from to the emergency room later, so tracking your information, staying in touch with your members, getting ahead of cards that are set to expire or may expire soon, sending out proactive reminders to update information, also keeping that list handy for when declines occur.

If you have 50 members whose cards will expire, you maybe have spoken to 25 of them at some point. Those other 25 are going to decline. Already being familiar with that list will keep you from being even more reactive after the fact, because you already have an idea of who you need to engage with, who you need to reach out to.

You might even be aware of when they come in, the best forms of…one member is really good about responding to emails where someone’s very good at answering phone calls.

Again, being familiar, being prepared, and staying consistently on top of your, um, members. Billing information and keeping that hosted will ultimately reduce the number of declines that you do have to, uh, react to once they, once they occur.

CB: Yeah. I think that’s great. Even just sitting in on this webinar, having a deeper understanding of how card processing works and being able to really get the lay of the land helps in that proactive step as well.

CW: Yeah. Even just having the mindset of anticipating declines and not just hoping that no one declines payments. Although no one would know what declined, but it’s good to anticipate that those are just a reality when you’re drafting a large number of stored billing methods. There is an inevitable amount of failed payments that will result for any of the number of reasons that we discussed earlier.

CB: Let’s go to the next step. We have proactive, and the next as be strategic. I think everyone on the call would like to think they have strategic practices already in place, but we realize that sometimes once you get into the grind and you are trying to juggle multiple things, it can be hard to get down in and be strategic in your approach to those that do decline that you couldn’t be proactive about.

So, let’s dig into what people should be considering in this step and what some pitfalls are that you’ve seen related to this.

CW: Yeah, absolutely. With being strategic, it really kind of leads into what I was saying earlier. It all comes down to intention and attention, knowing what kind of declines you’re encountering, who your demographics are, what your member base is made up of, how they’re going to receive these communications or if you want to do a resubmission or re-attempting the drafts, knowing when most numbers at your facility might be paid, or might be most receptive to these communications.

Some members work late, some work early hours, knowing when you might be able to reach them, knowing just the member knowledge. I keep going back to it because it is really invaluable. It helps when you want to contact, how you want to contact, how they want to receive this information. It all stems to best practices and providing, ultimately, with everything you do.

You want to provide a good member experience. A lot of times I’ve seen pitfalls is with club owners reaching out to members after work hours at seven or eight o’clock at night. Oftentimes, members are eating dinner with their family. It is not an opportune time for them to take a phone call about their declined payment for their gym membership, so knowing the most opportune times.

Or your members to get emails, phone calls, text messages, that sort of thing. If you have a very intimate relationship with your members, maybe you opt to have those face-to-face interactions at the facility. Really, it just comes down to knowing your members, knowing your business and what’s going to give you what you feel is the most genuine way to deliver the message.

I wouldn’t recommend straightforward messaging. It’s always received better when it’s coming from a place of genuine friendliness and just wanting to say, “Hey, Christy, just wanted to reach out, let you know that the visa card we had on file didn’t go through recently. Did you change your card or do you have a new card you’d like to update with your member account today?”

Those types of exchanges, rather than: “Hey, Christy. You still owe us $50. Please pay us that $50 that you owe us.” You want to consider how you’re delivering that and not sending information out in a very off-putting way.

CB: Yeah, the delivery is important with that message. It can be a sensitive conversation.

CW:  Like you said, it’s a necessary evil, but it doesn’t have to be overly burdensome or hostile or contentious. It can be a very friendly and amicable sort of messaging.

CB: For sure. I want to dig in a little bit more to the third one, which is be persistent.

This one kind of ties into what you’re saying around the messaging, because it can be uncomfortable to be persistent, but it is actually probably the most important specifically for a decline that happens that you couldn’t be proactive about, or you couldn’t prevent.

Can you talk a little bit about why this is important, how often clubs should be following up, and what all is encompassed in this “be persistent” step?

CW:  Yeah. Anyone who’s ever had to deal with receivables should be keenly aware that the more time that goes on, the harder it is to collect that lost revenue.

Honestly, in my experience, the bulk of successfully recovered payments usually happen within the first two weeks, specifically the first week of a decline occurring. So, getting that messaging out the next day, two days, the first few days after that decline occurs is really going to be pivotal in making a successful recovery.

The longer you let these balances age out, the less a member feels committed to paying it. You’ve probably experienced this in your personal life, too. When somebody owes you money, a lot of that time goes on the less they feel responsible for owing it. That can also lead to more time that they may spend away from the facility and that could lead into those conversations around cancellation.

If you have a member that hasn’t come in in a month and you’re just now getting around to making that call, that may dawn on them that they just need to go ahead and cancel because they have not been in, but reaching out a day or two, at least within the first week to let them know we’ll prompt them that yes, they have this membership, they need to come in and enjoy it, but they also need to reconcile this failed payment that they have sitting out there.

Being timely, start taking action immediately is definitely paramount, but then second to that is persistence. Sending out a voicemail or an email one time is often not going to cut it. Creating a consistent cadence for as long as the balance goes unpaid and then increasing the urgency of the communications so you’re not sending the same sort of messaging each time.

The first one can be a friendly reminder and then quick follow up just to just remind them that it’s still outstanding, but then as time goes on, remind them that consequences could result, whther it’s termination of the account, penalties being added, return fees being applied, late fees, anything that’s part of your internal policies. Those escalating measures will also drive the urgency and prompt that member to respond and take action.

CB: If I’m a club owner right now and I’m thinking, “Okay, now I have X number of declines sitting out there and I need to be doing seven outreaches per decline,” that can seem very overwhelming. Can you talk a little bit about…I know that it can be tempting to just almost like ignore that it’s happening, but the risks of, if you do approach that and you do not have a plan in place for managing these declines.

CW: Yeah. I’ve, I’ve seen this come up from time to time where either no one has the time to follow up on these items or someone doesn’t want to have those conversations with their members. I would not advise to just turn a blind eye to outstanding declines.

If you basically leave it as a problem, it’s going to fester. It’s going to become a larger problem. If you leave a member as active and they continue to draft each month and decline each month, they’re just going to balloon your receivable balances. They’re going to throw off your ledger.

You’re not going to know the overall financial health of your business, because at some point a large bulk of these unpaid balances are going to have to be written off and it’s going to bleed into items that you not might be able to recover.

You don’t really have an accurate look of what the overall health of your business is if you allow for these declines to just continue to build up and inflate and ultimately fog the view of your business landscape.

CB: Colby, we have a question in the chat that’s come in that says, “If there are seven outreaches, what are the best channels that you’ve seen be effective in recovering that decline?”‍

CW:  Yeah. This goes back to your demographics. Who are you serving? Do you know the behaviors and habits of the members that you serve?

I personally find that electronic forms of communication tend to be the least invasive for the initial communication, so emails, text messages, phone calls. You’re pulling a member out of their day-to-day activities. You’re kind of rolling the dice on when you’re catching them at a good time. Are they sitting in traffic? Are they in line at the DMV? Are they waiting on a doctor’s appointment?

You don’t know what their experience is, and that kind of comes in line with that increased urgency where, maybe they’ve been unresponsive to text messages or emails, so you want to follow up with phone calls because you do want to get this resolved. You do want to put the item to rest.

Those phone calls are effective, but I would reserve them for follow-up conversations as opposed to calling them right away, but you know what’s best for your members. Some may be more responsive to a phone call. This is not a one size fits all advice across the board.

I would really first take a look at your community that you serve and learn about them. If you’re not aware of what is going to be most effective to get the most responsive turnaround from those outreach methods.

CB: Another question that has come in, “Do you see the risk and cancellations with seven outreaches if you’re hammering your members?”

CW: So, when we say seven outreaches, we’re not talking about call them every day until they pay. I would recommend doing an outreach attempt. Providing, uh, you know, time, you know, time for the member to take action. You may leave a voicemail.

You may speak to the member. They may say they’ll come in at the end of the week, given the benefit of the doubt a few days to take action, then change up your communication approach. If you started with a phone call, send them a reminder email after maybe four or five days, even a week, just remind them, “Hey, just wanted to keep this on your radar that we still have this unresolved decline item that we want to address.”

One day after the next is not an effective way to coax someone to take action. I always recommend being persistent but polite, and don’t harass. When we say seven outreaches, I would say maybe seven outreaches in a month, as opposed to a week or two weeks. Maybe even seven outreaches in five to six weeks, depending on your scheduled drafts and time of year. All of this can play into how often and how consistently you want to make those outreach attempts.

CB: Yeah. I think that plays into what you were saying earlier. If you do act soon and act quickly, you are less likely to have to do the seven outreaches because you’ve moved quickly. Well, we talked through a lot of moving parts, and I know that some people are probably thinking through how to go and act this, or they’re thinking through, “We cannot go in after this and we don’t have the time to.”

So, what advice would you give to someone who’s feeling overwhelmed by going and acting on this process?

CW:  Yeah, so it is always a good practice to have someone who’s dedicated to receivables management and recovering revenue, whether that is in-house or through a billing service. We actually have a billing service that clubs take advantage of called full-service billing.

That basically takes the focus of decline recovery and revenue retention and puts it in the hands of professionals whose everyday focus from morning till late at night is recovering this lost revenue. When you have a small business or small club, and you maybe have trusted someone with this responsibility, it can quickly fall to the back burner as competing priorities start to take hold in the day-to-day operations.

So, having a dedicated person who is 100% focused on this action will, like we said, have that timely outreach, have those proactive actions in place, have that strategic workflow already in place so that you can optimize the efficacy of your revenue retention. Ultimately, it becomes something you have to worry about less and less.

CB: Do you have a question that has come in through the chat that says, “Does that mean the team at club automation is calling our members?”

CW: That’s correct. Right. The team at Club Automation would reach out to members via phone call, via email, in addition to strategic resubmissions of decline items.

Sometimes, communication isn’t enough. Re-attempting the draft at a later date and doing that in an intelligent, data-driven way makes up for a large bulk of the success we see in decline recovery. But yes, to answer your question, via email, via phone, our team reaches out to members.

We introduce ourselves as the Club Automation team reaching out on behalf of said club and then inform them that the billing method they have on file didn’t have a successful draft recently and we want to provide them with the most convenient way to resolve that by either working with our team, going online to pay if that is an option for the club, and then obviously working directly with the team, facilitating those handoffs to make those connections.

It’s not a one-size-fits-all solution. It really comes down to knowing your club, knowing the community you serve, and then optimizing the best approach to serve that community, to address these decline items and, ultimately, create the highest level of success we possibly can in this one regard that we do have control over.

CB: Yeah. For every a thousand members that decline, we save clubs 33 hours of work, which is huge because everything we just talked through, all of the steps to take does take work, it does take time, but we can do it for you. So that just helps really save the amount of effort that you’re putting into a work day to recover this.

CW: Exactly. Yeah. It’s not something that everyone enjoys, but it’s not a test that’s going to go away, especially as we see even more growth in the credit card and really just the contactless payment space is just a trend that’s only going to continue. I don’t see us going back to cash and checks anytime soon.

CB: One thing I want to talk about through is, okay, we talked about a lot, but we want to see the hard numbers of how this will impact our club. One thing that we’re offering as a follow-up to this webinar is actually a revenue retention analysis where we will work with the Gains team to pull some data from yours where we’re actually seeing the total number of cards that declined, and how much direct revenue loss, so you have a good understanding of, okay, where am I currently and how do I go and tackle this? We talked a lot about the impact on membership. We’ll also be pulling information on those that did decline, of those members that hadn’t declined, how many of them canceled in the next 60 days?

Because we can tie that correlation together and show you that overall impact on your membership revenue as well. This is a free report. This is something that we just want to get you all a starting place to understand where you are currently so that either you guys can take our steps today or you can leverage our team for support.

So, if you want that, we will be doing a follow-up email, so you can send a request or email us at [email protected]. Also, we have one more question around the percent that we take in this number collected. Colby, can you help me answer that?

CW: Yeah. There are actually two models that we have with full-service billing when it comes to charging for the service. One is based on your rate of credit card processing, which is, essentially, we would adjust the cost of processing to cover the services itself. That’s one option, if that makes the most sense for your enterprise.

The other means is results driven, so you are paying a percentage based on the return fee that’s recovered, which would ultimately cover the cost of the services itself. If you’re interested in that, please reach out to Club Automation and we can definitely discuss those in further detail.

CB: That’s great. I think that’s all the questions we have submitted. If anyone has any more, like we said, reach out to our team. We can get you set up. We can produce this report for free, and we can turn it around quickly, so if you’re eager to see where you are currently, we can get that to you as soon as possible.

We will be sending this recording out as a follow-up, so if you have some takeaways that you want to share with your team, please feel free to distribute it amongst your team. That is all we have today.

Colby, thank you so much for your insight and for talking to us.

CW: Yes, it was a pleasure. Thank you so much.

CB: Well, thank you all. I hope you have a great rest of your day.