The Economy's Affect on my Martial Arts School

The current state of our economy (in the USA) has affected my martial arts school. I have felt the effects recently.

I know many people tend to use the negative state of the economy as a crutch to lean on to blame for not-so-positive business results.

I'm not one of those people. We have regular traffic of walk ins, referrals, and plenty from our website. People are coming to our door, and they are ready to buy.

BUT

Here is where I noticed a difference, and I have to attribute it to the economy. Well, that and my lack of ability of being a hard-seller.

More and more, people seem to not want to do autopays with us. They don't have or want to do the Credit Card autobilling or they don't want us to do autowithdrawls by EFT.

I've lost the potential of 2 clients, simply because I was adamant about autopayment. I have now decided to go ahead and let those who request it, manually giving us payment. Our office manager and our software system is great at keeping track of stuff, so we can do it, but UGH.

It feels like I've sort of lowered our standards a little. But, I was tired of missing out on the opportunity to make more revenue because they were uncomfortable with autopays.

But jeez. With people paying manually, why even bother having an agreement rate. Yeah you can commit to 6 months with us, but if you're paying us manually, you can quit at any time with no consequence.

Perhaps we should have a separate rate for people who want to pay manually.

There's another martial arts school in town that actually sends a collection agency to people who decide to breach the contract. I have to admit, the thought is tempting, but then, I'm sure it is expensive to hire that kind of agency, and, it seems like you'd get sort of a bad reputation for doing that.

I've never seen so much resistance to autopays before, and we've been doing them since 2006. So the only conclusion I can come up with is that the economy has caused people to be very very tight and protective of their finances, not letting anyone in to doing autopayments - even though it makes life simpler for everyone.

So, we're manually taking payments again (definitely not promoting that we do). What next? Are we going to start doing all of our accounting in a notebook again? Just kidding. But seriously, it would be interesting to see if when the economy improves, if people are more willing to do autopays.

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Comment by Jon Malach on January 7, 2011 at 12:14pm: Santanu - that's a good question, I say feel them out:

- if they've been talkative during the intro/first visit then I say off the top just keep it real with them and proactively knock down the potential rebuttal

- but, if they have been the quieter type, then see if they take without the explanation, and elaborate if/when necessary

BUT! My approach to everything - try it out

On your next 6 visits - try both ways 3 times each and evaluate.

Comment by Santanu on January 6, 2011 at 10:56am: Excellent take on the matter, Nick! Thank you.

Comment by Sensei Nick on January 5, 2011 at 4:00pm

Santanu,

Great post.

My opinion:

People are scared because they are tight. They want to train in the martial arts, but they auto payment is scary because they are barley making their bills.

Ways to make up for it:

Enroll more students
For people that do not want to do auto payment, tell them you need a credit card on file and you will not run it unless they are seven days late for the payment.
Split up thier payments and charge them twice a month.
Find out if the monthly rate is too high and let them make a larger down payment

In other words-Adjust and adapt to the market.

Comment by Santanu on January 5, 2011 at 12:19pm: Jon -

Excellent response, thank you for sharing that. I really love the idea of having them "step in our shoes for a moment".

What do you think about telling them the reason for the extra charge up front, as in, "We do have a manual payment option, which is ___. It is more because we have to have staff to manually keep track of it. For autopayment, everything is automatic so we don't need to do any extra work for tracking it."

Or is the strategy specifically to not mention that detail and just see if they take?

Comment by Jon Malach on January 5, 2011 at 12:04pm: Big post here, hoping a few will weigh in on their points of views / experiences on this one...

My two cents:

"Perhaps we should have a separate rate for people who want to pay manually." < YES, and be real casual/transparent in explaining why there is a separate rate (which I will throw an example of in a second).

Here is main theme to convey here - it's the era of the "new school sales approach", all the hard selling / soft selling / eduselling / "yes sequencing" selling etc etc < pretty much all done now

What do I mean? We are all introducing products and services to people who may want them now, we aren't selling them anymore (sounds weird but it's true). Let me clarify, during today's sales process - most of us tend to go through the same stages without knowing it:

1) Get to know the prospect, what are their needs, pains, fears, desires, etc

2) Communicate/Paraphrase what we learn back to to the Prospect (Basically Ensure the prospect understands that we understand them)

3) After we-know-they-know that we understand them, we introduce them to what we feel in our experienced opinion would be best for them based on what they have shared

4) They either go for it, or begin to introduce some new needs/pains/details (example - budget)

5) We start the problem solving (times they can make it, what they really can afford etc) and if we manage to solve the problems (one of them often being trust), we get the sale.

^^^^ In this example, I am not selling really am I?

Ok so let's apply it to the guarded prospect who won't auto pay (I'll take it from the moment he's/she's sold and now is selecting payment method), and please note - I have a habit of being over-transparent and making the prospect help me solve my problems after I have solved theirs:

Jon: "Great, so your first lesson will be on _______, here's the student agreement, while you are reviewing it, I'll cover off the payment options to choose from"

(pretend I just covered them all and that none of them I described include manual pay options)

Prospect: "Uh, I see, well do you have any options where I can just pay you at the beginning of each month, I'd really prefer to not commit to any automatic payments, I am sure you can understand considering how things have been lately"

Jon: "Yeah, I do understand, and your preference to pay manually is not isolated, at least the last 10 people that joined our school said similar things. We do have a manual pay option, but it's an extra ___ month."

Prospect: "I'm sorry, I just wanted to confirm that you are saying that if I want to pay you without you automatically charging me you are going to penalize me for that? I need to pay more?"

Jon: "I totally understand where you are coming from, and I know it does seem that way, the best thing I can do right now is just bring you behind the scenes for a moment ok? My staff here is a small team as we are a small business, and our core skill sets are teaching martial arts and assisting our students in reaching their goals. When people pay us manually, we have to take time away from what we are here to do (teach), and the extra accounting strain of managing manual payments really deters us from having meetings on more important things, like maintaining safety in our classes, ensuring lesson plans are being carried out properly and so on. Lastly, we are also human, and with manual payments we have made mistakes before - hence we encourage everyone to go on auto pay because then we don't have worry about any of that and we can focus on teaching martial arts... not really any different than how everyone is taking advantage of other new technology like paying your hydro online instead of at the bank... sorry for the long winded explanation sir/ma'am, but I wanted to you understand why we encourage auto pay - it's really to ensure our service is first class more than anything else..."

^^^ For sure not everyone will just drop their guard and go the auto pay route, but they also won't pester you about the higher rate to pay manually if you explain it to them by introducing your situation to them, it's like subtle way of daring them to try and offer a better solution (which there isn't one) and in the end they'll most likely concur that your auto pay isn't so evil and you are simply trying to maximize your time to focus making sure they/their child has the best experience possible.