Why Membership?

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THE MEMBERSHIP CONCEPT is certainly not new – countless businesses have used it, including the largest insurance marketing organization in the world, AARP, to the once extremely popular Playboy® clubs (which lost their allure over time only because the bunny suit and club environment went from racy to quaint), even to American Express, with  its slogan “Membership Has Its Privileges.” You have probably seen the TV commercials or heard the radio commercials for DirectBuy®, a wholesale buying club requiring a substantial membership fee. Those requiring much more modest membership fees are Sam’s Club and Costco. In all these cases, customers are paying for the privileges of membership, primarily including the right to be a customer and patronize the business.

There are many profound reasons for choosing to develop Kennedy’s™ with a Membership Concept:

1.) People who perceive themselves as Members of a club, restaurant, buying group, etc. typically spend at least twice as much as customers of similar businesses absent membership do. Another way to say this is: each Member is worth two or more non-member customers.*  This is important because it means each location requires a lot fewer Members to meet income targets than it would if operated as an ordinary barber/hair-cutting shop. Since the most expensive and difficult part of business is getting new customers, the fewer customers needed, the better.

2.) People who perceive themselves as Members of a club, restaurant, buying group, etc. typically patronize the business more frequently than customers of similar businesses absent membership do. * This reinforces #1 above, regarding customer value, but also links to another important measurement: likelihood and frequency of referring others to the business. Again, people who are involved as Members refer more, and people who patronize a business more frequently, refer more.*  Customer retention is the weakness in most small businesses where there are significant numbers of alternative, competing choices. The concept of “customer loyalty” based on customer satisfaction is long ago dead. Other “chains that bind” are needed to keep customers from casually dividing their patronage by whim or convenience. Because it is so costly to replace lost or inconsistently active customers, retention is a chief control element in net profit. Our Membership Concept has built-in retention.

3.) The Patent-Pending Membership Concept developed for Kennedy’s™ provides clear differentiation from all other barber shops and hair-cutting establishments. There are other, obvious points of differentiation, but this is certainly an easily understood and significant one that resonates with certain types of customers.**   Jack Trout, of the famous advertising team Ries and Trout, wrote a book titled DIFFERENTIATE OR DIE, about the explosive growth of consumer choice and marketplace clutter. Another outstanding book, THE PARADOX OF CHOICE by Barry Schwartz, goes into in-depth detail about the perils for consumers and marketers alike of too many choices in a product or service category. For any given type of business, the proliferation of me-too choices dilutes the market to the point that all have too small a share of the market to prosper. The answer is “differentiation,” by being not just different, but different in a way that resonates with a particular market segment.**

4.) Our Membership Concept stabilizes owner income. One of the worst aspects of small business franchise ownership is the unpredictability and instability of income, while expenses are pretty predictable!  Many business owners ride income roller coasters: income going up, income going down. Its feast or famine . . . affected by everything from stretches of bad or good weather or seasons to something going on in the news that’s a distraction for several weeks in a row. The owner of a Kennedy’s™ franchise has a very different experience, because well over 70% of all the income is in the form of monthly continuity, providing a solid and predictable base of recurring income.  You are not waiting for customers to come in…. or affected by customers not coming in as frequently in July and August as in October . . . you are in control of your income.

This is very important for the person for whom ownership of a Kennedy’s™ is a second business – such as the doctor with his own private practice, restaurant owner, corporate executive, etc.  You already have a business with unpredictable, “roller-coaster” income and do not need to multiply that anxiety!  A second business must offer a different financial formula otherwise, why bother?It is an equally important consideration for the person leaving behind the (apparent) security of a regular paycheck from a corporate career; for many, the change to uncertain and unpredictable income causes great personal and family stress – that’s minimized with a Kennedy’s™ franchise.

5.) Our Membership Concept can embolden and empower you to grow your business with advertising and marketing, and by opening additional Kennedy’s™ locations, because the income is so predictable and stable. Complex and difficult to manage metrics like number of customers, average transaction, average frequency, percentage who spend “x” versus “y,” percentage who come in at “x” frequency versus “y” frequency, etc. are replaced by a much simpler, more manageable, more certain formula for creating, controlling and predicting income: number of Members added per month and number of total active Members. This turns advertising and marketing from a guessing game into a true investment strategy. And it can enable you to provide or obtain financing for, and to open additional locations with strong confidence in the projections for number of months to profitability and to full recovery of investment.

6.) Our Membership Concept makes your business more valuable and more saleable, when the time comes that, for whatever reason, you wish to exit. When selling an ordinary business, you have historical sales and income numbers and customer goodwill, but no certain current and continuing income. Businesses with income streams based on renewal, auto-renewal, or continuity tend to sell at a higher multiple of sales or profits than do other types of businesses***, because there is an income stream being sold.  The time you invest in owning and building Kennedy’s™ franchises and your years of ownership should pay you much greater exit dividends than those same years’ ownership in most other franchised businesses of comparable gross sales.

7.) Our Membership Concept creates an environment and a relationship conducive to providing an expansive portfolio of products, services, events, etc. to Members, administered both at the local level and at the national level, creating additional income beyond the core business for franchise owners.****

This is not an exhaustive list of the benefits, but these are some very significant benefits. And frankly, most local retail or service businesses are not designed with anywhere near this level of sophistication. Most are: establish a business that does or sells something; decorate and equip the location; hang the sign; open the doors; advertise incessantly; and hope that enough customers come in to make money. We say: hope is not a business strategy. Our approach is VERY different. It is about using the business as a means of putting in place a continuing, reoccurring income stream, with a high level of predictability and security.

The Membership; the Members; the greatest asset. In a very important sense, owning a Kennedy’s franchise is NOT about (just) owning an upscale barber shop; it is as much or more about owning a Club of Members, and being in the Membership business.

We have developed the Membership Concept for Kennedy’s™ in a complete, sophisticated, and appealing way (see details – “Products and Services” – elsewhere in this booklet). Our chief strategy advisor and consultant on this, Dan Kennedy, has over 15 years’ extensive experience with “Membership Concept” and continuity marketing, encompassing years of work with one of the largest consumer-product continuity/”club” marketers in the direct marketing industry: Guthy-Renker. They have grown to more than $1-billion in revenue with their portfolio of product lines including Pro-Activ® acne treatments and Victoria Principal and Susan Lucci skin care and cosmetics. Dan has also worked with Weight-Watchers International and also brought these same marketing strategies, very successfully, to a wide variety of businesses where they are not commonplace or even thought possible, including: restaurants, including pizza shops; clothing stores and other retail businesses; real estate investing and residential and commercial real estate brokerages; and the list goes on and on. The publishing company he is voice and personality of, lead author for, and helped grow, and continues to advise, Glazer-Kennedy Insider’s Circle™, might be viewed by casual observers as a newsletter, seminar, and catalog business, but it is, in fact, entirely Membership Concept-driven and continuity-income based.  The principals of Kennedy’s All-American Barber Club™, Chris Hurn, Tony Zara, JW Dicks, and Nick Nanton have all mastered continuity and membership models, in part as Dan Kennedy students, and deployed them in diverse businesses of their own, as well as for private consulting clients.

*Research from various sources including The Luxury Institute; The National Association of Retailers; and Restaurant Marketing Systems Inc.

**Approximately 35% of the general population can be classified as “joiners;” they tend to belong to and be active in a number of clubs, associations, subscriptions, continuity programs, etc., and are consistently responsive to “membership concept” – and, incidentally, identifiable and reachable via different commercially available mailing lists. A higher percentage of Mass-Affluent consumers tend to be responsive to membership, when it is presented as “achievement of aspiration” – - the belonging to the group, a recognition of status. And a high percentage of Affluent consumers are also responsive to membership, when it is reinforcement of elite status and access to something “behind closed doors,” not available to all.  Boomers have been “joiners” their entire lives at a rate 5-times greater than are those 30 years of age and younger.

***Research from M&A Advisors and Harvey Zemmel, an exit strategy consultant included in the book, No B.S. Guide to Ruthless Management of People and Profits; and certain industry norms for valuing businesses.

****See Additional Opportunities www.kennedysbarberclub.com/digital-information-kit/additional-opportunities.php

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