Land of Opportunity – 2: The cost of the lost opportunity?

As I hightlighted in my last post Land of Opportunities – part 1: Engage & Educate recently, in the space of a week or so, three individual events sparked my interest. All relate to highly favourable business opportunities that were already 'warm' that with a different approach would have led to income for the people I was interacting with. In this post, I will look at the second.

The Background

After completing a half and a full marathon, I have now set my sights on doing a triathlon. A great challenge in itself, but there is an added benefit that I will significantly improve my swimming and I have engaged a coach to help me do that. The gym I currently attend has a small swimming pool, where it is difficult to develop. Therefore, I decided to look for an alternative gym that had a larger pool; after a little research I found a gym that seemed right, it also had newer and more modern facilities, more facilities generally, larger car park and a much nicer view when you are on a treadmill. I knew that this would be more expensive than the current gym and was prepared for that, however, I did not want to pay the full price which was over double what I was already paying.

Having had the usual tour, the Sales person sat down with me and started the sales pitch. I was impressed with the gym, but laid out my case. I was prepared to split the difference or go slightly over 50% more than I was currently paying but not prepared to pay the full price. I got the response that all fees were set centrally and that there was no room for negotiation or flexibility. Therefore, no deal was done and I walked away.

Missed opportunity?

This gym is constantly advertising for new members. I approached them and was in a ‘buying’ position and would have ‘bought’ had the price met my requirements. To the gym it was almost guaranteed revenue, yet the local inability to be flexible on the price/package meant they lost out altogether. Aside from the setting up costs, I cannot believe that the monthly maintenance cost of my membership was more than a few pounds so there was potentially a good margin to be had with my offer of 75% fee.

Ignition Coaching - cash in hand

The Math

Gym asking price for a full membership: £1200pa
My offer price for full membership: £900pa

Differential cost, the cost difference between two options, of my offer to the Gym: £1200 – £900 = £300 – the gym would have made £300 less on my membership

Opportunity cost, the benefit sacrificed when one option is surrendered for another, to the gym: £900 – if they had taken my offer they would have obtained revenue of £900pa, as it was they made £0pa as I walked away. Of course there may have been additional revenue for them too, in the form of drinks, snacks and social events

This is a fairly simplistic analysis, as I do not know what the margins are or break even point is on a membership.

In many businesses, cash is king. What would you do, if a potential customer came and offered to put £900 in your hand with little or no effort on your part? Would you stick out for the £1200?