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  • Key Success Factors: Membership Renewal Rate Determines Profitability

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    Hannah Reinecke
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    A fitness club's profitability depends on renewing membership rates as it costs $2 to acquire new members but renewing members provide $27.36 in net cash inflow. The club markets heavily to maintain high sign-up and renewal rates. An accounting firm capitalized marketing costs for new products as assets, but later had to write them down significantly, drawing comparisons to a similar case at a credit card company.

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    Original Title

    Business Description of CUC

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    A fitness club's profitability depends on renewing membership rates as it costs $2 to acquire new members but renewing members provide $27.36 in net cash inflow. The club markets heavily to maintain high sign-up and renewal rates. An accounting firm capitalized marketing costs for new products as assets, but later had to write them down significantly, drawing comparisons to a similar case at a credit card company.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
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    5 views3 pages

    Key Success Factors: Membership Renewal Rate Determines Profitability

    Uploaded by

    Hannah Reinecke
    A fitness club's profitability depends on renewing membership rates as it costs $2 to acquire new members but renewing members provide $27.36 in net cash inflow. The club markets heavily to maintain high sign-up and renewal rates. An accounting firm capitalized marketing costs for new products as assets, but later had to write them down significantly, drawing comparisons to a similar case at a credit card company.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Key Success Factors

    Membership renewal rate determines profitability


    new

    member incurred cash outflow of $2 in first

    year net cash inflow of $27.36 for each renewing member Marketing outlays to maintain high sign-up and renewal rates

    Information Mismatch

    CUCs managers believed that payoffs from new products far exceeded marketing costs reported outlays as assets on companys financial statements Safeguard Services Inc., a credit card registration company also capitilized membership acquisition costs, but had to take significant write-down on this asset Analysts equate the two cases

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