Do Referrals & Member Retention Go Hand In Hand?
May 30, 2019 •
Referrals are not only a great way to boost sales figures but can actually help keep member retention rates high too, and therefore should be part of every gym owner’s retention strategy.
Any smart gym owner knows that no matter how much time, effort and budget they put into their marketing and retention strategies, without loyal members who are so impressed with their service that they are willing to shout about it and encourage their nearest and dearest to join, their retention rates may remain unstable.
Every new gym member is another person who needs nurturing, encouragement and attention to ensure they remain with the gym. This takes work, time and money, and while a gym owners primary focus may well be on finding new members and retaining them once they join, it is also essential to understand how retention links to referrals and why boosting referrals should be an integral part of the retention strategy overall.
According to the Nielsen Global Trust In Advertising Survey, 92% of people trust recommendations from friends. This means gyms are missing a trick if they aren’t gently encouraging members to get their friends to sign up too.
Word of mouth marketing is hugely influential and cannot be underestimated. A person may be mistrustful of a salesperson who evidently has their own agenda, i.e. to close the deal and make the sale. A friend, however, or even a stranger who bothers to write a review or say something positive on social media is more likely to be doing so because they genuinely believe in the quality of the products and services offered. Therefore, people are more likely to trust the opinions they receive this way and be persuaded by what they say. In fact, word of mouth marketing is the primary factor behind 20 to 50 percent of all purchasing decisions. Having a robust strategy to utilise this, and ensure that your current members are not only spreading positive messages about the gym but actively working for you by encouraging new members to join, can have a significant and hugely positive impact on member retention rates.
So why are referred members more likely to remain members?
One of the important factors to consider when devising a member retention strategy is how to keep gym members motivated. One key component that keeps people coming back to the gym is if they feel it is a welcoming space where they can interact with other members, socialise and have fun. According to a 2014 IHRSA Member Retention Report, almost 60 percent of members credit social motivation as one of the main reasons they continue to use the club.
People who refer their friends and relatives to the gym already have an established relationship; they’ll come together, workout together, spot one another, try new classes, and keep one another motivated, this makes them more likely to stay loyal members and, as a by-product, keep retention rates high.
Social influence can also have a profound and exciting effect on member retention rates. Meaning that if members say positive things about the gym and convince others to join, the new member will also feel positive towards the gym, having had their opinion and beliefs already shaped by their social interactions with their friends. As this study on Social Influence and the Collective Dynamics of Opinion Formation states: ‘In many social and biological systems, individuals rely on the observation of others to adapt their behaviors, revise their judgments, or make decisions.’
Customers who are referred come with an already embedded sense of positivity towards your business and brand. While this expectation must be met, the initial positive perception helps get more members onboard (therefore making your sales teams jobs a lot easier) but also carries with them as they begin to use the gym. If you can continue to meet their needs and expectations, they will likely remain and turn into a loyal customer themselves.
It is also important to note that encouraging referrals can have a positive impact on the referrer as well as the referred. By asking your members to refer you are strengthening your relationship, you are doing business together. You are also asking them and in turn reminding them to think of all the things they love about the services you offer. This can help members feel more invested in (and loyal to) a gym.
Referrals are likely to breed more referrals, particularly if you are incentivising your customers to do so. This ‘snowballing effect’ means that if your members have a positive experience they’ll tell others, and if they have a positive experience, they’ll do the same.
At the heart of it all; however, it is crucial for gym owners to remember that these newly referred customers still require the nurturing, the attention and excellent customer service that your current ones do. If you put all your energy into referrals and hugely incentivise your members to help you but do not then match expectations, retention rates will continue to fall and the time and money you put into creating a referral campaign could result in a poor ROI. Incentivising customers for referrals is fine, but encouraging them to do so organically and naturally is better, and you can do this by providing an excellent service. Then appeal to their ego, let them know that their opinion counts and acknowledge that they clearly have influence and are doing you a favour. Flattery will get you everywhere after all.
A study in the Harvard Business Review showed that bank customers who opened an account from a customer referral were 18 percent more likely to stay with the bank than new customers who weren’t referred. This is because people who refer are kind of like matchmakers. They go out and find people who they think would be a good fit for your gym, who would like what you’re offering. They aren’t just grabbing anyone off the street, and they are finding motivated, interested, engaged people – people who are more likely to remain members and keep your retention rates high — because of this focusing on referrals can be crucial and should be included in every gym owner’s retention strategy.
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