March 21, 2019 Category: Retention
A healthy membership retention rate is absolutely vital for any businesses’ success, especially in the increasingly competitive fitness industry. After all, acquiring a new customer can be up to 25 times more expensive than retaining an old one – membership retention doesn’t merely affect who walks through your doors, it also affects your bottom line.
Member loyalty and member retention are often seen as heavily synonymous. If members are staying with your brand, that means they’re loyal, right? Not necessarily. Membership retention measures whether or not an existing customer continues to do business with you. In contrast, loyalty measures a customer’s attitudes towards your brand. Do your customers actively prefer your brand over your competitors, or are you at risk of losing their business to that new business on the block?
Of course, there is still a relationship between retention and loyalty, since a loyal customer will almost every case also be a retained customer (barring factors such as a sudden inability to pay). Furthermore, there is a relationship between retention and rewarding loyalty – a staggering 82.4% of respondents said they would be “more likely” or “much more likely” to shop at stores that offered loyalty programmes.
It’s not hard to imagine why this is the case. When people are rewarded for loyalty, they feel appreciated, something that is being increasingly important in business – 68% of customers said they left a company because they believed that they were not cared about.
If customers are not rewarded for their loyalty, they have less incentive to be loyal, particularly in an industry like fitness where new competitors crop up every day with attractive deals designed to draw new customers through the door. A loyalty programme also helps to cultivate a sense of community and belonging in members. For instance, Harley Davidson customers, who call themselves “hogs,” frequently develop bonds with their community members. When customers strongly identify with a brand, they are less likely to switch to a competitor.
Loyalty programmes take many different forms. In its most basic form, a loyalty programme is a points-based system, such as UK supermarket giant Sainsbury’s Nectar Points scheme. However, many businesses are adding on to the classic model, providing special features to members as well as points. For example, the wildly popular Sephora Beauty Insider scheme, which has over 17 million loyal members, organises exclusive member events and makeup classes. The Starbucks Rewards™ scheme gives members free in-store refills and the ability to order drinks in advance. For a gym, non-monetary incentives like exclusive fitness classes and the use of special facilities like saunas or access to sports therapists could also be extremely effective. One might also consider pricing strategies that directly reward loyalty as another way to signal to loyal members that you value their business.
However, according to The Loyalty Report 2017, the average consumer is involved in 14 loyalty programs but only has the capacity to engage with half of them. Companies lose money on time and effort, and customers get no more value from the businesses to which they are “loyal.” Here are two important things to remember when designing a loyalty rewards scheme:
1. Keep it simple
If you can’t explain your loyalty programme to a customer in two sentences, it’s probably too complicated, and it will probably be ineffective. Keep things simple and easy to understand! For example, one H&M Club has designed their programme so that one point is worth $1. Structuring your rewards scheme in an easy-to-understand way means that customers are more likely to understand what’s in it for them, and subsequently more likely to engage with the loyalty scheme.
2. Offer a personalised experience
Increasingly, customers are demanding personalised services. Think with Google discovered that 63% of people expect brands to use their purchase history to provide them with personalized experiences. Every demographic is different, and you must first know what your customers actually want. If you don’t, there is likely to be a mismatch between the rewards you offer and what would actually incentivise your customer base to stay loyal.
Rewarding loyalty can be an extremely effective way to boost customer loyalty, and consequently, customer retention. Take the time to assess what sort of loyalty rewards scheme will work best for your demographic, keep it as simple as possible, and you’re likely to see great improvements in both loyalty and retention.
March 7, 2019 Category: Retention
Artificial intelligence (AI) has, in recent years, continued to develop and infiltrate many aspects of the fitness industry and will continue to do so for the foreseeable future. Be it through sales and marketing, customer service, or data collection, the influence of AI is extending its reach and affecting how gym owners and other fitness industry operatives create more meaningful retention strategies to keep existing members renewing their gym membership contracts time and time again.
The Encyclopedia Britannica definition of AI is “the ability of a digital computer or computer-controlled robot to perform tasks commonly associated with intelligent beings.”
However, in reality, the term AI is much more fluid then this and, over time has been adapted and modified to better match the goals that a particular system is designed to achieve.
But how does the fitness industry make use of this technology? And is it necessarily a good thing?
People who join the gym are interested in their health and fitness and self-improvement. For a gym to be invested in AI and to be willing to utilise this new technology to improve their systems, to gather data, to inform them on customer satisfaction, and to tailor their service to better suit the needs of the individual is likely to appeal to gym goers across the board.
The implementation of AI in the fitness industry can not only serve to attract new members with its shiny, hi-tech promises but also convince longer serving members to continue to use the gym as they see it reacting to their ever-evolving needs.
According to Gartner Inc., only 2% of businesses in 2017 used virtual customer assistant (VCA) or chatbot technology for customer service and support, but by 2020, this figure is expected to increase to 25%.
AI can also be used to gather intelligence on messaging interactions, phone conversations, gym attendance records, and other communication between a club and its members. This information enables marketing teams to identify when customers might be at-risk and to act by creating personalised incentives to draw customers back in and keep member retention rates high.
Gyms are also beginning to see how the application of AI could be used to offer virtual personal training programmes to members, lowering the cost for them of hiring an actual personal trainer while giving them a similar option for customised workouts and even individual motivational strategies delivered in a virtual form.
By using a mobile app, gym owners can gather data on how individuals workout – which machines they use and how long for as well as other useful information such as their heart rate. This data can be used to devise bespoke training programmes as well as other nutrition and fitness advice tailored to the individual.
As AI continues to improve members can expect even more specific advice, for example when coupled with motion sensing technology, suggestions on how to improve movement to make the most from a workout are possible. This kind of personalised experience is likely to help members remain motivated and engaged in their workouts and renew their gym membership when the time comes.
Wearable technology and connected fitness machines will allow trainers to get real-time information on gym members activities both inside and outside the gym. This data again can be used to help identify less engaged gym members and to flag up at-risk members thus informing retention strategies to help keep those members motivated.
The development and refinement of AI opens up a whole wealth of possibilities in the fitness industry increasing productivity, gathering and analysing unprecedented amounts of data and taking over routine tasks which could free up gym owners and their employees to spend more time improving customer experience.
However, there are some drawbacks. For a start implementing AI doesn’t come cheap, and for low-budget gyms purchasing the necessary equipment and systems to apply any meaningful AI into their club may, for now, be out of reach.
It is also important to note that humans crave human contact, communication, and company and the importance of face-to-face interaction with customers cannot be underestimated. As Mina Chang writes for Forbes: “you do business with people, not entities. The beauty of communication is found in the nuance that’s only felt in face-to-face conversations.”
This sentiment rings true for gym members who rate having no gym buddy, lack of guidance and feeling out of place as their top three reasons for wanting to quit, problems that are hard to rectify without human contact.
AI certainly has its place in the fitness industry, and it is up to health club operators to strategise how they can implement the technology available to them to best effect.
If they can successfully implement AI systems to automate the more routine conversations or demands that take up employees valuable time, while simultaneously gathering data to improve facilities and offer personalised experiences they could have the best of both worlds. Intelligent, productive systems that inform sales and retention strategies in addition to a team with more time to be out there communicating, motivating and engaging with customers and providing that irreplaceable ‘human touch.’
February 28, 2019 Category: Retention
Customer service plays an important role in improving membership retention – 73% of consumers said they would consider purchasing from a brand again if they had a superior customer service. In addition, customer experience is predicted to overtake price and product as the key brand differentiator by 2020. Put more simply, excellent customer service is a great way to distinguish your brand and what you offer from your competitors, keeping your members coming back for more.
“Don’t worry, I already provide great customer service”, you might say. However, do you know if this is really the case? Rather startlingly, Bain & Company found that while 80% of CEOs believe they deliver a superior customer experience, only 8% of their customers agree! To avoid this, this article will walk you through 5 important tips to improve your customer service and boost retention rates at your gym.
The first interaction you have with any customer is absolutely vital, since it will set the tone for all further engagements. People are prone to the halo effect, a form of cognitive bias where, if an observer likes one aspect of something, they will have a positive predisposition toward everything about it. If the observer dislikes one aspect of something, they will have a negative predisposition toward everything about it.
As such, start off on a sour note with a customer, and their entire impression of you will be tarnished by their bad first impression. You will have to work even harder the next time (if they even give you a second chance!) to convince them that your offering is worth their time and money. In addition, you may have to bear the consequences of them detracting your brand, since 95% of customers talk about a bad experience. In contrast, make a good first impression, and you are not only more likely to be forgiven by a customer for any future slip-ups, but also (and this is particularly the case for gyms) a happy first-time customer might commit to a long-term membership straight away as a result of their positive experience, guaranteeing their business for an extended period!
Many elements go into making a good first impression, such as being particularly welcoming to new customers, or ensuring that any queries or concerns they have are quickly addressed. The physical venue of the gym is also of vital importance, since customers will often interact with your physical space before they meet a member of staff: is your gym easy to find? Is there ample, affordable, parking? Is it clean and tidy? Even though a detailed look at making a first impression is beyond the scope of this article, one key aspect of customer service is strategically ensuring that your customers have a positive first impression of your brand.
In the context of online purchases, It was discovered that some of the most important factors driving good customer service impressions all entailed an issue being resolved as quickly as possible by a friendly, identifiable member of staff:
(Chart Source: EConsultancy)
One great way to ensure that customers’ issues are resolved efficiently and simply is to ensure that your staff are equipped to do so. How can this be achieved?
The first step is to invest in employee training. An employee that has received adequate customer service training will not only know what the best decision to make in any given case is, but is also more likely to be calm and confident in high-pressure scenarios. In fact, household names like Disney and Zappos are well-known for the excellent customer service training that their staff members undergo.
In addition to being trained, staff must also be given the authority necessary for important client-facing decisions like payments, discounts, and on-boardings. While it may seem tempting to prevent staff members from having too much ‘power’ over the gym’s decision-making, unnecessarily restricting what your staff has the authority to do prevents them from efficiently handling customer concerns in a way that would benefit both your customers and your business.
At the heart of positive customer service is each and every one of your customers feeling truly cared for and appreciated. According to research by Forrester, emotion was the #1 factor in customer loyalty across 17 of 18 industries studied. Furthermore, A Gallup study revealed that enduring relationships result only when companies pay attention to meeting the important emotional needs of their customers, not just providing faster service.
So avoid inauthentic, canned, interactions with clients and try to get to know them for the people they are, not just as cogs in the machinery of your business! This can be accomplished through acts like sending out personalised emails to check on how your members are progressing along with their fitness journey, sharing resources you know they will find helpful or interesting, or even something as simple as addressing your customers by name whenever they visit the gym or get in contact about their concerns. By going beyond the minimum acceptable standard of what one might expect from consumer service, you will not only improve your customer’s experience, but also alter the relationship between you and your customer to one emphasises meaningful engagement, omitting one of the several main reasons why customers churn.
Finally, the most crucial aspect of providing good customer service involves regularly and effectively checking in with what your customers are experiencing. At the start of this article, I introduced a statistic that showed that there was a great gap between what CEOs believed they were offering their clients and what their clients experienced. In order to avoid this sort of information asymmetry, regularly assessing your customer’s satisfaction with your brand is vital.
There are a variety of ways to measure customer satisfaction, ranging from
February 21, 2019 Category: Retention
Ever since Frederick F. Reichheld identified ‘Net Promoter Score (NPS)’ as the ‘one number you need to grow’, it has become one of the most prominent customer loyalty metrics in business. The NPS asks important questions that every business leader should know: how satisfied are your customers, and how likely are they to recommend your business or service to someone they know? In this article, we’ll explore the ins-and-outs of NPS, answering all of your questions about what NPS is, how to calculate NPS, and how to take advantage of its power.
The NPS is used to measure customer satisfaction. A tangible snapshot of how well a company is meeting consumer expectations, it provides helpful insights into how an enterprise can serve their customers better, or, alternatively, maintain high levels of customer satisfaction.
Here’s how it works. Customers are asked this question: “On a scale of 0–10, how likely are you to recommend [brand] to a colleague or friend?” Then, based on their responses to this question, customers are classified into one of three categories: detractors, passives or promoters.
‘Promoters’ are loyal customers who will not only consistently buy from a brand, but who will also urge their friends and family to do the same. ‘Passives’ are customers who are relatively satisfied with the service they’ve received, but who may patronise another company if given the opportunity. Finally, ‘detractors’ are customers who are actively unhappy with the service they’ve purchased, and who may tarnish the brand’s reputation through negative word-of-mouth.
The actual NPS score is calculated by taking the percentage of customers who are promoters, and subtracting the percentage of customers who are detractors, like so:
P – D = NPS
In theory, anything above 0 is a good NPS score, since a positive NPS indicates that you have more promoters than detractors – an indicator of potential growth. However, it is also important to benchmark yourself to your competitors, since average NPS scores vary across industries. A recent study across 109 companies in the Wellness and Fitness sector yielded an average NPS score of 77. If this figure is accurate, it would indicate that a gym or fitness facility needs to attain an NPS score close to 77 to remain competitive.
More than two thirds of Fortune 1000 companies use the NPS metric, a testament to how important NPS is for businesses. In addition, Bain and Company research has found that companies that achieve long-term profitable growth have a NPS that is 2 times higher than the average company.
A well-executed NPS strategy will also result in all-around better customer retention. Your NPS score gives you a clear and tangible assessment of how satisfied your customers are with the services you are providing. The score is also a good indicator of your customer retention rate – the more promoters you have relative to passives or detractors, the more likely you are to observe high membership retention rates and see membership growth via positive word-of-mouth.
Most importantly, NPS systems follow-up customer’s assessments of their willingness to recommend the brand with enquiries into the main factors that influenced their response. This is called key driver analysis, and looks into the specific areas of customer service that impact (or, indeed – drive) customer experience the most. Driver analysis is crucial for improving customer satisfaction and retention. With knowledge of what your key drivers are, you can focus company resources on what customers find the most important. This will allow you to be more effective in improving the experience of customers who are dissatisfied with your service and solidifying the support of those who are satisfied. This is crucial, since according to a study by consultancy Walker Information, customer experience (CX) will overtake price and product as the key brand differentiator by 2020.
Now that we’ve given you the run-down on what NPS is, here’s are two important points to keep in mind when executing your NPS strategy.
How you conduct your brand sentiment surveys matters significantly in NPS strategy. For example, CustomerGauge discovered that phone interviews have some of the highest response and retention rates, that shorter surveys (2-6 questions) resulted in a 5.3% increase in response rate, and that customer retention increased 5.2% if customers were surveyed every quarter. In addition, utilising both relationship and transactional surveys resulted in a 4.9% average increase in retention.
If you’re going into an NPS strategy for the first time, be mindful of the details of how you’re surveying your customer base – they could make or break your data collection. If you’re already running an NPS system, re-examine your data collection strategy to see if there are ways to improve it.
Part of the beauty of NPS is that it gives you actionable data. Thus, it also follows that the effectiveness of NPS relies on you acting swiftly and decisively once the data collection and data analysis stages have elapsed. Within NPS systems, acting on feedback received is called ‘closing the loop’. There are many ways that one might set about ‘closing the loop’. Here’s one simple example:
Once you discover who your respective promoters, detractors, and passives are, design targeted communication strategies for each of these categories of customers. A strategy that works to address the gripes of a detractor will have a negligible effect on solidifying the loyalty of a promoter. Similarly, a detractor should not receive messages encouraging them to tell their friends about your brand; they will only say negative things! In contrast, a promoter should be encouraged in their ‘evangelistic’ efforts.
Even though NPS systems are powerful, they are only so if you’re willing to take a hands-on approach to business. The 2018 NPS® and CX Benchmarks Report found that 90% of companies close the loop in some way, and enjoy higher retention as a result of their efforts. However, companies that don’t close the loop increase their churn a minimum of 2.1% per year – yikes!
This article should’ve told you all you need to know about NPS. If you’re serious about improving your customer retention rate, get started as soon as possible on implementing and executing an effective NPS strategy – it’ll be worth the investment.
October 30, 2018 Category: Retention
Low-cost gyms are dominating the fitness industry. In 2015, the number of members at “budget club(s)” grew 69%, while the growth rate of “mid-market clubs” stagnated. As of June 2017, there were more than 500 low-cost gyms in the United Kingdom alone, accounting for an estimated 35% of all gym memberships, and offering membership rates from as low as £8.99 per month.
Besides cheap membership rates, low-costs gyms often share more than one common characteristic. Fernandez et. al. (2017) discovered that many low-cost gyms shared multiple characteristics, like running on very little manpower and offering a “gym-only proposition”.
However, the characteristics that make low-cost gyms so successful also create unique challenges with respect to membership retention. This article uncovers the challenges low-cost gyms face in retaining customers, and suggests that the right technology can meet these challenges head-on.
The business model of low-cost gym facilities can be summed up with one phrase: the essentials. Besides doing away with rarely-used facilities like cafés and saunas to maximise workout space, many low-cost gyms also allow gym members to access the facility without requiring a staff member to let them in. For example, the U.K.’s largest low-cost gym chain, PureGym, has an access system in which each member has a unique PIN code, and international gym giant Anytime Fitness provides members with electronic key fobs for around-the-clock access.
Since low-cost gym facilities depend on a low-manpower business model, they observe substantially lower recurring operational costs than traditional gyms, which depend heavily on staff members being present on-site. These cost savings can then be passed on to the consumer through attractively low membership fees.
However, the same systems and operations that make it possible for low-cost gyms to offer cheap memberships also present severe challenges in terms of membership retention. We know that gym memberships are often cancelled when members experience low engagement, lack in motivation, or lack sufficient funds to continue with the membership. Members of low-cost gyms are unlikely to drop-out due to not being able to afford the membership fee, but they are particularly prone to experience both low engagement and low motivation.
Consider the average new member at a low-cost gym. This member is likely to sign up, make payment, and receive their gym access information through the Internet. When they visit the gym for the first time, they may not encounter a single staff member, since, as previously mentioned, most low-cost gyms have enabled staff-free access. Finally, since many low-cost gyms also tend to have non-binding membership contracts, that same member could cancel their membership as easily and as quickly as they signed up – all without meeting a single member of staff face-to-face. This lack of meaningful engagement between customer and company inhibits the sort of community-building that we know improves member retention rates, and transforms the gym into a mere physical location, entirely substitutable for the next best option. In addition, a lack of member engagement also means that the gym is deprived of an avenue to find out their customer bases’ sentiments and needs. This makes it almost impossible to identify which members are at risk of terminating their membership.
Members of low-cost gyms are also prone to experience low motivation to exercise, which in turn makes them more likely to terminate their membership. Because it costs so little to join a low-cost gym, the sunk cost (incurred costs that cannot be recovered) for the average member is very low in comparison to a mid-range or luxury gym. A member of a mid-range or luxury gym may, in the absence of all other motivation, continue working out as a result of sunk-cost effect; they’ve spent a lot on their gym membership and want to get their money’s worth. However, the sunk-cost effect is negligible in cases of low-cost gyms. The aforementioned lack of engagement that members of low-cost gyms experience also hampers motivation because it results in a lack of accountability for the average gym member. After all, if a member at a low-cost gym stops turning up, it is unlikely that anyone would notice.
It is obvious, therefore, that many traditional strategies or gateways to improve membership retention inherently conflict with the low-budget gym’s business model. For example, on-boarding new members can drastically improve both short-term and long-term membership retention rates, but on-boarding every new member entails a sizable team of staff that many low-cost gyms lack. Similarly, strategic communication with at-risk members, and creating a personalised member experience seem unrealistic low-cost gyms.
That is, until you fully consider the power of technology.
Many low-cost gyms already incorporate technology in their operations. After all, the automated member access systems at most low-cost gyms run on fairly sophisticated data and technology. In fact, these automated access systems may already hold substantial amounts of crucial member data, such as the number of times a particular member has attended the gym in the past month. This sort of information is powerful, particularly when harnessed by the right technology.
For example, Machine Learning and Artificial Intelligence (AI) can utilise existing data to identify which members are at higher risk of terminating their membership, which locations (if a gym owns several) are more likely to see member attrition than others, and even provide custom class or product recommendations to members based on their gym activity. In fact, online fitness marketplace PayAsUGym has recently taken a step in this direction, signing a partnership deal with customer data expert InfoSum to gain greater insight into their customer base and to improve their customer retention rate.
With the right technology, a low-cost gym can generate a member experience as personalised as that at a luxury gym by acting as an intermediary between client and company – a role typically filled by staff. Technology might even be able to be more effective in understanding customer’s needs than staff members, since it is free from human error and available around-the-clock. Bye, bye, low retention!
October 28, 2018 Category: Retention
Membership retention should be top priority for any business aiming for long-term success. It costs five times as much to attract a new customer than to keep an existing one, and increasing customer retention rates by 5% increases profits by 25% to 95%.
One of the factors that affects membership retention rates is pricing strategy. In this article, I’ll discuss the current pricing strategies popular in the health and fitness industry, and suggest three strategies to improve membership retention rates.
Pricing speaks volumes in this industry. When a gym or health centre sets its prices, it is also involuntarily committing to a model of business that prioritises either attraction or retention.
Statistically, it is well-established that 44% of companies focus on customer acquisition as compared to 16% that focus on retention. Taking the United Kingdom as a case study, virtually every commercial gym giant offers free trials of at least 1 day in length. For example, Virgin Active, Anytime Fitness, Fitness First, and Nuffield Health all offer free trial schemes of varying lengths. Other household names like easyGym and PureGym also promote offers which reduce joining fees for new customers. In addition, many gyms promote lower membership rates for new members. These establishments are all following a pricing model that intends to bring in new customers with eye-catching offers.
However, this pricing strategy also sorely misses the mark. The optimal strategy for a firm in the health and fitness industry is to focus its resources on retaining existing members rather than attracting new ones. But current behavior communicates to both existing and prospective members that the business cares more about its new members than its existing ones. After all, the old members aren’t the ones getting discounts and membership benefits.
Jill Avery, a senior lecturer at Harvard Business School, adds that this sort of pricing strategy also is likely to attract the ‘wrong kind’ of customer – “deal seekers who then leave quickly when they find a better deal with another company”.
‘Okay’, you might say. ‘The status quo hasn’t quite got it right. But what would an optimal strategy for membership retention look like?’ In the next section, I suggest a few general principles to guide a retention-focused pricing strategy.
Have you ever received a stamp card from a coffee shop? If you have, it probably sounded something like this: ‘buy 9 coffees, and get the 10th free’. If you’re lucky, you may even have experienced the sweet satisfaction of turning in a completed stamp card at your favourite coffee joint, and subsequently claiming a free drink.
That feeling of excitement is why so many coffee shops have this sort of loyalty scheme. When you feel rewarded for your action (in this case, consistently getting your coffee from one particular shop), you are more likely to associate enjoyable experiences with that same shop. You are motivated, through such an action-and-reward mechanism, to stay engaged with the shop you are patronizing.
And it’s not just coffee shops that play the ‘loyalty card’. International clothing brand H&M has H&M Club, a loyalty program that gives regular shoppers reward points for their purchases. These points can then go on to redeem “offers, services, events and much more”. Sainsbury’s, the second largest chain of supermarkets in the United Kingdom, also runs a similar program with their Nectar Points scheme. In fact, everyone seems to agree that rewarding loyalty matters. Except, strangely enough, the health and fitness industry, in which loyalty programs are not the norm.
If you’re a health and fitness operation, making loyal customers feel valued will not only improve their experience of your brand, but will also solidify their commitment to your business. Some techniques to make long-time customers feel valued include allowing for members to pay incrementally lower monthly rates depending on how many years they’ve stayed with you, or for long-term members to get perks that new members don’t, like a free towel service and refreshments.
This will not only improve membership retention rates but could even have the happy consequence of attracting new members through word-of-mouth recommendations from your ever-growing loyal and satisfied consumer base.
In a recent article, Harvard Business School professor John Gourville discussed the psychology of pricing. He discussed the case study of an “average health club” who is faced with the challenge of ensuring that they both attract and retain their member base (sound familiar?). Gourville suggests that the owner of a health and fitness business should actually make members pay monthly, rather than yearly, in order to improve membership retention rates.
This seems odd at first. Surely, making new members commit to a year of payments upfront is better, since it eliminates the ability for them to ‘drop-out’ every month. However, the psychological element behind payment means that a monthly payment cycle incentivises people to exercise more regularly than a yearly payment cycle. This, in turn, means that members of your health and fitness facility members are more likely to reap the physical benefits that they signed up with you in order to achieve, and will motivate them to continue on with their membership beyond the first year.
Thus, knowing when to charge is just as important in pricing strategy as knowing how much to charge.
Finally, one final important element that is necessary in pricing for retention is a sensitivity to your target demographic. Every business has unique needs and a unique demographic. You know your business better than anyone and are better placed than anyone else to figure out what sort of pricing strategy will work best for your members. Do your members value flexibility or costs-savings? Do they use all your services, or would they prefer paying for one at a time? Find out, and then work towards your demographic.
After all, at the heart of all of my suggestions is one simple principle: if your consumers feel valued, they’ll stick with you for the long-run.
October 25, 2018 Category: Retention
So, you’ve got the fitness company of your dreams. You’ve pushed through hours of conceptualising your brand and business model, creating the best facilities, hiring the best employees. You’ve even been successful at getting customers in the door. All the hard work is over now, right?
Wrong. The key to real, sustained success in the fitness industry is not member attraction, but member retention. This article will explore why this is the case, why it’s not necessarily easy to achieve a healthy membership retention rate, and why you should make improving membership retention a top priority, starting right now.
You probably don’t need to look at your bank book to know that a strong membership base is really important for any health and fitness business. However, if you do, you’re likely to see that membership fees account for around 80% of overall revenue, as Helen Watts discovered was the case for a significant proportion of businesses studied in her paper “A Psychological Approach to Predicting Membership Retention in the Fitness Industry” (2012). This means that member fees are a vital component of revenue (and consequently, profit) generation for fitness businesses. And yet, according to the Fitness Industry Association’s figures in 2002, the average retention rate for a fitness club is 60.6%. This means that each year, a club loses approximately 40% of its members! It is unsurprising, therefore, that the IHRSA has referred to membership retention as the “Achilles Heel” of the fitness industry.
“But who cares?” You might question. “Even if people leave, new members will just come in and replace them.” However, the statistics indicate that this may not necessarily be true. The 2018 State of the UK Fitness Industry Report shows that the rate of growth of the fitness industry is slowing – during the 12 months to March 2018, the number of fitness facilities increased by 4.6 percent, as compared to increases of more than 5 percent in the previously recorded period (March 2016 to March 2017). IBISWorld, an international market research company, has made a similar warning, recently predicting that Australia’s gym market may reach saturation in the next five years. This means that there is no guarantee that there will always be new members to make up for the revenue (and love) lost if your current members leave.
Additionally, apart from ensuring the longevity of your business, there are also inherent benefits to higher membership retention rates. Firstly, focusing business strategy on retaining existing members rather than attracting new members is likely to result in some real costs savings, since, as the Harvard Business Review notes, the acquisition of new customers entails unique costs. For example, the costs associated with advertising, new member discounts, and the practice of giving ‘free trials’. These costs are not incurred with the retention of existing customers. Thus, a shift in business focus towards retention will bring about costs savings, and accordingly, higher profits.
Secondly, improving your membership retention rate can also improve your rate of growth. With a more consistent consumer base, meaningful relationships between these regular members (and even between staff and members) are more likely to develop. This sense of belonging can drastically improve the member experience. As Phillip Mills once said, “people join to get results and motivation, but they stay because they make friends”. When people enjoy and have confidence in your business, they are more likely to recommend your business to others, bringing new customers to your door! Retained customers, therefore, could also be a valuable form of word-of-mouth advertising for your business.
In the first part of this article, I showed that membership retention is really, really important for any successful health and fitness business, and that it is often a problem for businesses within the fitness industry. Why might this be the case? I suggest three reasons.
Firstly, fitness culture is changing. The concept of holistic fitness is becoming more popular, people are demanding greater variety in their fitness regimes, and companies such as ClassPass and GuavaPass are stepping up to meet that demand. This means that the idea of long-term commitment to just one type of fitness facility or workout is becoming increasingly unattractive to consumers. In the Internet age, there are also an increasing number of resources available for free online that allow people to work out from the comfort of their homes, without spending any money!
Secondly, staying fit isn’t easy. At almost every point of one’s fitness journey, there is the temptation to quit. At the beginning, fitness is difficult because one hasn’t yet developed the habit of regularly turning up to the gym and working out. Even when that has been overcome, the motivation to keep exercising diminishes as one becomes more experienced, and session-to-session progress slows down. In addition, people often undergo life changes that make it difficult to keep up with their fitness routine – people go away to college, start demanding new jobs, or have babies. There are many exogenous factors that can make someone leave a fitness gym or facility, membership retention strategies aside.
Thirdly, and most importantly, health and fitness businesses simply aren’t doing enough to ensure that their members stay in the long-run. If businesses don’t actively prioritise membership retention, they won’t account for it in their business and resource allocation strategy. Many businesses even actively divert energy and resources into attracting new members rather than retaining existing ones. As has already been discussed, this is a big mistake, and is likely to be a significant source of the retention problem in the industry.
If you’re reading this article, you’re probably interested in improving your health & fitness business’ retention rate. Although every situation is unique, one thing to be mindful of is the existence of ‘first-mover advantage’. First-mover advantage is the advantage gained by the initial significant occupant of a market segment. Although this phenomenon usually refers to the gaining of technological leadership or resources, it is also applicable when a business emphasises membership retention amidst an industry that does not. As illustrated earlier on in the article, low membership retention is a striking problem throughout the health and fitness industry as a whole, and businesses haven’t caught on yet. But you have.
So, start thinking about your membership retention today. Look closely at your demographics, the people behind your profit line. Think about how to make them feel happier, more included, and more engaged. Think about developing relationships with them for the long-run, not just for the now, and start considering the resources you may need to do so. Start today, get that first-mover advantage, start retaining your members, and watch your business grow!