November 14, 2019 Danni Poulton
There was a time when gym membership plans were all pretty much the same. But now there is a wide range of gyms on the market, with as many membership categories as there are calories in a protein shake.
So the big question you may be asking is, do membership categories affect your gym membership retention rates? Well, read on because we might just have the answer (spoiler: we do).
Broadly speaking there are two standard approaches to gym membership pricing plans, pay as you go monthly plans or annual plans, although day passes are often available.
Monthly plans are for members who are either watching their pennies or are unsure whether they want to take up going to the gym in the long term, so they’re testing the water. They may even only want to join for a few months to get slim enough to fit into that awesome dress they want to wear to a summer wedding, who knows?
Most gyms offer monthly plans because it still equates to cash coming in and some of those members will stick around for the long term. But on the whole, monthly plans are poor when it comes to actually retain your members over the long term.
In 2009, a study by Dr Paul Beford found that over 50% of new members on monthly contracts quit within the first 8 months. Within two years, 80% of them will have quit.
Some big commercial gyms factor this kind of “churn” into their business model, but it’s worth pointing out that it is much more expensive to acquire new members than it is to retain existing ones.
We’re not suggesting that you don’t offer these monthly plans to prospective members. In fact, the rise of pay as you go membership is contributing to the ongoing boom in the fitness industry in the US (more on this later). But it’s worth putting a focus on up-selling monthly subscribers to annual plans and putting effort into preventing churn from these at-risk monthly plan members, especially if you’re competing with more flexible rivals.
Annual plans put you on a much surer footing when it comes to boosting fitness membership retention.
70% of members will still be around by the 12-month mark, although this is probably because their contract is fixed and they don’t want to waste money by quitting early. So you’re certain to retain members longer with annual plans. But that doesn’t mean people will necessarily attend that much during their first year, and if they quit after a year you have to go through another round of member acquisition every year which is expensive and not very efficient.
Think of every annual plan you sell as a step in the right direction. But make sure you have a solid, customised retention strategy in place that works for all your members, whilst addressing their individual needs (more on this here).
But there’s more to life than monthly and yearly membership plans.
Gym memberships aren’t just defined by the length of the contract. That might mean something to your accounts team, but it means little to individual members. They want to know what your gym can do for them that will help them reach their fitness goals. And fitness goals vary from person to person. It’s common to offer package plans to members to help tailor their workouts to fit them, thus ensuring they stick around longer. Clever, hey?
A package plan could offer sessions with a personal trainer, VIP perks, product discounts, or reduced rates on long-term membership plans.
By tailoring your plans to suit your members, you’re ensuring that they will have a gym experience that works for them. But that’s only the tip of the iceberg in terms of how custom plans can help improve gym retention.
One of the biggest drivers of retention is how much interaction gym members have with other members and with staff. People who work out in groups are less likely to quit than people who work out on their own. So your membership plans should involve lots of opportunities for your members to be involved in the social life of the gym.
Puregym offers a “buddy access” bolt-on to their monthly or annual plans that allow a friend to join you at the gym up to 4 times a month. This is a great way to ensure members don’t work out alone and may lead to the buddy joining full time themselves.
If we’re talking about boosting retention then loyalty schemes are a great way to encourage this. Loyalty schemes can include free friend passes, personal trainer sessions, product and class discounts, and so on. Improving member retention involves motivating and incentivising your members where possible.
All data points to the fact that long term plans are better for retention. But before you ditch your monthly or day pass options consider the following…
In the past decade small, budget gyms have been muscling into the market share of big box gyms. Millennials are attracted to flexible fitness offerings, and have been leading a cultural revolution that has seen more and more people hitting the gym on a weekend than hitting the club. And research has shown that 36% of millennials pay monthly gym membership fees, double the amount of older age groups.
It’s important to be aware of this trend in the industry. Depending on the audience, your gym is catering to you may want to move towards more flexible pricing in order to capture this market of young professionals with money to spend, or else they’ll only go to someone who has offerings that suit their needs.
If this feels like an uphill struggle, you can use AI retention tools like Keepme to help improve gym retention. This will help you monitor individual members and assess their risk of attrition, as well as how favourably they view your club (their Net Promoter Score). This data can then be used to automatically trigger outreach campaigns to help improve the changes that members stay at your gym.
One of the main reasons people quit the gym is because their gym membership plan doesn’t work for them. You can do a lot to prevent churn by sending surveys to your members asking if they are happy with their plans, or if there is any room for improvement. By troubleshooting the member experience in this way, they will feel listened to, and will hopefully end up with a more suitable membership package. If that means tailoring a plan to suit individual members then so be it. The trick to gym retention is that you can’t take a one size fits all approach, you have to look at your members in terms of their demographic and their churn risk.
Keepme can automate this process, giving members a retention score from low to high-risk of quitting. You can then act on this data to improve your member retention.
So when it comes to how membership categories affect retention, you should pay close attention to monitoring the link between your plans and attrition. But the bigger task is not to turn away from members who are at high risk of retention like monthly members are, the point is to actually get to the root problems that lead to retention and fix them.
October 3, 2019 Beth Cadman
Should gym operators focus on persuading members to sign up for longer contract lengths, or is pay as you go better for retention? A careful combination might be the best way.
Understanding what effect membership plans have on gym membership retention rates can provide a useful insight to enable operators to market one or the other more strongly, and should be considered when devising a smart retention strategy.
There are, of course, benefits to both members and the club to offer different membership types. Most gyms can charge more if they offer a ‘drop-in’ or pay as you go service. However, convincing members to sign up for a 12-month contract means that the business has greater financial security and can forecast and make budgeting and growth plans more easily.
So how does each membership type effect retention rates?
Those who commit to a 12-month contract, be that by paying a monthly fee or paying the entire sum upfront, naturally have a higher retention rate than those who only pay from month to month or simply pay each time they visit. This, of course, is understandable as if a person feels tied into a service that they have committed to pay for for a particular length of time, they are more likely to use it to get their monies worth.
Persuading members to sign up for a 12-month contract can give operators more stability and financial security, and because this is the standard for many gyms, there is less likely to be much resistance if dealing with an engaged and motivated member.
However, it is important to acknowledge that offering flexibility and freedom in a members contract can also work well. Members who don’t feel ‘trapped’ and who see going to the gym as a choice that they are fully in control of, rather than an activity that they have been coerced into are perhaps more likely to remain motivated and inspired to continue. Exercise quickly becomes unenjoyable if a person feels as though they are being forced into it against their will.
Similarly, if a person can no longer afford to pay the monthly fee, and has the flexibility to pause their membership for a while, they may be more likely to return to the gym when their income increases again. Those who have committed to a 12-month contract they can’t get out of, who then fall upon hard times, may end up feeling extremely resentful towards the gym when they have to continue to pay even though they are struggling to afford it. This could lead to a negative association, and even if they then become more affluent and can afford to rejoin, may refuse to do so because of the negative experience they underwent the first time.
According to a study, numbers indicate that members who commit to 12-month membership agreements have a higher rate of retention than members who join month-to-month without any commitment. The research shows that those who pay month-to-month decrease significantly beginning at three months.
What is interesting to point out, however, is that the same study also revealed that of the 1.47 million memberships sold, 80% of these are month-to-month plans, and only 20% are 12-month agreements. This indicates that month to month contracts remains a more popular choice for people and that they do crave options, get-out clauses, and flexibility in their memberships. However, being given that choice, then makes it much easier to leave – and they are reminded of that possibility every month when given the option to renew.
The maths makes this even more plain to see. In short, those who have a month by month contract have 12 chances to leave every year, while those who sign up for a 12-month contract only have one chance. As a gym operator, it’s easy to see which odds are more attractive when trying to boost member retention rates.
In terms of revenue, however, it might not make a great deal of difference. Since the more attractive option to entice new members appears to be the month by month payment option, selling a greater number of these membership types could offset losses made when members do quit. What it does mean, however, it that gyms have to fight each month to find new members, where those who are signed up to a 12-month contract remain secure, for the time being.
The truth of the matter is that the more you can sell to a member, the better the chances are of them remaining committed to the gym. Joining fees, longer contract lengths, added extras, higher price points – these are all challenging to sell. However, if a salesperson is able to get a potential member to make that commitment, once they have signed on the dotted line, they will be more motivated to ensure that they obtain value from that commitment.
It is important, as always, for gym operators to gather data, research member behaviour, and offer tailored marketing plans, personalised memberships, and flexible options if they wish to optimise retention rates. For example, focusing on customer service, on excellent orientation and onboarding procedures can help to ensure a member remains more committed. Encouraging members to attend the gym more frequently and create a routine can also help to boost retention. In fact, doing so means a member is likely to stay an additional six months longer than one who visits the gym on a more ad hoc basis.
Certainly, operators have begun to change their business models, and brands such as The Gym Group and PayasUGym use these flexible contract types as one of their main benefits to entice members away from bigger gyms who want to tie them into a longer contract length.
Research from energy firm JD Power in the utility sector revealed that billing and payment factors could account for 20 percent or more of total customer satisfaction scores. Making sure that the payment process is smooth and error-free is, therefore, imperative. By paying attention to how much time the team spends correcting payment errors, gym owners can get a clearer idea of whether payment experience is positive or poor.
It also might be worth considering and revising systems for chasing those customers who fail to pay. Debt collection should be handled sensitively and if not done so could trigger a backlash from upset members, which could then damage the reputation of the gym.
Providing flexibility is also crucial. While collecting monies via direct debit is the preferred option, it could be well worth gyms offering different payment offers to suit various cohorts of customers, such as allowing members to pay on any day in a given month. Being sensitive to different members budgets can also help operators come up with a range of membership plans to cater to everyone. Offering different types of payment plans and lower-cost memberships can encourage members to commit for longer, and can also foster customer loyalty from a broader range of members. The rise in popularity of fitness passports which offers those who sign up access to a wide variety of gyms and other health and fitness facilities in their local area is also a consideration that gym owners should consider buying into.
Pushing for a 12-month contract can have a positive psychological effect too. If a member signs up for this length of time, they start their gym-going feeling committed to attending longer term. Statistics show that if a gym-goers attend more sessions when they first join, they are more likely to continue to use the gym going forwards.
There are pros and cons for both contract, pay monthly and pay as you go options, and it is important for a gym to be able to calculate how to achieve the best balance for optimum revenue and retention. While the evidence seems to suggest that longer, fixed-term contracts tend to improve rendition rates, month to month contracts to appear easier to sell. Gyms must be careful not to push too hard for one at the expense of the other, and as always it is by engaging with members, listening to their needs and investing time and resources into understanding their behaviour that gyms will provide unique, satisfying fitness experiences and retention rates will remain high.