April 25, 2019 Category: Retention
One of the best ways to improve your membership retention is to make your members feel valued and important. “But how?”, you might ask. Well, as we’ve discussed a few times already on this blog, customers are increasingly demanding personalised service from brands.
According to the 2018 Accenture Interactive Personalization Pulse Report, an extensive 91% of consumers are more likely to shop with brands who “recognise, remember, and provide them with relevant offers and recommendations”. An important part of what it means to
In our article on risk scoring, we’ve talked about the fact that certain types of customers may be at a greater risk of leaving than others. Once you’ve accurately identified which members are ‘at-risk’, the necessary steps to prevent these ‘at-risk’ customers from leaving can then be taken.
For example, consider a hypothetical member, Jane. Jane signed up for the gym a few months
Do you know how long each of your members has been with your gym? There are two reasons why you should. Firstly, there is strong evidence that rewarding loyal members directly results in a better retention rate – 82.4% of respondents said they would be “more likely” or “much more likely” to shop at stores that offered loyalty programmes. However, you can’t reward your most loyal members if you don’t know who they are in the first place!
Secondly, the sort of correspondence you want to have with a long-term member is going to look very different from a new member. With a new member, your main goal should be ensuring that they are settling in as well as they can. In contrast, a long-term member ought to be acknowledged for their loyalty. They should also be asked for recommendations as to how the gym could improve; long-term members’ experience at the gym over time can yield valuable insights, since they will be able to compare existing gym strategies with old ones.
Even though everyone who buys a gym membership is fundamentally after the same product (gym access), their purpose for wanting that product is likely to differ widely. For example, while some members may be complete beginners to fitness just starting out their health journey, other members may be seasoned athletes looking to develop themselves further in their area of expertise. By differentiating why various members use the gym, you can make your communications strategy more effective.
For example, it would be pointless advertising a coaching certificate course or a high-level personal trainer to someone who’s just started exercising. It would also not be effective to promote a beginner’s kickboxing class to a seasoned MMA fighter. In contrast, imagine targeted communications that acknowledge a member’s purpose at the gym (e.g. lose weight), and make a meaningful suggestion that can help them achieve that goal (e.g. an introductory class to good nutrition). Not only will members feel more supported in their fitness journey, but you may also be more effective at selling add-on purchases — a win-win situation!
Think With Google found that 63% of people expect brands to use their purchase history to provide them with personalized experiences. There’s good reason for this. The services that members have used in the past are a good way to separate one type of customer from another. In the gym context, this could mean distinguishing members that only use the free weights section of the gym from those that only attend group classes. You could even dive deeper into the data, and examine what sorts of classes people are attending.
Understanding what services your customer base is using is an important first-step to serving them better. Once you have that knowledge, you can assign more resources to more popular services, improving the quality of the service that you provide. In addition, you can make targeted promotions and incentives, encouraging people to try facilities or services they haven’t used before, but that complement their existing purchases. The more reasons that people have to use your gym, the more value you provide to their life, and the less likely they are to churn.
Finally, categorising your members in terms of their financial situation is an integral part of any personalised communications strategy. One big reasons for customer churn is a lack of sufficient funds.
For members who may be in more precarious financial situations, such as students or contract workers, one engagement strategy would be to offer these customers a flexible payments scheme or to give them the flexibility to ‘downgrade’ their membership to a discounted rate (with perhaps some reduced membership perks) when necessary. After all, many businesses already offer student discounts, so why not take price discrimination one step further? You stand to gain more from retaining a customer at a discounted rate over the long run, rather than losing them altogether. Additionally, by showing that you are able to work flexibly around your customer’s financial circumstances, your customers will feel cared about.
On the flip side, customers who are working professionals or who are otherwise financially comfortable shouldn’t be offered discounts, or monetary incentives (for referral programmes etc.), since they are likely to be more price insensitive. Other engagement methods should be used with them for greater effectiveness.
April 11, 2019 Category: Retention
Understanding the factors which affect a gym member’s experience can help owners refine their retention strategies to ensure customers feel satisfied with the service as well as loyal to the brand.
There are many reasons that a person might feel motivated to join the gym. Most commonly these reasons are related to health and fitness, losing weight, toning up, and getting in shape. Though there are others such as gaining strength after an injury or training for a specific event. These initial desires are what inspires a person to sign up for a gym membership in the first place.
However, it is through a continued positive experience when attending the gym and by developing a relationship with the brand that ensures a customer’s loyalty and prevents them from becoming at-risk.
It is a customer’s satisfaction overall that will safeguard their continued membership and make it easier and more predictable for gym owners to identify those who are unhappy with the service. Focusing on customer experience and identifying any issues means that owners can drive their resources and energy towards improvement and problem solving to address customer need and boost gym member retention rates.
Understanding the customer experience is, however, just as much about focusing on what makes people remain gym members as it is about knowing why people leave, as virtugym succinctly puts it: “People can leave for a manner of reasons but usually, it’s because of something that can be controlled by you.”
From the moment a person begins to consider joining the gym, they start to move down a particular pathway. They will perhaps start to research different gyms and consider factors such as the cost of membership, the convenience of location, and provision of facilities. They may search for gyms that offer trial days; they may book a session to look around the gym and talk with staff members, they may try to find offers or discounts or certain flexibilities that make the membership more appealing.
Gym owners, therefore, have a significant opportunity to provide a positive experience, one that makes their facilities stand out from their competitors even at this early stage. The ease of use of their website, the helpfulness and availability of staff to meet with them or talk to them, and the first impression of the facilities all play a part. These factors can all influence not only a customers decision to join that gym in the first place but also provide a lasting impression that could stick with them as they continue to use it.
When it comes to member satisfaction, there are a number of factors that gym owners and their teams can control to ensure a member has a positive experience from the moment they arrive, to leaving the gym and even beyond.
As soon as a person arrives at the gym, their experience can be affected. Can they park easily? Are they welcomed warmly on arrival? Is it easy and straightforward to get into the gym? Ensuring that as soon as a customer steps foot on the premises, they feel as though they are being given personalised attention and that it is a seamless and hassle-free experience to begin their workout, is essential.
Provision of facilities also plays a significant part in member experience. Clean, contemporary and practical facilities are a must, and the higher the quality, the more likely a customer will be impressed. Standard gym facilities such as changing rooms and showers are essential but to stand out, gym owners should consider what other facilities could make their customers feel more appreciated. Social areas, drinks machines, a shop and cafe all add value. However, it is also important to remember the smaller details such as providing hand soap and towels, and making sure the toilets have toilet roll (!) that will make sure the member’s experience is even better.
Fitness technology improves member retention and so provision of the latest equipment is important. It is also crucial that gyms provide a sufficient number of each machine, as well as making sure that gym members understand how to use the apparatus to ensure that their workout sessions are constructive and useful.
Self-efficacy is powerful as this study found, so providing instructions and training on how to use gym equipment is a must. Doing so will again reflect well in a customer’s overall experience and feeling of satisfaction, being respected and looked after.
If members have to queue for machines, or if they become frustrated because they can’t work out how to use them they will start to doubt that they are valued as a customer. If the machines are broken or out of order, or if they feel as though the variety or standard of equipment is not adequate these could all be factors which create a poor impression, make members feel less invested in or cared for, and therefore increase the likelihood of them becoming at-risk.
Gym members who feel connected to the gym are more likely to feel loyalty towards it. If they don’t feel welcome, become self-conscious or uncomfortable or find coming to the gym to be an isolating or challenging experience they will be less likely to want to return. Staff members out on the floor communicating with members, motivating them, helping and advising them and giving them personalised attention can help gym members feel as though they are part of a community, creating a sense of connection and lowering the chances of them becoming at-risk.
The above points all tie into the fact that gyms must continually pay attention to the products and facilities they provide, their communication and customer service and how they can make customers feel valued and motivated. 81% of consumers are more likely to give a company repeated business after good service, and companies that prioritise the customer experience generate 60% higher profits than their competitors, so it is certainly well worth including these factors in your retention strategy.
Understanding the specific struggles that gym members face is crucial and gives owners better insight into how to solve their problems. For example, if a member cannot find a parking space, can’t get on a machine they want to use, or can’t book a class because it’s full, combined with more general issues such as feeling demotivated or not enjoying their workout they may struggle to feel positively towards the gym. In fact, it is proven enjoyment of exercise plays a significant role with studies like this one reporting that those who enjoyed exercise at baseline were more likely to stick with it.
These factors should be recognised and addressed to help provide a better service and boost member retention simultaneously.
Of course, while it is not always possible to ensure that a gym member leaves the gym in a positive mindset, there are plenty of things that gym owners can do and strategies that can be put in place to help make coming to and working out at the gym more of a pleasure than a chore.
Attending the gym should be a fantastic experience from start to finish, one where customers feel as though they are being cared for, looked after, and invested in. It’s not just about the obvious things; it’s the details that count and trying to help customers leave the gym in a positive frame of mind and reflect that the experience was a good one will encourage them to return time and time again. Being able to analyse and identify patterns that could lead members to have either a positive or negative experience is an essential way to help gym owners and their teams recognise when a member may become at-risk and improve that experience before it is too late.
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 4, 2019 Category: Retention
The verdict is out – anyone who wants to run a successful and sustainable business should be focusing on retention. After all, 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%. Poor retention is a particular problem for enterprises in the health and fitness industry. In this article, we’ll discuss the practice of risk scoring. Risk scoring is the act of
Some customers or customers segments are inherently more prone to churn than others. This is expressed in patterns of customer behaviour, with some patterns indicating a higher probability to churn than others. However, without a risk scoring system, it is extremely difficult to identify these behaviours, and who high-risk customers might be. It is even harder to proactively take the necessary steps to prevent these ‘high-risk’ customers from leaving. An effective risk scoring system will not only identify who high-risk customers are, but will also be able to do it in a timely fashion for your to make the necessary changes before it is too late.
The practice of risk scoring assesses the probability (or risk) that a given customer or segment of customers will churn, ceasing to do business with you. There are a variety of factors that come into play in determining the risk of a particular customer or segment of customers churning. While the specifics will vary between contexts, some factors that are likely to be important include how often they attend the gym, their purchase history, and how long they have been a member of the gym.
Risk scores can also be aggregated. Aggregating risk scores is particularly helpful for individuals who run several clubs or facilities at the same time. By comparing clubs’ overall risk scores, it is easy to tell at a glance which clubs are doing better than others at retaining their members and to swiftly respond to that information.
In addition, most risk scoring systems will also be able to segment your customer base based on their risk scores, and provide you with a visualisation of the composition of your demographic relative to these segments. Here’s an example of two personas that you may see in your gym:
With insights into the profile of your customers, you will be able to develop marketing and communications strategies that effectively meet your demographic.
One of the best ways to utilise risk scoring in retention management strategy is through the practice of micro-segmentation marketing and communication. Micro-segmentation refers to the practice where customers are divided into niche personas or ‘segments’ based on several specific characteristics such as demographic information or behavioural attributes.
Micro-segmentation marketing, in turn, refers to a marketing strategy that creates “hyper-focused campaigns” to accurately satisfy the needs of each of these varying types of customers. This strategy is incredibly effective because one of the best ways to retain high-risk customers is to meaningfully engage them and help them to understand the value of what your business offers. Remember ‘John’ and ‘Jane’? Here’s an example of how two different types of strategic communication could be developed based on their risk scores:
In this article, we’ve discussed two simplified examples how risk scoring can work to improve your membership retention rate. However, in reality, the various personas you find in a given facility are bound to be more numerous, and the precise communications strategy required more nuanced and sophisticated. Indeed, risk scoring is a very complicated, and potentially tedious process for human hands. The work necessary to carry out accurate and effective risk scoring as a part of retention strategy is exorbitant, and unfeasible for most businesses.
Fortunately, predictive analytics, big data, and other sophisticated technologies have been shown to be effective at risk scoring in some industries. Should a business in the health and fitness industry implement a fitness-specific risk scoring technology, they are bound to see their retention rates quickly improve.
It is crucial to understand how effectively you are (or are not) retaining your client base. In their 2018 NPS and CX Benchmarks Report, CustomerGauge discovered that “a shockingly high” number of companies can’t report how many customers they are losing annually, with 44% of respondents and 32% of senior management not knowing their retention rate. This is unacceptable. Tracking and managing member activity is a vital component of managing a business and sustaining membership retention in the health and fitness industry. Risk scoring, which we’ve discussed today, is an important part of getting to grips with your member demographics and, accordingly, improving your business’ membership retention.
January 25, 2019 Category: Retention
With the average person checking their phone 80 times a day, it is not surprising that an increasing number of gym owners are implementing strategies to utilise this kind of technology in their clubs.
The potential for wearable technology to motivate, challenge and ignite a competitive spirit in gym goers is extensive, and the use of such devices could lead to a notable increase in member retention. Not only that, but the opportunity to capture data and use it to identify and target at-risk customers is also considerable.
Studies have shown that 50% of new members on monthly contracts end their gym membership within eight months of signing up. This equates to around a $6 billion loss of revenue for the fitness industry each year. If gyms, therefore, can better understand what makes previously engaged members lose interest and ultimately leave the gym, the financial benefits are significant.
Now, more than ever, customers are results-driven, and impatient too. They don’t want to wait to find out their progress. They call for instant information on demand, whenever and wherever they are.
Health clubs are in a particularly favourable position to explore the possibilities of wearable technology and offering the use of wearables or tracking apps during workouts and classes could see customer retention rates soar.
In this article, we explore the potential that wearable technology and tracking apps could have on member retention and why club owners should seriously consider implementing the use of these devices as part of their member retention strategy.
A gym member who is accountable for their workouts and motivation needs to be able to assess their performance. Wearable technology can track progress during exercise, summarise post-workout performance and can compare this with historical performance data. This enables gym goers to take responsibility for their own fitness goals, to feel a sense of accountability, and to compete with themselves. They become active and involved in their own fitness and, as a by-product more engaged and motivated to continue.
Shawn Potocki, the owner of UFIT Personal Training in Hamilton, New Jersey, agrees that the use of technology keeps clients more interested in their workouts:
“My clients definitely feel more accountable when wearing a heart rate monitor or another forms of wearable technology. This is especially true when they are doing workouts on their own. The technology helps them keep track of their progress.”
Technology that allows members to set goals and track progress gives them ultimate control and means they actively participate in their workouts rather than being a passive bystander – and doing so naturally has a positive effect on member retention as more engaged members are less likely to feel demotivated, stop going to the gym and eventually end their contracts.
The number of people using social media increased from 0.97 billion in 2010 to 2.62 billion in 2018 and is set to rise even further in the future. Fitness clubs have realised that combining social media and wearable technology creates digital communities, increases socialisation, and encourages members to view workouts as something social, enjoyable and fun.
Gamification is the use of game elements and game-design techniques in non-game contexts to engage people and solve problems. Enabling gym goers to communicate with one another and compete with one another via wearable technology gamifies the process and encourages friendships to form.
People who feel that they are part of a community when attending the gym, and who view going to the gym as a social activity are less likely to leave, so encouraging these communities to develop as well as a sense of friendly competition can see member retention rates increase.
Gyms can promote communication and competition via the use of social media, apps and wearable technology pitting members against one another, creating virtual leadership boards and even setting competitions themselves such as ‘who can burn the most calories’, ‘who has come to the most sessions’ and so on. Seeing other members engaged in such a way could also influence those who are less engaged and encourage them to become more involved.
Wearable fitness trackers that can be linked up to gym equipment can turn both individual workouts and group exercises classes into a game, not only motivating members to push themselves harder but simultaneously increasing the sense of community at the gym. This feeling of belonging coupled with an increase in engagement in their workouts means members are also more likely to reach their personal fitness goals, increasing levels of satisfaction, motivation, and desire to continue.
According to Soreon research, the use of wearable technology in the healthcare sector is only going to extend, with a predicted increase of investments into the healthcare sector from $2 billion in 2014 to $41 billion in 2020.
The vast amounts of data gathered from apps and wearables can provide gym owners and their team’s crucial information that can help influence membership retention strategies and can be key to answering the problem of how to improve customer retention.
The information gathered from these devices can indicate which members are at higher risk of cancelling their membership, enabling staff to intervene and influence with measures to try and turn them around, be that through 1:1 attention and motivation techniques or through offering an incentive to stay such as free classes or personal training sessions.
Sending out reminders for classes that might interest members based on the data collected from wearables, as well as training tips and push notifications could also help to encourage at-risk members to continue using the gym. Using apps that inspire people to set their goals and track their progress when not at the gym such as inputting meals or additional workouts can also provide valuable insights into whether members are having trouble sticking to their goals – and if they are offering advice and support could help them get back on track.
Whether the gym is part of a multinational chain or a small local business, club owners are beginning to realise that improving member retention rates is key to their continued success, and the benefits of using wearable technology can play a meaningful part in this. Be it attendance, in-club spending, workout progress and fulfilment, or rating the facilities and customer satisfaction overall, all this data can be collected, analysed and used to improve customer experience from every angle.
Integrating wearables and tracking apps into the fitness experience and using this technology to gather individual membership data provides a powerful insight into how engaged customers are. This gives gyms the opportunity to become an essential part of members lives, improve their experience, increase motivation and offer them incentives, all of which will inevitably result in higher member retention rates and steady, sustainable growth.
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!