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A Lure for Loyalty

<b><i>Fitness facility owners are dangling rewards programs in front of their members as a way to retain them in an increasingly competitive marketplace.</i></b>

Once upon a time, club owners may have focused only on signing new members, keeping retention low on their list of priorities. Those days are gone, however. With the fitness market becoming more saturated, fitness facility owners must find a way to reduce churn and retain existing members.

Loyalty programs, which reward members with cash and prizes for working out at a club, buying products and services at a club or referring members, are increasing in popularity as clubs look for new ways to set themselves apart from the competition.

These programs aren't new to the fitness industry, but in the last few years, more vendors have begun partnering with health clubs on these types of promotions. One vendor just started targeting the fitness industry 2 ½ years ago and now has 200 for-profit, nonprofit and medically based fitness centers as clients. Another vendor is working with Bally Total Fitness on a pilot loyalty program.

Whether they are in-house or outsourced, rewards programs can build perceived value for members and keep them emotionally connected to the club, says Neal Pire, president of InsPIRE Training Systems in Upper Saddle River, NJ.

To make sure programs don't fall flat, club owners must invest time and energy into training their employees about the programs, Pire says.

Sandy Coffman, president of Programming for Profit, a Bradenton, FL-based firm, couldn't agree more. In her view, loyalty programs can be effective only if they're championed by a designated employee at the club. Many club owners view loyalty programs as an easy fix for rising attrition rates, but they shouldn't view them as an easy way out, Coffman says.

“I've seen clubs using loyalty programs all the time, but most of the time improperly,” she says. “They think that all they have to do is have an incentive for using the club a number of times, and the program will be a success. It sounds simple, but if there were more clubs doing it right, we wouldn't have the attrition that we have now.”

Most clubs make the mistake of placing the emphasis on the prize rather than on the program. If the program is run properly, however, the reward becomes inconsequential, whether it is a water bottle or a trip to the Bahamas, Coffman says. By focusing on the program rather than the prize, retention will take care of itself, she says.

Pire cautions clubs to not forego the member-to-member or staff-to-member relationship in favor of a reward.

“Members won't stay because they earned a gym bag, but they will stay if they have a great experience and have developed relationships with those at your club,” he says.

Loyalty programs that are only tied to spending a certain amount of money at the club can also be a turnoff for members, says Patrick Rigsby, co-owner of the Fitness Consulting Group, Fit Systems Personal Training and Anytime Fitness in Owensboro, KY.

“The club member can see right through them,” he says. “They are more designed to drive revenue than to keep the member using the club.”

Retention Rewards

If designed properly, however, a loyalty program can help a club reap significant benefits. For example, Elmwood Fitness Center in New Orleans increased its ancillary revenue by 8 percent by launching a complimentary rewards and loyalty program called Elmwood Edge. The program allows members to redeem points for gifts and prizes, and for discounts to local businesses.

Loyalty programs not only can boost revenues but also can lower attrition. Hockessin Athletic Club (HAC) in Hockessin, DE, dropped its attrition rate from 30 percent to 24 percent by investing in customer management software, retention software and a membership rewards program two years ago. The 120,000-square-foot club, which previously operated an in-house loyalty program, partnered with a vendor to increase its retention rate, boost the number of referrals and give the club a competitive edge. About 70 percent of the 4,000 membership units (or 11,000 members) are enrolled in the membership rewards program.

HAC spends about $1,200 a month on the program, which is a drop in the bucket, says Greg Maurer, general manager. Club members often enroll in rewards programs for credit card companies, grocery stores and airlines, so offering a program at a health club is a natural fit, he says.

“We look like a professional business,” he says. “It's something that our members have come to expect.”

To enroll members in a rewards program, clubs need to obtain their e-mail addresses. Although most clubs don't have good e-mail penetration, HAC's rate doubled from 40 percent to 80 percent by using the program, he says. New members' e-mail addresses are automatically entered into the membership rewards system, and on a regular basis, they receive personalized e-mail messages with their point totals.

Bill Lemanski, the owner and general manager of Eclipse Fitness Sports and Wellness in Green Brook, NJ, captured e-mail addresses for about 80 percent of the membership base, which consists of 3,800 members. About 60 percent are actively using their rewards program, he says. Despite the high level of member participation in the program, the club did not have to hire any additional staff to track points or help members to redeem prizes.

“The best thing about the product rewards program is that it is little work on my end,” he says. “I have a person here who spends a few hours a month inputting the new members, but it's very little work.”

Many health club owners have invested in outsourced vendors for their rewards programs as a way to minimize the time employees spend on the programs. By partnering with a vendor, club owners no longer have to buy hundreds of logo-embroidered T-shirts, store them at the club and give them away to members. Their vendors warehouse all the products, ship the prizes directly to the club member and then bill the club. A vendor takes away the headache of managing in-house inventory, Maurer says.

Storage for prize inventory can be a problem because health clubs give away a diverse selection of products in their rewards programs. For example, at the lowest level of 1,000 points, Eclipse club members can earn magazine subscriptions, sunglasses or tote bags with the club's logo. If they rack up 2,500 points, they can get prizes such as a leather coat or a DVD player. One Eclipse member even earned a mountain bike by referring five friends to the club and signing up for a personal training package.

Before Lemanski invested a few hundred dollars per month in the vendor's program, he solicited local companies to donate gifts that the club could use as referral prizes, he says.

“It was a hassle and always on my mind,” Lemanski says. “Now, we don't have to even think of the program because it's in place for the whole year.”

Profit Center Boosts

Fitness facilities are not only giving away product prizes, but they also are allowing members to trade in their points for such in-house services as free massage appointments or personal training sessions.

By signing up for the Club Bally Member Rewards Program, Bally Total Fitness members can earn points by working out a certain number of times per week, referring a friend, attending studio classes or making apparel purchases. Members can renew their points at any time during the year for personal training, dietetic counseling or other products or services. Bally tested the program in a number of markets and is now looking at various options for the next step, says Matt Messinger, spokesperson for Bally.

Bally's membership rewards program has an effective model for a loyalty program, says Donna Hegdahl, founder and president of TransSynergy Group, a Dallas-based marketing and communications firm. By using this approach, a club can get members hooked on a service and encourage them to eventually pay for it.

“It ties you to another service that makes you want to stay with the club,” Hegdahl says. “Rather than going to a spa for a massage, you're keeping your dollar with the same facility. You need to make sure they keep coming back to your club.”

Some health clubs are giving their members a choice when it comes to redeeming points. At Sentara Hampton and Fitness Center in Hampton, VA, members can earn a gift card for the club's services, or they can redeem the points to buy select merchandise from the membership rewards program's Web site. Since launching the program a year ago, the club has decreased its attrition rate by 5 percent to 22 percent and increased its referrals, says Christine Hubbard, team coordinator of member services and operations at the facility.

As the fitness industry gets more competitive, these types of programs will help clubs set themselves apart from others and reduce attrition rates, experts say.

“Big bucks stem from initiation fees, but loyal, ongoing memberships should pay the way,” Hegdahl says. “A lot of clubs focus more on the new members and ignore the members who have already chosen them. But in order to increase retention, clubs need to lavish attention on existing members.”

Tips for a Successful Loyalty Program

  • If you are designing an in-house loyalty program, limit the duration to six to eight weeks, and tie it to a theme.

  • Allow members to redeem points for rewards in a timely manner.

  • Place one of your employees in charge of the loyalty program, and reward the staff member for positive results.

  • Offer in-house services such as massage therapy, personal training or specialized fitness classes as prizes for your loyalty program.

  • Integrate your customer management software with your membership rewards program to allow for a seamless data transfer and limit the required amount of employee resources.

  • Partner with community vendors to offer discounts and incentives.

Other Tools to Boost Retention

Although some health clubs have found success through loyalty programs, not all health clubs are taking this approach to increase retention. Club Sport Renaissance in Pleasanton, CA, does not have a company-wide loyalty or rewards program. The club, which has a 72 percent retention rate, offers frequent buyer cards for its pro shop and café and is constantly looking at new programs to increase retention, says Laurie Smith, senior vice president of operations.

Pinnacle Athletic Club in Awaka, IN, retains its members through events such as wine-tasting parties, summertime Friday night cookouts and personalized e-mails from the club's head trainer. The 50,000-square-foot club would consider launching a loyalty program if it did not affect dues, says Nicole Elliott, membership director.

Patrick Rigsby, co-owner of Anytime Fitness in Owensboro, KY, attributes his club's 78 percent retention rate partially to the greeting cards he mails, the free quarterly personal training sessions he offers and his club's e-mail newsletters. Although loyalty programs are effective, they have not been a large part of the club's business model at this point because the business has had good luck with its other retention programs, he says.

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