(Editors' Note: This article is part of Club Industry's report, "Trends That Will Affect the Fitness Industry in 2019," sponsored by Twin Oaks Software. You can download this report for free by going here.)
Depending on which study you believe or who you listen to, the cost of acquiring a new member is anywhere from five to 20 times more expensive than retaining an existing member. No matter which number is correct, the premise is undeniable and indisputable: it’s expensive to gain new members. But you don’t have to spend time and resources finding a new member – you just have to keep the ones you have happy.
Even more impressive is the effect that retention has on your bottom line. According to Bain & Company, increasing your retention rate by only five percent can increase profits more than 25 percent. Gartner research statistics tell us that 80 percent of your future earnings will come from 20 percent of your current members. And if you are still skeptical, member retention is cited as the biggest and most significant revenue driver for your club’s future earnings, according to KPMG.
So if we all know and understand this, why do statistics still show that investment in obtaining new members has increased, while investment in member retention has not? Clubs still focus on gaining new members and fail to effectively address the need to retain the members they already have.
There are two main reasons why owners and managers miss this great opportunity. One is the misconception of how retention happens. Management falls in love with the shiny new joins and believes that retention is a byproduct of offering the lowest-priced memberships and/or having the best, newest or prettiest facility. But once again, research shows a majority of club members leave because they believe the club doesn’t care about them. In fact, four times as many members leave a club for a competitor due to service-based issues, as opposed to price-related issues. The second reason clubs don’t focus on retention as much as they should is because their software either isn’t equipped with retention technology or the software has the tools but the club simply chooses not to take advantage of it.
The best part of retention management is it is all about one word: relationships. The relationship the club and the staff have with each member is what is going to drive your retention statistics, and invariably your profits up, up and away.
A properly managed retention program should look at prospects, new members and members at risk of quitting the club as three separate relationships that all need different and distinctive forms of communication to achieve their desired goals. Club operators want prospects to become members and need to stay connected with them to make sure they close the sale. New members need to get integrated into the club with information about events, programs and offers they can take advantage of. Finally, current members who are at risk of quitting first need to be identified and then communicated with, all in an effort to get them re-integrated into the club.
In the end, a club should not focus just on their new member acquisition rate or just on their retention rate. They should pay attention to both because they both are statistical indications of not only how well the club is doing, but also what areas a club needs to improve on.
To be successful in 2019, make sure you are doing both.
Eric Claman is a senior health and racquet club consultant at Twin Oaks Software. He owned two clubs in Torrington, Connecticut (Pinewoods Health and Racquet Club for 23 years and Energy Fitness for four years) before selling both and accepting a consulting job at Twin Oaks Software Development in 2011. He also serves as a selectman in his hometown in Connecticut. He can be reached at (866) 278-6750, [email protected] or visit healthclubsoftware.com.