Is it Time to Outsource Your Retention Management?

Is it Time to Outsource Your Retention Management? By Matthew Bradbury

Club Success Magazine by Peak Performance June 2003

As a club manager or owner, you are well aware that memberships are the lifeblood of your business. Retaining and growing your membership base with satisfied customers provides you with financial rewards, and allows your club to prosper. And because a health club is generally a fixed-cost business, most incremental revenues flow right to the bottom line once costs are covered. Therefore retaining members is one of the most profitable pursuits your club can have, and your club can make the most of its retention dollar by outsourcing retention management to third party vendors.

Before delving into the reasons why outsourcing is such a profitable choice for retention management, it is important to comprehend the current industry standards for calculating retention rates. Retention rates, which must first take attrition into consideration, are calculated as follows according the IHRSA website. First divide the number of dropped memberships in a 12-month period by the average number of new members acquired within the same 12-month period (because memberships are added and dropped each month, the attrition formula is best calculated using the average opening monthly membership for a rolling twelve-month period). The result will be your member attrition percentage. The inversion of this attrition percentage is your member retention percentage (see example below).

Example:

 

Beginning Memberships

Dropped Memberships

January

2,000

60

February

2,025

60

March

2,040

110

April

2,060

75

May

2,090

50

June

2,100

60

July

2,125

60

August

2,130

50

September

2,140

60

October

2,150

70

November

2,175

70

December

2,190

60

Total

25,225

785

Average 2,102

Membership Attrition = 785 / 2,102 = 37.3%

Membership Retention = The inversion of 37.3% = 100%-37.3% = 62.7%

The financial benefits of retention Now that we all calculate retention the same way, just how profitable is it? Well by sponsoring activities that cut attrition (thus improve retention) by five percentage points, the hypothetical retention example in Figure 1 equates to retaining an additional 106 members annually. If the average annual revenue per member is $650 annually ($50 per month for dues, plus auxiliary revenues of another $50) this business just gained $68,900 of additional revenue. And, most of this revenue flows to the bottom line if the hypothetical fitness center is already profitable.

Improving retention another five points to 72.7 percent is an entirely reasonable goal that would double the financial benefit to $137,800. This is profit in your pocket! To do this, ask yourself which activities are the most cost effective, and how much are you willing to spend to put that $137,800 in your pocket.

Building your brand-customer relationship Your club is your brand. When customers join they believe your brand will deliver certain “promised experiences” and benefits. How well you deliver those “promised experiences” and benefits strongly influences customer satisfaction, usage and your brand-customer relationship.

Research has shown that one of the most important metrics for retention is usage. Members using your facility six or more times a month have the highest retention rates. Well what gets them coming this frequently? You can encourage good usage habits from your members by accomplishing the following:

  1. Help them see early success. 
  2. Meet their rational and emotional needs. 
  3. Help them feel comfortable and connect to your environment. 
  4. Let them know you care.

Typical retention strategies Creating a clean, friendly environment that delivers your brand in a manner that meets most members’ expectations is essential. However, there are inherent limitations with this as a sole retention strategy. First, we usually interact with those members who are regular users in the club rather than infrequent users at high risk for attrition. Plus, we all have natural affinities toward those members who are most like us―friendly, energetic, fit, outgoing, etc. Therefore, those members who don’t “fit in” do not have the level of interaction with the club as those who do, limiting the impact of even the friendliest, most competent staff. Finally, delivering an “exceeds expectations” level of service is down-right expensive unless you can harness technology to do some of the relationship building with your customers.

Both personal experience and industry research have revealed that the level of usage during the first 30 days is an important predictor of a member’s future retention. Therefore, it’s important to measure and manage the processes that impact early usage. You should target new members with extra retention initiatives during their initial membership periods to assure you’re meeting their needs and that they’re using the club.

Are you Outsourcing key business functions now? Outsourcing functions to companies with expertise in certain areas is on the rise in all industries. Payroll services, human resources, newsletters and web design are a few club functions that you might already outsource. But have you considered outsourcing your retention management initiatives? For what it would cost to hire and provide benefits to a dedicated membership retention director, you can receive better retention by outsourcing key retention management initiatives to a new breed of companies that specialize in managing these core activities.

Two Unique Approaches to Happier, more Satisfied Members

In addition to the expanded capabilities of most membership management software providers, two other companies have harnessed technology to help you create stronger relationships with your members.

Focusing on the Exercise Experience -Activtrax

Activtrax provides outsourced retention services by focusing on the exercise experience offered to your members. Studies show that new exercisers are often intimidated by their new club. The people, equipment and programs can often make new members feel insecure or inadequate; and feeling insecure at your club is a recipe for increased attrition. If you help these members have a comfortable new fitness experience, you’re likely to get lots of usage during the initial months of membership -a strong predictor that you’ll retain this member for a long time. Activtrax takes the initial feedback from your trainers and delivers customized daily exercise programs for your members—a real plus for creating the perception that your trainers are working overtime. After a free trial of the service, members have an opportunity to purchase the daily custom workout service for continued new work-outs. The program is web-enabled so that members can log on and view their progress. The company’s tracking and reporting features assist the club with member follow-up. Printed reports queue opportune times to contact your members, to check in on satisfaction and potentially recommend other services. The online reporting features keep tabs on appointment history, evaluation data, member interaction with club staff, and workout performance (or lack of it). This early reporting intervention allows you to pull out all the stops to meet both new and existing member needs before they become a low user.

Another aspect of the program includes company visits to your club whereby they map out your equipment, and take extensive inventory of each piece, noting seat and weight stack calibrations. These maps are incorporated into the detailed exercise protocols for your members.

An interesting stat is that those members who use the service, (about 75%) use the facility four or more times a month during their initial experience; yielding a solid prediction of good future retention.

In the end, the Activtrax system ensures your members’ successful launch into a fitness option at your club. The impression to your customer is that you deliver personalized service during each of their visits.

To learn more about Activtrax, visit www.activtrax.com, or call 301.840.0040 x106.

Motivation Through Communication -Retention Management

Another new offering at your disposal comes from a company called Retention Management. Imagine if all your member communications were actively managed over the web. Instead of training and retraining staff to manage the process, you outsource it to experts who customize proven messages to your member’s unique profile.

Retention Management uses a proprietary web-enabled program to personalize and customize communications, newsletters and preferred health information all according to the preferences of you and your members. It’s motivation through communication; your members connect to your brand in a manner that goes beyond mail merging names with form letters. It’s like each member has their own PR agency, checking in regularly with the members to show them how much they care.

For a monthly fee and per-user fee, the company executes their system of custom communications developed around the unique personalities, interests and activities of that member and the unique personality and attributes of your club.

Their service breaks your membership into 3 categories: new members, existing members and non-attending members. New members are automatically part of an 8-12 week orientation program, receiving two emails per week that offer attendance encouragement as well as a thorough orientation on all the services your club has to offer. This virtual “how to” manual helps to get the new member integrated and involved as quickly as possible. Which we all know is very important to their future usage and longevity as a member.

Existing members receive regular emails based on their attendance patterns. Not only do these emails provide support and encourage frequent usage, they provide easy to apply health tips that add value to their membership. The company also creates and sends an interactive club newsletter that keeps members informed about all the programs and activities going on in the club. A Club News component allows members to simply click here if they are interested in signing up or requesting more information on what’s going on in your club. It’s a wonderful vehicle to fill your programs and drive non-dues revenues.

For non-attending members (those most likely to cancel) the company’s proactive Recovery Program is automatically initiated after the 1st week of non-usage. This sequence of specifically designed emails culminates in an offer (i.e., a complimentary re-orientation or personal training session) that is made to the non-attending member enticing them to get back in to the club.

The company is invisible to your members; all emails appear to be sent from your club personnel. Your members also receive special holiday, birthday and club anniversary greetings further demonstrating to your members that your club is different -you care about your members, you want them to use their club, and, you want them to achieve their goals.

It’s truly a unique, innovative and tailored service that has taken member communication and interaction to a whole new level. If you would like learn more about them go to www.retentionmanagement.com or call 704-895-4021.

Both Activetrax and Retention Management utilize technology that provides you with a cost effective solution to increase your retention. I strongly urge you to check out their offerings reviewing each value proposition for yourself. Best of luck on your quest to achieving strong brand-customer relationships, increased usage and improved retention.

Date:

Chris W