Energize your Members with Incentives

Put the Club in your Health
With an annual churn rate of 35%, a health club needs to replace their entire membership in less than 3 years! The back door is losing members faster than the Membership Director can replace them. An obvious question jumps to mind, “Is there anything we can do about it, or is this just a fact of life in the health club business?” The answer, not surprisingly, is “Yes, you can do something about this fact of life!”

Numerous analyses have demonstrated the value of retaining a customer versus the value of acquiring a new customer. While the specific numbers differ by industry and business, keeping an existing customer can be more valuable than adding two to five new customers. The intent of this article is to offer ideas and a game plan to provide incentives to reduce customer attrition. Ultimately, these actions will increase your club’s growth rate and profitability.

Interestingly, the typical marketing budget allocates 80% toward acquiring new customers, and 20% toward retaining existing customers. Substantial incentives are often provided to new customers to entice them to join, which clearly generate quantity, but not always quality customers.

It’s always informative to analyze the myriad of reasons members leave a club. Some cannot be influenced (e.g., moving), but many can (e.g., lack of use). It’s also interesting to look at the retention rates of other club-based organizations and note that health clubs are one of the worst-performing groups. Much of the attrition from “lack of use” occurs because the member never connected to the club and its members in a meaningful fashion. A recent member-exit survey that used the “5-Why” technique yielded the following insights:

1. Why did you drop your membership? Answer: Not enough time.

2. Why didn’t you have enough time? Answer: Doing other things.

3. Why did you do other things? Answer: Liked them more.

4. Why did you like them more? Answer: Had more friends.

5. Why did you have more friends? Answer: We had similar interests.

The key word that health club operators must embrace is CLUB. According to Merriam Webster, the definition of a club is “…to combine or join together, as for a common purpose or interest…” The challenge for health club operators is to find and nurture those common purposes and the roads to achieve them. For instance, weight loss may be a common goal, but the road (e.g., nutrition, spinning, yoga, personal training) to achieve it will be different for different members.

FREQUENCY OF CLUB USAGE IS DIRECTLY RELATED TO RETENTION

Usage/Week

First Month

Last Month

<1

5%

50%

1

7%

17%

2

21%

0%

3 to 4

56%

16%

5 to 6

7%

13%

7

4%

4%

Source: Why People Quit: Fitness Industry Association, U.K.

 

 

In Da Club
As hip hop artist, 50 Cent says, “You should love it, way more than you hate it.” So, the key question becomes, “How do I get members meaningfully involved in my club?” Taking lessons from other successful clubbased organizations, there are three basic needs a club member seeks to fulfill in addition to the activity the club is organized to nurture: education, shopping, and friends. For instance, a health club in Southern California automatically enrolls every new member in one of its special interest groups (e.g., yoga, nutrition, core training). Each member is immediately contacted by the head “practitioner” to help them understand educational resources; introduce them to other club members, and guide them through the online store that offers books, equipment, and apparel that support their interests.

The biggest hurdle is often fundamentally changing human behavior. How do you get a person with an unhealthy lifestyle to adopt a healthy lifestyle? The answer lies in using education, shopping, and friends to get new members to take the necessary steps quickly, and then to maintain their commitment until it becomes habit. “Fake it till you make it,” as another club reminds its members.

Give your members solutions to their problems, not tools to get to a solution on their own. This can only be done if the club segments members based on interests and abilities. Then, set triggers to motivate members to take the actions that will transform them in to loyal customers. Your team must educate, motivate, assist, and reward members for achieving their goals.

Keep Reading and Get a Free iPod
And, that is exactly how a call-to-action works! Since marketing programs are your primary communication vehicle, small reallocations of the marketing budget toward retention programs can have a significant impact on profitability. Every marketer is familiar with the 4-P model: Price, Product, Promotion, and Place. However, few marketers apply this framework to customer retention programs. The good news is that the same techniques work – whether you’re searching for new customers or holding on to the ones you have. Let’s take a look at a few examples in action.

Infrequent club usage is an obvious red flag for customer attrition. Following are three different examples of the use of promotions and incentives to increase usage and ultimately, member retention:

In the first case, the club sends direct mail to members; offering them a free iPod for coming back (and using the club six times in the next four weeks). In the second case, a club representative calls the member to identify a special interest, such as yoga, and offers the member a $50 Gift Card to an online yoga store. In the third case, the club sends an email offering a free portable DVD player to a member and a friend, when that friend joins. (For more information on how to save 80% on these promotions, see last month’s article “Pump Some Emotion into Your Promotion.”)

Promotions or incentives are often the pivotal element of a marketing campaign that motivates customers to take the first step. Whether that step is reading a piece of mail, responding to an email, using the club, trying a personal trainer, or attending a Pilates class. Members need an incentive to get them to act, such as a friend joining the club or a new iPod to start working out again.

So, redirect your marketing budget toward customer retention programs and use incentives to get your current members more active in the club! Your return on investment will surprise you!

START BUILDING YOUR MARKETING RETENTION PROGRAM1. Set Retention Goals and Milestones.

•What are the current defection rates?

•What things trigger defections and when are these things known?

•What is the impact on profitability?

2. Create a Detailed, Retention Marketing Plan.

•What marketing channels will be most effective, e.g., email, web, in club, direct mail, radio, TV, person-to-person?

•What programs will yield the highest returns, e.g., rejoins, stays, pre-empts, usage?

•What is the 30-60-90-day, detailed plan and 1-2-3-year high-level plan?

•How will ideas be tested before full rollout?

•How will investments in retention be measured?

3. Allocate Resources toward Retention.

•Who’s in charge of retention?

•Who’s on the retention team?

•What is the budget?

•What incentives are necessary to inspire your members to act?

Tim Rohner is the Vice President of Marketing at Mpell Solutions, a leading provider of promotional programs for member retention and acquisition in the fitness industry. For more information visit www.mpellsolutions.com or email to info@mpellsolutions.com.

 

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