Referrals are one of the most powerful forms of advertising[1]. For health clubs, referrals are the lifeblood of their business with referrals typically accounting for 40 percent to 65 percent of new memberships. Research has shown that referrals are more effective and potential customers view them as more credible than traditional advertising because referrals come from a trusted third-party[2]. For this reason, it’s essential for health clubs to implement effective and systematic approaches to generating and capturing referrals.
Axiom Fitness, a leading chain of health clubs in Treasure Valley, Idaho, is a great case in point. Since re-branding its clubs in 2011, Axiom has grown rapidly by coupling state-of-the-art facilities with a broad range of high-impact classes. This strategy has allowed Axiom to build a loyal customer base, leading referrals to account for a significantly higher percent of new business than the industry average. However, in 2013 Axiom realized it didn’t have an automated way to track and reward referrals.
In July 2013, Axiom unveiled [Axiom Rewards], a loyalty and rewards program powered by Perkville. [Axiom Rewards] drives member loyalty[3] by awarding points for among other things, new member referrals, gym check-ins and social media engagement. Members can easily redeem these points for great rewards such as free massages and personal training sessions.
“We’ve been very happy with the program,” said JP Green, Axiom’s president. “We’ve been able to generate a lot of new sales without significant new acquisition spending.”
In setting up [Axiom Rewards], Axiom was looking to accomplish two goals: (1) automate the process of tracking and rewarding new member referrals and (2) create a point of differentiation in a crowded local health club market.
Given Axiom’s objective of automating the process, they sought a rewards solution that would be as hands-off and fool-proof as possible. For this reason, Axiom chose to build [Axiom Rewards] on Perkville, which is integrated with ABC Financial, Axiom’s club management software. According to JP Green, “Because Perkville integrates directly with ABC Financial, [Axiom Rewards] can run in the background and managing referrals is no longer work that we have to do.”
Now nearly two years on, the data is in and the proof of [Axiom Rewards]’ success is in the pudding.
Automating and Encouraging New Member Referrals
The key metric Axiom uses to evaluate the success of [Axiom Rewards] is new memberships generated through program referrals. We looked at this metric through a two-fold analysis: (1) the number of new member referrals tracked and rewarded through [Axiom Rewards]; and (2) the increase in new member referrals generated by [Axiom Rewards].
Through April 2015, [682] new member referrals have been tracked and rewarded through [Axiom Rewards]. Over that same period, participants in [Axiom Rewards] averaged [92%] more referrals per member than members who were not participants. From these metrics, it’s clear that [Axiom Rewards] was successful in tracking and rewarding the referrals generated by Axiom’s most loyal and engaged members. To take this one step further, we also analyzed whether [Axiom Rewards] was driving an increase in referrals by those same members.
In order to measure [Axiom Rewards] impact on member behavior, a subset of Participants for whom at least 3 months of pre-rewards program participation usage data was available was evaluated. We then compared the referrals generated per month by Participants prior to joining [Axiom Rewards] with the referrals generated per month by those same Participants after they joined [Axiom Rewards]. The results show that [Axiom Rewards] has a strong impact on member referrals. In the period including the month of joining [Axiom Rewards] and the three months thereafter, Participants in the sample averaged 29% more new member referrals per months than they had during the three months prior to joining [Axiom Rewards].
Differentiation Through Rewards
A secondary goal of [Axiom Rewards] is to provide differentiation in a competitive market. There are a number of ways Axiom Rewards helps Axiom differentiate its offering. For example, [Axiom Rewards] enables Axiom to easily provide high value rewards to loyal members to drive engagement. Axiom members have quickly taken to this element of the program redeeming free classes, gym credit, personal training and massages. The rewards are driving behavior as well. Participants have averaged an increase of 29 percent[5] in their monthly average check-ins in the 3-month period after joining [Axiom Rewards].
Axiom Rewards also enables Axiom to engage participants through social media channels. Perkville is integrated with Facebook and Twitter, making earning points for social media posts quick and easy for participants. As a result, Axiom Rewards has generated over [500] social media engagements[6] with Participants to date. It’s clear from the data that Axiom Rewards is driving significant increases in member engagement.
Conclusion
Axiom Fitness has achieved great success in growing its business through the word-of-mouth advertising that comes with providing members with a great experience and top-notch facilities. But even a health club as successful at generating referrals as Axiom can always do more to drive new member referrals. By implementing a rewards program, Axiom not only eliminated an administrative burden by automating its referral program, it also increased the rate at which its most loyal members were generating referrals.
Interested in learning how Perkville can increase retention and referrals at your club? Sign up for a free 10 minute consultation with one of Perkville’s retention experts.
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[1] See, e.g., http://www.mckinsey.com/insights/marketing_sales/a_new_way_to_measure_word-of-mouth_marketing (word of mouth key driver of 20-50% of purchase decisions).
[2] See, e.g. http://www.nielsen.com/us/en/insights/reports/2012/global-trust-in-advertising-and-brand-messages.html and http://www.nielsen.com/us/en/insights/news/2013/under-the-influence-consumer-trust-in-advertising.html.
[3] Research by The American Marketing Association has demonstrated that rewards programs increase customer referrals.
[4] Participation Rate defined as percent of Axiom Fitness members visiting a club at least once in the last 6 months who have activated their Axiom Rewards account.
[5] This figure calculated using the same methodology as the referral impact analysis described above.
[6] Engagements defined as Facebook posts, Tweets and Twitter follows by Participants.
