Increase Profits 25 Percent by Focusing on Retention

IMAGE BY SHUTTERSTOCK

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 you believe in, the premise is undeniable and indisputable. You don’t have to spend time and resources going out and finding a new member — you just have to keep the ones you have happy.

Even more impressive is the effect retention has on your bottom line. According to Bain & Company, increasing your retention rate by only 5 percent can increase profits more than 25 percent. Gartner research statistics tell us that 80 percent of your future revenue will come from 20 percent of your current members. And if you are still skeptical, according to KPMG, member retention is cited as the biggest and most significant revenue driver for your club’s future earnings.

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 currently have.

I believe the main reason is that owners and managers get complacent when it comes to retention. They believe offering the lowest priced membership in their area or the best facility with a top-notch staff is what drives retention. 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 a service-based issue, as opposed to a price-related issue.

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 ways to achieve their desired goals. Clubs want prospects to become members and need to stay connected with them to make sure they close the sale. In addition, 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 need to be communicated with, in an effort to get them re-integrated back into the club.

In the end, a club should not only focus on just their new member acquisition rate or just 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.

Eric Claman 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 can be reached at 866.278.6750, eclaman@tosd.com
or visit healthclubsoftware.com.