What makes one company retain its customers at 90 percent and another at 50 percent? Maybe it's because it is an organization of like-minded people that know their roles with leadership that goes beyond Stage One thinking. Let's start by defining key terms. According to Webster's dictionary:
- Customer: someone who pays for goods or services.
- Service: an act of help or assistance.
- Retention: the act of keeping in your possession.
The statement, ‘the customer comes first,’ is where the cycle begins. Nothing happens without customers paying for your service. We assist and help (service) our customers to keep them using our products (retention).
With the proper focus and action plan you can make dramatic improvements in member retention. With increasing competition you have to have a mindset that pays close attention to, “How do I get my members, and how am I going to keep them longer and expand my membership base with their friends and family through referrals?”
|Retention Improvement||Month/Year||5-year/10-year Period|
|1%||$350/ $4,200||$21,000/ $42,000|
|5%||$1,750/ $21,000||$105,000/ $210,000|
To illustrate the financial importance of a club having a customer relation management (CRM) plan in place, consider a club with an average of 100 renewals every month. This club is renewing 50 percent of its members at an average of $700 per member. The total revenue that the club is bringing in is 50 x $700 or $35,000 each month, leaving 50 unrenewed memberships, which is the equivalent of $35,000. It is important to look at the long-term growth (five to 10 years out) of your business. Table 1 shows the impact that increased retention can have on your business.
For example, if you increased retention by 5 percent for 10 years, you would have $210,000 of additional revenue. This does not take compound interest into consideration. You also could probably double your money in that time with the right investment vehicle.
Club management places a strong emphasis on strategic thinking and planning. Shared financials have become more accepted among club owners and operators because tying your staff into the club's bottom line can help ensure success. Managers are expected to mine their club's databases to anticipate member trends. Better reporting and information is available so staff can make real-time decisions, which should translate into the bottom line. Here are some tips that may help when looking closer at your membership:
What percentage of your membership is due to expire in the next six- to 12-month cycle? If you have a new competitor ready to open make sure you have a plan to limit its exposure and lock those members into your club.
Male/female member and age percentage. What type of member is the club attracting and how do you find more of them?
Manipulate your member database so you can see it on an Excel spreadsheet. You will be able to see trends that may be happening within your membership groups.
Once you understand your club's demographics, develop a customer relation management program. Below is a sample outline — use it as a guideline to go beyond Stage One thinking to develop your own customized plan of attack.
Make sure your staff is happy and knows their importance in keeping your members happy. The top reason members stop using the club is staff indifference. Make sure staff understands this and set specific service standards.
Minimize staff turnover. There are two reasons for this. First, you want your staff and your members to develop a good relationship. Second, staff turnover costs a fortune. Studies among HR professionals concluded the average cost for recruiting, screening, interviewing, processing and acclimating a new employee is equal to one to 1.5 percent of their annual salary. Say you have 50 employees — 25 stay and 25 leave at an average of $20,000. That's equivalent to $20,000 × 25, or $450,000 in turnover costs.
Personal touch still is the best. Put your staff in a position to interact directly with your members. Free giveaway days are great to help them to get to know the members. Don't just leave give-aways on a table. Have your staff interact directly with your members. Surveys are also a great way to force your staff to come out of their comfort zones and have the members feel it is their club by offering suggestion on how to improve their club.
Get started today. Plan, act and measure your results. Set the bar at 100 percent retention and go beyond Stage One thinking.
Douglas Talmage has more than 15 years of experience in the health and fitness industry, and is the executive director of Hudson Athletic Club in Hoboken, NJ. Doug can be reached at 201-424-5825 or via e-mail at email@example.com.