Four categories drive membership attrition rates: broad economic conditions, seasonal impact, contract design and the user experience. For this article, I am examining the role macroeconomics plays in member attrition and how to mitigate it.
How much would you pay to save a single member for three months? How about 100 members? Or 400? Or 500? Member retention rates in the fitness industry are notoriously low. Industry leaders often accept these dismal figures as a given or offer broad speculation about what drives member attrition. But if fitness club owners and operators want to stem the flow out of their clubs, they must better understand what is pushing members to the exits.
Based on my consulting company's analysis of millions of data elements from U.S. clubs' membership and billing databases, we found four categories that drive membership attrition rates: broad economic conditions, seasonal impact, contract design and the user experience. For this article, I am examining the role macroeconomics plays in member attrition and how to mitigate it.
The dismal economic conditions of the last several years have had a severe and sustained impact on fitness clubs nationwide. Since 2008, one of every three consumers who terminated a membership did so for financial reasons, according to my company's analysis. Club owners may not realize how much membership is viewed as a recreational expense. As disposable incomes shrink, recreational spending drops quickly and, in turn, club member attrition rates quickly rise. In contrast, health-related services are more resistant to economic ups and downs. To keep members, even during tough economic times, club owners and operators will need to stress health and wellness at their facilities rather than strictly fitness.
Although membership levels are rebounding from their recession lows and attrition rates are returning to pre-2008 levels, the fundamental link between member attrition and recreational spending levels has not changed. This leaves member retention at the mercy of the same economic factors that drive theater ticket sales, gambling and other purely recreational pursuits.
Clearly, club owners and operators cannot control the macroeconomic forces that drive down recreational spending and drive up member attrition. But industry leaders can influence how members categorize their fitness club expenditure. According to the Bureau of Economic Analysis, the average consumer spends 4 1/2 times more on health-related services than recreational services. If consumers begin to view their gym bill as a health expense rather than a recreational one, clubs will be better insulated against future economic slowdowns and drops in disposable income. Already, hospital-based wellness centers have consistently driven their attrition rates down to 20 percent (compared to between 25 percent and 40 percent for the industry as a whole).
To initiate this change in consumer thinking, the industry will need to shift its focus from fitness to wellness. Although shifting the consumer mindset is a long-term proposition, club operators can take short-term steps to hasten the process:
Broaden service/program offerings. Think beyond traditional group exercise and yoga to offer programming that promotes healthy lifestyles and attracts all ages and abilities into the club. Programs could include weight-loss meetings, nutrition clinics/consultations, health education programs and even more explicitly medical-related offerings, including physical and occupational therapy.
Change rhetoric. Based on these expanded offerings, clubs should sell programs rather than just memberships. Attending a program is a way for prospective members (many of whom are new to exercise) to ease into club membership. Our analysis shows that people who initially join a program are 20 percent more likely to remain a member.
Establish wellness coordinators/coaches. After they swipe in, a member might be doing anything (or nothing), and most club operators do not know. Learn if your members do cardio, free weights or something else. Deploy staff to engage members, both online and in person. If you create an engaging experience that increases their club usage, retention improves and member health and wellness improves.
Over the longer term, club owners and operators could harness broad health trends, such as the obesity crisis, soaring health care costs and the implementation of the Affordable Care Act, to recast club membership as a health cost vs. a recreational one. In this climate, clubs should explore ways to strengthen their links with the health community and even with medical facilities. Despite the recession, the number of medical fitness centers has risen in the United States. These centers unite health and fitness professionals under one roof and offer programs and services to promote health and wellness. This more formal link with the health care community would go a long way to permanently recategorize club membership as a health cost rather than a recreational expense, allowing clubs to hold onto members even during future economic downturns.
Keith Catanzano, co-founder and partner of 2River Consulting Group, uses analytics and data to support profit and sales growth of mid-market businesses. He uses fact-based analysis to create effective member-retention strategies. 2River helps its clients increase operational efficiency, measure and understand risk, and reach an informed strategic direction. Catanzano can be reached at firstname.lastname@example.org.