In their latest research, The Retention People (TRP) and Dr Melvyn Hillsdon examined the difference in retention rates between ‘high risk’ members (defined by the TRP Solution) who received at least one interaction compared to high risk members who did not receive an interaction.
The research looked at members who were on one month notice (i.e. no contract) and 12 month contracts. In both cases the effect of well timed interactions was profound – increasing the average length of stay of members by between 8 months and 12.3 months. This translates into an extra 12.3 x your monthly fee per member (e.g. 12.3 x £35 = £430.50 per member!), just from interacting with members at the right time.
No contracts (one month notice)
Figure 1 clearly demonstrates the positive effect of interacting with people not signed to contract. Figure 1 illustrates the retention rate for members not interacted with (blue line) and the retention rate when they are interacted with (red line).
| Number of members | Cancellations per thousand per month | Median length of membership | |
| No interactions | 1029 | 112 | 5.3 |
| At least 1 interaction | 944 | 44 | 13.3 |
Financial Impact
It is essential to convert this research into a financial model to represent the financial gains to be made by managing and monitoring interactions. If the month by month retention rates are modelled based on 1000 members paying £35.00 per month the difference in estimated income rates is staggering (Figure 2). Figure 2 simply takes the proportion of the 1000 starting members who survive each month and multiplies it by £35 for 18 consecutive months. This is accumulated over the total time of membership. So if all members received at least 1 interaction the estimated income for 1000 members would be £204,393 higher compared to 1000 members who did not receive an interaction.
Figure 2. Income estimates based on retention rates for members
12 Month Contracts
The second stage of the summary looked at the same analysis but on a club running only 12 months contracts.
Figure 3 shows the effect of an interaction on retention for members in this sample. It clearly indicates that the effect is largest at the point of renewal of 12 month contracts. However, it is critical to note that there is still a higher survival rate up to the 12 month point – showing interactions reduce the chances of a member defaulting on a contract.
The attrition rate in Table 2 translates in to a risk of quitting that is 1.56 times higher in the members who do not receive an interaction compared to those who do. Furthermore, the average yield from membership dues is nearly twice as much in the members receiving interactions.
| Cancellations per thousand per month | Median length of membership | |
| No interactions | 42.1 | 12.3 |
| At least 1 interaction | 26.9 | 24.4 |
Financial Impact
The model employed above can also be used here to assess the financial impact of interacting with members when contracts are in place.
Once again, the difference in estimated income from membership dues is substantial. Figure 4 takes the proportion of the 1000 starting members who survive each month and multiplies it by £35 for 30 consecutive months for members who formed this sample. This is accumulated over the total time of membership. So if all members received at least 1 interaction the estimated income for a 1000 members over 30 months would be £129,664.50 higher compared to a 1000 members who did not receive an interaction. Figure 4 plots this financial analyses with six month data points for clarity.
Conclusion
The results and financial analysis clearly indicate that operators need to be able to identify members at high risk of being on their last visit and then interact with them.
This activity will produce considerable impact on member retention and subsequent length of stay resulting in very large finance gains for the business.
