Dr Melvyn Hillsdon – Author of FIA’s Winning The Retention Battle series of reports. Melvyn is at the forefront of research in this field, he is a highly respected academic and sought after advisor in public health.
Q1. As long as my member base is still growing why do I need to look at retention?
If retention is 100% (no one leaves) then achieving growth is simple as every sale adds the total number of members. However, achieving sales in a climate of high attrition puts significant pressure on sales teams just to stop the membership base from falling. Of course a higher attrition rate requires greater sales, which requires more sales people and therefore higher overheads. This high churn model is not as cost effective as a low churn model. It is also possible to calculate the average membership yield per member. Growth with high attrition is also likely to mean that the membership income per member is lower than it might be, reducing overall profit. Finally it is important to note that a health club’s market is limited to a geographic area normally within 15 minutes drive time. On average only 11% of the population within the drive time will become a member of a health club. Clubs with a high churn model will soon find they have ‘run out’ of potential new members especially if they have competition.
Q2. How do I proportion my retention efforts across different usage types i.e. gym users, racket sport users, social users, swimmers etc?
If membership retention rates were reported by usage types then it would be quite easy to classify usage types according to their risk of quitting. In other words if social users quit at a rate twice that of gym users then you might decide to expend twice the effort on retention in social users. Without accurate retention rates by usage types it becomes more of a guessing game.
Q3. How do I put a case forward for using marketing budget for retention initiatives?
It is very concerning that despite the severity of membership churn in this industry, almost no operator has a budget specifically for retention. In the answer to Q1 you will see why having a retention budget is equally if not more important than having a marketing budget. My suggestion for putting forward a case for a retention budget would be to use the arguments presented in Q1 and go for a minimum of a 50: 50 spilt between retention spend and marketing spend. It is also worth noting that the marketing spend could be used wisely to help retention.
Since 2001, the numerous reports we have completed on membership retention show that certain membership types (older, family, corporate) have higher retention rates than others. Consequently, a marketing strategy that leads to a greater proportion of members from older age groups who have other family members in the club etc would increase membership retention without any change in operations.
