One Million Strong: A Study In Retention

For Gym Operators

One Million Strong: A Study In Retention

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Why “One Million Strong”? The researchers of this study sought to learn the social and behavioral characteristics and habits of over one million fitness club members. Here are some facts from their in-depth study on health club membership retention in North America from 456 clubs and over 1.47 million members surveyed.

The following is a summarization of an education session from the 2016 IHRSA Convention, produced with full permission from IHRSA. The full-length video is available for purchase at ihrsastore.com.

About the Speaker

Paul Bedford, PhD, Research Director at Retention Guru, Ltd.

Where Does Technology Fit?

Technology is a tool which drives the data we can then use to discover insights about our members’ habits and behaviors. These insights enable gym operators to more effectively direct efforts to improve a club’s retention, attrition, and exercise adherence, and to impact behavioral and cultural change.

Within the industry there is a continual progression of new software emerging for gyms: technology that tracks members’ personal performance data, membership systems software to collect information on frequency of visits, or software that provides critical financial data. But, what gym operators say they need most is to understand how to decipher the data and what to do with the data, and then determine the actionable takeaways.

Data offers a road map and can create powerful insights into what club owners and gym operators need to do to improve their business.

The industry has shown it is good at copying the market whether for gym design, equipment choice, or programming. The question is, are these well-reasoned decisions for your business?

Retention – Not the Opposite of Attrition

Don’t confuse these two measurable components of a club’s business nor the relative place each holds in analyzing month-to-month and year to-year growth. Sales, not retention, is the opposite of attrition. Sales figures tell you when a member joins and attrition says when that member quits.

Imagine two clubs where each has the exact same number of people, say 1,000, join. Likewise, 1,000 people quit in the same period. Comparing the two clubs, the sales and attrition numbers in terms of people are the same. Yet, what if in one club those 1,000 members stay three months and in the other club twelve months? Given everything else is equal, the later club benefits from nine more months of having members exercising and getting fit in their facilities.

The time between when a member joins and when they leave equals retention. Retention is measured in months. It is the most important measure to a club owner’s business. Attrition is a secondary measure or an after effect rather than the primary.

Are You Still Measuring Attrition as A Percentage?

Attrition should be measured by the number of people who quit and not represented as a percentage. For example, if you tell your sales staff 16% of members quit versus 460 people quit last month, it will have a different impact on your team. By making attrition a percentage it hides the effect and the true value begins to lose meaning. It’s unlikely you measure the number of people who join as a percentage.

The Study 

The “Million Strong” study was conducted from the beginning of 2012 through the end of 2015. The study surveyed over 1.47 million members from 456 clubs in the United States in the three-year period.

There was an equal split between traditional independent and chain clubs. Smaller studios, boutiques, and CrossFit® facilities were not included in the study. 

Study Sample Profiles  

The proportion of members in the study sample were 54% male and 46% female. This roughly 50-50 split tends to be true across operators and in most US markets apart from the boutiques. Boutique clubs tend to have 60-80% female to 40-20% male. CrossFit is equally split between female and male members.

Age Characteristics

%

16-24

14.9

25-34

34.3

35-44

22.5

45-54

14.5

55+

13.9

The fast majority of the 1.47 million members were under the age of 35, while the people over the age of 55 represent a significantly small number as a group. On whole, the industry does not do an exceedingly good job at attracting the 55+ crowd. Although, the findings in studying retention show that the 55+ group positively influences retention rates.

Overall Retention of 1.47 Million Members in North America

Over a 36-month period 67% of members were still members after 12 months from joining. 44% of members continued through to 24 months. Fewer than 20% of members stayed 36 months.

The Gender Split

The study found little difference in retention percentages between female and male members. There are differences though in the types of activities between women and men within a club. This is not shown, however, to have any effect on retention.

Group exercise activities tend to keep members exercising for longer. Swimmers tend to have the longest retention rates, but there are fewer swimmers so no attributable difference. Generally, people will gravitate to the activities they enjoy. Therefore, make it an objective to engage a member in an activity which interests them.

Should You Target Younger Groups?

The older the member, the longer they’ll stay. The effect of age begins to show at 8-9 months and at 12 months, people age 35+ begin to stay significantly longer than those under 35. Although, it’s important to note that there may be little a club owner can do to change retention rates if, for example, the club is located within a younger community.

Also notable here is that industry-wide marketing efforts are geared around younger membership groups. New activity programs often target younger member groups. Yet, these groups are the least likely to stay for a longer period.

Families tend to stay members longer than single members.

What Effect Do Membership Plans Have on Retention Rates?

Members who join and commit to 12-month membership agreements (regardless if they pay monthly or up front) have a higher rate of retention than members who join month-to-month without any commitment. Significant numbers of members who pay month-to-month decrease beginning at 3 months.

Of the 1.47 million memberships sold, 80% are on month-to-month plans, while 20% are 12-month agreements. The study also shows that once membership reaches 24 months, member don’t leave. These member types tend to be age 35 and above. They join for 12 months and stay for 24 months, 36 months, and longer.

Most members 35+ who stay for 12 or more months are savvy exercisers. These members know they’ll come for 12 months and want to benefit from a deal offered for a longer duration.

Always give people the option for a longer period agreement. Optimize your membership price point to differentiate and to make one more attractive than another.

12-Month Agreement vs. Month-to-Month  

From the 456 clubs in the study big box operators are more comfortable selling 12-month agreements.  The small, independent clubs with a moderate price point of $50-$70 per month are less likely to sell a 12-month agreement, opting to sell month-to-month plans. Their ability to sell 12-month agreements has been eroded by smaller boutiques, pay-as-you-go studios, ClassPass, etc.

Surprisingly, 80% of those who commit to a 12-month agreement achieve their first fitness goal within 6-12 weeks. No one thinks to begin to exercise for the day. People take up exercise as a lifestyle and to become fitter throughout their life. Most people who commit to a longer period of time, commit to exercising better. 

A member paying month-by-month is reminded they can quit every month. If committed for a longer period members tend to not think about quitting until closer to the end of the agreement, unless they don’t receive the product or service promised. People who join for a year believe they’ll be there for a year.

Statistically, given only one financial opportunity every 12 months to quit is a 1 out of 12 chance that a member might leave. If given the financial option to quit every month, that is 12 opportunities out of 12. The risk of cancelling increases with more opportunities to cancel. Which odds would you take?

Attrition Rate Overall By Gender, Age, and Length of Contract

For the purposes of the study, the attrition rate is the number of people who cancel every month per 1,000 members. On average chain clubs lose 28 members per month for every 1,000 members. Independent clubs lose 51 members per thousand per month. The chains achieve better retention because they’re more confident in selling longer period agreements.

Members with 12-month agreements quit at a rate of 30 members per thousand per month, while clubs with month-to-month membership plans lose 42 members each month per 1000 members. That is a difference of 12 members each month per thousand for month-to-month versus 12-month contracts. Certainly, selling a greater number of month-to-month memberships could offset this difference.

What is true is that everything that makes a sale harder increases retention. Joining fees, yearly contracts, higher price points, and older age groups all make for a harder sale, yet will increase retention. Those aspects that make it easier to sell, e.g. low cost, month-by-month, younger age groups, etc. reduce retention and increases attrition.

Men and Women Quit at an Equal Rate

The attrition rate for males is 35 members per 1,000 per month, while the rate for females is 37 members per 1,000 per month. Women average an 18-month length of membership. Their counterpart will average 19-months.

Equal Among Age Groups

There is very little difference in the attrition rate between 35-44, 45-54, and 55+ age groups. Within the fitness market, people 35+ and those under 35 display different social and behavioral characteristics. Generally, people 35 and older are more secure in their careers, more stable in their home life, and have more established routines.

Age Group

Attrition Rate (per 1000/month)

Avg. Membership Length

16-24

42.6

15.5

24-34

38.1

17.5

35-44

34.4

20.8

45-54

33.4

22.1

55+

33.4

22.3

The Value Proposition of 12-Month Memberships

Club owners average 15 months of membership from month-to-month membership plans. Twelve-month membership agreements result in greater than 36-month memberships. To calculate the value in the difference between memberships types at the point of sale simply multiple the cost of a monthly membership by 15 and then by 36.

Income Estimate Based on Overall Retention Rate

The study analyzes income differences based on the type of membership plans a club sells.

The estimated income based on the study’s retention rates for month-to-month membership plans for 1,000 members paying $60 per month is:

12 months = $568,386

24 months = $885,078 

Compare this to 12-month contract retention rates for 1,000 members paying $60 per month:

12 months = $663,048

24 months = $1,226,610

In comparison, 12-month agreements offer club owners the financial flexibility to offer incentives. Using the figures above, lowering the monthly rate by $10 to $50 per month could attract members to a 12-month agreement. And even then, the reduced monthly rate on the 12-month agreement nets more income, $1,022,170, than the estimated income from month-to-month plans.

It Quickly Ramps Up

The net gain by increasing or doubling the numbers of 12-month contracts can increase income exponentially. Take these examples of a $60/month, 12-month agreement at 24 months.

1,000 members = $1,226,610

5,000 members = $4,425,390

10,000 members = $8,850.780

100,000 members = $88,507,800

By doubling the number of 12-month agreements (below) from 160 to 320, a club would have an additional net gain of $54,645 per 1,000 members.

84% (840 members) on month-to-month plan

-

16% (160 members) on 12-month agreement

Based on retention rates for each membership type, 1,000 members paying $60/month would yield $939,723 over 24 months.

  68% (680 members) on month to month plan

-

32% (320 members) on 12-month agreement

  Based on retention rates for each membership type, 1,000 members paying $60/month would yield $994,368.00 over 24 months.

So What?

Drilling down into your club’s statistics is essential to discovering trends and behavioral patterns of your membership base. Analyzing the data helps find relationships among the different pieces of data. This leads to developing member segments and creating targeted, individualized marketing approaches, promotions, and social media campaigns.

In some cases, there are situations which are non-starters. For example, if an operator has three clubs and one is situated in a more transient location with a younger demographic, it’s likely little can be done to affect change. Due to the demographics and the location any efforts would likely not net results.

Squeezing Additional Months

  • Members who, as part of their membership, receive an orientation or onboarding stay an additional 7 months.
  • Members who visit 2 times per week stay an additional 7 months.
  • Members age 34-55 stay 12 months longer.
  • Pre-selling membership (before a club’s opening) adds 15 months to a membership.
  • Members who live within 5 minutes stay 11 months longer.
  • 2-3 visits per week add an additional 19 months.
  • Members age 45+ stay 22 months longer.
  • 3 or more visits per week add an additional 28 months.  

The results of a deep dive into your club’s statistics will help determine where to best place your efforts. For chains and independents using an accurate measurement of average months of membership versus percentage of attrition provides a basis of comparisons across clubs. Club owners and gym operators will have the knowledge and understanding to make better calculated decisions on where to spend resources effectively and efficiently.

 

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