How gyms can enhance their retention rate and the case for (reasonable) contracts

Robin Karn is the National Sales Manager for Harlands Group. Having started in the industry managing a number of private gyms and then as a regional sales manager for Holmes Place, there is little Robin hasn’t experienced when it comes to acquiring new members and managing their monthly payments.

Since 2005 Robin has worked with Harlands Group, where he has grown their sales to 1.8 million direct debits per month. This data has given Robin incredible insight into the merits of different pricing structures and sales techniques, as well as the pros and cons of contracts. We met with Robin to find out if there was an ideal approach that operators could take to maximise revenue whilst enhancing the member experience.

 

From your experience, what are some of the things gyms can be doing to enhance their retention rate?

1. Keep your membership offering simple

Leisure centres are particularly bad with this, given that they have to be more inclusive. They tend to have lots of options and the customer ends up so confused that they often don’t take any action at all. Operators should have just two or three choices. Not only does this simplicity increase the conversion rate but it also makes the data far easier to analyse.

 

2. Don’t rule out contracts

Contracts have a bad reputation because they tend to be used by the more aggressive operators, but if applied properly they can transform your retention rates whilst enhancing your customer relationships.

The key is to give two options, one on a monthly rolling basis and the other as a 12 month contract that offers a discount of approximately 20%. There are several benefits:

  • The drop off rate is far lower after 12 months as by that stage they have adjusted their long term lifestyle habits.
  • The average lifetime of a member on a contract is 16 months, versus just 7 months for members not on a contract, so you can sell cheaper and still make more money.
  • In those 16 months you have far more time and revenue to invest in building the relationship and enahancing the customer’s experience.You can afford to offer PT sessions, nutiritional consultations, free towels, fully staffed reception area and all the other things that can distinguish your club from other operators.
  • This increased lifetime value also enables you to scale up your advertising as you know that the average member is worth £xx multiplied by 16, rather than £xx multiplied by 7.
  • Longer customer lifetime also increases the likelihood they will refer your brand to their friends and family, and gives them more time to build up new personal connections and friendships within the club’s community.

The key is to sell this as a lifestyle change, and that doesn’t happen in three months. They have to buy into the idea of it being a long term change.

“If applied properly contracts can transform your retention rates whilst enhancing your customer relationships.”

This is how gyms that are struggling to compete with the large budget chains can survive as it enables them to offer the best possible price whilst still maintaining all the little extras that define and distinguish their brand

 
3. Ensure the contracts are fair

Offering contracts to members should be an absolute no brainer for operators, but unfortunately they associate them with aggressive and manipulative tactics employed by a small number of brands. However, the problem in these instances is not the contract itself, but the terms and conditions.

“A good sales person will be able to use the terms and conditions to remove all perceived barriers until the only seemingly sensible option for the customer is the contracted option.”

If someone is unable to use the gym due to being unemployed or injured, for example, they should be able to cancel/freeze the contract. Not only does this protect you from getting dragged on to Watch Dog, but a good sales person will be able to use these terms and conditions to remove all perceived barriers until the only seemingly sensible option for the customer is the contracted option.

Ultimately, however, it’s generally best to give both options. You can call one a flexible membership and one a value membership. Just be completely upfront and let the customer decide. It’s on old sales trick but you want to leave the customer with 2 options to choose from; namely a value membership over 12 months or a flexible membership month to month – Don’t let the 2 options be join or don’t join!!

 
4. If you’re not a budget operator, don’t try to be one – focus on the thing you can do that they can’t

If you run a gym on £40 a month memberships, and someone opens up down the road for £19.99. don’t compete on price on a monthly rolling basis – that’s suicide. You’re simply not set up to compete at that end of the market. However, as explained previously, if you offer a contract for 12 months then this may allow you to come closer to the budget gym’s price point, whilst still allowing you to offer the frills that they can’t.

 
5. Focus on the thing you do best

Your focus as a gym should be the customer experience from the moment they interact with you. Everything else is a distraction. Too many gyms try to do their admin, finance, marketing, etc, in-house, but then the staff end up spending too much time on areas where they have limited expertise and have little time left on the thing they do best, which is engage with the members. Our industry has some of the best people I’ve ever met and they should spend their time becoming friends with your members. Gyms should be focusing on engaging with members in the club, on social media and out in the community – the more you do the more you’re membership will grow; it’s really that simple.

“Gyms should be focusing on engaging with members in the club. Everything else is a distraction”

This is particularly true for small gyms, which is why so many use services like ours. For really large companies there can be a an argument for taking control in-house, but in reality they’ll still never be able to achieve the efficiency of a specialist external company who can just focus on a single discipline. For example, when a small gym starts using our service they receive the following even if they only have 100 members:

  • Online joining with verification of bank details and the experience of literally millions of joiners going through the system
  • State of the art cyber security
  • End to end credit control to ensure maximum revenue is collected
  • Advice on how to maximise your profitability in an ever changing market place
  • If someone stops their DD early, then we step in and manage that to increase your retention
  • It’s the same for IT, health and safety and marketing – outsource it all and free up your staff to engage with your members! If you pay a salary to anyone then ask what that staff member does to improve my members experience or attract new members into the club.

     
    6. Have a sales person on site

    The final point is that you must have a professional sales person on every site. Some gyms try to automate this or get the trainers to fill the role but it’s just not the same. A sales person will pay for themselves simply by overcoming objections to joining turning more enquiries into sales, creating extra leads via referrals and community engagement and converting more signups to higher yielding memberships.

    If you consider the difference in revenue between a 16 month membership and a 7 month membership, it’s clear that even if the sales person doesn’t affect the number of members you convert but instead only increases the proportion that sign up to contracts, then they will still pay for themselves in no time at all!

    “Gyms must have a professional sales person on every site”

     

Posted in Gyms & Clubs, The Fitness Network.
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