Abandon Client Retention for A Leaner Business Model

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  • Abandon Client Retention for A Leaner Business Model

Sometimes it’s when you go against the grain that you do your best work. If you’re in a competitive marketplace, (and let’s face it, in this industry, who isn’t?) you have to fight for every advantage. Your membership retention rate is one of those things that can make an impact in the profitability and survival of your small gym business.

I certainly don’t think small gym business owners should completely ignore how well they retain their membership. However, if you’re working on a shoestring budget and living in the back office because you can’t pay yourself a salary, maybe it’s a good time to question everything.

Grab The Business And Figure Out Retention Later

The value of having retention policies and practices in place comes when it increases the lifetime value of each customer. If you just try to hang on to all members, you may unintentionally undercut your own objectives.

If you measure what customers are the most valuable carefully you may find that some pay the monthly fee and use the facilities and that’s it. Others might purchase premium products and services on top, raising the marginal return and lifetime value you earn from their memberships.

In this way, you see that historically high-value members might be worth pursuing with a phone call when they drop out. On the other hand, if you call all members who cancel their memberships, it could burn up hours of the day you don’t have.

Naturally, you have to be mindful of what you’re doing with this. Yes, you might want to be selective in a retention policy. However, if you actively select for some purchasing behavior and then discover it appears to correlate with a protected status such as race, religion, or sex, and that could be problematic for you down the road.

An alternative strategy might be to sell all-inclusive premium memberships at a higher price point. You could potentially get a less costly retention policy that you can apply across the board.

The Eighty Twenty Rule Of Priorities

What are your highest priorities? Remember the Pareto Principle? If you can do the easy wins first, you can build the revenue to do the rest in its own time.

There are only so many hours in the day. So, if you can do those things that get the most results, defer the rest until time and resources permit. Doing the twenty percent of things that get eighty percent of the results is smart time management. The other way around is just hard work for little gain, right?

Transient Marketplaces

Is there a high-margin transient market for your business? Does anyone operate a gym in an airport terminal? I’d love to hear about it if you do! Big cities and transit centers offer the chance to do one-off training and serve customers who may turn up once or every day for a week never to be seen again.

If you can start a gym in a place with hotels, tourists and business travelers you might go for one-and-done premium sales. Scout around in your market to find a niche that works on a convenience-based retail-pricing model.

Specialize And Collaborate

Can you specialize and collaborate to leverage someone else’s retention? This is a variation on freelancing or becoming a contractor to serve specific customer needs. It’s like being a trainer, but on a much grander scale.

This might be the model if you work in partnership with other fitness clubs or companies that include gym facilities and an employee benefit. The main difference to you would be that you invoice a corporate client rather than individual members. You need to be careful with this of course; too much dependence on one client could leave you vulnerable to late payments or non-payment.

Retaining a few corporate contracts could be much more straightforward than attempting to second-guess hundreds of consumers. If you approach this business model with care and build relationships over time, avoiding over-dependence on too few clients, these could turn into lacerative low-maintenance contracts.

Question Everything

The point is to question everything. Keep an eye open for better ways to achieve your goals. To that end, there is often a chance to get more for less.

If you put a lot of effort into retaining your customers for a small reward, it might be a smart move to change your practices. Perhaps limit your gym membership retention activities to only the high-margin customers, abandon lost members altogether, or change your business model to one that’s more amenable to member retention.

Bibliography

Ecott, Steve. A Guide to Developing a Winning Member Retention Strategy. https://virtuagym.com/blog/client-engagement/member-retention-strategy/ (accessed August 2, 2018).

Fagan, Lawrence. Finding Your Retention Rate and Why It Matters. March 22, 2016. https://blog.gyminsight.com/3741-finding-your-retention-rate-and-why-it-matters/ (accessed August 2, 2018).

—. Get Gym Management Leverage With the 80/20 Rule. November 25, 2013. https://blog.gyminsight.com/2204-get-gym-management-leverage-with-the-8020-rule/ (accessed August 2, 2018).

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