Retention vs. Sales Costs: A Re-Examination
Every year, as facility owners do all over the world, my business partner and I craft a marketing and advertising budget. We then refine our spending throughout the year and, before you know it, it's time to start all over again. Each time we go through this exercise, I hear these often-said words in my head: "Selling a new membership is more expensive than keeping an existing one." Sometimes, I hear the actual number in my head: Is it five times more expensive? Ten times? I'm never quite sure, but that message keeps popping up, like an annoying tune you just heard on the radio. And, this little fact is just as annoying.
I understand the spirit of the message. It is, after all, quite expensive to run advertisements, receive visits by prospects, assign them to sales people, provide an orientation, follow up, etc. Sales, marketing and advertising can be a huge percentage of a fitness center's expenses. Keeping customers, on the other hand, has an immediate payoff. Every member provides monthly dues, and can also provide health bar and pro shop sales, personal training and tanning revenue, referrals of other members, etc. But when messages like this are repeated often enough, they tend to be taken as unquestioned truths. And several aspects of this message bother me.
Which is more worthy?One thing that bothers me about this statement is the implication that retention efforts are somehow more worthy than sales efforts. Now, if you've read this far (and thank you for that!), I'd like you to guess — is my small club a sales- or retention-focused operation? You may be surprised to learn that we are retention- and service-focused. We don't even have sales people. Our trainers and front desk people do our sales and, I must admit, I typically hate walking into a sales-based fitness center. The rows of cubicles with sales people seem more appropriate for a car dealer than a fitness facility. However, if such sales-focused facilities weren't successful financially, they wouldn't continue to exist and thrive. Many of these fitness centers are some of the most widely known and respected businesses in our industry. I certainly believe that if there were a less expensive way for them to be as successful as they are, they'd take it.
Which is less expensive?Which brings me to the second thing that bothers me about this message: I don't believe it. I may not like the particular business model of a sales-driven facility, and their clubs might not be for me, but I certainly respect them. And, sometimes I envy them. That's because retaining members is hard work and it's expensive — more expensive than most people realize. Almost every dollar we spend on our business goes to customer service and keeping our members as satisfied as possible in order to keep their business for another day.
If our daycare gets too crowded, we bring in the emergency babysitter. If we fill up our group cycling classes, we add more. If we can make a case for new equipment that will be popular with members, we buy it. If we have valuable staff members, we reward them. If a member hasn't been to the facility for a few weeks, we contact them. And yes, we have member appreciation events, seminars, newsletters and many other things that fall under the formal banner of "retention." But, it's the daily operation of our business that is our single biggest retention effort.
Sometimes I wonder if it's all worth it. Our experience, which is consistent with industry data, is that approximately 30 percent of members quit each year due to factors beyond the our control — relocation, changes in work schedules, family crises and other life factors. So, while we are tracking every member's attendance, contacting them when they are not showing up, and helping them to stay motivated and successful, we're going to lose a whole bunch of them anyway.
I know that our efforts to serve and retain members are, in fact, worth it for us, and our business model has proven successful over the years. We have proactively chosen not to pursue aggressive sales techniques because (among other reasons) we want the right kind of members who will, hopefully, respond to and appreciate the services we provide. We have found that when we "talked" people into a membership, and they really weren't ready to join, they didn't stick with it.
So, our model is right for us. But, all of those costs make me wonder just who is doing the math that says finding a new customer is more expensive than keeping an existing one.
Facility of the Week
Ithaca College Athletics and Events Center