Membership Attrition and Club Profitability, Part 1

The 1998 publication Why People Quit, published by the International Health, Racquet and Sportsclub Association (IHRSA), Boston, Mass., highlighted the fitness industry's understanding of why people quit their memberships, and the steps facilities need to take to reduce this exodus. Two years later, IHRSA released a second publication, Why People Stay: Health Club Member Retention Research and Best Practices. This resource provided further evidence about the variables influencing an individual's desire to remain a member of a fitness center, and shared some strategies used by several of the top club operators to enhance retention. In 2001, just one year later, the Fitness Industry Association in the United Kingdom released Winning the Retention Battle, a six-part report on the forces driving attrition and retention in the U.K. fitness industry. It not only identified the reasons why people maintain and/or drop their membership, but it also identified strategies that facility operators could execute to help win the retention battle. These publications represent the tip of the iceberg when it comes to articles, presentations and reports written and espoused by industry experts that address the topic of membership attrition and retention. As a result of these publications, and the continued dissemination of information on the topics, retention has become one of the hottest areas of concern in our industry. For example, just last year, IHRSA adopted Face to Face, a program developed by Paul Brown of Australia, as its official member retention program. In a similar vein, Duncan Green, CEO of Momentum Business Development in the U.K., introduced a dynamic membership retention program for the U.K. market. Collectively, these efforts (written and programmatic) offer a meaningful signal that the fitness industry needs to address and solve the attrition puzzle.

Why attrition is so important

An old saying states, "a penny saved is a penny earned." By the same token, for the fitness industry, "a member saved is a member sold." Such a point is particularly relevant because common wisdom states that the cost to save a membership is far less expensive than the cost to sell one. Doing whatever you can to retain members can be a more profitable strategy than selling more memberships if you want to experience continuous business growth. The value of this strategy is illustrated in statistics contained in IHRSA's 2005 Profiles of Success, which show that the average IHRSA club of 60,000 square feet or greater has the following profile:

• Average memberships: 4,670
• Average membership fees at joining: $249
• Average annual dues: $882
• Average non-dues revenue: $545
• Average length of membership: 3.2 years (based on retention level)
• Average number of members who drop their membership each year: 1,225

Based on this data, a typical facility member is worth approximately $5,364 to the facility, an amount that does not include the value of their referrals. As such, the average 60,000-plus square-foot IHRSA facility has approximately $7,713,202 worth of members who quit each year. In other words, facilities have to sell an incredible number of new memberships to turn the faucet off, let alone let the sink fill up. As this example indicates, the fitness industry has become all too adept at throwing money away - an attribute that reinforces why membership retention is so important. Obviously, facilities that are able to win the "retention battle" are in a better position to generate long-term revenue and sustain profit growth.