Member Retention Strategies for Health Clubs
I was CEO and President of The Claremont Club (TCC) for 23 years. The insights I am sharing here are based on my experience as a club operator at TCC and my 31 total years in the industry.
In my view, the 3 areas that you can work on to build member and staff loyalty. These are Shared Values, Culture, and Character. We were among the top 1% in the world for staff and member retention.
1. Members buy products and support companies where there is a sense of SHARED VALUES
An example is Apple. A person may be willing to pay more for Apple products because they feel that they are supporting a company that has the same value structures that they do. The values of simplicity in design and use, creativity, and to do less with more.
In our case, our members constantly told us that a big part of why they stayed at the club so long is because they felt there was a sense of shared values. When we drilled down and asked them what they meant by that. They would say things like:
”It makes me feel good to be working out on the treadmill next to someone that’s paralyzed that can’t walk and is working out on an assisted machine next to them.”
“It made them feel good to have their seven-year-old in childcare because Jason, who was paralyzed and in a powerchair, was reading a story to them.”
They felt good that their children were learning about empathy, compassion, and acceptance at The Claremont club and not at school.”
And these kinds of programs we ran for children with cancer, senior citizens that had Parkinson’s or dementia resonated with our members. So, they wanted to support the club, and they were willing to pay higher dues and remained members longer than the average Health Club. Not because we had a lot of equipment and tennis courts, but because of these programs. Oftentimes, these are hard things to teach businesses but they’re really powerful.
2. Is your culture about caring, giving back, and adding value?
Are you a company that gives back and is deeply rooted in your community? Let me tell you why that is important. Because it is directly related to staff and member retention.
At the Claremont Club, our staff attrition was as low as 8.4% a year and these are hourly people living in southern California that are often challenged to be able to meet their monthly cost of living expenses. They stayed at the club because they felt we had created and maintained meaningful, purposeful work.
And again we drilled down on that and asked them to explain that to us, what’s purposeful work? Working in childcare, changing diapers, playing with kids is not what they meant by meaningful.
What they went on to tell us was that meaningful work for them was knowing that they were a huge part of these programs: the Pediatric Cancer Program, the Adult Cancer Program, the Spinal Cord and Paralysis Program, the Adoptive Family Program, Kids Scholarship Programs and that gave them meaning and purpose in their work.
Again, it all comes back to culture because all those programs except the Spinal Cord and Paralysis programs were free programs that went on all year that were supported through fundraising and out of operating income. They came right off the bottom line but that was part of the company culture and it resonated deeply with our members and the communities that we lived and worked in. That was the inspiration and passion behind having a space that allowed us to do these things.
And attributing a significant drop in member attrition and this resulted, by accident, in quite a bit of increase in both cash flow and net income, year-over-year. I say “by accident” because these programs were never about money, they were about doing the right things to help people.
There is not a club in the world that can’t be doing some of these things. The unfortunate reality is that a very small percentage of them do. But a lot of clubs run fundraisers and they do give back to their community.
What I’m trying to say is that there is a very strong human element to it. What is gonna keep a person working in California, Dallas, New York, Chicago, Atlanta working for $13/hour? Here that’s not enough money to pay half your rent for a one-bedroom apartment. So what keeps those people at a facility so long?
You can’t do it with pay, you have to do it with your culture and your character. Take care of your people, give them meaning and purpose in their work, caring about them as human beings. REALLY care about them, not just saying it! Spending money, effort, and time with them. With education.
The same principles apply to members. At Claremont, the average length of membership was just shy of 7 years. We were doing what all successful Clubs were doing: great customer service; clean locker rooms and grounds; new equipment coming in every year and doing necessary M&R and Capital Improvements. And we had every competitor in the industry within a 3 mile radius of our club and for a lot less money.
So, what it really came down to was our culture and it made everyone feel good. Getting the organization and staff from Good to Great came down to our culture and developing and maintaining meaningful, purposeful work.
Give your members value in their membership. Rather than focus strictly on revenue, you also need to look at your non-dues revenue. That revenue gets slashed in commissions and payroll-related expenses. So for every dollar, you generate maybe 20 cents go to the bottom line.
But the real value of non-dues revenue is it acts as a safety net under a trapeze. When you look at the percentage of your gross revenue vs. non-dues revenue. And the higher the non-dues, the more valuable your members find in being a member of your club. It becomes hard for them to give that sense of belonging up. Even as you raise your dues slightly YOY and people don’t like it, they don’t leave because there’s a lot of other things they find value in.
One way to do this is by having a Kids’ Club. A place where they have a safe, wholesome and welcoming environment for their kids to learn. They have daily lesson plans, enrichment classes, foreign language classes, and socialization while mom or dad or both are working out, playing tennis, and doing other stuff. The higher the percentage of your non-dues, the higher your member retention.
The average attrition rate of an IHRSA club in the United States is about 31% to 40%. The average length of membership of an IHRSA club is about 18 months.
Another reason I will attribute our member retention success to is the socialization process that takes place within clubs. Where people connect with other people, there are social activities and there’s a sense of belonging. It’s a place where you work out and you hang out or stick around. That’s probably as important or more important than the workout part. By the way, this is not marketed and talked about enough in the industry, but it’s critical.
As a member when I quit, I’m either quitting due to financial issues or I’m not finding value out of the membership, or somebody has treated me with a sense of indifference or rudely, or I’ve complained to management about something and I haven’t been considered and listened to.
Then, they sit at home and think:
“Gosh, I miss my friends at the club”
“Gosh, I miss that class that Sharon used to teach every Monday and Wednesday ”
“I miss my buddies on the Tennis court”
And then, they want to be back.
That’s why it’s important to stay in touch with your members. But what usually brings them back in quantities is a special offer of some kind.
We were the lowest club in the US on aged receivables. Our bad debt or Aged receivables at the end of 2019 was 0.009% on $15.185 million of gross revenue. We wrote off $10,000 in bad debt.
Last but not the least, be an inclusive facility – Not just inclusive but welcoming to all populations, including people with disabilities.
3. Finally, look beyond the numbers. Who are you?
Who are you as a person? As a leader? I don’t mind being quoted on this, but, “Nobody wants to work with a boss, they want to work with a mentor and somebody that they respect.”
We had people working for us who had cancer and we paid them every day they were out. Only 3 people in the company knew about it: My CFO and my HR director. We had people that had family emergencies that had terrible things happen that they couldn’t take care of, we paid for it. We had 141 families that didn’t pay dues at our club and a good percentage of them since 2008 either lost their jobs or had their hours cut or had a terrible illness in their family and came in to quit.
And we didn’t let them quit. Again, there were a very small handful of people that knew about it. But that was the culture of the club. It was never meant to be a “to give to get” act but it came back in very powerful ways.
It wasn’t we’re gonna give so you can give back. It was done because it was the right thing to do.
They become like your extended family and they’re there for you forever.
Also, communication is super important. Transparent and honest communication with your members, especially when there are difficult times. The number of clubs that lost members during covid but didn’t get them back yet because they didn’t communicate with their members consistently during the closures. In personal contact, focus groups, surveys, listening to them day in day out.
We used to write letters to the members before we had a dues increase that was necessary as it was tied into the consumer price index and labor cost. Honest communication with the members. You need to take the time to draft an appropriate professional and kind letter to the members explaining it.
Transparency and visibility of the top people in the organization is critical. If you’re an owner, CEO, or COO, you should be out on the floor, meeting people, talking to people. You have to be visible and you have to be there.
4. This is the culture and character we are trying to build at Smart Health Clubs
First of all, we have big dreams. We see a world where fitness and wellness industries work together. Where every citizen has access to superior fitness and nutrition guidance. We actually dream of a world without medicine. A world where Exercise is Medicine. Read more blogs by me on the subject here.
So, we are committed to building a platform that adds value to the life of a member and eases the life of the club operator and staff. Read more about our offerings here.
In addition, we have already inculcated the culture of giving back already in our company. With every referral we get for a new customer, we contribute the first month’s billing to a charity of the club’s choice in the club’s name.