Relationship, Retention, and Revenue in the Fitness Industry

By TechZone360 Special Guest
Max Porter, Strategic Partnerships at CallFire
April 17, 2015

The first time I ran a marathon I was unprepared. I was 23, had a full-time job, and didn’t want to give up my social life on weekends to recover from 12-20 miles runs. So I fit in training when I could. My lack of discipline caught up with me on race day when I collapsed twice from exhaustion/dehydration, and had to be pulled off the course by medics.

Once recovered, I was committed to doing it again the right way. I realized that my biggest challenge was my discipline; I needed to be held accountable to my training schedule. I decided to partner up with a friend who was planning on running the same marathon. Neither of us had much marathon training experience, but we trained so hard you would have thought we were going to the Olympics. On race day we both ran under 3 hours and 45 minutes; no medics and no (significant) dehydration. We killed it.

The difference between my first and second marathon had nothing to do with my training regimen, diet, or the motivation from my previous failure. All that changed was that I now had a training partner that held me accountable to my training schedule. If I didn’t wake up at 6am for our Tuesday 10 milers, I would be letting him down. Nothing ever got me out of bed faster than knowing someone was waiting for me to train with them. Communication was everything; texting the night before to confirm training the next day, emailing each other workout plans, and calling to discuss training availability all kept me on point.

A study by Stanford University demonstrates just how powerful social “nudges” can be. Researchers took a group of 218 participants, explained to them that their goal activity level was 100 minutes of exercise per week, and separated them into three groups. Group one received one call from a live person every three weeks. During the call, participants were asked how much they worked out in the past week, were congratulated, and cheered on. Group two received the same call at the same frequency but from a robotic message. Group three received no phone calls.

Image via Shutterstock

After one year, participants who received a call from a live person increased their weekly activity level by 78 percent. Participants who received pre-recorded calls increased their activity level by 50 percent. Even the participants that received no phone calls, but were present for the initial meeting, increased their activity level by 28 percent. Six months after the study ended, the participant’s activity level stayed the same.

Why do personal trainers still exist? Anyone with an Internet connection can watch videos on YouTube or read fitness blogs to find the best workout routine. Trainers exist because people are willing to pay them to hold them accountable to their goals, similarly to group fitness gyms like Crossfit, Soul Cycle and Zumba, which are exploding across the country.

With that in mind, it’s interesting to consider that the fitness industry is the only subscription-based industry that typically glorifies member acquisition over retention. Get ‘em signed up and hope they never show up so that you can get the most out of your gym space. However, focusing on retention as opposed to acquisition, can dramatically increase gym revenues and build a stronger foundation against market volatility.

When gym owners focus on increasing member attendance and the average length of membership, they reduce member acquisition costs by increasing word-of-mouth marketing. The best marketers are your customers, especially in the fitness industry. I’m significantly more likely to work out at a gym my friends go to than a gym with a really cool billboard. Increasing member retention also makes gyms more resistant to typical churn forces. So if a cheaper gym moves in across the street or a new fitness concept takes over pop culture, your members will be less likely to switch because of their loyalty to your brand.

Building brand loyalty can also be defined as increasing “switching costs.” The cost a member incurs by switching from one gym to the other is usually low. Most gyms offer similar amenities, equipment, classes etc., and as Warren Buffet would say, “it’s an awfully thin moat to cross.” But one of the few ways a gym can retain its members is by building relationships with them and making members feel accountable to working out in the context of their gym. This could be achieved through social media, phone calls, text messages, or face-to-face communication, all which can increase attendance among members.

Occasional social nudges can dramatically increase member activity level. Increasing member activity level and attendance increases the points of contact they have with your gym, and more points of contact increase the lifetime value of your members, which ultimately reduces member acquisition costs, and increases brand loyalty.

Eric Casaburi, the CEO of Retro Fitness, which boasts one of the best retention rates in the fitness industry (over 16 months), says, “Price point, early intervention and adoption are the keys to keeping customers in place, but at the end of the day, what matters are the little things: remembering a customer’s name, knowing which drink they like from the juice bar, and how easy it is to reach the club from the customers house. . . You have to press all the buttons,” Casaburi stresses, “not just one or two of them.”

Edited by Dominick Sorrentino

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