The Cost of Replacing a Health Club Member

16 Aug
2018
The Cost of Replacing a Health Club Member

The cost of replacing a member goes beyond sales and marketing expenses, according to data from IHRSA’s Profiles of Success.

A constant stream of new members is the lifeblood of a club, so we say each year in IHRSA’s Profiles of Success. Acquiring new members also provides ongoing validation for your efforts in getting your community more active and healthier with the services and facilities your club provides.

However, in today’s industry, with so many fitness options available to consumers, keeping existing members is just as important, if not more so. IHRSA’s most recent Profiles of Success shows that leading club operators are ahead of the pack in this respect, notching a median member retention rate of 72.5%. Leading multipurpose clubs recorded a median member retention rate of 73.2% in 2016, while top fitness-only clubs posted a median member retention rate of 66.2%. In comparison, IHRSA’s Health Club Business Handbook estimates attrition for the “average” club can reach as high as 45%.

Strategy 2016 Health Club Business Handbook column

Source: IHRSA's Health Club Business Handbook

It’s clear member retention is an all-important metric every club operator strives to maximize. But just how much does it cost to replace a member that leaves? IHRSA’s Profiles of Success highlights three important cost considerations.

Leading clubs spend a median of $66.48 in sales and marketing costs per new membership account.

Thanks to budget-friendly sales and marketing outlets like social media and online ads along with company websites, the sales and marketing costs associated with acquiring a new member has decreased significantly over the years. IHRSA’s 2012 edition of Profiles of Success shows that clubs spent a median of $103.50 in sales and marketing costs per new member account in 2011. Although the cost to acquire a new member has never been cheaper, a newly acquired member may not necessarily replace the revenue lost from a member that quits.

A health club member that leaves can cost a club as much as $674 in annual revenue per dropped account.

When a member leaves, particularly a long-tenured member, it may take years to replace the revenue lost from that account. Historically, long-term members typically pay more in club access as they not only pay monthly dues but may also purchase non-dues services like personal and small group training, spa, and sport-specific instruction. According to Profiles of Success, leading clubs generate a median of $674 in annual revenue per member.

Consider the total revenue generated per member at your club in order to determine how much it costs to replace a member. Also be sure to take into account the average revenue generated by a longer-tenured member who has been with your club for years versus a new member that recently joined your club in the past 12 months.

Not all memberships are equal.

You may find that your club, on average, generates more per member account than the overall sample of participating clubs in IHRSA’s Profiles of Success. This is understandable as revenue generated per member varies across club segments.

Leading multipurpose clubs generate a median of $894.50 per member, while fitness-only clubs total a median of $467.50 per member. Multipurpose clubs typically offer more amenities and non-dues services than fitness-only clubs, explaining the distinction in revenue per member. Considering the net membership growth for multipurpose clubs was a median of 2.9% in comparison with 5.1% for fitness-only clubs, multipurpose clubs stand to lose more revenue relative to fitness-only clubs when a member leaves.

Strategy Profiles Fitness Only Graphic column

Source: IHRSA 2017 Profiles of Success

Member retention: the new lifeblood of a health club?

In a competitive health club market, being able to predict and maintain recurring dues revenue is critical. Member retention may now form the lifeblood to a club’s bottom line. It’s possible your club may rank among the best in member retention, and you know how to engage your members for years of continued health club usage. But if you are looking for more ideas on how to improve member retention, be sure to visit IHRSA’s member retention resources.

Resource: IHRSA

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