Give 'em What They Want

It's the age-old question: How do we increase membership and retention, especially among an increasingly hard-to-please, sedentary population? While industry professionals have been struggling with this question, coming up with many good programs and practices, retention rates have remained virtually the same, and facilities have failed to attract and retain the sedentary population. The reason: Most facilities still haven't figured out how to give members what they want.

According to an article in the Harvard Business Review,1 the key to customer retention, which is defined as "the art and science of keeping your best customers and selling more to them," is continuous learning. Continuous learning means learning about individuals rather than markets, and particular needs rather than average trends. The five methods of continuous learning are:

1. Identify core customers. You can identify core customers by answering three overlapping questions: a) Which customers are the most profitable and the most loyal? b) Which customers place the greatest value on what you offer? c) Which of your customers are worth more to you than to your competitors? To quantify the value of loyalty, use these six components: the cost of acquiring the customer, the base profit to be expected from the customer, the anticipated revenue growth from the relationship with the customer, any cost savings that may accrue from serving the customer, referrals provided by the customer, and the price premium that a first-class relationship with the customer may allow you to charge.

2. Measure what matters. To accurately predict repurchase behavior, business owners need to measure customer share and customer sacrifice. "Customer share is the proportion of a customer's total potential business that you have. The higher the customer share, the higher his investment loyalty to you, and the higher the barriers to entry for your competitors." Customer sacrifice "is what your customer must give up in order to do business with you, the gap between what he wants ideally and what you currently offer." The key is to put less emphasis on quantitative measures, and more on hands-on contact so you can gain an understanding of customer sacrifice. Try the "voice of the customer" approach, which calls for listening to the customer as an integral part of the corporate culture. This means paying close attention to what the customer is saying, and directing that information to those who can use it to make a difference.

3. Analyze defections. Look hard at those in the core group who have left, because many lessons, including how to win them back, lie in lost memberships. One suggestion is to use "failure analysis teams," in which each member of a group, headed by a senior manager, is tasked with interviewing 10 to 25 defectors. The teams should use the "5-why's" series of questions to get to the root cause of defection. For example, the first question would be "Why did you cancel your membership?" The ex-member's answer may be, "I got a better membership deal from your competitor." To whichyou would respond, "Why was that a better deal?" and so on.

4. Mass customize. Treat your members as individuals. For instance, Levi-Strauss introduced the "Personal Pair" jeans, which incorporates two additional measures, hip size and rise.

5. Learn to meet unspoken needs. The bottom line is that members todayare more informed than ever, and they want more than ever. In addition, since they are presented with more options, their wants have become more specific. According to Guff Muench, vice president of distribution and customer support for Cummins Engine, "...In this era of ever expanding expectations, satisfaction does not translate into loyalty. You can do everything right as far as spoken needs go and still lose the customer. You must learn to satisfy unspoken needs, and go beyond expectations. This comes from understanding what makes relationships tick, and does not have to mean big programs. If you are in an industry filled with rudeness, then courtesy can be the edge."

Fitness business operators are in an excellent position to use these five methods of continuous learning. As a service business, we need to empower our staff to build relationships with members to determine what they want from their memberships. When this is done -- when the needs are met and the outcomes are measured -- we are bound to gain new members and retain existing ones.

1. Billington, Jim. Five Keys to Keeping Your Best Customers. Harvard Business Review, Jul. 1996.