Retention is a tricky topic. It’s measured in a hundred different (incorrect) ways, and it’s critical to the financial planning of running your gym.
If you don’t know what your retention rate is, you can’t predict sales, cash flow, and you won’t know when to expand the size of your gym. Without retention information, you’re left in the dark.
You can find numerous incorrect ways to calculate your retention rate with online articles, which is why we made it simple for gym owners with our PushPress software: you can generate your retention rate and member value right on the spot, helping you plan out month after month of your gym.
How to Calculate the Retention Rate for Your Gym?
Keeping existing members/clients is much easier (and less expensive) than acquiring new ones. Marketing, sales, and finally getting someone to sign up for your gym is a costly process.
You won’t know where to start if you don’t know how to accurately calculate your gym’s retention rate, and there are plenty of “shortcut” methods that people have used in the past, which end up leading you to the wrong numbers.
You can calculate your own retention rate, as long as you don’t fall into the common mistake of simply dividing your memberships and cancellations and calling it a day.
It’s more complicated than that. You have to:
- Get a chart of all new memberships at the beginning of each month over the course of the last twelve months. This is referred to as the previous month’s beginning membership or PMBM.
- Get your total number of sales in the previous month, we’ll refer to this as PSM.
- Last but not least, you need the number of recurring memberships that were not canceled. If a member cancels one month and comes back the next, you just count it as a new membership since the revenue stream was disrupted. This is your RMM, of recurring monthly memberships.
To find your true retention rate, you want to subtract the total amount of membership cancellations from your total after adding RMM, PSM, and PMBM.
Then, you want to divide your PMBMs for the last 12 months by 12, and total your membership cancellations for the last 12 months, then divide those by the average number of PMBMs you have.
If it sounds complicated, that’s because it is, especially to just do it on the fly. It becomes a tedious process. That’s why we developed PushPress to make it easy to get your retention rate, and it takes far less time than determining your retention rate on your own.
PushPress will also help you improve your retention rate by showing you at-risk members who may be close to cancellation, so you can use the methods described in this guide to keep them as members without sacrificing revenue.
What is a Good Retention Rate for Gyms?
Retention is the number one issue that gym owners are constantly trying to solve. It doesn’t mean that your gym isn’t aesthetic, effective, and entertaining for your members, but it also doesn’t mean that there aren’t some things that could be improved upon.
It’s difficult to find proper retention rates to base your own off of. There’s a study from 2002 that says the average retention rate is 60.6%, and then there’s a study from 2016 that says the average retention rate is around 67% for the first 12 months.
Different sources will have different information and conduct their studies differently, and of course, fitness trends and current economic stability affect gyms as well.
So what can we aim for? While the average is somewhere between 60% and 70%, that still means that up to 40% of all members you acquire are likely to disband their gym membership. That’s almost half of your gym’s income.
Your target should be to hit a 75% retention rate. That’s not a wholly unrealistic number, either, because the Association of Fitness Studios says that studio-style gyms have retained an average of 75.9% in recent years.
Your gym should feel comfortable, have good lighting (for the Instagram and YouTube crowd), accommodate as many types of exercise as possible, and be a motivational space, somehow all at the same time.
Once you have a good foundation set, you can focus on the tactics we’ve listed below to maintain a high percentage of retention.
How to Improve It?
There are a few methods we can take a look at to increase retention. While many gym owners will float somewhere around the national average (hence why there is an average), you’re reading this because you want to be exceptional. It’s completely doable.
Keep in mind that seasonal changes, current fitness and lifestyle trends, and increasing cost-of-living in certain areas can all impact your gym’s retention rate, so while we can control many variables and keep members engaged in their memberships, there will be some accounts that fall off and are completely outside of your control.
Who doesn’t love a discount? Run a promotion where new members can get one month off of a three-month package.
If your gym offers a massage parlor as an extension of your services, run a promotion for one free massage with the purchase of at least one month of gym membership. Then, upsell the three-month package by discounting it slightly.
Discounts are subscription pricing models in disguise. The more they sign up for all at once, the more they save. If they’re fit and the offer looks like it’ll save them money, they may just pay for months (or a full year) in advance if the price is right.
You can also take a competitive approach to discounts by inspecting what other local gyms are offering, and beat their price.
Advertise those discounts in an area close to that gym, or through online locally-targeted ads that state your prices. It may take a copywriter and some flashy graphics to get the point across, but discounts are easily the best way to acquire new customers.
Affiliate Program for Members
Affiliates are individuals who earn compensation for referring customers, clients, or members to your service or product. In this case, that’s the gym (affiliate marketing is a very wide topic with a lot to cover).
For your gym members, this could be more simply called a refer-a-friend program. Allow your members to bring a guest with them for a single day (perhaps per their monthly membership, allowing for 12 potential new customers/clients over the course of a year). Existing members can basically sell the idea of your gym for you.
Your member needs to be rewarded if the guest signs up and pays for a gym membership in order for this to work. The member receives half-off their next month, and the guest gets their first month free if they pay for three months in advance.
Custom acquisition was essentially done for you. The existing member did the marketing, they received a reward (retention is easier than acquisition, so this is beyond worth it), and you’ve acquired that new member with little cost to you.
You can structure the way that your affiliate or refer-a-friend program works based on your gym’s needs and capabilities, but the basic rule is that the existing member that refers another customer needs to be compensated in some way.
It doesn’t have to be anything crazy, either. You can wholesale purchase sweat-wicking towels, exercise mats, or other tantalizing fitness items that would tell a potential customer “That’s going to save me some money.”
Gift-giving can be a financially hefty method of improving retention rates. If you give away too much value, you’re setting expectations by the member and they may assume that they’re entitled to more than the membership allows. You want to be tactical and strategic about this one.
Gifts can also be a reward for maintaining your membership, which would more directly relate to retention instead of just acquisition. Consider gifts for the three-month, six-month, nine-month, and one-year mark of a member’s continuity.
You want to be sure that you have a plan in place to give them these rewards without them having to ask. You could either mail it to them (it’d be local postage, so it won’t be too expensive) with a nice thank-you message or set up a method to notify them through their PushPress Members app. Just be sure that they don’t have to ask for it.
Communication With Existing Members
Talk to your current members. If they’re not in the middle of a workout, talk to them and ask what they would like to see improved in the gym.
Talk about their favorite things, their least-liked things, and what could be improved upon. As gym owners, it’s easy to sit in the driver’s seat and think that you know which road your passengers want to go down.
You’ll likely be surprised to learn a few wants or grievances from your current members, and you can use this feedback to improve upon your gym and make it more desirable, reducing cancellations or frozen accounts, and helping with your overall retention.