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Old 09-10-2014, 11:21 AM   #1
Mike Mollin
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Reducing Member Churn Rates

I was wondering if anyone could share ideas on how they reduce member churn rates?

We seem to have a number of members recently who are trying to get out of their 1 year contracts. We typically have people commit to a 1 year membership and charge their cards automatically monthly.

We want to be sensitive to our members needs but we also expect people to honor their contracts.

We are afraid of "making enemies" if we are too tough and we strive to build a strong community. We are also aware that bad word spreads a lot faster than good word.

Any advice is appreciated!
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Old 09-10-2014, 11:44 AM   #2
Tommy Alfinito
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Re: Reducing Member Churn Rates

This is why I don't do contracts - you end up with one of two options - letting people out of their contracts which completely takes out the positive benefit of a contract or making people who aren't happy stay and pay money.

If you do decide to go with contracts, there should be a decided upon buyout clause in the contract. This way if someone wants to terminate the contract you can simply say ok it is x% of whats left or 2 months of whatever works for you. Another option I have seen is making people pay back the discount they received by signing a contract.

I run month to month and my turnover is really low. I think people equate a contract with fixed income, but an unhappy customer is going to cost you in some way. Either getting out early, creating a negative presence in your classes, or by bad mouthing your gym to others.

I am not saying contracts can't work, many gyms make them work, but I have used it as a selling point for us that we don't have contracts and that has worked well for us.
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Old 09-10-2014, 01:14 PM   #3
Brian Strump
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Re: Reducing Member Churn Rates

I'm in awe of how many affiliates allow members to pay a reduced rated with an annual agreement.
It's simple to just change your account info; and the odds of you going to collections is nil.

Change your membership options. Or plan on being the bad guy. If you're not going to hold members to a signed contract, why offer them at all?
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Old 09-11-2014, 12:15 AM   #4
Aushion Chatman
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Re: Reducing Member Churn Rates

Mike,

It is not bad on you to hold people to a contract they willfully signed. Don't make any decisions out of fear in your biz.

How immature is it on their part to commit to a legal agreement, then try to back out of it.

I understand your fears truly as we operate with contracts. You are probably a generous guy who truly cares about his clients.

Nothing wrong with contracts, we use them.

Before you go any further we should identify Why you decided to use contracts, can you lay that out for us?
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Old 09-11-2014, 06:56 AM   #5
Brendan McNamar
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Re: Reducing Member Churn Rates

The biggest gyms in Phoenix are month to month. Number of members seems to be unrelated to billing method.

You can't create buy in with a contract. I know my local YMCA where I swam on a Masters swim team tried to enforce a long cancellation notification on me. ****ed me off so bad I just reported the debit card lost and they had no way to collect.

Personally I think contracts are a mistake. If you think they are best then I would say the mobile phone industry is a good example of how to handle it.

In the phone industry they provide you with a heavily discounted phone in return for 2 years worth of payments. Because they have a big up front cost they have a significant cancellation fee. About 2.5 months worth of payments on a 2 year contract.

In CrossFit we provide a tremendous amount of coaching to new people hoping to get a happy member who stays with us and needs less coaching over time. If you want to offer a 1 year contract then a preset buy out of 1 to 1.5 months fees seems about right. You would have to carefully write up the explanation so people understood the fee is to help off set the initial extra coaching cost the gym incurs. The cancellation process should be carefully explained when the person signs up.

We experimented at my gym with a couple of systems. The most profitable system that did not create ill will from folks who didn't workout was a required Foundations class with its own fee. About 50% of people who completed Foundations would sign up as members. 25% or so would complete Foundations but decide CrossFit wasn't for them and wander off happy with the whole experience. 25% would quit Foundations knowing they didn't owe anything else. We priced Foundation above our monthly membership price.

In the end your community, your coach's skills and their passion is what will keep members regardless of how you structure payment.
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Old 09-11-2014, 11:12 AM   #6
Mike Mollin
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Re: Reducing Member Churn Rates

we like the idea of having steady income over a period of time
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Old 09-11-2014, 11:59 AM   #7
Mauricio Leal
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Re: Reducing Member Churn Rates

We offer M2M and 6 month or 12 month memberships with single lump sum payments. No cancellations/refunds (except in exceptional circumstances as per the law), but we do have a grace/buyer's remorse period up front, again as per the law. Make sure to check your state's laws regarding this, as they are quite detailed, which I think is in response to a few naughty gyms in the past having a huge pre-opening sale and shortly thereafter skipping town . Here is CA's (wfs). Sometimes we allow them to split it into two payments one month apart. When someone cancels a long-term membership that you have agreed to even partially refund because you're just nice guys/gals, it is almost the same as incurring a surprise expense, like one of your barbells just broke in two .

I never understood gyms that offered a deal for long-term "commitments" that were just auto-pay month-to-month memberships. Unless they have got a huge bankroll to start (which diminished the effects of "small" surprise fluctuations like refunds), they're asking for a reality check. I think the reason people go this route is that you are perhaps more likely to get someone to sign-up by offering them a "deal" that is technically long-term (and thus matches the commitment clients need to get fit also) but isn't a huge up front payment. We haven't had a problem with the lump payments so far. It really solidifies our commitments to each other, as we have greater certainty that they're going to be around a while, and our coaching investment in them will likely reciprocate. Otherwise it really is a one-sided deal, because we invest so much energy early on with newbies (who don't even know it), that to have them bail and take their money back a month or two or three in is the ultimate kick in the nuts.

The Biz now promotes an in between system where there is a modest non-refundable down payment followed by lesser monthly payments. So, for their 4 month contract (which BTW is their shortest term, i.e. no M2M) @ 1X/week attendance, it is $475 total, $199 down payment, with $92 for the last 3 months. Though as it scales up to longer term packages, the down payment becomes a smaller percentage of the total amount (less than 10% on their top tier package), but still respectable enough to discourage short-term bailing. It is probably a good system, however it is pretty complicated to follow let alone explain to a prospect, people can still bail and cause financial headaches, and I'd rather keep things simple for now. Gap theory says to avoid overly complicated sets of choices or else the client will just check out and choose "neither."

At the end of the day, I start to understand more and more why some gyms just opt for M2M auto-pay all the way. It avoids some potentially massive headaches, and if you're doing your job exceptionally well, as we all should strive to do, the committed folks stick around whether they are getting a deal or not.
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Old 09-11-2014, 12:01 PM   #8
Clint Harris
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Re: Reducing Member Churn Rates

Do you know why they are trying to leave ? To me, that is your most important question.

Contracts suck, stuff happens, but even month-month people will leave if you are not capturing their hearts. Even content customers will drop you in a heart beat .... you need to get them to the next level - loyal customers. This is where they see value and you are demonstrating it. Simply running classes may not do it.

Perhaps, to try and stem this churn rate, survey all your members about your gym. (do this professionally, so it can be anonymous and the company performing the survey can both guide you and correlate your results).
What do they like/dislike about the coaches, schedule, equipment, cleanliness, bathrooms etc. Have a few questions but also give them a free from box at the end. You may find some really easy actionable items.
- Perhaps it's as simple as changing your schedule to be 5:30, 6:30, 7:30 rather than 5, 6, 7.
- Others may think the floors are always too dirty.
- Maybe there's nothing to use to wipe down the wall balls.
- Perhaps the toilet paper sucks or is never there.
- There may even be a coach or member that is turning people off.
- Perhaps there's something dumb like they thought there'd be events every month ..... and they simply don't read the whiteboard or your 12pm coach never tells anyone about it.
- Maybe they're getting burnt out because it's too many metcons.
- Someone may want more strength
- Someone needs to know what the weekly schedule is so they can plan their triathlon training.
- People may want yoga
- People might be sick of sharing equipment
- Perhaps the classes are run in a micro-managed fashion. (It's adult playtime ... not the military).
- Maybe a class on Sunday would go a long way.
- Maybe the "thursday rest day" people don't enjoy because you're effectively closed.

It can be amazing what you will find out. And if you publicize what you heard from the survey then action it, you'll probably save a few members too. Often if 1 or 2 people want it or are thinking it, there's more that aren't saying anything. (or have, and no one listened).

Some items you won't be able to address, at least immediately, but you can at least recognize their value and see what you can do. Perhaps committing to quarterly spend on equipment might be a way. Or partner with the local yoga studio for a discount.
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Old 09-12-2014, 06:34 AM   #9
David Storm
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Re: Reducing Member Churn Rates

We run month to month. Before I opened our box I learned from others that I helped with that having someone locked into a contract that didn't want to be there was the quickest way to spread cancer in your box and results, from what I have seen, in a greater loss of members. We do auto debit but it is month to month. Our turnover rate for anyone staying more than the first month is very, very low. We have had people stop for the summer because kids out of school, extended vacations etc. and they are back in the fall with their friends. If I had been trying to squeeze them when they couldn't get in I most likely wouldn't have them back nor their referrals.
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Old 09-12-2014, 08:53 AM   #10
Nathan Holmes
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Re: Reducing Member Churn Rates

I personally detest contracts both as a coach and a client. Boxes change clients, schedules, or, even worse, they stay the same despite the changing/advancing needs of their clients. Requiring (or "incentivizing"?) clients to commit to a long-term contract would only work if nothing is going to change for that term. Neither the box nor the client has any idea whether that is true. If one requires a client to buy out the rest of their contract, that most certainly leads to (more) disgruntled customers. They are already ceasing their business with the box...trying to squeeze more money out of them is not going to get a positive review. The best idea, in my mind, is to offer a slightly discounted price in exchange for monthly auto-payments with a reasonable cancellation notice (30 days?). This allows you to reward your long-term customers and actually encourages new customers to sign up for the longterm because they aren't locked into a contract. Both boxes I have worked at (and all the boxes I have been a client at) operate as I described. I have specifically avoided any box that required me to sign a contract and pay a fee for leaving. It isn't fair and it isn't right.
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