In this episode, Rick and Matt discuss the fitness sales paradox. It is a constant struggle in the fitness industry, especially with large fitness clubs, whether to focus attention on customer acquisition (sales) vs retention (customer service). There should be a healthy balance between sales and customer care. You really need both, so building a culture that can acquire new customers with care and keep your present customers happy is critical for business success and the success of your customers.
In most fitness businesses, there are two main levers you can pull to grow and maintain your business.
Ways To Balance The Fitness Sales Paradox
Sales and marketing are critical to be successful. You need to have a process with a marketing program in place to bring leads to you, then once you meet the prospect, you need a system to convince them you have the solution to their problem.
Retention is KEY to growing your business. A good retention strategy is necessary to keep the customers IN your business.
The fitness industry has always struggled with membership retention.
If you don’t keep your customers, your churn rate will increase. It’s like a leaky bucket where you constantly work to add water. If you just plug those holes, the water will stay in the bucket with less work.
If you want to grow and fill up your gym, you’re probably not going to get there if you’re putting water in a leaky bucket and constantly sell new memberships. You’ve got to plug those holes, which is the retention side.
Customer Acquisition vs Retention Stats
- Acquiring a new customer can cost 5 times more than retaining an existing customer.
- Increasing customer retention rates by 5% increase in member retention rate can increase profits anywhere between 25% and 95% for a gym according to a survey by Invesp Consulting.
- The success rate of selling to a customer you already have is 60-70%, while the success rate of selling to a new customer is only 5-20%.
- IHRSA research shows that a member that leaves can cost as much as $674 in annual revenue per dropped account.
Both are equally important to a business. Sometimes you should focus more on sales and other times more on retention. In reality, the best businesses intertwine the sales process with the retention play.
If you’re a sales minded individual, you really struggle to understand customer service and retention concept, especially the person who likes sales. Sales is easy for them to understand because there are many metrics for measuring sales. The problem is if you only focus on sales without customer service, you constantly have to outsell churn.
For some reason, the retention side of the formula seems much harder because of something we call the “20 Mile March.” The 20 Mile March means to achieve the set objectives each year with a long-term vision in mind. The name comes from the concept of reaching a destination by hitting 20 miles a day, no more, no less—no matter what. What this means for retention in our Alloy business model is consistency in the way we deliver the customer experience. We show up every day, run the Alloy seven core tenants, know customer names, take care of customers, celebrate their wins and goal achievement, and all the little things that contribute to a great customer experience.
The 20 Mile March is harder to focus on every single day, when sales alone can be a one and done approach. Especially if you’re an investor or a person guy who owned like multiple, giant health clubs. In that environment, it is always about sales. Larger clubs don’t want to dig in the dirt to uncover customer service and experience issues. They create so much sales momentum to offset their terrible retention with a massive amount of sales like in the big $10 a month gyms.
If you are a personal training business like Alloy Personal Training, the name implies that we’re going to take better care of you. The price threshold is high compared to those other types of fitness concepts. So the price itself creates stickiness. Psychology proves that if you pay more, you’ll appreciate it more, take advantage of it and stay around longer. So in our business, we balance our approach on 50% acquisition and 50% retention.
Now there are phases in the business life cycle where you might have more effort on sales in the beginning. That’s a point in time where it’s all about sales. In our case, it would be for each franchise presale. After you have been open for three months and they settle the dust from presale, you start your 20 Mile March with your retention strategy. You make sure the coaches are providing the best customer experience possible, apply the core tenants, and all the other things that come along with retention. That’s when you need to switch gears. And so what’s interesting is we work with franchisees and we’ve worked with organizations who are stronger on each side of sales and retention, but they need to understand to both equally.
You need to thread retention and customer experience strategies within the culture and the strengths of the company. We articulate and communicate that with our investors, who will then pass that down to their operators, who will then pass it down to the coaches and team members.
In this episode, we discuss the healthy friction between sales and customer service results in growing your business with strategic customer acquisition and retention. Many brands/individuals are good at one and not the other. This is the paradox between sales and retention.
Learn how to build a successful culture to grow your business with a balanced acquisition and retention strategy.
- Matt’s new role at Alloy Franchise (00:46)
- The 2 levers in a fitness business (04:31)
- The difference between sales and retention (06:12)
- The sales process is intertwined with the retention play (10:06)
- Achieving both sales and retention (17:33)
- Systems vs. culture (20:28)
- A system gives you more opportunities to have great experiences (27:02)
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