Why is it important to measure gym membership retention? (And How to correctly calculate it)
Improving membership retention is the fastest way to improve the operations of any health club or gym.
Most gyms experience a retention rate of somewhere between 50 and 60%, however, research has shown that annual health club member retention rates can vary from as low as 30% to as high as 90%!
Let’s take a look at some more specific gym member retention statistics.
A 2009 study by Dr Paul Bedford found that over 50% of new members on monthly contracts had terminated their membership within eight months. Over 80% of new members had terminated their memberships within two years!
Other studies have shown that 53.5% of all new members terminated their membership within 12 months. Seventy-three per cent had terminated their memberships within two years and 86.7% had left within three years.
It is important to measure gym membership retention rates as without understanding where your club is, it becomes very difficult to measure any improvements gained from the implementation of new retention strategies and tactics.
Want to learn how to improve retention rates in your gym? Download our member retention checklist with 33 tips for improving retention rates – Here
How to calculate annual member retention rates!
Membership attrition is generally measured on an annual basis. Since memberships are added and dropped each month, the attrition formula is best calculated using the average opening monthly membership for a rolling twelve-month period.
To calculate member retention we need to find the annual membership attrition rate.
Follow the following steps:
Step 1
Calculate the membership cancellations for each month and add these together to calculate the total annual cancellations.
Step 2
Take the starting membership level for each month of the year and then calculate the average annual membership level by adding these together and dividing them by the 12 months.
Step 3
Divide the total number of membership cancellations by the average starting month membership level and multiply by 100 to calculate the attrition rate.
Step 4
The retention rate can be calculated by subtracting the attrition rate from 100.
Example 1- Membership Retention Rate
Month | Members | Cancellations |
---|---|---|
January | 2555 | 50 |
February | 2565 | 55 |
March | 2570 | 60 |
April | 2570 | 65 |
May | 2581 | 70 |
June | 2593 | 65 |
July | 2613 | 55 |
August | 2612 | 59 |
September | 2619 | 54 |
October | 2633 | 50 |
November | 2633 | 62 |
December | 2634 | 63 |
AVERAGE | 2598 | 708 TOTAL |
Other Measurements!
Although calculating annual membership retention rates provide a great overview of performance other retention indicators should be considered to provide a more rounded assessment of health club performance.
One of the problems with measuring gym retention rates over 12 months is that its a lag metric. In other words, its the result of what happened many months ago.
Two further assessment indicators that should be considered include monthly attrition and average membership length.
Calculating Monthly Attrition Rates
Number of cancellations for the month/The membership base at the start of the month x 100.
For example:
If you lost 79 members for June and the starting membership base was 1398 your monthly attrition for June would be 5.68%.
If you lost 90 members in July and your starting membership eas 1410 your monthly attrition would be 6.38%.
By calculating monthly attrition you can keep your finger on the pulse when it comes to your gyms retention performance.
Want to learn how to improve retention rates in your gym? Download our member retention checklist with 33 tips for improving retention rates – Here
What should our retention level be?
As discussed earlier most health clubs have retention rates of around 50-60%. Every club no matter how good their retention strategy will have some attrition rate due to uncontrollable factors such as members moving. It has been estimated that these factors account for around 25-33% of the total attrition rate. Therefore clubs that are performing at levels of around 75-80% retention are most likely performing at close to peak performance and should focus on maintaining these levels.
A UK based member retention study found that the top 25% of performing clubs had retention rates higher than 69%. This benchmark should be seen as an achievable long term goal for any club that is willing to put in the hard work and model other successful health clubs; however, clubs should be encouraged to focus on the short-term increase of 1-3% per year.
In terms of monthly attrition rates we recommend you aim to keep your monthly attrition below 4% of your membership base.
The information and statistics in this article were taken from IHRSA’s guide to membership retention and the FIA study – Winning the Retention battle.
Want to learn how to improve retention rates in your gym? Download our member retention checklist with 33 tips for improving retention rates – Here