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member
retention
In the first of a two-part series, Melvyn Hillsdon uses a case study to
outline the initial steps in the development of a retention strategy –
starting with how to gain an understanding of the problem
PROBLEM SOLVING
I
n the current economic climate, performance indicators (KPIs) to monitor (attrition rate); on average how long do
retaining club members is more their implementation. We then need to people stay and therefore how many
important than ever. Maximising revisit – measuring the problem to see membership payments do they make?
sales and retaining them for as if any change has occurred following the (lifetime value); and at what point in
long as possible is the key to financial intervention and, if so, whether it has their membership are they most at risk
success. However, compared to the occurred equally in all members. of quitting? (risk rate)
investment clubs make in resources for In this article, we will focus on Our club has 10,309 member records
selling memberships, the investment defi ning the problem, as well as on sales with join dates between 1 January 2006
in membership retention pales into and marketing solutions. In the next and 9 April 2009. Of these members,
insignificance. A more systematic feature (to appear in HCM Sept 09), we 64 per cent have cancelled and 36 per
approach to membership retention, that will consider retention interventions cent are live. The retention rate is
yields more monthly payments, would not and how to measure their effectiveness. presented in Figure 2 (see p38). The
only increase profitability but also reduce horizontal axis on the graphs shows
both the demand for new memberships what’s the problem? the time lapsed since joining, taking 0 as
and the accompanying costs. The first task is to define the problem the start of a membership. The vertical
In this article, I will take a sample of and see if this varies by type of member. axis shows the proportion of members
data from a well-established private We will consider four measures of who do not cancel. The graphs show the
club and use it to show how to develop retention that answer the following overall retention rate and the rate by
a retention strategy. In developing questions: what proportion of members age, gender and year of joining. Overall,
solutions and strategies to tackle any stay a predefined period of time, eg 50 per cent of members retain their
problem, there is a cycle of events (see three months, 12 months etc? membership for at least 12 months, 26.5
Figure 1, below). The most important (retention rate); at what rate do they per cent for 24 months and 15 per cent
task is to fully understand the size of leave, ie what is the churn rate? for at least 36 months. We can also see
the problem, and whether the problem
is more prevalent in some members In this case study, members aged 35 and above had
than in others. This will lead higher retention rates than 16- to 24-year-olds
to possible solutions in sales
and marketing, and in policies
and procedures.
Once solutions and
interventions have been decided
upon, it’s imperative to develop key
1
retention strategy
development cycle
1
Defi ne the
problem
4 2
Monitor/audit Consider
KPIs solutions
3
Implement
strategy
july 2009 © cybertrek 2009 Read Health Club Management online 37
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