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retention
series
4
Average length of membership
(median months) and average income
different retention rates. Again, we have members at Club B. By multiplying the
months of membership
£465
estimated the incomes based on 1,000 average number of months by £30 (our
average income
members at each club paying £30 a monthly fee), the average income per
month. (Although the actual number in member can be estimated. We can see
£273
each club would be different in practice, that Club B yields an average of £192
we need to estimate the income based more per member than Club A. Again,
on the same number of members, the estimates in Figure 4 can be used to
otherwise the differences observed compare members against a range of
would simply represent the difference in characteristics, including whether they
9.1 15.5
the number of members rather than the had an induction or not, whether they
club A club B
difference in retention.) paid a joining fee or not, and so on.
Figure 3 shows a difference of In part one of this series, we
calculating income £44,790 in income between the two described the attrition rate – the rate of
This simple graph (Figure 1) can also clubs over 12 months, based on a cancellations per thousand members per
provide us with information about relatively small difference in retention month. We can also use this information
income. The area under the retention and only 1,000 members. If there were to estimate the financial gain from
curve represents the total income from 10,000 members, then the difference different types of members or retention
membership dues over 12 months for a in income would be nearly £0.5m. Also, interventions. For this example, we
given set of members – say 2008 joiners. if these members were followed for will consider the difference in attrition
Because we know how many members longer than a year, the differences in between members who received at least
retain their membership each month income would continue – after, say, two four fitness staff interactions during the
after joining, we can multiply this figure years of membership, the difference in life of their membership, compared to
by the monthly fee to get an income income would be even greater. those who had fewer. Table 1 (below)
figure for each month. This type of income estimate can shows the attrition rates for each group
As with retention, the easiest way to also be used to compare the same of members. The second row shows
present this is in a graph. The amounts club’s performance by year, as well as that, for every 1,000 members who
shown each month in Figure 2 (see p35) to look at the difference in income receive fewer than four interactions, an
represent revenue from a sample of 1,000 between, for example, members of additional 43 members leave each month
members: for each month, we simply different ages or gender. compared to members who receive at
multiply the retention rate by 1,000 and least four interactions.
by £30 (monthly fee). For example, at member value Based on these figures, we can do
month six, 73.45 per cent of members Using data from the same club, we can some further computations – too much
retain their membership. Therefore, also use the average length of stay algebra to describe here – to estimate
0.7345 x 1,000 x £30 = £22,035. If we add shown in Figure 1 to estimate differences what proportion of membership
up each month’s income, the total income in income per individual member. Figure cancellations would be prevented if
from 1,000 members – based on the 4 (above left) shows that members at all members received at least four
retention rates in Figure 1 – is £262,146. Club A retain their membership, on interactions. The third row in Table 1
On its own, this may not be that average, nearly 6.5 months less than calculates that, if all members received
interesting. However, when comparing
groups of members with different
table 1
retention rates, we can see how the
fewer than four at least four
interactions interactions
difference in retention translates into
differences in income. In Figure 3 (see
attrition rate (cancellations per thousand members per month) 75.0 31.6
p35), we have employed exactly the
difference in attrition rate 43.4
same method as that employed to
% of cancellations attributable to lack of interactions 42.8%
produce the values in Figure 2, but number of members needing to receive >4 interactions to
23
this time for two different clubs with
prevent one cancellation
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