When judging the health of your membership based fitness business, one of the most important metrics to keep a pulse on is, “Net Members.”
Net Members is the true measure of how well your business and staff is executing the overall plan to build, strengthen and keeping your business competitive.
iKizmet calculates Net Members using the following calculation:
Net Members = (Existing Members + New Members) MINUS (no longer active)
*No longer active members are those that let their membership run out and didn’t renew to another membership
Net Members shows you the true member base after accounting for all the transactions that your front desk manages during the month (e.g. adding new members, no longer active members, not being able to renew members)
So why is the Net Members metric so vital to your business? Well let’s take a deeper look by using real business scenarios:
If your Net Members number is not growing in the last 6 months but your new membership sales is strong then you have a customer attrition issue. Where your upfront process is getting people exciting about joining but the business as a whole is not engaging or keeping a high enough engagement level with existing members where they lose interest or worse the go somewhere else. Understanding what month members lose interest and what similarities exist is a good way to combat this. Many times a properly timed phone call, studio event, or email is the way to reconnect with members to remind them why they joined in the first place.
If your Net Members number continues to stay flat and is not growing in the last 6 months, however the number of lost members is really low which is considered “natural customer attrition” (e.g. member is moving away for another job). Then you need to look at how many New Members you are adding each month and are you showing improvement as your business brand and reputation grows? If you are not adding new members at a strong rate and are not able to backfill those lost members with new members then you need to focus immediately on a) How many new student offers am I selling each month and is that enough to give my team a chance to convert and sell 20 new memberships every month) b) what’s my conversion success from converting new student offers to actual paying customers, better yet to paying members c) is my new student conversion percentage improving? Do I have a sales process problem (people purchasing drop-ins instead of the offer) OR do I have a problem with selling new student offers (advertising/promotion)
Each month you go into the month with a specific number of memberships that are considered still active from previous months. Seeing a consistent growth in memberships month over month is a good thing but it’s not the whole story. How do you measure Net Memberships? It’s the previous month’s net memberships + new memberships – no longer active memberships. Measuring net memberships can give you the “bird’s eye view” of your membership/recurring revenue health but not much more than that. It’s just one facet of understanding your membership business.
No Longer Active Memberships
Each month there will be churn in your business which happens to almost every business, but why is it happening? Churn is natural, and unavoidable for the most part. The fact that some people will choose to no longer participate in a membership is just something as a business owner you must live with. For most studios, this is the perfect time to gather valuable feedback about their business. Best practice is to install a process to call, email & collect data from specific no longer active members to find out exactly they no longer want a membership with your business. This data can provide you valuable insight into your pricing model, teachers, classes offered, times and overall experience customers have. Whatever the reason is, it’s important to find out exactly why and look strategically for ways to reduce this number as much as possible.
Think about it, most people who decide to leave your membership model will end their memberships rather than continue to pay and let the membership expire. This leads us to two possible conclusions. First, we are not effectively communicating with members when their current membership is going to expire and how to renew it. This is easily preventable by installing processes to either auto-renew or communicate clearly via phone, email and in person with customers who are about to expire. The second conclusion we can draw from this is we aren’t doing our job to retain customers through providing them with enough value to have them renew their membership. This is where diving deeper into popular classes, times and teachers to give customers a deeper value will help retain a higher percentage of customers. A 5% increase in retention rates on average increases revenues by 60%.
Are you getting new leads/prospects into the door? New memberships are the lifeblood of your business, new memberships can give your recurring revenue a boost and help you grow. By measuring this number studio owners can see that their marketing and sales efforts are paying off by bringing new people in the door. Measuring and analyzing new memberships month over month can verify that marketing channels and intro offers are doing the job or not. A best practice to install a sales and conversion process can increase intro offer conversions and give your employees a strategic focus on new members who come into the studio to give them that little bit of extra attention they need to become a part of your recurring revenue.
The truth is in the data!
The most important part of membership measurements is analyzing your data to make strategic decisions about your recurring revenue model. You can do this by deriving where your potential issues are, and installing processes to address them. This will be the difference between your studio out-shining the competition or falling by the wayside. The only way to truly get accurately measure net, new, and no longer active memberships is through iKizmet’s memberships analysis matrix.
We hope you were able to take value from this blog post and ultimately make a huge impact on your business! Check out iKizmet for more information!
Shawn Winters: Customer Success