Reduce Churn Risk of New Joins, Post COVID19

Gym and health club operators around the country are re-opening with staggering new join and rejoin numbers. We’ve heard the same feedback from non-profit and for-profit operators in various stages of re-opening. New memberships are MUCH higher than expected. Anecdotal feedback from those operators also tells us that many of these new joins are new, not just returning members. I've seen numbers between 40-60% of new joins being new, not returning members. This should be good news right? It might be, but the market has shifted and the needs of these new members are different.

Market Size Pre-COVID19

We are really simple creatures when it comes to behavior. People adopt behaviors either to achieve pleasure or relieve discomfort. Some of us are so concerned with being healthy that we adopt a regular exercise habit to relieve that worry. Others are driven by worry about their physical appearance and they work out for vanity’s sake. Either way, about 5% of the population falls into that self-motivated category (1). This group is characterized by their willingness to sacrifice short term convenience and comfort for long term health benefits. 

Simple math tells us that if 5% are regularly active, that means that 95% of the population doesn’t meet basic activity standards. Some percentage of those ‘non-actives’ are actually members of health clubs and just don’t attend. Or, they periodically join health clubs and cancel, or churn within 90 days. Member or non-member, this group is characterized by the unwillingness or inability to endure short term discomfort and inconvenience, for long term benefits. 

At least before COVID-19...

COVID19 fears have provoked unprecedented fear and uncertainty, especially among the inactive and unfit population. New data confirming that chronic health conditions, including many related to lifestyle choices, are correlated with a higher COVID19 severity (2). That realization has sparked a strong driver to become more active. That driver, or impactful event, is strong enough to shift the demand for health club memberships.

While this is encouraging news to most operators, those of us who’ve been in the industry for a while see a challenge with this new demand curve. 

Dangerous Demand Curve

To better understand why people like me are concerned, we have to first understand that behavior exploration and behavior adoption are two different things. 

Behavior exploration can be driven by fleeting emotions like fear, excitement, insecurity, jealousy, etc. The problem with emotions is that they change and are subject to distraction. Joining a health club FEELS like a commitment to the member but really it’s just a first step. The hard work comes later with actual behavior change.

Behavior change is much more difficult. It requires commitment and hard work even after the driver for the exploration phase has passed. This is the same type of mental discipline required to save for retirement, floss your teeth every day and not text and drive. Aptitude for behavior change is what separates the 95% from the 5%. Unfortunately for most of the population it has a predictably high failure rate. You see this magnified with New Year's resolutions, but people fail all the time. Failure is like drowning, it usually happens very quietly.

Three Main Challenges to Overcome

For new members who are trying to change behavior and adopt an exercise habit there are three main challenges to overcome. Understanding these challenges can help your team better plan to support these members. The challenges are…

1. Immediate Payoff. The act of joining a gym or health club gave the member an immediate payoff. If the worry and fear about a terrible outcome from exposure to COVID19 was the driver for that decision, then to some extent, the act of just joining the health club relieved much of that worry. Unless another driver is put in place quickly, the fear must remain real and persistent, or that driver will fade over time...  
2. Intimidation Factor. For beginners and health seekers, the wellness floor is extremely intimidating. It is so uncomfortable that it often provokes negative feelings. Those negative feelings and the discomfort they produce can be the driver for another behavior… avoidance. If a member isn’t made comfortable very quickly upon joining, avoidance will set in. Once that happens, on average health seekers will abandon the behavior within 3 weeks and cancel by the time the second draft hits their account. 
3. Competing Interests. Once quarantine restrictions begin lifting and society starts reopening, people will slowly resume their normal activities. Whether it’s going out to eat, planning a vacation, or going to the movies, these things will once again compete for their time, attention, and money. Many of those activities have an immediate dopamine reward, unlike exercise. Those substitute behaviors can distract from health behaviors which, in the absence of a strong, persistent emotional driver, lack an immediate reward. Remember, for people who don’t love to workout, exercise is typically a long term reward activity. It requires short-term sacrifice, which again, requires discipline.

Normal Churn Pattern 

I’ve spent the better part of 20 years working in the fitness industry. During that time I became fascinated with why some members were successful while others failed. That led me to many years of studying the patterns of member ‘churn’ and the behavioral science that drives it. 

A normal 'non-crisis' new member churn pattern begins with a significant spike in member cancellations beginning around 4 weeks of membership and continuing aggressively for 90 days, then tapers less dramatically over 36 months. The graphs usually look something like the one below. 

At about 36 months, most operators have turned over almost their entire member base, minus a small percentage of loyal members. This historical churn effect is well known across all sectors of our industry. Unfortunately, churn is an unavoidable part of operating a health club. That said, making even slight changes in this graph can make a significant difference in profitability.  

Well planned member retention efforts are aimed at flattening and pushing this curve out as far as possible. Keeping a few hundred members a few months longer can add up to a lot of additional revenue. 

From a less financial lens, the longer a member is active the more likely they are to be successful, eventually. It may not be this attempt, but a member who achieves 45 days of activity is set up much better next time they try to establish the behavior. For those reasons, even if someone cancels, you’re planting a seed for success if they return. 

COVID19 Churn Pattern 

If the typical new member processes are still in place when these vulnerable members join, I’m afraid the post-COVID19 curve could look much different. Due to the strong emotional driver COVID19 has created, the COVID19 termination pattern could look more like the chart below, with a steep drop-off rather than the normal more gradual slide. In the member retention world this is the most dangerous shape to encounter. It signals extreme financial risk. The loss of revenue in the health seeker churn graph compared to the normal churn graph is on the order of tens of thousands of dollars, depending on the size of the membership base. 

The churn risk is greater and will happen faster as drivers for behavior fade (COVID919 fears) unless other strong, emotional drivers are established early in the membership. Effective, well-designed interventions aimed at the most vulnerable members is the only way to mitigate this risk.

Super Bowl Moment

Operators will have a window of motivation to work with post quarantine. They will be faced with extremely vulnerable members who need specific support to transition from behavior exploration to behavior change. Ironically, during this high need period, many operators will also be working with limited staff resources and new hygiene burdens.

That said, how operators handle the first 30-60 days of re-opening could impact financial recovery for the next several years. This is a matter of gaining market share. Opportunities to gain market share usually require disruption, which doesn’t happen often. Those that take advantage of this new demand and serve these members well could be in a better position than pre-COVID19. 

Focused Resources

As an expert on new member onboarding, I can tell you that much of the activities designed for new members under the guise of ‘member retention’ are a total waste of time and money. Not to mention staff resources, which are likely in short supply post quarantine. Operators will have to be smarter about laser focusing their resources on the MOST at-risk members. 

Unless you have unlimited resources, you should laser focus on the most at-risk members during their most vulnerable period, the first 3-4 weeks of membership. Beyond that, it’s about hospitality and operations. You mitigate 80% of retention risk in the first 3 weeks. That’s when members decide if they will adopt the behavior or not. After that it’s just a matter of the draft hitting their account again that prompts them to cancel. Your ‘engagement’ phone call can actually provoke that cancellation… don’t call, email, or text non-active members after the first 3 weeks. (free advice)

The Most Important Question

Have you been a member of a health club in the last year? 

Why is this question so important? If your new member hasn’t been a member of a health club in the last year, they are health seekers. This means they’re trying to ADOPT a new behavior. Behavioral science tells us that they have a VERY high failure rate. They need special support beyond just a typical orientation. Developing a plan that addresses this group is critical, but you have to identify them first. On every membership card, ask this question. Flag anyone who answers ‘no’, or even waivers at that question. By the way, at home workouts don’t count… This is about the behavior of coming to a facility.

What needs to happen for those high-risk members

• Activities with positive emotional payoffs. Members need activities that can compete with alternate activities that provide immediate payoffs, or dopamine hits. Think about what you can do to make a member laugh, smile, and feel connected to others. They need a series of positive emotional experiences. 

"Dopamine. Also known as the “feel-good” hormone, dopamine is a hormone and neurotransmitter that's an important part of your brain's reward system. Dopamine is associated with pleasurable sensations, along with learning, memory, motor system function, and more (3)"

• Immediate positive feedback. One of the challenges with adopting a new health behavior is that rewards are delayed. Members don’t see results in the mirror for weeks, or even months. Find a way to SHOW members their progress in other ways to keep them motivated. Digital tools are critical here. Think about partners that can show meaningful, encouraging data to members that reinforce their new behavior. This is NOT body fat testing or invasive tests that embarrass members (see the previous point about emotional experiences).
• A clear path to independence. Design a path for new members from their perspective. Don’t start the design thinking about a series of appointments or amenities. Start your design work thinking about skill adoption and challenges peppered with positive emotional experiences throughout. Both physical and digital solutions are needed here. There’s simply no way we have the staff-to-member ratio to provide this personally. Digital partners that leverage skill adoption and challenges are critical to amplify your staff efforts. 
• Wellness Floor Modernization. Along those lines, select partners that can provide new ways of guiding members. Most new members default to cardio because it’s the only thing they can do independently. Unfortunately, cardio is lonely, boring, and doesn’t generate the results of strength training. There must be a beginner-friendly path, or zone and strategy that doesn’t isolate or patronize beginners, but puts them in a ‘no-fail’ environment. Digital training solutions are the wave of the future and can really help members become independent. That, combined with a seamless digital experience is the path forward. 

Special note to my Non-Profit Colleagues

Many of you know I was with the Birmingham YMCA for 6 years. After my tenure, I spent several more years working with Ys across the country analyzing their new member onboarding processes. That work will always be part of my story. The next section is speaking directly to my colleagues and my friends in the movement. Please excuse my use of the word ‘we’ here. I will always consider myself part of the movement and a helper in this work. 

We have historically owned the health seeker market, for better or worse. Our messaging and our mission targets beginners. At times, we questioned that market and aspired for a larger chunk of the ‘already or highly active’ market, but little did we know, we were actually holding the golden ticket.

You see, the marketing and messaging for most commercial operators and boutique owners typically targets the highly active population. Their ads contain ripped bodies and ideal physiques. That represents the top 10% of the market. 

The budget operator subset of the commercial market mostly targets another 10% of the market that’s a blend of:

• Somewhat active (pay but don’t attend)
• Highly active/highly skilled (don’t need staff support or amenities) 

We, the nonprofit sector, have had almost unchallenged access to the other 80% of the market, the health seekers. They are neither highly skilled nor already active. The reason no one fought for the right to the health seeker market is that they have an exceptionally high failure rate and are expensive to acquire. This high-risk profile made them comparably less attractive prospects. 

If we based our decisions strictly on the numbers, we would have walked away from that group also. It turns out though, we have an advantage with health seekers that mitigates risk. Our mission also makes it critical to serve the community, especially where there's a real need. 

The advantages. Our high-staff, high-touch business model is much better equipped to deal with high-risk members. Your wellness floors are staffed, that is an advantage. You hire for soft skills and member engagement, that is an advantage. You have medical partnerships and motivated boards, that is an advantage. Although member churn is a risk, the available impact and social impact is even greater. For many years, these advantages along with mission-driven employees have put you in first position with health seekers. 

Disruption impacts market share. That safe position changed with the COVID19 disruption. The realization that a large number of non-actives could become available, piqued the interest of all operators, including the commercial segment. That new demand, combined with the financial crisis of long term closures, has everyone scrambling to gain market share. The conversations I’m hearing throughout the industry sound very different than pre-COVID19. 

Claim your position. Non-profit colleagues, you are so far ahead right now. You have the staffing model to support this demographic effectively, without dramatic changes to your business model. If you can focus on this specific, health seeker group you are perfectly positioned to rapidly grow your market share. Work with your medical partners and technology partners. Refine your messaging to speak to this group directly.

Not only will you grow your market share, but you'll do it the right way. You'll sleep well at night knowing that you’re delivering on a promise we’ve been making to this group for years. 

Staff isn’t the solution... but they are the bridge

The one other take away I would give you, other than the battle cry relates to design work. If you’re envisioning your wellness staff team as your primary solution, you will always be limited in how many members you can impact. It’s hard to scale that model. Besides staff turnover and the high level of staff training required to deliver effective behavioral coaching, members are more skeptical than ever. Offering new members ‘free orientations’ with a personal trainer sounds like an uncomfortable conversation about buying personal training sessions. In fact, typically less than 30% of new members schedule an ‘orientation’ - no matter what you call it. Even more sobering, less than half that schedule an orientation will ever show up.

Instead of thinking through that lens, think of your health coaches and personal trainers as the BRIDGE to a solution, rather than being the solution. In this way, they can impact exponentially more members and you can be better insulated against staff consistency, turnover, and shortages. 

Simply put, using your staff to connect members with highly engaging, digital, and guided experiences is to your advantage. For now, staff is the key access to many of these experiences but to scale, you need a partner. Over time, most innovations will become less dependent on staff and you could potentially lose this ‘gatekeeper advantage’. Right now is the time to get a foothold while your competition has to adjust and add staff and grant access to these digital and guided experiences.