Times have changed, there’s no debating it. A revolution has happened in the Fitness Industry over the last five years and things will never be the same. If you’re an executive at a YMCA or Fitness Center you no doubt have felt it. Your metrics are probably there to back it up.
In 2012 four types of fitness venues dominated the market: Large multipurpose facilities, such as community Rec. Centers; Fitness Only facilities, such as Gold’s gym; YMCAs; and Corporate Fitness Centers. Together these four types of fitness venues gobbled up 88% of the revenue in the fitness market.
Then came a dramatic change. The millennial generation entered the marketplace with a different set of parameters for what they sought in a fitness venue. Millennials place a greater value than previous generations on personal interaction and the experience they have in the center. They’re willing to pay top dollar to those who provide them. This new millennial-driven marketplace has moved away from traditional multipurpose facilities and fostered the creation of franchises targeted at a unique fitness experience and intense coach-member interaction. In 2013 CrossFiT and boutique fitness facilities exploded onto the scene and staked a claim to 21% of the market’s revenue. (Fig. 1)1
Orange Theory, Pure Barre, and others like them began grabbing members and all four of the traditional major market players lost market share as a result. By 2014, 54 million Americans belonged to a fitness center. Of that number, 42% were members of a studio or boutique facility.2
In addition to the explosion of these high-priced specialty facilities, fitness centers arose on the other side of the spectrum. They offer little or no staff interaction, but cost only a fraction of what multipurpose facilities typically charge. Venues such as Planet Fitness, AnyTime Fitness, and Fitness 19 are can offer memberships for only $10 – $20 per month, less than half what is charged by Ys and traditional Fitness Centers.
A Split in the Fitness Industry
The fitness industry has experienced a dramatic bifurcation, or splitting, as a result of these developments. Individuals who can self-regulate their exercise habits are now able to go to discount facilities and pay just a fraction of what they had to fork out just a few years ago. In contrast, people with no exercise experience will pay a premium to boutique studios that give them a highly interactive, personal experience. This type of service offering is especially attractive to millennials.
So what affect has this all had on you? If you are a leader at a YMCA or traditional fitness center, the impact has been huge. You now face more competition than ever before as the market puts pressure on you from above and below. As this plays out over the next few years, you will continue to see fewer and fewer new prospects walking in your front door. Not only that, it will be more and more challenging to keep the members you do have since they simply have more options to choose from.
As a leader in the fitness industry, you’ve experienced this disruption and you’re probably grappling with how to respond.
It’s Time to Close the Back Door
In order to determine the proper response to these new market realities, think of your facility as a house with a front door and a back door. The front door is new members joining your facility. The backdoor is people terminating their membership. Your front yard is people in the market, prospects, looking for a fitness facility to join.
For many years, maybe even decades, there was an equilibrium. The membership within your facility stayed roughly the same. The people coming in the front door equaled (or hopefully exceeded) those going out the back door. Since you were in a market with less competition, you didn’t need to worry that much about the back door. If you had a number of people leave, you could, without much difficulty, draw from the large number of people milling around in your “front yard” to replace those that went out the back.
But the recent disruption in the market has decreased the number of people in your front yard. The increased variety of venues means some prospects that could have become members, now won’t even consider a multipurpose facility. There are locations that more closely fit their specific needs or desires. As the pool of prospective members has decreased, it’s harder and harder to maintain equilibrium simply by bringing more people in the front door. The bottom line is this: the days of simply outselling member attrition are over.
At the same time, the new market realities mean more people will be going out your back door. The number and novel options available to them will simply entice them away.
With these realities in mind, the way to address the challenges of the new market environment becomes obvious: it’s time to close the back door. There really are no other options.
The Need for a Plan
Since fewer prospects are coming in, each new member becomes more valuable. It’s essential to become “stickier” with these new members to ensure you maximize their membership life. At the same time, attention needs to be focused on keeping your current members from going out the “back door.”
It is possible to survive and even thrive in this newly disrupted marketplace, but in order to do so, you must execute on a solid, data-driven retention plan.
But, with limited time and resources, what is the best plan for attacking your retention rate? How should you structure your processes and your staff to keep members around longer? Fortunately, scientist have done a surprising amount of research on the subject and we will break it down in our next post.
This post is an edited excerpt from Brining New Members On Board. Click here to download the entire book, with its discussions of research on member retention, the ROI you can expect from an onboarding program, and practical steps toward retaining members at your facility.
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