It was the same story I had heard many times before. I listened as a group of fitness center executives wondered aloud about why they are losing members at such an alarming rate. They had tried a number of member retention initiatives to slow the bleeding, but nothing seemed to make a lasting difference. Why did everything they try fail? As we discussed the situation, we came to a surprising conclusion… the problem didn’t lie in the initiatives. Instead, the culprit was the manner in which they measured the results of those initiatives.
The Fatal Flaw of Retention Metrics
The fundamental problem was that this group of centers was measuring their success by looking at their 13-month retention rollover. As we saw in our last post, retention rollovers are lagging indicators. As such, they’re a good measure of overall past performance. But, they have a two fatal flaws.
In this case, after almost every effort to improve member retention, a small improvement was made. But soon after, everything returned to the status quo. And here’s the two-fold problem. First, the 13-month rollover data was too late to make any meaningful adjustments to the initiative. Second, and perhaps even more significantly, it could not answer the essential question “why?” We could see that the effort had failed, but why did it fail? The metric simply couldn’t tell us. Without this answer, they learned nothing. They could make no adjustments. Any future plan would just be flailing in the dark hoping something different would happen this time around.
KPIs and Kayak Races
What was needed to achieve a different result was a different kind of metric. Let’s think about it this way:
Last night, my son and I kayaked to the middle of our favorite lake to watch the sunset. After the last golden hue had faded from the sky, he challenged me to a race back to the dock. Now my son is younger, lighter, and stronger than I am. But, to my son’s great surprise as we neared the dock I beat him…handily.
You see, even though age may be catching up with me, I have experience on my side. As my son paddled, he was all over the place. He was looking at me, looking down at the water, then glancing back toward the dock. As a result, he zigzagged everywhere. Sometimes he was on my right, then he was on my left. Fits and starts, together with a lot of wasted effort, characterized his path toward the goal. (Which sounds like a lot of retention initiatives I know!).
I, on the other hand, kept my eyes focused on the solely on the dock. So, with each paddle stroke I could see if I was veering off course, even a little. Clearly seeing the problem, I could tweak my next stroke to get me back on a straight line toward my goal. Because I was able to immediately measure the success of each small step toward reaching my goal and quickly make the changes needed to keep me on course, my path was a straight line. Every step took me closer to the dock.
Success was achieved not through the power of my effort, but through the way that I measured each step so quick corrections could be made to keep me on course. What if you could do the same with your member retention initiatives, or any leadership initiatives for that matter? What if there were metrics that would allow you to instantaneously measure your success toward reaching your goal, so you could make real time adjustments ensure you’re staying on the right path?
Definition of a KPI?
Fortunately, such “magic” metrics do exist, they are known as Key Performance Indicators, or KPIs. A KPI is a quantifiable measure of an organization’s success in the steps most critical to the achieving an objective. Critically, KPI’s are leading indicators. They give an instantaneous look at the success being achieved. As a result, real-time corrections can be made to keep moving toward the goal.
Key Performance Indicators can measure success in achieving almost any goal. And while trying to determine what KPIs to use may seem like a daunting task, it can actually be achieved by asking two simple questions:
- What are the steps that are essential to reaching our goal?
- How do we measure success in each step?
How KPI’s Work
Let’s look at a concrete example. Imagine you’re a sales manager for a company that has a goal of selling 100,000 widgets this year. How will you measure for success? It won’t help to wait until the end of the year and see how many the company sold (a lagging indicator similar to a 13-month retention rollover). By then it’s too late to make any adjustments. Nor will it be enough to look at your total sales each week. This may show that you have reason to panic, but you’re totally blind to where the source of the problem lies.
Instead, you need to break the sales cycle in to simple steps. At its essence, the sales cycle involves three steps: receiving leads from marketing, calling those leads, and making the sale. Once you have determined the steps that are key to success, all that is left is to come up with quantifiable measures for each. These could be: How many leads are we getting from marketing? How many calls are our sales reps making? What is our sales conversion rate (number of sales per number of leads or number of calls)?
These KPIs are metrics you can measure every month, every week, or even every day to see your progress toward your goal. Just as when I was paddling the kayak, you can see instantly if you are off course so you can quickly make adjustments.
Just as importantly, you now have the data know precisely where the problem lies, so you know exactly how to fix it. If your volume of leads is down, you don’t push your sales people to make more calls, you talk to marketing about generating more contacts. If your conversion rate is not good, it calls for training of your sales people, or tweaking your talk tracks.
The “Magic” of KPIs
The “magic” of KPIs is that they allow you to see in real time exactly how you are performing in each step toward reaching your goal. This allows you to quickly make the corrective action that targets the specific problem areas. As a result, your member retention initiatives look less like my son zigzagging all over the place and more like me, moving in a consistent direction toward reaching your goals.
Many times, success is achieved not because of the strength of the plan, but because of the way you measure progress. In our next blog, we will look at what KPIs every fitness center executive or director should be measuring.
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