New Isn’t Always Better

The cost of recruiting new members versus retaining existing ones

“Make new friends but keep the old. One is silver and the other is gold.” It turns out these classic children’s song lyrics have good advice when it comes to customer recruitment and retention strategies. Bringing in new customers is great, but you’re golden if you can retain your existing customers.

According to 2019 data from the International Health, Racquet and Sportsclub Association (IHRSA), nearly 29 out of 100 members are expected to cancel their gym memberships each year. While leading clubs today spend a median of $66.48 in sales and marketing costs per new membership account, in 2011, the median cost per new member account was $103.50.

Though the cost of sales and marketing per each new member has decreased over the years, according to IHRSA, the cost of recruiting a new member still is more than twice the cost of retaining an existing member. When an existing member leaves, it can cost a club as much as $674 in annual revenue per dropped account.

Woman on Treadmill for Fitness Blog

For the fitness industry specifically, this can create big problems. A study conducted by Mintel showed that, though fitness centers have been finding ways to add alternative revenue streams, membership fees still account for 80% of overall revenue. As much as losing an existing member can hurt profits, retaining members is the most cost-effective way to increase profit.

“In financial services, for example, a 5% increase in customer retention produces more than a 25% increase in profit,” according to Frederick Reichheld, a Bain & Company fellow, author, and creator of the Net Promoter System. “Why? Return customers tend to buy more from a company over time.”

In an article published in the Harvard Business Review, Reichheld stated that, in some industries, reducing customer defections by as little as 5% per year can double profits.

“In general, the longer a customer stays with a company, the more that customer is worth,” Reichheld said. “Long-term customers buy more, take less of a company’s time, are less sensitive to price, and bring in new customers.”

The real question now is — how can you retain your fitness members? But that is another topic for another time. Stay on the lookout for our next blog where we’ll share tips on how to grow your profits by increasing your membership retention.

About United Leasing & Finance

United Leasing & Finance is a customer-focused and growth-oriented leasing and finance company committed to providing custom financing solutions to businesses across the U.S. and Canada. For almost 60 years, United has partnered with clients to achieve mutual success from small businesses to Fortune 100 companies and has been lending in the fitness space since 2000.