Loyalty: what is it, how do you calculate it?

Those who work in the market will have heard of Retention, that is all those actions aimed at keeping their employees - employee retention - or their customers - customer retention - and the relative rates at which you should aim to tit within considered models or even just to fall within certain standards.
In Italy is usual to talk about loyalty, which leaves room for wider considerations as a customer might not betray the company but simply cease to be a customer.
Fidelity means faithfulness in a relationship.
So when a member of the fitness centre expires their subscription, and decides not to renew it; this is not failing to make a promise and is not necessarily a betrayal to leave you for your competitor. Simply, in most cases, they will have decided to stop their fitness program. It would be good to choose a different term, but since retention or preservation of the client does not sound quite as good, we are satisfied with what we use and we try to understand what is meant by loyalty rate, how to calculate it and what goals the fitness company should achieve.
fitness loyalty
Let's start from this consideration: if there were no abandonment and turnover from members, the fitness centre would find itself, in a variable but fixed time, exhausted of capacity for the rooms, making it impossible to recruit new members.

Fortunately, therefore, an abandonment rate is present and is linked to several factors to which we will devote a lot of time; let’s pause to understand when this loss is physiological and when it requires a repair intervention.

It is important to understand that it is not the same for everyone and there is no absolute reference to what should be the loyalty rate of the centre; in fact, it is closely linked to the possibility of compensating for losses through the inclusion of new users, therefore from the catchment area in which it operates.
In practice, a club located in an area with a high population density but which has a limited number of competitors, will have less need to retain loyalty than another that is located in a small urban centre with many competitors. In a nutshell, fitness centres who have less chance of attracting a visitor population, the higher the need for customer faithfulness to the centre and their service.

How do you calculate the loyalty rate or abandonment difference?

There are different methods and without having to establish which one is the correct one, we can try to enter into an objective analysis of the pros and cons in adopting one against another.

Annual growth rate method

Given the number of subscribers on 1 January of a given year, the growth rate of total subscribers as at 31 December of the same year is analysed, verifying how many new users and how many are lost.
So if the famous "Tom" had a subscription in progress on the first day of the year and was not present in the list of assets on the last day of the same year, then the club has lost a member.  His friends. on the other hand, let’s call them "Dick and Harry" who had registered respectively in April and September of the same year and who at the time of analysis had a subscription in full force, would then be defined as new members.
The fitness club stops at this simplistic analysis. Now, to make everything more understandable, let's assume that there are 10 Tom and 20 Dick and Harrys, and that the centre under analysis had 100 active subscriptions on the first day of the year: we can define the abandonment rate at 10% and acquisition rate at 20% that magically brings to 110 the number of assets at the end of the year with a growth rate of 10%.
The loyalty rate of this centre will therefore be a utopian 90% but certainly many of the readers have already grasped the legitimate doubt: what happens if the Tom subscription expired before the summer and for convenience decided to renew it in the magical month of September? Tom is loyal but his subscription is not! Be careful, we are not saying that the calculation is wrong but that it must be interpreted. Through this method, in fact, we will have a precise picture of those who are faithful subscribers to the centre and we should evaluate the average monthly salary spent in order to be able to make the assessments in terms of drafting budgets.

No subscription

There is a stricter method of calculation, which does not take into account subscribers but their subscription and which searches for the famous quotation of the "seamless", i. e. that is not interrupted or interspersed for periods, but that binds a subscription to the next one. The difference can be important,  because in our sector, subject to seasonality and loss of motivation, it is highly probable that the average time that starts between a subscription and the next one can be close to 15 days, which multiplied by the 90 faithful members of the above example, mean 1350 days, or 45 months, that is to say a few thousand that can probably represent a value between 0.5 and 1% of the centre's turnover. Imagine what it means about real and more significant numbers, perhaps those in your centre.
Yes, it is true, the risk is much higher and has a far greater impact if we consider that those who abandon their exercise for only a few days are extremely at risk of not recovering the good habit created, but for now let's dwell only on the first element.

Expiring Subscriptions

Let's move on to the method of calculation for which it is necessary to take into account, month by month, how many subscriptions are due to expire and to check how many of them are renewed before or on the exact day of expiration. Going back to the example of first checking the 100 subscriptions that expire in January and verifying how many of them have been renewed: If 20 were expiring and only 12 were renewed early or at maturity, the monthly loyalty rate of the centre will be 60%. Thus to calculate the annual loyalty rate, it will be necessary to average all the values (not percentages) of the year by putting together the January result with the July one and it is therefore difficult to find out more than 65% loyalty rates.
By applying this second method, it will be possible to determine more precisely the objectives in terms of acquisition of new members, managing to better target forces and resources to offset or increase those compared to the subscriptions lost.
This does not mean not paying attention to the faithful members, which, as we have been taught for some time now, costs much less in terms of marketing budget than generating new ones, but to be just as focused on acquisition and above all on actions that allow an active role of self-handling by the commercial team rather than simply waiting for those who cross the threshold spontaneously.

Monthly, weekly and daily monitoring of deadlines allows verification of the results deriving from loyalty, fidelity and incentive plans for the frequency that the Centre will have been able to implement and on which we will come back to in the next articles.

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