Cost of Retention Broken Down 🔥🔥🔥 (Dollars & Cents...) Send to yo' Ops Manager Ep 113

Summary Notes


In a detailed analysis of customer retention costs for gym owners, Speaker A emphasizes the financial benefits of reducing churn from 10% to 3% per month, which more than triples the lifetime value of a customer. He outlines actionable retention strategies such as weekly check-ins, bi-monthly communications, and monthly handwritten cards, estimating the total cost at approximately $10 per customer per month. By investing in these tactics, gym owners can achieve a significant return on investment, enhancing profitability and fostering stronger client relationships. Speaker A's insights are aimed at helping business owners understand that retention efforts are not only cost-effective but also crucial for long-term success.

Summary Notes

Cost of Retention vs. Cost of Acquisition

  • Speaker A emphasizes the importance of understanding not just the cost of acquiring customers but also the cost of retaining them.
  • The discussion begins with the acknowledgment that many businesses focus on acquisition but neglect the cost of retention.
  • Speaker A intends to provide a detailed breakdown of the costs associated with retaining a customer, specifically in the context of gym memberships.

So I wanted to break down the cost of retention. So I talk a lot about cost of acquisition, being able to outspend your competitors, being able to make money, you know, in the acquisition, etc. So that you can market it, market your ass off. But the other side of the equation, a lot of people don't want to break down, and I want to break this down, dollars and cents for you, the cost of retaining a customer.

The quote highlights Speaker A's goal to discuss the often-overlooked aspect of customer retention costs, contrasting it with the more commonly discussed customer acquisition costs.

Gym Membership Churn Rate and Lifetime Value

  • Speaker A mentions that the average gym has a 10% month-over-month churn rate, meaning they lose 10% of their Electronic Funds Transfer (EFT) memberships each month.
  • The average lifetime value of a gym EFT membership is stated to be ten months, according to data from Mindbody.
  • Speaker A references benchmark reports from Mindbody and Wodify's Mplan, which provide insights into industry standards.

The average gym has a 10% month over month churn, right? So they're losing 10% of their efts month over month. Now, there's two numbers that I want to tell you. One is that the average lifetime value of a gym eft is ten month. Ten months according to Mindbody.

This quote presents specific industry metrics regarding gym membership churn and lifetime value, which are crucial for understanding the financial impact of customer retention.

Challenges Faced by Owner-Operated Gyms

  • Speaker A points out that many gyms, CrossFit boxes, and boot camps are small-scale operations with a client base of 50 to 100 members, often owned and operated by the same person.
  • These owner-operated facilities tend to have a core group of original, loyal customers who are sometimes charged less due to being grandfathered into older pricing plans.
  • The data on average membership duration is skewed because of the owner-operator model, which differs from gyms that have transitioned to a more hands-off ownership model.

And what's the other one? Wadifies Mplan are those ones. They release benchmark reports, which I always like to go through. The difficulty is that most gyms, most crossfits, boot camp, some are private facilities, are usually in that 50, 8100 max type clients. And most of those people are OGs who have been grandfathered in. They're still being operated by the owner, so they're usually not owner like. The owner is not just owning, they're usually owner operating, which skews the numbers.

The quote explains the typical client base and operational structure of small fitness facilities, which affects the interpretation of industry benchmarks and the cost of retention.

Retention Cost Analysis for Ownership-Transitioned Gyms

  • Speaker A wants to analyze the cost of retaining customers for gyms that have moved from an owner-operated model to an ownership model where the owner does not handle daily operations.
  • The speaker describes a common scenario where a base of original, lower-paying members coexists with a higher-churning group of new members acquired through marketing.
  • The speaker suggests that the high churn rate among new members is not due to the quality of service but rather due to the transition in ownership and the lack of owner involvement in operations.

So how do you transition from this kind of bifurcated gym where you have your ogs and then you have these transient people that are coming on average for only three ish, three to four months? A lot of people who are on here already know about that because it's like, why is it three or four months so the actual average for people are coming in off cult traffic marketing is much less. And I don't think it's because of the fulfillment. I think it's because of the fact that the type of owner who is doing that has already transition to ownership and it's no longer operating the business.

This quote discusses the challenge of managing a gym with two distinct member groups: long-term, loyal members and short-term, high-churn members. It suggests that the churn is related to the gym's operational model rather than the service quality.

Customer Retention and Lifetime Value

  • Discussing the impact of reducing customer churn from 10% to 3% on the lifetime value of a customer.
  • Emphasizes the importance of knowing the cost of retaining a customer, which is often overlooked compared to acquisition costs.
  • Suggests that retention strategies can more than triple the lifetime value of a customer.

"So if you go from 10% to 3%, then it means that you're 3.3, xing your lifetime value of a customer more than tripling your lifetime value by going from 10% to 3%."

This quote highlights the significant increase in customer lifetime value when churn is reduced from 10% to 3%, indicating a more than threefold increase.

Retention Strategies

  • Outlines specific actions needed for customer retention.
  • Recommends reaching out to customers who haven't shown up by Wednesday each week.
  • Advises contacting all customers on a bi-weekly basis for a pulse check.
  • Suggests sending a handwritten card once a month to customers.

"First, you need to make sure that you're reaching out to every single one of them by Wednesday of that week to make sure that they've actually showed up."

This quote outlines the first action in the retention strategy, which involves ensuring customer engagement by mid-week.

"Second is that you're reaching out to all of your customers on a 14 day basis." "Third is you should be making sure that you're writing them a handwritten card once a month."

These quotes detail the second and third actions of the retention strategy: regular bi-weekly check-ins and monthly handwritten cards to maintain a personal connection with customers.

Cost Analysis of Retention Efforts

  • Breaks down the cost of implementing retention tactics.
  • Estimates the cost of handwritten cards and the associated labor.
  • Allocates the costs of a trainer's time for customer outreach.

"So the actual envelope and the handwritten card, et cetera, costs about $2 all in, including the man hours that it costs takes like a minute and a half to actually write a card."

This quote provides a cost estimate for the materials and labor involved in writing a handwritten card to a customer as part of the retention strategy.

"Let's say the remaining $8 that you have would be another 45 minutes or 40 minutes or so of one trainer's time per month."

This quote estimates the additional cost of a trainer's time dedicated to customer outreach, completing the cost analysis for the discussed retention strategies.

Customer Retention Costs and Lifetime Value

  • Discussing the cost of retaining a customer and its impact on the lifetime value of the customer.
  • The cost of retaining a customer is referred to as the hard cost, which is $10 in the given scenario.
  • If not retaining customers, they might stay only 3-4 months, but with retention efforts, this could increase to 13 months.
  • The investment in retention could lead to a ten to one return on investment over the customer's lifetime.
  • The example provided includes spending $10 monthly on retention to extend a customer's lifespan from 4 months to 13 months.
  • The additional revenue from the extended customer lifespan far outweighs the retention costs.
  • The speaker emphasizes the importance of allocating a portion of the earnings (EFT) towards customer retention.

So that means it's going to cost you $10 in hard cost to retain a customer.

This quote outlines the direct cost associated with customer retention efforts per month, which is essential to calculate the return on investment in the context of customer lifetime value.

So it's going to cost you $40 to do that for the first four months. But then if it triples your lifetime value, you go from four months to 14 months of life.

The speaker is breaking down the initial investment over four months and the potential increase in customer lifetime value as a result of retention efforts.

So to triple that, you get 13 more months by spending $10 extra per month.

This quote explains how investing an additional $10 per month in retention can significantly extend the customer's lifespan with the company.

Version two, you spend $10 per month, including month one month, two month, three month four. So that's an additional cost that you didn't have the first time and you're getting the same month's revenue that you would have anyways.

The speaker clarifies that the retention cost is an extra expense over the initial months but leads to additional revenue in the long term.

So you get a ten to one return forever, always.

The speaker summarizes the benefit of the retention strategy, highlighting a tenfold return on the investment in customer retention.

And so if you were to simply implement those things and say, I'm going to mentally allocate $10 per month to retain these people.

The speaker suggests a mindset shift where businesses proactively allocate funds each month for the purpose of retaining customers.

Business Growth Strategy

  • The conversation shifts to a call-to-action for business owners looking to grow their businesses substantially.
  • is mentioned as a resource for business owners to learn more and potentially receive assistance in scaling their businesses.
  • The speakers offer to engage with business owners to discuss strategies for reaching higher revenue milestones.

If you are a business owner that has a big old business and wants to get to a much bigger business, going to 5100 million dollars plus, we.

This quote introduces the topic of business growth and the potential for businesses to scale up significantly with the right strategies.

Would love to talk to you. And if you like that or would.

The speaker is expressing a willingness to engage with business owners interested in growing their business.

Like to hear more about it, go to

This quote provides the listeners with a direct call-to-action, guiding them to a resource where they can learn more about scaling their business.

You can apply anywhere on the page.

The speaker indicates that there is an application process involved for business owners interested in their services, which can be found on the provided website.

And talk to one of our team.

The final quote here suggests that there is a team available to discuss growth strategies with business owners, offering personalized assistance.

Importance of Client Retention in Fitness Industry

  • Client retention is critical for fitness businesses; it's not just about the initial sign-up.
  • Providing value to clients is key to retention, which involves helping them maintain their commitments.
  • Fitness and nutrition programs' inherent value is less significant compared to the accountability they offer.
  • Clients are willing to pay for gym memberships when they utilize the services consistently.
  • The goal is to prevent clients from quitting by fostering a strong relationship and communication.
  • Retention costs are a small fraction of the revenue generated from a loyal customer base.

"You need to preach this to your trainers. Because ultimately, if we claim that we're trying to help people, if that's what we claim, right, then we need to help them stick with it."

This quote emphasizes the importance of trainers understanding their role in client retention, which is to support clients in adhering to their fitness commitments.

"What is the main thing people are actually paying for? They're paying for accountability."

This quote identifies accountability as the primary service clients seek from fitness programs, more than the workouts or facilities themselves.

"It's much easier to quit a membership than it is to quit a relationship."

This quote underlines the need to build personal relationships with clients to increase retention, as people are less likely to quit when they feel a personal connection.

"It costs $10 a month, $15 a month top to retain a customer."

This quote provides a specific cost estimate for customer retention, highlighting its affordability compared to the potential revenue from a retained customer.

The Role of Accountability and Value in Fitness Services

  • The intrinsic value of fitness programs lies in the accountability they provide, not the facilities or the workout sessions.
  • Clients have no issue with the cost of gym memberships as long as they are actively using the services.
  • The actual fitness services can be obtained elsewhere, often at a lower cost, which is why accountability becomes the unique selling point.

"Our fitness programs, our nutrition programs, the coaching, like the actual sessions, none of that is that valuable."

This quote candidly points out that the tangible elements of fitness programs are not the most valuable aspect, suggesting a need to focus on intangible benefits like accountability.

"Because you can get it at 24 hours fitness for $29 a month."

This quote highlights the availability of cheaper alternatives for fitness services, emphasizing the need for fitness businesses to offer more than just the basics.

Strategies for Client Retention

  • The strategy involves adding a sign-up fee that covers the first few months to ease clients into the commitment.
  • The focus is on building relationships and maintaining tight communication to keep clients engaged.
  • Investing in retention is presented as a cost-effective strategy to maintain business and prevent being outcompeted.

"Add a $30 sign up fee and then that covers your first three months."

This quote suggests a pricing strategy that could help clients commit to the fitness service by covering an initial period, making the commitment seem more manageable.

"So how much does it cost? It costs $10 a month, $15 a month top to retain a customer."

This quote provides a clear cost-benefit analysis of retention strategies, showing the financial sense in investing in customer retention.

Conclusion and Encouragement

  • The speaker summarizes the importance of retention and its cost-effectiveness.
  • They encourage the audience to adopt these strategies to avoid being outcompeted.
  • The speaker concludes with well-wishes, emphasizing a positive and supportive approach.

"Cost of retention broken down if you're not doing that, because ultimately if you don't, you will get put out of business by someone who hits."

This quote concludes with a stark warning about the necessity of retention strategies for the survival of the business.

"Have an amazing, terrific, tremendous, fantabulous Thursday."

This quote ends the discussion on a positive and uplifting note, wishing the audience well and reinforcing a sense of community and support.

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