Making Money From Quitters

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I’ve spent a lot of years involved in the business of health and fitness.

So I know the metrics well. Still, when I stumbled upon this sentence in a fitness chain’s public disclosure report, it bothered me:

Operating margin was 8.0% for Q4 2010, which includes the benefit of $2.7 million of revenue from unused and expired personal training sessions.

The clubs benefited from being able to take in $2.7 million in personal training revenue from people who paid for their services, but then bailed on their programs.

Benefited…BENEFITED?!

Yes, I realize that as a business owner, you cannot be held accountable for your customers’ actions. You cannot force someone who has paid real money for your services to to then show up and actually use those services. And there may be at least a partial argument in there when it comes to general memberships (more on this in a sec).

But, when people are willing to plunk down $2.7 for high-touch, individualized, results-driven services, then walk away without receiving value, can you honestly say it’s really all about them?

Doesn’t that make you wonder about you?

Where are you dropping the ball that so many people would rather walk away from their investment than avail themselves of the services they’ve already paid for?

Is leaving 17% (that’s what it came out to) of your most-motivated, committed, results-driven customers so unhappy with the service you provided and the promises you made they’d rather walk away than get their money’s worth really a “benefit?”

As long as we’re having this conversation, let’s broaden the lens.

One of the things that’s bugged me about the fitness industry for a long time is the fact that a high-percentage of paying quitters or non-attenders are built into the model. In fact, most clubs would go broke if everyone who paid them actually used their services. Because they’d have to expand their space, add a ton of classes and equipment to handle the load.

Clubs bank on the fact that many members will either never or rarely ever come.

They know that a large percentage of their members will pay, then stop coming fairly rapidly, but keep paying for a while. Because canceling the monthly auto-pay is tantamount to saying “I give up,” and that’s a tough psychological pill for most people to swallow. So, even after they’ve stopped going, the money keeps flowing for a while. Eventually, 40% will work up the nerve to quit and stop paying.

Same thing with the personal service packages they offer. Many expire with substantial chunks unused and this is built into the model.

Yes, there are standouts who defy these metrics, but sadly, they are the outliers, not the norm.

As much as the mainstream fitness industry claims publicly to be working like crazy to figure out how to up participation and retention, fact is very few providers have made even the slightest dent in their awful numbers.

Because the fundamental model is built on the backs of paying quitters.

They can’t push too hard to get people to love them because if they do, everyone would start showing up, demanding more and stressing facilities, services and staff that are built on the assumption that a huge number of paying members will never or rarely-ever actually show up.

That provides a huge disincentive for club owners and service providers to make the extensive changes to the model needed to build their businesses around services, solutions and experiences that are so enchanting and delightful that people can’t get enough, then charging what needs to be charged to deliver on the promise of lifestyle genius.

The industry says:

We can’t do that, people aren’t willing to pay what it would really take for us to create an experience that consistently blows their minds.

Um, no.

People aren’t willing to pay for the repackaged, lip-service modifications of the same old same old that tend to be offered up, then dismissed as failures.

They are willing to pay for “Sweet Mother of God, if I’d known it could be like this, I’d have been doing it decades ago.”

C’mon, industry, for years…YEARS…more than 90% of us adults have been saying we believe in our hearts that exercise is mandatory if we want to live well into the second half of our lives.

You don’t need to do any convincing! We’re sold.

But at the same time, for just as long, 85% refuse to participate in mainstream health clubs.

Hello, Beuler…BEULER?!

Okay, let’s make this easy for you:

  • We want to have more energy,
  • We want to be more pain-free,
  • We want to sleep better,
  • We want to be less-stressed,
  • We want to feel great,
  • We want to feel connected,
  • We want to look hotter (yep, even old dudes like me), and…
  • We WILL PAY if you can deliver on that promise.

But what you’re offering, at least for 85% of us is so devoid of the ability to make us feel this way and it’s being delivered in a setting, manner and mode that’s so insanely unappealing, guess what, we run like hell from it.

So, to the mainstream fitness industry, I’ve got a message.

Wake up! What got you here ain’t gonna get you there!

When millions of dollars of personal training services go abandoned and 40% of your members say I’d kill to get what you claim to deliver, but then quit, that’s not a “benefit” to your organization.

We want more. We want better. And, yes, we are willing to pay for it.

But, you’ve got to give us something that works not just for you, but for us.

Capisce?

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36 responses

36 responses to “Making Money From Quitters”

  1. Mohit Pawar says:

    Jonathan, interesting point. Do you think pay-as-you-go solution works for this? or probably a daily reminder service built of the back of apps like http://loseit.com/

  2. B says:

    So what is the answer? How can they improve and build something that “works for us”?

  3. Tony Grogan says:

    Just think of the possibilities of just getting 1/4 of that 85% to stick it out. Same initial profit, but look at the referrals and future business. You could not build new gyms fast enough. It all comes down to meeting, or better yet exceeding, the customers expectations, and just plain old fashioned integrity.

  4. […] This post was mentioned on Twitter by Jonathan Fields, remarkablogger, Grant Griffiths, Amber Zuckswert, Les McKeown and others. Les McKeown said: Great article, esp if you persevere to the end: RT @jonathanfields: Making Money From Quitters – http://bit.ly/herxNd […]

  5. Amen!! What no one will say is that if they really delivered, health care costs in this country would plummet. Demand for prescription drugs for obesity related illness would disappear, and those boxed, bagged, packaged faux food aisles would dwindle to make room for large produce aisles.
    Of course, that means a lot of other industries that benefit from paying quitters would have to get off their present model too. Drug companies, grocery stores, big box stores, health insurers.. lobbyists…
    I like this post Jonathan.

  6. wendy reese says:

    As a personal trainer for almost 20 years, proudly away from mainstream gyms for the past 10 for this exact reason…well said! I have always believed that if I did my job well, my clients would cease to need my services beyond the regular oil change/tune up.

  7. Bridget says:

    I was a little worried when I saw that title that you were going to show me how to make money from people who bought but didn’t use services from me.
    I am so happy to read this instead!
    I use inexpensive gift certificate programs in my businesses, to enable people who can’t afford full sessions with me to get a taste of it.
    Last year, roughly 10% of them went unused.
    There’s an expiration date on them, but some people have come back and said “Oh I missed my date! Can I still use it?” and I say, “Yes.”
    They paid for it.
    If that’s what they can afford to buy from me, or if it’s their first interaction with working with me, why would I send them away? That’s a lose-lose.

    I have joined and quit 3 gyms and I can tell you why their services went unused by me. It’s a long list. It makes me sad that they bank on good intentions with short follow-through.

  8. Noola says:

    Why does everyone talk about building new gyms etc? Use the existing one as a base then complement it by inspiring members to follow you into The Great Outdoors! ie Biking, running, swimming, walking, climbing, yoga etc. All types of classes can be done outdoors in some way. Look at China where there are huge numbers of people to be seen every morning in the parks practicing Thai Chi. Yeah, people could do that by themselves, but they don’t. They need the motivation and leadership, mentoring and guidance you get from a ‘class’ with an instructor – which could all be delivered outside. Yes… there’s weather which is unpredictable, like life. But it could be done.

  9. Nikki says:

    I got a membership at a well publicized fitness company. I let it expire. I won’t be back.
    Aside from the terrible lighting, mirrors all over showing me what I didn’t really want to look at yet (after all, I joined because I DON’T like the way I look right now), and the meat market mentality of many of the other clients there, every time I wanted to go, the machines I wanted were all being used.
    Go figure – everyone else also wanted to go after work. Good luck finding a machine between 5 and 7 pm.

  10. Deb says:

    It’s not just exercise – I work at a subscription-based massage therapy practice and we actually have people who pay for a monthly massage but don’t use it. That’s right – they won’t come in for a massage!

    The paid hour massages roll over to the next month and our staff calls to remind them, but they still do not take the time to just lay there.

    • Jonathan Fields says:

      Agreed, the phenomenon exists across a wide variety of pre-paid types of business.

      And, let me be really clear, too, I’m not against monthly memberships or passes that expire.

      Leveraged properly, they can help reinforce a commitment to beneficial activities and increase the sense of urgency. But, that also depends largely on the nature of he solution you’re providing and how you position and support these vehicles.

  11. Bonnie says:

    A Canadian Broadcast Company television show called Marketplace recently ran a show about the gym industry. I was on it, so I know – it featured a bunch of people who had tried to quit, yet they were still being billed. The gyms offered up a ton of reasons why the billing could not be stopped.

    Getting out of a gym contract even after it expires is so hard, it’s put me off ever joining a gym again – and why would I, given the quality of exercise DVDs on the market and the availability of free exercise videos on iTunes.

    You can become fit for free, that’s the beauty of fitness!

  12. Jonathon this is the first time i have read your blog.

    I own a garage gym, so the model is different. We do not have plans of 500 members with only 30% routinely using the place. Everyone who is a member is in the doors at least twice a week, most three…but I do understand the angle of the commercial gym owners.

    many people walk in to our gym and look around in horror at the squat racks, barbells, and quickly note the lack of mirrors and machines. No spa, no shake bar, no UV lights or tanning beds.

    After their first workout, they will always comment something like “That was awesome, but can’t I do that at gym XXX (pick a globo gym of your choice we are in Minneapolis)

    A lot of people are shopping for gyms by features, not results. They say they want fat loss but what is done and what is said are not the same. If every dollar is a vote, then the over whelming vote goes to spa setting gyms where overhead lifting, deadlifting, athletic training, chalk, and sweating is out lawed.

    I agree with you people want to feel good, but most people seem to be confused on what it means to feel good. I think a measuring tape, caliper, and scale is a great grading system for results, not how many finnish saunas a gym has or how many plasma screen TVs are in the cardio machine area.

    I also agree with you that some things need to change. Consumers drive the market, not gym owners. If consumers continue to purchase services and not use them, gyms will continue to offer them and even plan on a profit from disuse.

    there are a lot of people trying to change this whole game, but it will take some perception shifts in the public before it all hits the tipping point. I think crossfit style gyms and the fringe fitness return to “Physical Culture” is a great start.

    Rather than demonize a business for making money, I ask why are customers paying for services which they do not use?

    We are all moving towards better, but not as fast as we would like.

    ATG

    • Jonathan Fields says:

      Adam, thanks for stopping by, appreciate your thoughtful comment.

      I think we actually are in agreement on most things. And the elements you point to and places like Crossfit are among the outliers I mentioned, a new breed that’s starting to “get it” on a whole different level.

      This is, no doubt, a complex issue, and I’ve just spoken to one element of it in the post. But, no matter where you come from, you can’t argue about an 85% aversion rate that hasn’t changed in years.

      On “demonizing a business for making money,” if that is how this article was perceived, apologies. That’s not the intent. So let me make this clear – I love businesses that make money, lot’s of it. I’m an entrepreneur, too. It’s how the money is made that I’m exploring.

      What I’d like to see more of is revenue coming from delight and needs being met, rather than less than optimal solutions and churn, which is a huge part of the current big box model. Again, not for all, but for many.

    • caitlyn says:

      I can picture what is good at your gym. A sense of mastery is very important, not a sense of “done” (although that feels good in the moment, too!) You offer an opportunity for clear challenge.

      I got so fired up about this I wrote a blog post about my experience, comparing the 8 unused, expired sessions at a hot yoga studio to the weekly hip hop dance class that I wouldn’t miss for the world. In the hip hop class, I’m essential to the success of the experience – not just for myself but for others, too.

      Find it at http://ImaginingBetter.com under Quitter?

  13. Wilson Usman says:

    It’s sad to see that businesses are benefiting from this business model. I mean seriously, they know that a certain percent won’t come or use their services. It’s like saying let make a business that people will pay for but will never use… maybe I’m dumb or something for using that analogy but it sounds like that’s one of the main reasons the gym business is so attractive to business owners.

  14. Eva-Maria says:

    thank you for the blog Jonathan – I have been “sponsoring” an upscale fitness club for years …so I have given this some thought ….I think people (we) need meaning to the exercise … shovel coal for the poor – help a farmer plough his field, chop wood for an elderly lady who needs help, help the trees in central park NY, charity runs, treadmill hours, yoga lessons or spinning sessions for charity – every hour spent in the Gym – somebody is benefiting.
    Not wanting to move your body and feeling good about it is strange urban behaviour – in this case – we have come too far I think – lol to all

  15. Brent Reader says:

    Jonathan,

    Crossfit definitely breaks the globo-gym mold. It’s all about building a tight community with common personal goals, while our gym is a total throw-back, resembling something from the 1970s.

    The key difference is they WANT you to be there. Slack for a few days, miss a class, and your coach and friends are calling you. “Is everything okay? Are you sick?… Oh, you’re just feeling lazy? Well, hope to see you Friday.”

    And the crazy thing is, while I was never willing to fork out a palsy $29 per month for a Gold’s membership, I will pay $125 for Crossfit. I’m not alone in this, as my local affiliate has been growing by around 20% each month with a 95% retention rate. The biggest problem is having to move to a larger building every 6 months!

    You’re absolutely right: provide the right experience and people will pay to have it.

  16. Jonathan,

    This doesn’t apply to just the fitness industry, either. EVERY industry needs to get this. Be remarkable, unexpected, surprising, extraordinary, and people will flock to your doors and pay to get in! What the heck does anyone get out of being normal and bland? Nothin!

  17. Marilyn Taillon says:

    Would you please take over the health care and insurance industries?

  18. Niel Malan says:

    To avert a mental health disaster, I’ve been attending a mainstream gym for the last five years, and I’ve achieved a lot. I’m proud of going. Reading this post made me realize while it’s cool of me that I’m so proud, for the gym it must be terrible news. Why isn’t a visit to the gym like going home? It’s like being proud of being clean despite having to take a cold shower at 5 am every morning.

    And this is a _good_ gym!

  19. Phil says:

    I think I may have mentioned it in a comment a few weeks ago, but gyms aren’t really making sustainable money off their churning customer base. A consulting client of mine (a large national fitness chain) has actually realized the problem they have and are at least trying to address it.

    Analysis we did as the financial crises hit was surprising even to them. More than 100% of their annual membership growth was from opening new clubs. If measuring only existing stores, they were losing customers.

    This was a “managable” problem during the boom, but became potentially fatal during a downturn with no capital to invest in new locations. So they got religion.

    They have focused on changing their sales and membership tactics to try and avoid this churn. Are they “good” now. No. But they’re doing better.

    I agree with your perspective that the vendor is a co-owner of the client result. So many gyms are “intimidating’ in many ways. Gyms need to focus on the needs of their clients and their clients’ satisfaction and results. If you don’t, in the long run you won’t make money. You can’t churn forever. Eventually there’s no one left.

  20. Rob says:

    Jonathan,
    Thanks. But. I would be asking the same question as ATG above,”why are customers paying for services which they do not use?”
    I’ve visited museums in basements loaded with the latest unused infomercial exercise ‘miracle’.
    Most people want easy. I know I have looked for the easy way far too many times to count. Remember the ad spot,’Face it. If it came in a bottle…’?
    Each that are reading this know that it’s true.
    If not, each of us would be able to play Bach on the piano, run a marathon or bench press 300 lbs. The estimated rule of 10,000 hours to be an expert transcends talent (The Tipping Point by Malcolm Gladwell). It is all about the time and dedication. The ‘want to’.
    When I read the headline, I thought it was going to be a sort of thanks to those who have quit the blogging world. Thus, making it easier for those who don’t. Not as a slam, but to encourage those who are willing to put the work in.
    It can be done if, YOU, ‘want to’. And, that includes using the health club membership you paid for.

  21. Mark Kelly says:

    You’ve hit on the whole Groupon business model plus any other deep discount prepaid offers. If everyone uses it they are dead in the water but the model and past data shows that won’t happen so they continue to make money.

  22. So let’s ask this same key question of us folks in the Information Product market:

    Where are we dropping the ball that so many people would rather walk away from their investment than avail themselves of the services they’ve already paid for?

    I don’t know the actual stats, but I’ll bet the “not using” it rate is pretty high for information products/programs.

    What is the definition of a SUCCESSFUL launch?
    Is it total sales? Or should it also include how many purchasers actually used the product AND had a great experience using it.

    Of course human nature – and how many folks you sell to – have a huge impact on how many will actually use the product/program. Human nature leads us to look for a quick fix – and we buy that $997 program. And the bigger the list (adding in affiliate lists), the harder it is to make sure that the customer actually uses the product and has a great experience in the process.

    But this doesn’t let us off the hook. Instead, it’s our job to ask ourselves: how can I make my product/program so high quality and user-friendly that it’s a no-brainer to use it – not just buy it?

    We are here to serve. Or said another way in the biz world, “the customer comes first.” And if we don’t put them first, they will take their next $997 and spend it somewhere else.

    Marie-Jeanne

    • Jonathan Fields says:

      Agreed. We ALL need to hold ourselves more responsible on both sides of the transaction.

  23. TomC says:

    I wonder if I should ask Tony Robbins for my money back on the tapes I bought 20 years ago and quit on. I quit on a lot of things that are hard and not fun with no immediate perceivable reward (or improvement). But the promise is so good (and is probably actually true) I buy in. But I also excel at things that are hard and fun for me. And sometimes I just need to see improvement. Make pretty much anything consistently fun or immediately rewarding and I’m in. Can a gym really do that?

    Anyway, that business model is for people who don’t care about people. Ironic that is has to do with improving people’s well being.

    • Jonathan Fields says:

      It’s an interesting question, right? And in writing my post, I don’t mean to absolve us customers of any responsibility for failing to follow through on opportunities that would in fact be beneficial. We “end users” bear some responsibility to both commit, own our actions and to step up and ask for something better if what’s being offered isn’t doing the job.

      The bigger point is really about doing better with what’s being offered. I’d rather try to build a business model around maximal utilization, high-level problem solving / delight to the point of rabid fan and evangelists and minimal retention, then charge what I need to charge to be able to deliver on that level.

      There’s a lot of lip service to this in many “helping” industries and, as I’ve said, there are outliers who are doing it differently, even some big boxes. But, I’d love to see the lessons of the outliers trickle into the mainstream a bit more.

      • TomC says:

        That’s a beauty of a business model that could probably work at any level of business. It has a built-in referral engine too.

  24. Very nicely stated Jonathan! Now, if we can say something very similar to probably at least 10 other industries! 😉

    What I think half of these clubs miss is the other piece of the “experience” of getting fit: the mental/emotional aspects of the transformation from out-of-shape to fully fit. Many of them can design a workout program… but not delve into finding out how we got to where we are (for a lot of us… there is an emotional/psychological reason) and without addressing that at the same time… we’re just sweating the weight off, but not the burdens that got us to where we are.

  25. Jonathan,

    Very well written article; I enjoyed reading it thoroughly.
    This is classic Pareto’s Principle stuff here. There will most most likely always be a healthy slacker contingent that generates passive income for myriad business models out there. But, I like your wake-up call-style open letter.

    Cheers and thanks!

    Peter

  26. Miguel_k says:

    As some people has pointed out in the comments, my girlfriend also profits from the quitters quite differently…she is a personal trainer and she is successful at least partially thanks to the failure of the gym model…she has some costumers for over 20 years, her training equipment? her knowledge and a genuine concern to provide an excellent service, to make human connections

  27. Mark Freddy Farrell says:

    “Accountability”. “What if” I turn up, Money Back Incentive? “What if” I get Results with your Help, Money Back Incentive. ” Incentive? ” its my Money anyway, you can Keep some, But give me some Back if we work Together and acheive MY Goals?
    The Big Picture is that it isnt just about the Money,
    But Im in for Trying a little Role reversal Now and then, – Especially where everyone Benefits.

  28. J. Villa says:

    Jonathan, thanks for this post so clarifying. I think, as someone else said, you should go back to the health care and insurance fields, simple because your dedication and hard working is for sure being missed now in those fields 😉

    I really enjoyed reading your detailed post. Thanks for your time and dedication.