What You Need to Know Before Offering Memberships
Repeat visit clients spend up to 10x more than first visit clients, according to research. This means that any service-based business must have client retention programs in place to be successful. Memberships are the most common retention program for increasing repeat visits, but have flaws. Knowing what makes them work and where they go wrong can increase your chances of success.
When we opened our spa, one of the first things we did was offer memberships. The reasoning was simple, we wanted more stable revenues and were willing to offer deep discounts to get them. Our membership program was very traditional. Clients paid a monthly fee and received membership rewards on the services they used. This seemed to work fine, but we began seeing serious flaws that were costing us potential revenues.
What We Noticed First
The first thing we noticed was that our clients did not want to be locked into a monthly payment. Several of them would come in a couple times a month and buy packages instead of the membership, even though it cost them more. Yes buying packages was guaranteed revenues, but not really a retention program because there is no mechanism to get them to come back within a certain time. Even our state, here in California, law mandates that the paid value never expires, so they would sometimes disappear for months.
The next thing we noticed was that those willing to commit to a monthly fee didn’t always visit every month. This meant that the savings they earned the previous month were wiped out the following month, when they paid their dues but didn’t come in. Many members got upset and canceled their membership when they discovered it wasn’t saving them money.
Why Didn’t They Come Back
It is important to note that members who canceled often never returned. They liked our services enough to commit to the membership, so why wouldn’t they come back after they canceled? After thinking on this for many months, the reason came. When a client commits to a membership, they are entering a relationship with your business. If they get upset and cancel, they aren’t just canceling a membership, they are severing a relationship which often can’t be mended.
When we discovered this, we moved into more advanced memberships and management of them. We created roll-over benefits and even allowed pausing memberships. With rolling over of benefits, we found that after just two months of not visiting, they had enough services rolled over that there was no point in continuing with the membership. They would simply sign up and cancel every few months and our revenues decreased. They got the discounts, but we didn’t get the stable income. Pausing memberships essentially meant that our revenues weren’t stable, not to mention, the management of pausing memberships was extra work that just couldn’t be justified by the returns.
Keep It Exlcusive
Today, we still offer memberships, but we are clear that they are only for those who use our services religiously. Most of our clients who request memberships find that our rewards program is a better fit. It can give them near to the same level of discounts, without the penalties. Our business does better with rewards because our program is time-based, which means it compels them to visit sooner. If they come in sooner, they earn bigger discounts, if they wait, their discount shrinks, but never are they forced to pay for something they aren’t using.
With so much business success dependent on increasing repeat visits, having good customer retention strategies is a must. Of the many types of customer retention programs available, memberships are popular, but not perfect. Knowing how they are helpful and where they go bad is important in creating a successful program. Always consider the impact they have on your clients, on your business, and complement with other retention programs to maximize repeat visits.