Understanding the Lifetime Value of Your Fitness Clients

Not all clients are created equal. Depending on industry, it can cost five to 25 times more to acquire a new client than to retain one.

The global health and fitness industry is currently valued at $96.7 billion and is projected at a steady increase. What this means for fitness business owners is that you have a reliable pool of consumers who want fitness services. The caveat is: so do many others. In an increasingly saturated market, it’s crucial to understand the value of the clients you do have to have a better shot at success. A key metric to measure the value of business of your existing client base is the Customer Lifetime Value (CLTV).

What is customer lifetime value?

In a nutshell, Customer Lifetime Value is the revenue a client is expected to spend on services or products over their entire relationship with your business. Essentially, CLTV reframes the acquisition conversation from minimum cost to maximum value you get from your client.

To measure CLTV, you simply follow the equation:

Lifetime value = average value of sale x number of transactions x retention time period 

Customer lifetime value = lifetime value x profit margin

For example, if it costs you $100 to acquire a new client and you end up earning revenue in four six-month memberships over two years, the customer lifetime value is $500 x 2 x 2 x 80% = $1600.

A high Customer Lifetime Value is due to an effective acquisition, engagement, and retention strategy. According to research by Invespcro, 76% of companies consider CLTV as an important concept for their business.

Why does customer lifetime value matter?

Customer Lifetime Value is a very important metric. Not only does it put your customer acquisition costs into perspective, but it helps you track your spending and create a clear objective for your marketing efforts. Here we break it all down for you with four reasons customer lifetime value matters for your fitness business.

Helps target your ideal client

According to IHRSA’s Global Report, over half of new gym members are under 30 and 80% of new gym members are Gen-Z or Millennials. However, the members between 16-24 years old remain at a health club for an average of 16.7 months. Comparatively, members over 55 years old remain at a health club for an average of 24 months. CLTV helps identify quality over quantity of clients, and tells you the ideal client worth investing in.

Directly affects revenue

CLTV is also directly linked to your revenue, since it is essentially the amount of money spent by a single client. Basically, you earn more over time. You get to measure the projected revenue generated and return on investment (ROI) at each touchpoint (e.g., yearly) of your business to have an idea of future success.

Boosts loyalty and retention

CLTV can help you tell which clients may require more convincing to continue their business after a certain period. This metric also highlights the need to constantly provide value to your fitness clients, whether through customer service or incentives. Simply put, a happy customer is a repeat customer. And repeat customers are a hallmark of a good lifetime value.

Reduces customer acquisition costs

Shifting your focus to retention can in turn increase CLTV quicker than acquisition. There is a common misconception that a low CLTV justifies increasing the budget for customer acquisition efforts, but that’s not the case. Considering that by increasing your customer retention rate by 5%, you can potentially generate 25-95% more revenue, it’s beneficial to your business to keep your existing clients happy—rather than splurging on marketing campaigns to find new ones.

Tips to increase client value

Knowing this can also help you understand which of your marketing campaigns are driving loyalty and revenue. For instance, if a client you worked hard to acquire cancels their membership, it can be worth taking a look at the reasons why their CLTV is low.

Understanding a customer’s lifespan and value with your business can signal the underlying reasons and rate at which your fitness clients are leaving. Leveraging these insights, you can work to adjust your marketing campaigns or customer service to boost retention and loyalty, which will in turn generate more profit.

We’ve listed here four strategies to ensure you increase your client’s value.

1. Create a client avatar: bring in the right client

An organized customer retention strategy must first begin with customer acquisition. Your fitness business will see clients that spend different amounts, whether it’s $10, $100, or $1,000. From this, you can build a client avatar profile of a high-value client based on similar characteristics. Knowing this will help you come up with customer acquisition strategies to target the ones with higher CLTV.

If you’re noticing that a particular demographic constantly generates a higher CLTV at your gym, finding the right targeting methods will bring in higher value than casting a wide net.

2. Automate email and SMS to boost engagement

There are three stages that directly impact CLTV of your fitness clients: acquisition, optimization, and retention. While it seems counterproductive to invest in acquisition, it’s still the first and foremost step to building a high-quality client base. By focusing on these touchpoints, you can automate your communication, such as through email and SMS marketing, to boost engagement. For instance, sending out welcome emails and birthday discounts can keep your clients coming back and loyal to your fitness business.

3. Offer a loyalty rewards program: keeps clients longer

Loyalty is a crucial aspect of customer lifetime value. Repeat clients who continue to spend on your fitness business will generate more revenue. That being said, you can work on ways to boost customer loyalty, such as through rewards programs. Loyalty rewards programs are shown to influence purchase decisions. In fact, 49% of consumers are said to spend more after joining one.

4. Collect client reviews: get your clients working for you

Studies have found that customers referred by other customers experience a 16% higher lifetime value. So it’s probably time to get a referral campaign in place for your business. One of the most common forms of referrals is through word-of-mouth marketing: a scalable business model that requires little to no cost.

Referred customers are also four times more likely to engage in referring new customers. In short, boosting client-led promotion can be valuable for your business by creating a growing web of new clients. You can do this by encouraging clients to leave comments on review sites or social media.

Track and increase your fitness customer lifetime value with WellnessLiving

In summary, there are so many possibilities when you know the lifetime value of your clients. You can target the right clients for your business, predict how much you will earn from each client, and improve your customer lifetime value as you increase retention rates and reduce customer acquisition costs.

After you know, there’s room to grow. The first step is understanding why your clients leave, then you can find ones that best fit your business. What you do after that will further increase your client’s value. Remember to engage through email and text communication, boost loyalty with a rewards program, and get your clients referring others to your business with reviews and social media comments.

It’s time to analyze your customer lifetime value metrics. For tracking important data related to your customer lifetime value, it’s important to have the right business management software by your side. That’s where WellnessLiving can help. From tracking attendance and revenue to automated marketing and rewards programs, WellnessLiving does all the heavy lifting—from admin to operations—so you can focus on your clients.

Interested in knowing how you can propel your business to success with WellnessLiving? Book a free, no-commitment trial with us today.