What if Every Client Spent $12,000 at Your Gym?

Beckner

Mike (00:02):

Knowing the lifetime value of your clients changes everything. It’s not about making people into dollar signs. It’s about measuring the value you provide, making smart financial decisions and changing the way you look at clients. We’ll begin right after this.

Chris (00:15):

Chris Cooper here to talk about Level Method. When it comes to owning a gym, it can be really tough to show your members their progress and keep them engaged long term. Level Method provides experienced gym owners with a visual step-by-step fitness progression system that’s fun, engaging and easy to use. With Level Method, your clients can reach their fitness goals faster and safer than ever before and become raving fans of your gym. Go to levelmethod.com to find out more. I use this product in my gym, it helped with my conversion from my on-ramp program into ongoing group coaching, and it’s also boosted my retention over time.

Mike (00:49):

Welcome to Two-Brain Radio I’m Mike Warkentin and today we’re examining lifetime value of clients or LTV. This figure is a function of two things: average revenue per member, and length of engagement or ARM and LEG as we call it. At a chain gym with $20 memberships, you’d have to keep a client for 41 years to get to an LTV of $10,000. Many Two-Brain gyms are scoring well over 10K, but they’re doing it with ARM numbers over $300 and length of engagement scores over 30 months or some combination of that. All this means that you can make a hundred thousand dollars per year or more with just 150 clients. If you don’t believe me, download the free guide, how to make a hundred thousand dollars per year. The link is in the show notes. Jonathan Beckner of Move Functional Fitness in Decatur, Georgia has a huge LTV.

Mike (01:33):

He was one of Two-Brain’s leaders in March, 2021. The top gym scored over $14,000 and Becker’s biz almost hit 12,000. Jonathan. Welcome. Thank you so much for being here today.

Jonathan (01:43):

Thanks for having me.

Mike (01:45):

Let’s get in. Let’s dig into it. I’m excited to talk about this one. I know this isn’t a number that you think about a lot, but we’re going to kind of dive in and just see what we can learn from you because you were one of our worldwide leaders, so you must know something about it. So we’ll figure out what that is. And we’ll talk. I know you focused on retention. Give me some idea of how long members generally stay at your gym and how do you make that happen? What are your keys for retention?

Jonathan (02:05):

Sure. You know, if I knew exactly what that was, I’m sure that number would be a whole lot better, but right now our average length for membership is around 58 months. So just under five years.

Mike (02:22):

That is excellent.

Jonathan (02:23):

And you know, we’re in a situation where we’ve been open for 13 years, we opened in 2008, we were a really early affiliate in the Atlanta area. And you know, a lot of those early adopters had such a passion for CrossFit and it became part of their identity. And, you know, that was a benefit to us and probably 25% of our membership joined in the first five years of our current membership. And so we’ve retained those, you know, for eight years or so, up to 13 years, we still have some of those original members. And then beyond that, we’re probably keeping about 10%, from beyond that per year. And, I think the biggest thing for retention for us has always been community. And, you know, I know every gym talks about community, but, you know, we’re in a pretty unique situation as a CrossFit gym and that’s we get to curate the culture here. And so you get the right people, as far as coaches, you get the right people, as far as members, throw in some competition, you know, throw in some challenges and people just want to stick around.

Mike (03:44):

You’ve hit on a couple of very interesting, and you know, one of the things that you have to do to have a high lifetime value is you have to have average revenue per member that’s in a good spot and you also have to have length of engagement. And the key to length of engagement is that you have to be around long enough to keep those members. So just think as a business, that is a key to length of engagement, but that said there are some long-term businesses that have very high churn and very poor retention. So, you know, you said that, you know, you’ve been around for a long time. You’ve kept some members for 13 years. That’s a huge deal like 13 years, even if we’re talking early adopters, 13 years at the same business in the fickle fitness industry is a huge accomplishment. So congratulations to you for having some of those members for a really long time. It’s really interesting. I’ve talked to a few other gym owners about this as well, and they say the same thing. You have to stay around. And that’s the sign of a healthy business that survives. Has your length of engagement gone up over the years, or have you tracked that to enough to know.

Jonathan (04:38):

You know, I haven’t tracked it enough to know. I would imagine that it went up for a little bit, probably through, I don’t know, 2017 or something like that. It was probably on its way up, maybe even a little bit earlier than that before it started to dip.

Mike (04:55):

What do you think made it dip?

Jonathan (04:58):

Just, we’ve gone through some changes, you know, the typical growing pains that a lot of CrossFit gyms go through with coaches leaving or a large group of members leaving at the same time, or, you know, that type of thing happens.

Mike (05:13):

Still talking like 50, was it 58 months? You said?

Jonathan (05:15):

Yes.

Mike (05:15):

So that’s a really, really good number we’re talking over, you know, over four years at that point, that’s, you know, almost five almost. Incredible number. And, you know, Chris Cooper’s been talking about length of engagement and targeting, like getting people to like over 10 to get that 14, 14-month range, you’re at five years. So that’s a really solid thing. So no matter what, even if your length of engagement dipped a little bit, you’re still at a really good spot. And again, that’s a huge contributor to lifetime value. You talked about community. So an interesting thing is like I was old school, like you were, you know, community was a big deal. And I used to try and sell that. Right. And we’ve kind of figured out with Two-Brain that people don’t necessarily come to a gym for community. Like it’s not a good sales pitch because what they’re really looking for is like weight loss or increased strength or confidence or fitting into a grad dress or whatever it is. And, but on the other end of it, community is a huge retainer. Do you agree with me on that?

Jonathan (06:07):

Absolutely. People definitely don’t come to us because they think they’re going to make friends. You know, I mean, I guess some people do, you know, some people are referrals or maybe they are looking for, you know, just a place to hang out, but, yeah, they’ve got some other idea of what we offer and as long as we are in agreement on we can fulfill that offer, then our next goal is to get them kind of stuck in the community. And I think about it kind of as like a web of connectivity where the coach is, you know, maybe one point of contact, but the member’s not going to stick around because of the coach. They need other points of contact. And so my goal is to get them introduced to as many people as possible who are in the gym who are long-term members, have them look forward to coming to the gym, because if they’re not having fun, they’re not going to come back, you know, and just have all these different points that keep them kind of stuck in a good way.

Mike (07:14):

Yeah. And it’s like multiple points of contact, you know, it’s like, a spider web, no spiderweb is strong with one strand, but you get a whole bunch of them, then it holds onto some stuff. And that’s kind of exactly what you’re saying, where the more points of contact you have from your business and through the people in your business to a member, the more they’re going to stay. And again, I actually put on my website at one point, Oh, we have friends for you here. I’m almost embarrassed to say it, but I thought it was so fun. Like all my best friends are working out together, but I didn’t realize until working with Two-Brain that that’s not why people came, no one comes for that, but they will stay for that. And to the point where now we moved our gym online completely and shut down our physical location and our old members, a lot of them are still working out together and they’re just going to parks and stuff like that. So it’s really cool. And that community was something that we all created together and is now continuing, you know, beyond us. So I think you’re on the right path there. I have to ask with COVID and restrictions and so forth. How do you deal with that? Can you like, can you still generate that community or how do you keep everybody linked together when you’re in a crazy situation?

Jonathan (08:16):

Yeah, it’s definitely been more challenging, but I do have to say, and I don’t know if you know this, but we started Two-Brain January 1st, 2020. And so, and I was thinking about this earlier is we did a whole lot of things early on in that year with the expectation that it was going to be an extremely important year for us to grow and this and that. So we bought a whole bunch of new equipment and we started mentorship and, you know, we were getting through, we had just finished the kind of on-ramp series with Two-Brain. And so all of these, our vision and our mission and our values and all these things were just like top of mind. And we were just in high gear ready to go.

Jonathan (09:07):

And then, you know, the pandemic hits and we’re like, Oh crap. But we were super prepared for it. Just because we were, like I said, we were already running at high gear. And, had you asked me, you know, if you had told me in December that the pandemic was going to happen, I probably would have saved that money. Not bought the equipment, not, you know, joined a mentorship and just, you know, tried to weather it out or something. And we definitely wouldn’t be here had that happened. So it’s like all these things I put into place unknowingly saved us, for sure. And you know, we’re still kind of kicking along through 2021. Yeah. That’s a little bit of an aside, but you know, going into the pandemic, we switched everybody immediately over to, or assigned people rather to, personal coaches, so, right.

Jonathan (10:03):

So we would deliver online coaching daily, be in daily contact with everyone. And then, we just tried to ramp up our social media presence and our Facebook groups and things like that. Just to keep people engaged, we did a bunch of trivia nights and bingo and some challenges. And I started a weekly newsletter, just to kind of like stay in contact with all the people that I wasn’t personally coaching. And so I would provide them with, you know, here’s what we did during the week. And here are some cool PRs that people hit, you know, these people are having fun and just trying to keep people connected. I started a podcast as well. Again, just for that same reason, just to have some sort of personal connection with all of our members. And so, uyou know, it’s just, you try to build the community where you can.

Mike (10:57):

So you’re putting in a lot of effort there and like, that’s what we’ve heard from our gym owners in lockdown, or who have been locked down and/or not been able to run their businesses, staying in touch with members in creative ways is essential. And, you know, the Two-Brain plan was exactly like you said, assign personal coaches to deliver the workouts to clients every single day. Right. It wasn’t zoom classes, some gyms used that and that can work, you know, in certain things, but the better plan was contacting members and maintaining that personal relationship. So you’ve done that, but then you’ve even gone further with different kinds of, you know, the podcast, the newsletter, the online stuff that really keeps people engaged. Are you guys locked down right now or what’s Georgia’s situation?

Jonathan (11:36):

No, we were actually only locked down for probably six weeks though. We actually closed for eight. And, that was early on, that would have been in April of last year. Not bad at all. But there has been, you know, that definitely put the brakes for obvious reasons on a lot of people’s expectations of going to the gym. And so as far as retention goes, we definitely lost some members last year and we definitely didn’t retain all of our new members that came on. And I was just looking at the number and it’s not a fun number to look at.

Mike (12:21):

Which one is that, is that total members or?

Jonathan (12:24):

No, the number of members who, who joined this last year, who are no longer with us, you know, and this year it’s so far so good. It’s a lot better situation. I think people are feeling better about getting out and joining gyms and, you know, we’re certainly trying to do our part to make it easy for people to come in.

Mike (12:45):

Yeah. It’s unprecedented times and it’s different in every place like there, you know, up where we are right now, we’re in Ontario, Canada still under a stay at home order. We’re in the middle of like a 42 day stay at home order. And like, there are gyms in Toronto that have not been open, I think for nine months kind of thing. Like it’s just incredible. And then there’s other ones that have been everything in between from no lockdowns to endless lockdown. So everybody kind of makes their own path through that. And I’m glad to hear things, you know, you were set up at least had some momentum to get through the period that you had to get through. And we experienced the same thing with members. You can’t fault people for being scared during a pandemic. You can’t fault people if they lose their jobs and things like that. There’s just so many circumstances that relate to retention that could become out of your control. So all you can really do is create the tightest bonds with the clients who can and want to be there. And then you go from there. Right?

Jonathan (13:32):

Absolutely.

Mike (13:32):

It’s such a crazy time. We’ll get into little bit more into lifetime value here. And you said before the show that it’s not something that you’ve tracked a whole lot, does knowing it now give you any insight at all? What do you think about it?

Jonathan (13:45):

I was thinking about this earlier and the best I can come up with right now is that this number is kind of a statistical representation of my value to someone, or the value that they see in my services. And so, you know, that it’s actually maybe a sense of pride, even that someone believes in me this much, that they’re willing to give me this much money over this amount of time. You know, and so I think as far as a metric, that’s a pretty cool thing. To be able to put a number on how much value someone sees in you.

Mike (14:27):

Yeah. And Chris has talked about this, Two-Brain Founder, Chris Cooper, obviously has talked about this so many times about constantly delivering value and a lot of us, especially, I mean, I’ll ask an old school question in a second, but when I started out, I was so new at fitness and I was so nervous for anything. I did not have any perception of what my actual value to a client was. And I was almost like just, I couldn’t even ask for 157.50 a month for unlimited membership. Right. Like it was a struggle for me. Like, do you remember when you started back in the day, do you remember what your basic membership price was?

Jonathan (15:00):

We actually started at 150 and we gave a million discounts. You know, so you could probably get that down to $110 or something. Right. If you were the right type of military, a teacher or something like that, you know, you could probably, student as well, you know? But yeah, 150 was kind of the number around Atlanta. And of course we started with what everyone else was doing for quite a while.

Mike (15:34):

What would your average membership cost be right now?

Jonathan (15:40):

$175.

Mike (15:42):

  1. So you’re moving up with your average revenue per member.

Jonathan (15:44):

Yeah. And you know, we honestly, when we started, we didn’t even really offer personal training that much either. We would do a handful of sessions every once in a while, but, you know, our main offering was group. And now our personal training packages start $360. I think.

Chris (16:06):

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Mike (16:39):

Do you have a sense of what percentage of your business now is personal training, or do you even know the exact number?

Jonathan (16:44):

I don’t know the exact number, but it has increased probably, it probably increased three X last year.

Mike (16:53):

  1. So the reason I ask is that I’ve talked to a number of gym owners about this, and it all relates back to like average revenue per member, and lifetime value. And a lot of them have talked about personal training. There was a lot of us who, you know, I didn’t even know, shamefully, that you could do personal training in a CrossFit setting. Right. I was just completely, it did not occur to me because that’s not what anyone did. Right. But when people are adding in personal training, either just straight up personal training packages, like you’re talking about or hybrid packages that are group and personal training, what they’re seeing is clients are loving it. They’re getting better results and their revenue is increasing. So it’s like a win for literally everyone in the business. Have you seen that?

Jonathan (17:32):

Yeah. I think for us, most of our people who come in for group typically don’t do much personal training, but people who come in for personal training, that’s really all they want to do. So for us, we’re seeing kind of a split. And then I get the occasional client who wants to do both who’s maybe got a competition they’re working on and they, you know, they want to do some private training to work on a few things or they have some specific goals that just aren’t getting covered you know, during our group classes.

Mike (18:10):

Yeah. So for you, it’s less hybrid stuff and it’s more just group or personal training. So that works just because you’ve got, like you said, you’re selling, what was it like $350 personal training package.

Jonathan (18:20):

Yeah. And, sometimes up to $1,200.

Mike (18:23):

So there you go. That’s a huge high value service. And if your lifetime value is $12,000, you know, you sell 10 packages to one client, there you go. That doesn’t even take you years to get to. Right. In some cases potentially. OK. So that’s a really interesting one because lifetime value, like if one client buys $12,000 from you in one purchase, that’s $12,000 lifetime value right there. So it doesn’t have to be stretched out over years if you’ve got the right value in your packages and services. So that’s really interesting how you’re doing it there. When you know that a lead might spend $12,000 in your business over the next, you know, call it 50 months or whatever, we’ll call it. How does that affect the way you handle leads and brand new members, or does it affect that at all for you?

Jonathan (19:06):

You know, I don’t think it does. And like I was saying, this isn’t really a number that I’ve focused on before. Maybe I will moving forward. You know, now that we’re having this conversation about it, but you know, it’s like every time, you know, we use GLM and anytime I get a notification on my phone that somebody requested info about pricing, it’s like, hooray, let’s get them in the door and talk to them. Right. So it’s just more about, OK, let’s see what they want and let’s see what we can offer. And, you know, and then it’s just, like I said, building that relationship from there.

Mike (19:44):

Yeah. It’s really interesting because you know, this is a number that a lot of gym owners haven’t thought about a lot of, but as you know, Chris has been digging into the gigabytes of data that we have, and he’s looking at stuff he’s finding things that people can do to drive up their revenue and make their businesses better. And so, as we talk about this, and this is why I wanted to have you on the show, the more we talk about this and kind of think about it, the more gym owners will start to kind of use this data to improve their own businesses. And one of the things I thought was really interesting is, um, you know, John Franklin and Mateo Lopez, the GLM guys, but also, help out with Two-Brain Marketing, they talked about like cost of acquisition. Right. So if you think about like advertising costs and things like that, do you do any advertising?

Jonathan (20:23):

Yeah, we do. We run the Facebook ads and that’s pretty much it.

Mike (20:31):

Yeah. So if you track your cost of acquisition for a member, you know, you say, Oh, let’s say, you know, I’m going to spend $50 to get a new member or something like that. Probably I’m going to guess, like, does it give you a sense of confidence in that $50 spend or whatever it might be when you think my average revenue for LTV was $12,000?

Jonathan (20:48):

Yeah. I definitely use that as maybe not the lifetime value as much as, you know, our front end offer. You know, but it’s like, OK, well, if I can just get one client out of this campaign, then, you know, it’ll more than pay for it. So, I think it’s more of just that front end offer for me versus the lifetime value.

Mike (21:11):

And I’m not sure if that’s like, if that perspective changes a little bit, when you start getting into like really big ad spends and things like that, the analogy that, you know, Mateo would always talk about on the show here was, you know, Netflix, I think Netflix spends, they know that the cost of acquisition is quite high and they’re willing to spend it because they know their lifetime value. And of course we’re talking like Netflix style advertising, we’re talking, you know, lots and lots of zeros behind the numbers. So it’s a different perspective. Whereas at the gym level, you might be able to recoup your advertising costs just on that front-end offer. So maybe you don’t see it as much, but at the same time, it is a metric that kind of play into that. And I’ve asked John and Mateo to kind of play with the numbers a little bit.

Mike (21:50):

And it’s really interesting to see, you know, gym owners saying, ah, this ad cost. And they’re like, well, your lifetime value is this, put that in perspective, you’re still profiting up until this point of ad spend, which is way higher than you’re panicking about right now. So it’s really fascinating to look at those metrics. I’ll ask you this again, we haven’t talked about this a whole lot, but I want to just see if you know, what your opinion is. If owners are looking to drive this number up, what would you recommend they first focus on?

Jonathan (22:14):

Yeah, no problem. Well, you know, like you had mentioned, it’s a multiplier, so you’ve got your ARM and your LEG to create the LTV. So, I would always focus on the value first, probably. So, you know, how are you providing value to your clients? Are you providing excellent coaches in all the ways that we know how, are you a clear communicator and making it easy for your clients to communicate clearly with you? Are you providing services that they want and need, and then you need to find reasons other than yourself or your coaches for people to stay members. So like we talked about creating that web of connectivity to keep them, you know, it could be that your services are just good enough that everybody wants to stay, but you know, the gym needs to be a fun place. It needs to be a place that people want to stay at and want to come to every day.

Mike (23:09):

Value first, that’s the best one is to just make sure that you are offering. And this, it sounds like when you say it, it’s simple, but it wasn’t simple for me. It’s like, you need to create things that people want. And for me, I think over a lot of times I created things that I thought people would want, but no one actually wanted. Did you notice that as you evolved as an affiliate owner?

Jonathan (23:28):

Oh, absolutely. It’s always, Oh, well, this is what I want to do, so let’s do it, you know, and I mean, honestly there were times where I completely ignored clients, and you know, for better or worse. And, you know, a big part of what we do in Two-Brain right now is, you know, we’re asking clients, we’re having those, uh, goal-setting sessions and just general conversations about, Hey, how can we help you better? And this and that. And GLM makes that easy too and sending out automated emails and getting that feedback. And it’s maybe hard on the ego to ask for help or to ask, you know, what can I do for you? What am I not doing now? You know, how am I not serving you now? Maybe that’s hard on the ego, but it’s better for your business if you do ask those questions.

Mike (24:22):

Isn’t it a novel concept to actually ask customers what they want? You know, it’s so funny. Cause again, so simple, but I didn’t get it until Chris told me, you know, and like, Hey, wait a second. Maybe not everyone wants to do muscle-up clinics. Huh. Interesting. You know, and that kinda changes things where all of a sudden, you really realize and some gym owners have had this crazy, you know, revelation where they’ve just discovered that maybe their clients don’t even want group fitness. And again, there’s nothing wrong with group fitness, but there’s some gym owners I’ve spoken to that have actually talked about getting rid of the group program just to go to personal training. And there’s the hybrid model. There’s all this other stuff, but it comes down to what their clients want. So asking your clients, you know what, I’m going to throw this out to you. I think some of your lifetime value is probably related to your willingness now to ask clients what they want and then providing those goal review sessions. Would you agree?

Jonathan (25:08):

Yeah, absolutely. People need a reason to stick around and if you’re constantly not giving them what they really want, then they’re going to go to a gym that gives them what they want. And we have certainly lost our share of clients to other gyms that have the type of programming that they want or, you know, a lifting class that we don’t provide or this or that. And so it’s like, OK, well, we have that choice at that moment. Do we provide this service? And do we think it’s a value to more than just the handful of people who, you know, who are asking for it or is it, something that we want to roll out to the rest of our clientele or do we want to avoid it and just say, OK, no, we want to focus on these, you know, this type of member, this avatar or whatever.

Mike (25:58):

And that’s, you know, that’s another thing I’m glad you brought up that I’m really hearing when I talk to gym owners around the world about this kind of stuff, knowing your client is just so important. And again, something I didn’t do back in the day, but now you have the competence to say, OK, you know what? We’re not going to be the Olympic weightlifting competition gym, or we are, whatever. And if you have to make a decision, it makes it way easier to make that decision. I mean, have you been in a spot, cause I was, where, you know, a bunch of clients say we’d really like a 9:00 AM class slot. And I’m like, OK. And I put it in and guess what happens? Right. Three people show up and you’re bleeding money out of this gunshot wound of a class and you can’t get rid of it, but you know, did you have something like that happen too?

Jonathan (26:37):

Oh, absolutely. Yeah. We even recently it’s like, OK, well we added in an extra class and all these people who said they wanted it aren’t showing up. So we’ll see how much longer it lasts, but you try. Yeah.

Mike (26:54):

And I love what you said there, you listen to the members most of the time, but not all the time. And you know, you give them what you want, unless it’s something that you just, it’s not something you’re going to provide to that client avatar. Jonathan, thank you so much. I love talking to old school affiliate owners who have been around for a really long time. Thanks so much for being here and sharing your thoughts on lifetime value. And eventually I want to chat with you down the line maybe a year or so, and see what your thoughts are as you’ve looked at that number even further.

Jonathan (27:17):

Yeah, absolutely.

Mike (27:17):

I’m Mike Warkentin. Jonathan Beckner was the guest today on Two-Brain Radio. Be sure to subscribe for more episodes. And the FOMO is real. Join Gym Owners United Facebook. That is a free group, but it’s private. You can literally ask your gym business questions and get answers from other gym owners, certified Two-Brain mentors and Two-Brain founder, Chris Cooper himself. The gym owner down the street is in that group. And you should be too. That’s Gym Owners United on Facebook. I’ll see you in there.

 

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