Bad MLM Retention?

by Ket-Sang Tai

I often hear people say MLM is a leaking bucket and the retention rate for most companies are poor. A lot of people even conclude that MLM doesn’t work and a better way to make money is just to sell high price products, earn the money and don’t have to worry about retention. This idea became very popular last couple of years and hence the term “Top Tier Programme”. It means exactly what it says on the tin which means only the very top people make money and they don’t care about your success or the overall retention. I was sucked into the idea few years ago but looking back I think it is laughable.

Let me tell you why the argument that MLM doesn’t work because of poor retention doesn’t make sense. It is because we live in a real world. It is a fact of life that most people do not have the drive and commitment to carry through the projects they started and to achieve their dream. This is not a “MLM” problem. It is human nature! These people will have the same high rate of failure doesn’t matter what they do.

Let’s put this into perpective by looking at a few facts about health club/gym membership, which has some similarities to MLM.

(image from xsandoscomic.com)

In the article Time Management Facts and Figures by  Dr. Donald E.Wetmore, it says that 90% of those who join health and fitness clubs will stop going within the first 90 days. http://www.dovico.com/time-management-factsandfigures.html.

“50 percent of all new health club members quit within the first six months of signing up, according to the International Health, Racquet &Sportsclub Association.”
Source: Wayback Machine Archived Webpage

1 in 5 club members use their club at least twice per week. 40% of those who join health clubs stop going soon afterwards.
Source: Health and Fitness Website

Unofficial statistic from a TV program:

  • 80% of gym members are not using the gym at all but are trapped in (or forgot about) the contract!
  • 25% of gym members drop out within 3 months of signing up (but I bet they’re still under contract!)
  • 52% of gym members drop out within 6 months (ditto)
  • Only 35% of people who sign up stay for 9 months or more
  • The figure remains reasonably flat from 9 months to 18 months, demonstrating it takes about 9 months for it to become a habit / part of the lifestyle

It sound bad right? But look at the other side of the coin:

“If health club membership continues to grow over the next ten years at its current compound annual growth rate of 4.6%, then U.S. healthclub membership will reach 51.4 million. Source: IHRSA Guide forLenders and Investors.”

“Frequent health club attendance (100+ days) has soared to a new high of 13.5 million. While they already account for 23% of the total memberships, people over 55 represent 28% of all frequent attendees.Source: IHRSA/ASD Health Club Trend Report”

On July 1, 1995, there were approximately 12,500 commercial fitness centers in the United States. By January 1, 2006, there were more than 29,000 such centers. Source: Survey of International Health, Racquet and Sportsclub Association members, 2005

Total U.S. Industry Revenues for 2004: $14.8 billionSource: Club Industry’s Fitness Business Pro Purchasing Power Survey, 2005

The health club industry will continue to enjoy strong growth for at least the next ten years. The industry has ridden out tough economic times and come back even stronger. External forces—the media, government and the medical community—both support and encourage the public to exercise. These factors combined with increasingly favorable demographics and a large pool of knowledgeable and experienced club professionals bode well for the future of the industry.   – IHRSA (International Health, Racquet and Sports club Association)

On top of that, I see new gyms opening on regular basis in where I live and the gym I go to is always crowded. Many people are making a lot of money in the gym industry. So is it the problem with the gym industry or the people who fail to follow through their goal? You decide.

So stop putting the blame on the industry. Do what is necessary to build your team and increase retention!

To Your Success,

Ket-Sang Tai

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  • Moon Loh

    A good piece of information about health club industry. I used to don’t want to get involve in MLM not because this industry is not good but I think this is not for me. But once I found the way to do it, I simply love it.

    I believe health club industry is the same. First, people wants to see fast results, Secondly, is there particular reason for them to go and exercise regularly (the WHY). Or thirdly, they like the environment and have a group of like-minded friends there, the community.

  • kstai

    Yes Moon. What we are doing is the same 🙂

  • Adam

    I don’t understand why gyms cannot use MLM as their marketing model?… I’ve looked everywhere and think that an MLM gym membership and profit share in all the products they offered would be an AMAZING incentive to get results, tell your friends and become wealthy… I think retention falls down because the products are expensive when “perceived” to the RESULTS they offer customers.

    But if a gym took only clients by invite only (the mlm referral part), and offered a complete health and wellness coaching plan (like it or not, not just a shop for the cheapest gym membership then go and fail after 2 months), I think it would work.

    But NOONE that I can see online is doing this model of MLM… Why is that?… I really love the MLM model1

  • kstai

    Adam, you have a fantastic business idea there. May you are can be the one to start this!

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