Keeping customers on contracts amid credit card churn

Data breaches give clients with new cards a chance to drop auto-pay


Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question Dear Your Business Credit,
At my gym, the most popular and profitable payment plan relies on customers signing up and paying monthly through automatic credit card payments. With each credit card breach, I'm losing customers and money. As the banks reissue credit cards, they reissue cards with new numbers, and my old automatic payments are no longer honored. It's up to the customer to renew the agreement with the new number, and many who were fine with me taking $30 a month take the opportunity to flake out or just drift away. Anything you can suggest to either force the bank to require they honor that contract commitment, or any other ideas to retain those streams of payment? -- Manny

Answer Dear Manny,
As you point out, it's easy for gym-goers to lose their motivation to work out and end their memberships -- especially when asked by a bank if they want to continue. Looking for new ways to prevent this is good business.

Let's face reality: Data breaches aren't going to disappear any time soon. And pressuring the banks isn't likely to work. Banks' obligation is to protect the security of their customers' accounts. I can't envision any small business persuading them to bypass the usual methods they use to do that.

To maintain steady cash flow, promote some new payment options to supplement recurring charges on a credit or debit card. For instance, I know one karate school that offers three years for the price of two if customers pay for the two years in a lump sum upfront. Whether customers make a one-time charge to a credit card or write a check, this can provide a boost to your cash flow, as credit cards do -- but it frees you from the risks of recurring payments being cut off.

I can't think of anything that will reduce the hassle your customers face of renewing their autopayments with their new cards. What you can work on, though, is their willingness to take on that hassle. The fact that customers aren't renewing when given a chance to opt out of their contracts could point to an issue you need to fix.

First, look at which customers are dropping out. Do you have an idea of why they lost interest in the gym? If not, hire a market research firm to survey them. If, say, most of them moved, then you may need to look for less-transient customers. Instead of focusing your direct marketing on apartment dwellers, maybe you should send your fliers to home owners.

What if they mention other reasons -- like not having time to work out or not finding offerings at the gym appealing? View it as a great opportunity to make the gym more engaging. Survey your existing customers about what they like and don't like about the gym. Here are some questions I would ask in your situation:

  • Are you offering classes at the times most convenient to them -- and the actual classes they want? As you know, fitness trends come and go.
  • Is the location convenient?
  • Do gym-goers feel the instructors are supportive?
  • Do customers feel comfortable among the other gym-goers, or is there a culture that for instance, is only welcoming to people who look like swimsuit models?
  • Are they happy with the cleanliness of the gym?
  • Is the equipment available when they want to use it-and kept in good repair?
  • Are they happy with childcare options at the gym?
  • Do they like the special events you offer members?

Their answers may be hard to hear but will tell you where you can improve your business to keep them loyal. Retaining customers is so important that many businesses I know use a formal system to measure how they are viewed in the eyes of their clientele. The Net Promoter Score is a popular one -- it asks how likely customers are to recommend your company to a friend or colleague.

You may discover that your finances will be stronger if you limit the number of customers you recruit but focus more on keeping each one excited about the gym and what it has to offer.

I would also consider adding some additional revenue streams if you haven't already, to insulate your business from sudden drop-offs in revenue when there is a credit card breach. You don't have to install a fancy juice bar or stock up on supplements to sell. Look for things that will sell themselves. For instance, my local YMCA sells basic, inexpensive workout gear such as T-shirts and shorts to gym-goers who have forgotten some vital element of their fitness wear. It's a great convenience to members who might otherwise miss a workout.

Good luck. I think you will find your efforts make your business stronger. 

See related: Retailers receive brunt of data breach blame, How can I protect my point-of-sale system against security breaches?

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Published: June 30, 2014

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