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What pricing structure is right for your fitness business?

7 November 2018 openplay Leave a comment Memberships

Is your current pricing structure optimising your revenue? Your facilities may be full, but that does not mean you are optimizing your revenue?

By rejigging your pricing structure, you can encourage greater customer loyalty and increase memberships without seeing your margins squeezed.

Today, a lot of fitness centres are experimenting with new tech, incorporating dynamic pricing into their revenue model. Dynamic pricing, the ClassPass marketplace and credit packages can be effective, but they may not be the best choice.

Here are five pricing structures to consider.

Class packages and pay-as-you-go

Class bundles are a better option, as they give customers time to establish a habit of going to your centre.

Many boutique studios offer class bundles, that work on a sliding scale: 1 class, 5 class, 10 class, 15 class, peaking at the Unlimited monthly membership.

The trick to getting customers booking higher bundles is to make the highest amount seem like such good value they cannot turn it down.

  • This building-block pricing structure is ineffective, offering no reward for choosing higher packages.

  • While this discount structure is logical and the most popular strategy, it can leave customers conflicted. They go home to think, considering if they will use the club enough to warrant opting for the highest option:

  • The best structure makes the highest, most expensive option the obvious bargain:

    Customers look at this and immediately realise unlimited is by far the best option. Thus, they are much more likely to choose it.


Monthly memberships

A set price per month or year will keep your revenue stream consistent and predictable. This is the prime choice for gyms, the ultimate hoop for studios to jump through.

So what is the best way to get people hooked on memberships? Well, first off there is a similar method to the class package: the decoy ascending pricing structure, as depicted above. A 12-month membership is by far the best value for money, while month-by-month is the most expensive option.

Offer free trials, be generous with your service- you need to get people through the door. Some gyms offer a three-day pass, so people can establish a habit and an attachment with your facility.

Offer different tiers of membership. For example, off-peak and peak, student or concession, gym only or gym and swim.

Dynamic pricing

Dynamic pricing involves fluctuating class prices, usually determined by the popularity of the class and the amount of time between booking a sport and starting the class. It is a difficult option to get right and one that is still in the experimental stages. It is most used in the boutique fitness market, where customers pay premium prices for premium slots.

There are a number of software products on the market, each of which follows a slightly different a system. However, uniform throughout is a minimum and maximum cut off point, so classes will never be dirt cheap or sky high.

The most popular strategy is a descending model. This means that the earlier you book a class the more expensive it is, while those who book last minute can grab a bargain. The purpose of this is to maximise capacity, so spots that would otherwise be vacant get snapped up. The problem with this is that no one is loyal to you and it destroys your ability to plan ahead. In our opinion this model is a race to the bottom, all of your customers are hungry for a bargain and will forget to appreciate the value of your service.

An ascending model, on the other hand, is much like aeroplane flights today, the earlier you book the cheaper your flight/ class. While it is better to reward advance booking, this method will dissuade some people from booking at all. Your classes will be half full- or half empty, as we see it- and some of your customers will grow to resent this system.

Classpass marketplace

Oh boy, this is a meat market, selling premium cuts at discount prices. It can be difficult to stand out in this marketplace since your competitors are merely a thumb-scroll away. Even your loyal customers will be tempted by the smell from the other sellers. Nobody knows where to look and so they float between stalls, grabbing samples as they go.

Classpass is not quite as cut-throat as it used to be; it understood that its model was pricing out many studios. One cannot deny that the service has opened doors and put bums onto yoga mats. It worked as a marketing tool for the boutique fitness industry as a whole, encouraging many would be gym-goers or non-exercisers into studio classes.

But Classpass monopolised the landscape, squeezing margins and turning loyal club members into casual drop-ins. If you think your boutique studio needs the marketing help, Classpass can provide an opportunity that will make your brand known. If, however, you have a loyal fanbase, think long and hard before making the switch. For all you know, those loyal customers might make the switch too.

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