Prior to making any move toward adjusting your pricing, it’s important to understand the history, purpose, and pros and cons when making such a move. Below we will explore these areas and hopefully clear up any indecision you may have about making this strategic change to your operation.
We have worked with fitness clubs and health centers across the United States and, believe us, you are not the only person asking these questions. The answers that we have heard from our clients are as varied as our clients are. The debate over low pricing is complicated, so we've included advantages and disadvantages learned from our experiences and those of our clients.
The strategy of lower pricing is not a new one. It was popular in earlier years of the fitness industry when “cash was king” and club owners were trying to generate as many cash sales as possible. The old adage was - the first day of business was no different from the next. But then came the computer age, and the cash concept was all but forgotten. Only a small segment of clubs still focused on the “cash is king” theory. Their only concern seemed to be what their monthly obligation was. The low price model continues to work today along with the help of the electronic funds transfer payment method. The original lower pricing model had nothing to do with service; it was all about the price and average cost per month, which will be discussed later in this article.
Over the years, I don’t know how many times I’ve explained to close colleagues of mine that just because Macy’s or the local Ford dealership says they are having a sale doesn’t mean that there are deals to be realized. How many times have you had a friend or relative tell you what they paid for a new car? I bet not too often. They seem to focus on what their monthly payments are. This new way of thinking is here to stay and must be considered when structuring your membership prices.
Does lower pricing work? Of course it does; however, what are the benefits of making such a move? The benefits of lower pricing are obvious. With increased enrollments comes greater cash flow, and with greater cash flow the monthly bills can be met. The old adage “a busy club is a healthy club” is true. But with the success of attracting new enrollments comes several concerns that must be considered. If you’ve always had a lower pricing model, then your problems are different from those of someone wanting to change to this type of price structure. Lower pricing means more enrollments. More enrollments mean more traffic. More traffic means crowded conditions. Crowded conditions mean more wear-and-tear on the equipment, carpet, locker rooms, and the facility as a whole. With this wear and tear come high maintenance costs. In addition, more enrollments impact your parking lot. None of these conditions are a positive to club owners or club members.
In today’s economy, the consumer is more concerned about price (not necessarily the lowest price), and they are demanding better service than ever before. Clubs with the lower pricing model should be aware of effects both positive and negative that go along with this type of pricing structure.
If you believe in the quality of your club and its services, then do yourself a favor and don’t sell your club short by pricing the memberships too low. Remember, perception is key. Cheap means cheap, and the value and integrity of what your club brings to its members are the end result, which will justify their investment in their health no matter the price. Changing to the lower price model may suggest to your members and guests that your club is hurting financially, and the only thing you care about is the new enrollment.
You can create a lower pricing model in many ways, but keep in mind that it has to be done without affecting your current members. If you make lower membership pricing available to the general public, you better believe that your members will start asking questions or will start looking for another club. There is a solution; make lower pricing short term and place reasonable restrictions on the membership offered. For example, let’s say your normal dues average around sixty dollars ($60.00) per month, and you want to attract more guests to your facility by advertising nineteen dollars ($19.00) per month. Not a bad idea, right? Just place a few conditions on the membership offered, ie, make the maximum term 3 months and require that the membership be paid in full. By doing this, your current members will also be content.
An idea other than lowering your membership rates to attract new members would be to make your club different and set yourself apart from your competitors by offering unique equipment and ancillary services. You might want to consider adding a tanning bed or two, juice bar, modern equipment by Jacobs Ladder, a climbing wall by (Skywall), a total body workout with a VersaClimber, or the latest continuous rope climbing system by Mt. Everclimb.
Whatever you decide to do, be assured that the jury is still out of the lower pricing model and whether it can be sustained over the long haul. On the surface many clubs that use the low pricing model appear to be successful, but with that success comes a serious concern that the lower prices have hidden effects that operators discover over time.
Remember that you can influence how your members and guests react, so strategize carefully.
Brighter days are sure to return, but until then, be proactive. The strategies you learn and practice now, when the economy is suffering, will serve you now and in the future.
For more information on this subject, give us a call at 925-672-4800 and we will gladly do our best to answer your questions. You can also visit our website at www.globalfitnessassociation.com/info for more information.