The decisions you make around your gym fees will have a crucial impact on the success or failure of your business. Get it right and you’ll be able to achieve a healthy return on investment, while also keeping your members happy. Get it wrong and you’ll be struggling every day simply to keep your head above water.
In this article, we lay out a game plan to allow you to price your gym programs for success.
Three key areas need to be considered when developing your gym pricing strategy:
- Customer demographics
- Competitor pricing
- Your market positioning
Once you have identified these areas, you will be in a position to decide on your pricing model.
Let’s drill down on the specifics.
If you want local people to pay for your services, you need to make sure that they can afford them. As a result, the first step in establishing your pricing policy is to study the demographics of your catchment area.
Consider firstly, the size of your area of draw. Are there enough people within a mile and a half of your location to support your membership? If there are other competing businesses in the area, will there still be enough left in the demographic pie to accommodate you?
Keep in mind that gyms are not your only competition. So are sports clubs, yoga, gymnastics and pilates studios, and martial arts clubs.
Next, drill down on the average income level of the people who live within your catchment area. Are they struggling just to pay their rent and buy food? Do they have the discretionary income to pay for a gym membership?
What sort of things are people spending their discretionary income on? What are the most popular entertainment choices? Do people take advantage of free fitness options, such as using running tracks and fitness trails? Are there home fitness equipment retailers situated locally?
Of course, you also need to consider the age groups that are represented within your catchment area. If there is a large retired population, you may be able to develop a special pricing package for seniors.
Gender is another consideration. According to research from the IHRSA, The Global Health & Fitness Association, more than 60% of gym members are female.
So, how do you go about locating this demographic information?
The US Census Bureau provides a database that allows you to search by ZIP code, city, county, and/or state to find a specific area’s income levels, ethnicities, ages, and other social characteristics. It is a great place to start as you dig into your customer demographics.
Other useful resources to help you drill down on demographics are your local, county, and state government websites as well as public and academic libraries.
Find out who your competition is and what they are charging for their services. Once again, you need to think beyond gyms here. Here are some potential competing businesses …
- Personal trainers
- Pilates & Yoga studios
- Martial arts clubs
- Gymnastics clubs
- Sports clubs
For each of these businesses, pay a visit to check out their pricing schedule. Ask them about special offers that may come up and package deals that they offer. If you’re looking into a gym, find out about their standard membership pricing, as well as personal training, and classes.
The more information you gather about your competition, the more you will be able to develop your unique selling point. When it comes to pricing, competitor pricing analysis will help you to decide whether you are going to focus on a pricing strategy that provides more value or less cost than what your competition is providing.
Your Market Positioning
Having done a deep dive into the demographics of your catchment area and undertaken a full analysis of your competition’s pricing strategies, you will be in a position to determine your market position.
In essence, your market position involves establishing your unique selling proposition. This is what sets you apart from all of your competitors. It answers the potential customer’s question “Why should I go with you instead of them?”
Your most basic decision here is whether you will position yourself as a high-end or low-end gym. High-end gyms are typified by expensive decor, less congestion, extras such as spa and massage services, and high-quality branding. They, naturally, charge higher fees.
Low-end gyms have a more spartan decor, while still providing quality equipment and amenities. Membership numbers are generally higher as are the sizes of classes. Membership fees are low.
Market positioning, though, isn’t just about establishing yourself as a high or low-end gym. You also need to decide on the key selling point that will underlie all of your marketing. For example, when I opened a small gym that was attached to a hotel in a city in New Zealand in 1987, I found myself competing with a huge gym in the middle of town. Knowing that I couldn’t compete with them on price or range of facilities, I focused all of my marketing on two things …
- Trainer expertise
- Personalized service
By developing the USP of a cozy, intimate training environment to contrast with the cold, factory-like atmosphere of the other gym, I was able to charge fees that were, on average, 20% higher than they were charging. Still, I had a significant number of people ditch that gym and move across to me.
I also emphasized my training experience and qualifications. This allowed me to draw in a large number of sports teams and individual athletes who were looking for specific training and guidance that they were unlikely to find at a big box general fitness gym.
Pricing Gym Memberships
There are several ways you can charge for your gym services. These include …
- Bundle memberships
- Unbundled plans
- Initiation Fees
- Off-peak memberships
- Membership by age (juniors, seniors)
- Family plans
- Trial membership
A bundled membership provides full access to the facility and all its services, including child care, and group classes. If you choose to do this, be sure to charge a price point that is worthy of everything that is included.
An unbundled plan could be a good option if you are having to compete with a budget gym competitor. This is where members only pay for the services that they are using, such as the weights room.
Many gyms charge an initiation or joining fee. In my experience, querying the reason for a joining fee is the biggest price objection that members have. If your staff is telling members that that’s the cost of setting up their account and putting them into the system, they are giving the member the wrong answer.
The right answer is simply to tell the member …
Joe, it’s how we pay the bills.
That is it. It’s the same reason that you have monthly fees. Don’t feel as if the fee has to be justified for some fake reason – after all, everybody knows that it doesn’t cost $50-$100 to enter a person into ‘the system.’ It’s always best just to be totally honest with your members.
When you sign up a member on a month-to-month basis, you are in a risky situation. They could cancel at any time. If they do so after a couple of months, it is likely that the cost of acquisition is not going to be recouped by that couple of months of membership. Having a joining fee that equates to three months’ worth of membership will at least cover your acquisition cost if the member cancels quickly.
An enrolment fee also acts as a subtle psychological tool to encourage membership retention. After all, a person who has already invested a decent amount of money is less likely to stop coming than one who only has a single month’s membership to consider.
Off peak, memberships can help you to fill up your traditionally quiet times, which are usually between 9 am and 4 pm. Off-peak members do not have access during busy times in the early morning and evenings and, accordingly, pay a reduced monthly fee.
Other forms of off-peak membership are weekend only and alternate day memberships.
Membership by Age
Age-related memberships provide reduced rates for students and elderly people. These may be connected to special programs to cater to these market segments.
Family plans can be a good way to increase your member spend. Let’s say your individual monthly fee is $30. By increasing that to $45 per month, the membership opens up to all family members – mom, dad, and the kids.
From my experience as a gym owner, after three to four months, that membership will settle down and, after the novelty has worn off, just one family member will continue coming regularly. However, the family will keep it at the family rate, so that mom or the kids can get in the odd workout when they feel like it.
A 7-day trial membership provides full transparency to your prospective members. It is also a show of good faith that can make a big difference. Do your part during that week to impress your prospective member with genuine personal interest and great facilities and you will get plenty of new members.
When to Charge Members
The average margin for gym owners across the board is 12.5 percent. By making a simple tweak to your pricing model, though, you can potentially double that percentage.
When you pay your gym bills, you are paying for all 52 weeks of rent, power, utilities, and other services. Yet, many gyms are not collecting 52 weeks of membership fees from their members. That’s because they are collecting fees on a monthly basis. That means they are receiving 48 weeks (12 months x 4 weeks) of fees rather than 52 weeks worth. That extra month of overheads has to be carried by the business!
That is not smart business practice. The way to stop losing this money is simple …
Charge your embers on a weekly or fortnightly basis. By making this simple change, you will increase your annual take significantly. Let’s say that you are charging $100 per month for a standard membership. If you switch from a monthly to a weekly plan, you will increase your annual take per member from $1200 to $1300. Multiply that by, let’s say, 500 members, and we’re talking about an extra $50,000 income per year for doing nothing but change your billing frequency!
Do Not Underprice Your Gym
There is a difference between being competitively priced and being underpriced. When you’re starting, it can be tempting to set a price that is significantly below the competition to get feet through the door. While this may boost revenue initially, it will harm you in the long run.
Over time your brand reputation may suffer as you are considered to be a cheap and nasty gym operation. This perception can take hold completely separate from the actual quality of the service you are providing.
By the same token, you should also avoid the temptation to lower your prices. This temptation could arise if a new competitor arises with much lower rates (like Planet Fitness) or you experience a sudden downturn in membership sales.
When you lower the price, you still have all the same overheads as you did when the price was higher. That means that your membership volume is going to have to go way up for you to stay in business. In the long run, that is going to make everybody, including your members, unhappy!
If you want to adjust your pricing strategy to meet the needs of price-sensitive people, there are better ways to do it than lowering your prices across the board.
Going back to the gym that I operated in New Zealand in the 1980s, at one time a number of my members who worked at the local timber mill were made redundant. I knew I had to do something or I would lose members, so I decided to introduce an alternate day membership, where people could train on either Monday, Wednesday, and Saturday, or Tuesday, Thursday, and Saturday at a significantly reduced rate.
It is important to note that I kept my regular rates intact, simply adding the alternate day membership as another option. Not only did I not lose any of my recently redundant members, I actually brought in a lot of new members with the alternate day membership initiative.
Another simple pricing strategy that I learned early to make use of was to charge a cent less. So, rather than charging $20 a month, I would market it as $19.99. There is plenty of research to show that there is a significant psychological difference between those two prices, even though, in real terms, they are the same amount.
How to Get Higher Membership Fees
In my experience, gym sales staff tend to sell an inordinate number of memberships at the lower end of the membership pricing chart. If they were able to increase the number of higher-priced memberships, your business would see a significant revenue increase.
Confidence is the key to selling. Confidence comes with knowledge and experience. So, make sure that your sales staff have experienced immersion in everything that comes with the higher-priced memberships and that they can confidently relate to the value proposition tied up with the higher membership offer.
Your sales staff need to sell themselves on the idea that this gym is the ideal setting for that member to achieve their health and fitness goals and that the service, amenities, and value represented by the offer are the creme de la creme of what you provide. When your sales staff are sold on the offer, they will automatically close at the higher rate.
People will buy when the value exceeds the price. Make sure that is the case when you are setting your prices, and your sales staff will be enthusiastic about selling your higher priced memberships.
In this article, we’ve covered the preparation for and implementation of your gym pricing strategy. The preparatory stage involves an analysis of . . .
- The catchment demographics
- The competition’s pricing strategies
- Your market position
You will then be in a position to decide on your membership package structure. By billing on a weekly, or fortnightly basis, selling your sales staff on the value of your higher priced membership packages, and using creative ways to meet the price sensitivity of potential members, you’ll be able to price your gym programs for success.