Today, fitness business owners use a variety of pricing models in order to satisfy their customer base, and increase their bottom line. With improvements in technology, pricing models have evolved from traditional monthly membership models, all the way to sophisticated dynamic pricing models that attempt to calculate optimal prices based on supply and demand of various classes. With so many options for pricing models, it can be overwhelming to find the right pricing structure(s) for your gym.
In this article, we'll compare the various membership models that fitness studios use today, and help you understand which ones would best suit your specific needs.
What are the different types of gym membership pricing models?
Before deciding which pricing model is best for your gym, it's important to first understand the various types of membership models that are used today:
Monthly membership pricing model
The monthly/annual membership business model is the most traditional pricing model, and is used in a variety of industries. In this model, clients pay a fixed monthly/annual fee in order to access your gym or fitness studio. This is simple for both the business and the member, since it's easy to understand and track. It also has the added benefit of being able to provide consistent revenue for your business, which is a nice perk for fitness businesses that are often impacted by seasonality (months of high activity, and months of lower activity). Another benefit is that if you have a specific revenue target you want to hit, you can easily calculate how many new members you'll need to attract to your gym, and then you can work to attain those goals.
Memberships can typically be purchased month-to-month, or as part of annual or multi-year contracts. It's common to charge higher rates for shorter term commitments, since you want to incentivize members to stay with your business for a longer period of time. So, a member who only signs up for a month-to-month contract will ultimately end up paying a higher monthly fee than a customer who signs up for a year-long contract.
Though the membership business model is the most basic model, it's also very flexible. If you want to modify the model, you can offer promotions to attract new customers (e.g., offer first month free for new customers), or to incentivize current customers to renew their membership. So, if you choose this business model, you can still customize it to suit your needs.
Class Packages & Pay-as-you-go models
Class packages refer to selling packages of classes, such as "10 classes for $200", and pay-as-you go pricing refers to paying for each visit (e.g "$30/visit").
Whereas monthly membership models are better for clients who plan on visiting your gym on a consistent basis, class packages and pay-as-you-go pricing models are appealing to clients who may be exploring your gym for the first time, or clients who want the ability to visit a variety of gyms. Class packages are also excellent options for your clients to gift to their friends and family.
Class packages and pay-as-you-go pricing can be powerful ways to attract new customers to your business without requiring much of a commitment on their part. Once they're through your doors, you'll have the ability to provide them with an exceptional customer experience, and demonstrate the benefits of purchasing longer-term membership plans.
Since class packages and pay-as-you-go plans don't provide businesses with a guaranteed or consistent revenue stream, it's generally not advisable to make these pricing models the only ones that you use for your gym. Otherwise, you'll face constant pressure to market your business and sell packages, as you may not know what your customer base will look like in the future. However, these models are excellent supplements to a traditional monthly membership model, since they also allow you to sell classes at a premium compared to what other members on membership plans pay. For example, a member who comes to your gym 15x/month may be paying $150/month which comes to $10/visit, but someone on a class package or pay-as-you-go pricing system may be paying $20/visit. Customers are generally willing to pay a premium on these types of systems since no long-term commitment is required on their part.
ClassPass is a popular, flexible option for clients. Clients pay a monthly membership fee to ClassPass, which enables them to join any class within the ClassPass network. Fitness studios can partner with ClassPass, which enables ClassPass members to discover any classes from studios in the network, and sign up for any open classes. In exchange, ClassPass will pay the studio for each customer that signs up for one of their classes.
This type of model has similar benefits to the class package models, since it's great at targeting users who want to explore different gyms without a long-term commitment. However, it also has similar disadvantages, since there's no guarantee that a customer actually returns to your studio again. For these users, it's important to provide them an exceptional customer experience so that they'll return, or sign up for a long-term membership.
One benefit that ClassPass-type models offer over class packages and pay-as-you-go pricing is that ClassPass will handle a lot of the marketing for you, and helps expose your business to new customers who are browsing through the ClassPass platform. Any business that partners with ClassPass will immediately gain access to ClassPass's large user base. And, once a user completes your class, ClassPass will prompt them to leave a review, which can be helpful in improving your web presence and attracting additional clients in the future.
This is the newest revenue model to hit the health and fitness industry, and it's especially popular amongst businesses that use ClassPass, as well as among businesses in high-density cities like New York City and London.
Dynamic pricing takes into account the popularity of specific times, trainers, and classes, and determines an appropriate price to smooth out demand. If all classes are valued the same, customers will choose the most desirable option for them, often based on how it fits into their schedule. This can cause crowding at your studio during certain hours, placing a strain on a facility’s resources and diminishing your members’ experience.
Offering lower prices for off-peak times and discounts for unsold classes can help combat this issue. For example, a popular yoga class at 6:00 p.m. may be consistently booked out at $30 per person Monday to Friday. The same class offered at 1:00 p.m. may only achieve an occupancy rate of 40%. Discounting the 1:00 p.m. class by $10 may enable the yoga studio to capture additional customers, while maximizing profit. In addition, customers who are able to attend the 1:00 p.m. class will be satisfied, knowing they got a great deal on a popular class at their favorite yoga studio.
Dynamic pricing can enable members to benefit from a boutique studio experience for a fraction of the cost, while studio owners see increased class occupancy rates and additional revenue. However, it's also the most complicated pricing option, and it requires you to use a gym management software system that supports this functionality, since it's too complex to do by hand. MINDBODY, the most popular gym management system on the market, recently launched this functionality for its users in January 2018.
Key considerations when selecting a pricing model
Here are some important tips to keep in mind before deciding on a particular pricing model for your fitness business.
Don't get married to one particular pricing model
The best solution for many fitness businesses will often involve a mix of different pricing models. Each of the pricing models described above has its pros and cons, and can serve as solutions to different problems.
Membership models will often serve as your business's bread and butter, due to its ease of implementation and the consistent revenue stream that it provides. Class packages and pay-as-you-go pricing models are excellent at attracting new customers, and for gaining access to customers who aren't ready to commit to one particular gym. The same is true for ClassPass-type models.
Dynamic pricing is another way to optimize attendance across all of your classes, and can be a nice source of untapped revenue.
Regardless of which pricing models you end up using, it's important to experiment to find the optimal pricing structure or combination of pricing models for your business and for your customers. This means experimenting with various promotions, and different prices and pricing models.
However, you shouldn't just blindly experiment—track and analyze the performance of your experiments by looking at reports in your gym management software, so that you can make data-driven decisions.
Make sure your gym management software can support your pricing model
If your gym management software cannot support a certain pricing model, then you'll either need to change your software (which can be a substantial effort), or you'll need to pick a different pricing model. For example, not all gym management systems support dynamic pricing. Also, many systems may support pay-as-you-go models, but if you offer array of packages, the system may have a tough time keeping track of all of the accounting, which can ultimately result in headaches for your staff and for your customers. In these scenarios, you'll probably need to keep experimenting with another pricing model that will suit your needs.
Keep it simple
Generally, simpler is better. If your pricing model is difficult for your software to keep track of, and if it's difficult for your customers to understand, then it's probably not worth the headaches—you'll be better off picking a simpler model.