If you’re like most gym owners, your expertise might lie outside of marketing and sales.  As a result, you might have sold your memberships at a rate that is below your fair value for years.   After all, the easiest way to become a better sales person is to sell a cheaper product.

In the long run, however, members on under-market rate pricing structures will cause ongoing cash flow issues for your business.

In this post and the next couple, we’re going to look to get you out of that mess by tactfully and professionally raising rates.  At the bottom of this post, there will be the ability to download the easy to use worksheet we’ve made to help you make an informed decision on raising your rates.

Download The Price Increase Worksheet Now!

Download the worksheet using the link below.

Expect an email or a call from one of our consultants soon . A PushPress consultant will help you go thru this worksheet and optimize your price increase.

 

1. Honestly Assess Your Value Proposition

Before you raise a single rate, you must understand that you cannot just raise rates without there being a validating value in your facility.  Raising your rates for the sake of just raising your rates is a massively bad idea.

Take a moment to honestly evaluate your value proposition.  Have you raised the quality of your facility since your original pricing?  Have you expanded? Bought a lot of new equipment?  Increased the value of your services by offering more classes, new types of services or open the gym for free use?

You will need to be able to clearly justify this to your clientele.  If you are raising rates without having an equal perceived value, you will be at a higher risk for losing members.

2. Restructuring Your Membership Plans

When it comes to restructuring your plans, we like to keep things somewhat simple.  Often we see gyms with up to a dozen membership choices.  You might consider to use this moment as a chance to clean up some of the old clutter.  For this example, we will be working with some fictional data, as illustrated in our downloadable template.

A Typical Gym Membership Structure.

This gym owner currently has 3 membership plans, but over the course of time they have older members paying a special grandfathered rate, and they have a host of discounts they’ve offered as well.  This owner has decided to simplify the sales equation tremendously by moving all this to just two plans:

  • 3x / Week, priced at $149.00
  • Unlimited, priced at $189.00

In doing so, they will be letting the members on the 2x / Week plan that they can upgrade to either Unlimited or 3x / Week. They also will be letting all members who are on cash-flow crushing discounts that discounts will no longer be available.

As you can see, right now this gym has 134 members, and grosses $16,997 per month.

Timing

You can, at your discretion, offer a grace period before the new pricing kicks in. This is often seen as a little more friendly to the consumers, so you don’t just jolt them into a new price weeks after the announcement.  We recommend offering some grace period.

Doing so will provide the following pretty important things:

  1. Show your clients this was a well thought out and planned action.
  2. Give you ample time to discuss the price increase with your clients.
  3. Allow you to start onboarding new clients at the new rates, which will give existing clients the understanding this is a business wide change.

Results of Change

As you can see in the chart below, the net effect of this pricing change is dramatic. The monthly net effect of this modest rate increase plus removal of discounts is $5,888.75. Almost a 33% increase in monthly revenue.

The Revenue Effect of the Pending Price Change

Loss Of Members

One thing to note, is the fact that these numbers reflect zero loss of memberships over the price increase.  You can expect to lose some members during this process – do not beat yourself up over this.

The members who do stay will be getting more of your attention, and generally speaking you will be weeding out the most price adverse clients you have.  In the end, as a boutique gym owner, you want to cater to the clients who place a value on your services, not those who are price adverse.

The number of members you lose will be directly co-related to how clearly you can have a direct, honest conversation with each of your clients about why you are raising rates.

How Many Members Can You Lose?

This is the question that makes most gym owners halt and catch fire.  The thought of losing even one member seems like it could ruin the proposition of raising rates – because you’re already in the situation where you need to make more money.  How can you possibly afford to lose a single client?

You can lose quite a bit of members and break even.

What most owners forget, is by raising your rates to something fair,  you can actually afford to lose quite a bit of members and still break even.  In the case above, this gym owner can lose almost 35 clients and still break even.

In all, by following the price increase outlined here, this gym will net $64,776.25 additional revenue over the course of a year.  (We would recommend reinvesting a good chunk of this back into the gym to show your clients their money is going to good use!)

Want To Evaluate A Price Increase For Your Gym?

Even if you have no path to pulling off a price increase, it’s a healthy exercise to explore.  Really think thru your value proposition and competitive value.  Consider if consolidating memership plans and reducing discounts might make sense.

Then download our free Price Increase Analysis worksheet and see if it makes sense to you!  The link to download is below.  If you’d like, we will even give you a call and see if you want any help going thru the process.

Part 2 – How to execute

Check out our next post on best practices for executing the rate increase. We have include 2 email templates to save you some time. Read here.

 

 

Download The Price Increase Worksheet Now!

Download the worksheet using the link below.

Expect an email or a call from one of our consultants soon . A PushPress consultant will help you go thru this worksheet and optimize your price increase.