An athlete that regularly visits your gym gets a one-day free pass for a friend. They bring their friend in on a Saturday, they take a class together, and the friend is convinced that this is the gym for them. So now what?
Now they check the pricing. What are they going to see? How are you going to structure your prices? They should be easy for the prospective client to understand, your terms shouldn’t be confusing or mask any ill intent whatsoever, and they should be favorable to both you and the client (in an ideal world).
So how do you price your services? Let’s show you.
Set a System of Payment Structure and Models
There are multiple ways that someone can pay. Decide now which ones you will make available. Keep in mind that some pricing arrangements work better for some financial demographics than others. Having a no contract option in low-income areas may yield better customer loyalty because your clients might have one bad month, and bounce back the next. Keep it in mind while you decide on how you’ll price your services and how many models you will offer.
No Contract Monthly Payment System
Just as the title suggests, you don’t lock a customer into a contract. They pay to play—if they don’t pay their membership, they can’t use the gym or attend classes. There are benefits and drawbacks to each.
- Monthly Payments: Some members may not like recurring payments on their account, like when Netflix has to renew. Seeing this charge every single month and expecting it makes it easier for them to cut it out as an expense rather than if they pay all at once.
- Cheaper: Paying for a single month is cheaper than paying for a six-month pass, even if the value and overall savings aren’t present. Some people join a gym with short-term goals in mind, whether it’s fitting in a wedding dress or getting ready for summer. They may not want a six-month commitment, so the month-to-month structure works best for them.
- Tracking: If you don’t use a system like PushPress and keep tabs on your memberships with automatic payments, you’ll quickly be lost in a haze of trying to figure out who has paid, who hasn’t, and that takes up time. Monthly payments can either be seamless or a headache, depending on how you organize your payments.
- Scaling and Upselling: Your client has been in your gym for two months, they’re paying monthly, and their third month is about to pop up. That’s an excellent opportunity to suggest a higher package depending on what services they’re using, or help them save money by selling bundles. They obviously like the product, so now it’s time to convert them for longer.
- Reduces Customer Fear: It’s monthly, it’s like any other subscription, so there’s no commitment. They just have to cancel it before it renews, and they’re golden. That removes fear from a customer on a budget who would otherwise be apprehensive about spending money like this.
There are pros and cons for sure, but it’s a good idea to at least leave this as an option for new customers even if it isn’t your preferred way of receiving money for memberships. It gives them options.
Term Contract Monthly Payment System
Now you’re on a monthly plan with a contract in place, so they’ll have to pay. This can be constricting, but it has its benefits. Let’s go over what you should and shouldn’t love about this payment structure.
- Difficulty Tracking Performance: If you have a member for a six-month term contract, how do you know if they become dissatisfied with the service? You can have member sign-in notifications from PushPress to let you know if they’re coming in or not, but otherwise you don’t know if they’re utilizing their contract. It makes it harder to adjust your services and/or fix problems with your gym.
- Slow Season: One of the most difficult things to account for as a CrossFit affiliate is the slow season. Every gym has its slow season, even if you’re in a mostly neutral climate, so you have to consider how much cash flow you’ll have during those periods. Term contracts help you pad your finances through these seasons, because it’s technically income for those months.
- Less Likely to Leave: Your members already paid for the service, so they’re going to use it. Not only does this improve the aesthetic of your gym when you can see multiple people working out (it’s like social proof for new signups), but then you know that your service is worth keeping for other term contract signups.
- Set and Forget: It’s nice and easy to just pay for something in a six-month term or a twelve-month term. If your customer doesn’t see money as an issue, they’ll be able to pay, forget about it, and just enjoy the gym.
- Price Increases Are a Pain: You paid one price, didn’t have to worry about anything, and a year later there’s a price increase? It’s difficult to manage price increases with annual customers, which is why it’s a smart idea to introduce a grandfather plan if they re-up for their previous price while dually letting them know of general price increases.
No Contract Class Package System
Contracts suck, especially if you just want to go to a single class every two weeks. Instead of forcing people to pay a set amount, you can let them pay as they go or pay for classes just before entering them. While this may mess with class scheduling, having some open spots available could also be a benefit. Here’s what you need to know.
- Inconsistency: There’s no proper way to track your revenue. You can have it tracked in your management software, but you can’t accurately predict when someone will come back for another class if there’s no contract in place.
- Scheduling Issues: As an extension of the previous point, this means you can’t properly plan out your class scheduling. People aren’t going to come into your building two days prior to a class and schedule it; they want to walk in and pay for the class, then take the class. It’s good to have some of these spots opened up, but if you have members on a term contract class package system taking up all the available spots, you run into a problem. You may have to schedule some first-come first-serve classes for these pay-as-you-go members, but then that might upset term contract class package system users.
- Requires Constant Sales Practice: If you reserve some class spots for pay-as-you-go customers, you have to market them and sell them constantly. This can be exhausting, especially for your front-end staff since upselling is difficult on its own. When people pay for term contracts, there’s no additional selling required.
- Ability to Survey: One good thing about this crowd is that in the receipt for their class, you can request a survey so they can describe perceived value and how important the class was to their fitness journey. With customers that pay for term contracts, they do that because they don’t want to be constantly bothered with bills, so they’re less likely to do surveys as well. This just opens up a great opportunity.
- Conversion and Scaling: One benefit is that if a customer comes through for a second class, you have the opportunity to convert them into a customer. If your term contract class package system involves cheaper classes at the same frequency they’re attending,
Term Contract Class Package System
If contracts are something you feel strongly about, you should know how a contract-led class package system should work so you don’t alienate your customers.
- Higher Barrier to Entry: Some people simply can’t afford the cost of these packages, so if this is the only way you offer classes (as some CrossFit gyms do), you can accidentally alienate some people who would otherwise be amazing customers. It’s definitely something to consider.
- More Money Upfront: If you have clients who want to pay for everything upfront, that’s great. That’s a lot of money all at once depending on how many classes they want to include in the package. Even with a discount for the bulk class order, they’ll be providing you with a lot of money all at once. This leads to another point.
- Identify Your Top Spenders: When someone pays for all these classes at once, that means they not only have the money to do so, but that they value their fitness enough to drop hundreds (or thousands) of dollars in a single payment. They’ve just identified themselves as a top spender: a high-priority target for upselling. They’re more likely to buy branded merchandise from your front desk as well. Track their spending in your management app.
- Customer Profiles: The downside to a pay-to-play class system, as we’ll discuss in a minute, is the lack of ability to track customer profiles. They don’t want to sign up with your management software; they’re practically looking for anonymity so they can take a class without being sold to. To them, that’s part of the experience they want, but customers who pay for class packages are expecting to be treated as valued customers.
Pay to Play Class System
Class patrons don’t need a membership—they can just walk in, pay for the class first, and then take the class. This is similar to what we discussed earlier about pay-as-you-go customers. They’re not committed and true customers of the business, but they take classes and you make one-time money off of them.
This can be for a myriad of reasons. They could just be checking out your gym to see if it’s a good fit for them, or they could be gym hoppers: people who don’t stay at one gym, but rather go to wherever the best prices are. They may just be trying to take advantage of promotional offers with no intent to convert to being a customer. That’s okay; it’s still money and it’s a chance to impress new prospects. At the very least, you made money for a spot in one of your classes and opened up the opportunity for word-of-mouth marketing.
Flat Rate System
Flat rate systems can work well, depending on your demographic and median income. There are definitely a lot of factors to include, so let’s go through the pluses and minuses of flat rate payment structures.
- Everyone’s on the Same Plan: Every member pays for the same amount of services. A flat rate system means access to the entire gym, and perhaps one or two monthly classes with the option to add more later. The good thing about this is that everyone has the same access, so there’s no exclusivity, but it can also mean that people are paying for classes they don’t intend to take (since you have to factor in the cost somewhere).
- Easy to Track: Your membership times the membership amount equals your income. It’s fairly easy to calculate, so you’ll have clear targets of how many memberships you need to hit. If there’s an annual flat rate option and a monthly option, it’s still easy to track and you can set clear goals for bringing in more customers.
- Difficult to Scale: Some of the artistry in business comes down to knowing when to scale a customer, and how to do it. If everyone is on a base plan (not flat rate), but a few certain customers have been taking classes, you can sell them on the idea of upgrading to a higher monthly price package that includes more classes. Yes, you’re saving them money, but it guarantees their business and helps you increase monthly income without hoping that they’ll pay for more classes in the future.
Variable Rate System
Variable rates are tricky. They’re not commonly used in affiliate gym setups, but it’s important to know what they’re all about so you know why a lot of affiliates choose not to use this structure.
- Fill Classes: Variable rates can be used to help you fill up classes. If your class is low, you can offer a lower rate for a short amount of time and send a notification to existing customers. Maybe they’ll sign up for the class at a discount. Since your instructor is already teaching at that time, it’s pure profit if you can get more people to sign up for it.
- Slow Times: Variable rates can be used to inflate customer retention during slow seasons. Your variable rates could be $25.00 a month for gym access in summer, but only $18.00 a month in winter. The difficulty here is making sure those customers who sign up at a lower price in winter don’t get angry and leave your gym when summer prices roll around.
- More Choices: After a certain number of choices, customers feel overwhelmed. It can happen pretty easily. You risk scaring them off, or having so many options that aren’t getting enough traction anyway that keeping them becomes a chore.
How to Handle Pricing Increases Over Time (Without Aggravating Clients)
First and foremost it’s important to understand that you have to make sure there’s a justifiable reason for your price increase. Seeing the cost of your gym membership go up “just because” doesn’t make for a very good customer service experience.
It will absolutely anger some of your clients, which is to be expected, but to those with more reason, they need to see why their price has increased.
Justifying Price Increases
What new value comes with their increased price? That’s the tricky angle you have to sell them on, even if the increase is only marginal. If you’re increasing your price, make sure you can justify it with one of the following reasons:
- Equipment Upgrade: Whether bought or rented, if you made a small upgrade to each machine in your gym (as in you upgrade the treadmills and the bikes, not just one), you can justify your price to customers by citing an increase in equipment costs and needs.
- Class Upgrades: Your classes now include a great view of the outdoors instead of a stuffy back room, mats are provided to the customers for class use and they don’t have to bring their own, etc. If you’ve done anything to improve the state of your current CrossFit classes, this is an excellent justification point since they’re usually going to be the main money-maker for your affiliate gym. Upgrade the experience, up the cost.
- Increased Hours: Are all-access gym members requesting longer hours so they can get to the gym after work? Give them what they want and increase the membership prices. This will cover the cost of having staff stay for longer, more electricity being used during the extended hours, and so on and so forth.
Just be sure that there’s value associated with change.
Notify Them Early
You have to be strategic, even if you could use the price to increase profits right now. It has to be convenient for your customers, especially since they have other bills to pay.
The time frame is up to you, but you should absolutely warn people about the price increase early. Pick a time where they won’t forget about it and feel blindsided (don’t wait six months after a notice to increase prices), but a short enough time frame that you don’t have to wait for ages for the price increase profits.
You can also find a way to notify them—which we’ll talk about in just a minute—and send them periodical reminders so they don’t forget.
How to Contact Gym Members About Price Increases
Your customers signed up for one specific price, but now it’s time to raise the profit ceiling—how do you break it to them? There are a few ways.
- Direct Contact (Email): If you’ve been building an email list for your gym (which you should be doing), you can contact them directly via a well thought-out email that explains your price increases. This is the fastest, cheapest, and most effective way to contact them. You should also put a notice at the front desk to let members know and check their alternate email tabs or spam folder (sometimes these messages can end up there).
- Direct Contact (Direct Response): Direct response involves the USPS, good old snail mail. This isn’t ideal for everyone, but it’s a physical reminder and not just something that gets lost in an organizational email folder and forgotten way too soon. Make it personal, make it justifiable, and make it easy for them to adapt to the price increase.
- SMS: If your gym members have opted-in for text messaging, this method is another way to get a notification to pop up on their phone as well. You can combine this with email notifications to give a more dynamic message, so long as they’re spaced out. Use SMS as a reminder instead of a full-fledged message about price increases perhaps.
Price for Success
Every gym can succeed by using whichever pricing model they want, but there are preferred models for a reason. Your goal isn’t just to get paid by your members: it’s also to have as little friction as possible for processing payments, billing customers, and keeping a tab on your financial data. Your pricing goes far beyond what customers see on a pamphlet or hear from your front desk staff.
The prices you set should reflect what you not only need to gain from the business to stay afloat, but what you want to be making. Pricing services and products are weird, because we’re immediately hit with this fear that if we charge what we want, what we know it’s worth, suddenly everyone will think it’s overpriced. Get it out of your head, charge what you want, and watch the data that follows to see if it’s too high.