As pricing experts, we often provide our member studios with advice on a range of issues related to the options they offer their customers, including how to formulate an effective introductory special, how to use pricing to discourage studio hopping, and how to optimize pricing across multiple locations of a studio.
The purpose of the Fitness Studio Pricing Basics Series is to share with you our recommendations about these common questions based on our many years of experience analyzing industry data and researching the impact of pricing on customer behavior. Our goal is to take the mystery out of how to price effectively to achieve your studio’s business objectives.
How to Approach Formulating Your Pricing Menu
Although it sounds counter-intuitive, the most successful pricing menu is one that removes pricing from the equation. When it comes to building solid relationships with your customers, you want to get pricing out of the way. At a high level, we recommend that studio owners keep the following in mind:
Friction Points: Take a good hard look at the friction points in your current pricing menu. Are there any points at which there is a big up-front ask for your customers, which could cause hesitation? (For example, strict expirations on packages; sometimes, efforts to drive faster usage can prevent the sale to begin with).
Fair Valuation: Resist the urge to list “vanity prices”; ie, expensive drop-ins that you don’t expect customers to repeatedly buy. Rather than drive customers to your other package options, this often has the negative effect of introducing doubt into the worth of your services.
Keeping these themes in mind will help guide the next step of setting the fundamental elements of your pricing menu: introductory offers and ongoing packages & memberships. While each of these categories has its own nuances, we’ve summarized a few of the most fundamental considerations below.
1) Pricing for New Clients
When it comes to attracting new clients, Intro Specials should achieve two goals:
Feel accessible enough to compel tentative customers to try your class at a low risk
Set customers on a path to retention and engagement with your studio
Specials that achieve the first, but not the second, can contribute to the “revolving door” effect - a high volume of new customers, with extremely low conversion. This is expensive to maintain, and holds instructors back from being able to push more regular visitors.
Free offers (whether it’s a first class, 7-day pass, a 2-for-1 special) often fall into this category. By anchoring the customer to an extremely low price per class, these offers make the jump to a package or drop-in seem prohibitive and difficult to maintain.
2) Pricing for Return Visitors
Here, it's important to take into account the current behavior of your most valuable customers, as well as the sort of behavior you are trying to drive.
A few tips:
Keep it simple: we suggest studios start off with three package options, as well as one or two auto-renewable options. This will provide enough variety for you to monitor the data of how your customers respond, without overwhelming them with choice.
Consider alternatives to the Unlimited Membership: Many customers like to balance their fitness routine with a few different class formats; it’s why they don’t just join a big box gym. Recognize that your customer is likely attending other studios each month, and offer capped packages and renewals. These customers can be just as committed and regular as your unlimited members, even if they don’t attend quite as frequently.
Know your customer: You know your customer base better than anyone else. Don’t be afraid to talk to them, and solicit their feedback. What sort of options do they feel are missing? Do your loyal regulars feel that the pricing reflects their engagement?
3) Periodically Assess Your Pricing
One of the most important aspects of instituting a pricing strategy is actually what comes next. Without a feedback loop, it can be difficult to measure the success of the options you have in place, and how to improve them. While there are a number of relevant metrics to monitor here, the following are crucial:
Revenue per customer
New customer conversion
Month over month retention
Seasonality has an extremely strong impact on revenue generation in the fitness industry. The key lever affected here is the number of active customers who are seeking out fitness classes, since so many (especially in New York City) have an irregular schedule or are gone on weekends. When that input is reduced, driving more visits from engaged customers is crucial - so it's important to ensure that incentives, package options, and pricing ranges are aligned accordingly.
If you have any specific questions regarding topics this article address, don't hesitate to reach out. If you're a studio owner and have any new topics you'd like us to explore, get in touch- we'd love to hear from you!