Knowing how to structure you gym's pricing involves far more than simply looking at what your local competition is charging. Unlimited classes has often been a common model, but have you considered frequency-based pricing?
Stu Brauer from WTF Gym Talk recently joined Gavin Martin, Director of Customer Success, for a recent PushStart webinar, discussing frequency-based versus unlimited pricing models. He also share some tips for creating higher retention using these models.
Below is the recap!
CLICK HERE to watch the full PushStart webinar recording!
The Basics of Frequency-Based Pricing.
Stu Brauer: Alrighty guys. Frequency Based Pricing. So I'm a big fan of frequency based pricing. There's essentially in the group fitness model when we're talking about subscription. So EFT is synonymous with subscription, that stands for just electronic funds transfer. Just fancy language for autopay subscription, all that, and then there's PIF, paid in full. I'm a big history buff in the fitness industry. Companies like SoulCycle existed solely on PIF. People would buy a pack of classes, and that's it. There was no recurring subscription.
And then, you look at the health club industry and then later on the boutique and the micro-gym industry, we all live off subscription. But once we learn living off subscription, we had to find different ways for people to pick options, and it really came down to these two. Frequency based, meaning I have different tiers of frequency, and your membership price is based on the frequency. The more frequent you come, the more your overall price is.
1. Cost Per Class.
There's generally an inverse relationship into your cost per class. So if you have an eight, a 12 and a 16 times a month membership, you would probably pay the least amount of money for the eight, but you'll be paying the most amount of money per class. And it goes down the line. When you got to that 16 times a month, you're paying the most amount of money overall per month, but is the least amount of money that you're making off that person per class.
So that's for frequency-based pricing. And then there was the all you can eat buffet option, was just an unlimited only. And a lot of gyms... I started doing this in 2006, we chose that option because it was simple. We didn't have a lot of business acumen. There weren't like...
We didn't have PushPress back then putting on these dope webinars for us, so we didn't know what to do. And so we're just like, well, let them come as often as they want. They can figure it out, but we're going to come up with one price.
2. Unlimited Versus Frequency-Based.
Let's go back real quick. All right, so we've got the two options. Here's an example again. Again, let's say you're at eight times per month on frequency based at $160, 12 times per month at $180, 16 times per month at $200. And the numbers I came up with for the monthly total, just pull them out of thin air. They don't mean anything. It's not based on your market, or your financial model. I grabbed some random numbers, separate them by 20 bucks a pop, and that's how I did that. You obviously would not want to come up with something as generic as basing your pricing based off the slide number two from this webinar today.
Now, unlimited only, one option, one price and then a combined. So let's talk about this.
So if we look at the left... I pulled this off a random website. I was just Google searching CrossFit unlimited memberships, and this was an option in which they offered this. $200 per month for unlimited. Then to the right is an actual price version. I forget which version this was.
But this went ahead and showed eight times a month, 12 times a month, and then unlimited. So this version from my micro-gym at Urban Movement in Charlotte, North Carolina back in the day, this was a “both” option, a hybrid option if you will. A little mix of both. We ran this for a period of time, and it worked just fine. But as you grow a business, and you have the both model, you will notice a lot of the benefits of that frequency base.
The first two, which is what most people have. They have frequency based option number one. In this case it's two times a week, aka eight times a month. Then you have frequency based pricing, option number two, which in this case is three times a week, or 12 times a month. And then unlimited. You'll start to notice some shortfalls, and some huge missed opportunities I'm going to talk about here. But this is kind of what these things look like in practical application.
Understanding The Metrics.
Now those opportunities to improve, they come when you have a better understanding as to the microeconomics, as I like to call it, of a gym. Back in the day, the “what do you bench” of owning a gym was how many members do you have? And then we get sophisticated enough and you've met gym owners out and about and they might have 450 members, but they're broke, right?
They can't afford full-time staff. The owner isn't making any money, but they had a lot of members, so we got away from that. Then we started asking about profit. What's your profit margin? And then we learned, that doesn't really make any sense either. There's a lot of gyms that purposely run a profit margin, like 2%, like I did, and you can make a ton of money, and everyone gets paid. So all those numbers didn't work.
Microeconomics is where it's at. So average revenue per class (ARC). And then average revenue per person per class (ARPC). These are two gym metrics that I like to utilize to go ahead and accurately project revenue based on some class capacity metrics you could provide me, your membership pricing and then attendance. So in this example, eight times a month at $160, that's a $20 ARPC, 12 times a month at $180, that's a $15 ARPC, but unlimited, we don't really know.
1. Calculate Your Metrics.
Remember, we talked about that inverse relationship as the total monthly amount goes up, the actual ARPC generally goes down. Well with unlimited we don't know, because you could have Sally on an unlimited who comes 14 times a month, and then Timmy Unlimited who's here literally eight days a week. So the average revenue per person is still completely skewed at that unlimited number.
So the whole reason you chose frequency-based pricing, one of the reasons was, predictability. I know if someone buys this membership, they come in this often. And if they come in this often, they're worth this much to me in class. So what I recommended people do is, we could convert that unlimited into a frequency-based actual product, a number, we could yet we could market it as unlimited. And I'll give you more of the details here on that in a second. But if we did that, let's say we just converted unlimited to 16 times. Because if you look across the entire micro-gym industry guys, the average client is like 3.2 down to 2.8.
Now in your subset, I hear a lot of gym owners be like, that's bullshit. The average person in my gym comes four times a month. I'm like, yeah, but you have 125 clients. I'm talking like the averages, and we're talking thousands of gyms across the scene.
So in your market, and your market specifically being your gym, I definitely want you to know the average attendance per person. That it's guaranteed if the numbers are done in frequency based. Well wait a minute, Stu, someone could have a 12 times a month membership, and only come six times. You're right. And in which case, what happens? Your ARPC whoop skyrockets, okay. But that's obviously not the goal.
2. Focus on Gym Member Check-Ins.
What's the north star metric of PushPress? Gym check-ins. So if people are not attending, sure you can high five yourself that you're making more money off them that month, because they came less than the frequency-based membership they bought, but your ass better get to work to figure out why their check-ins - or what I call utilization rate - is so low.
Why didn't they not come in that often? That's not a metric, that's not a bragging rate you want to have several months in a row, or what's going to happen? It's canceling. Okay?
So by locking this in, you can now predict worst case scenarios for your ARPC. At worst case, someone on an eight times a month membership is going to make me 20 bucks every time they're in class. Best case scenario, but it's not really best. They make me more, but that's actually a problem for us. We want people coming in.
3. Don’t Ditch Unlimited.
Now Stu, I really like the idea of an unlimited. I think it works on the marketing front and I want members to have the option to come more if they're more motivated to come on in. I understand it, I hear it and I agree with you. So the best of both worlds way to market this is that, in your language, and even on your price presentation sheets and on your website or wherever else you have this, you mark it as unlimited.
You put an asterisk next to it though. This membership allows for 16 classes per month. However, you may attend as many classes as you would like each additional class cost X. It's the only membership that allows you to jump up in frequency a la carte. If you're at eight, but I'm off work for two weeks, I think I'm going to come in more. Okay, well for 20 bucks more you can upgrade to 12 times a month.
And again, I'm not saying $20 is the right differential between all these prices. I'm just doing this for easy math. But the unlimited with the asterisks allows you to utilize the marketing language that we all like. Because I bet a lot of your competition also offers an unlimited. And you don't want when people are quickly scanning your price options to not see that, but you need to put a cap on it. And if people want to attend more, that has to be accounted for financially.
There will always be generally around 10 - maybe up to 15 - percent of your membership that attends the gym significantly more than everyone else. It's a basic bell curve kind of scenario. 20 percent potentially show up eight days a week. Sixty percent are the average. They stick within their frequency of their frequency based pricing. And then 20 percent come way under their frequency based pricing. Well, those 20 percent that are attending significantly, they are lowering the revenue per class ARC, significantly.
The “Saved By The Bell” Challenge.
I'm dating myself here. But if you got to do a saved by the bell like a Zach Morris timeout, in the middle of class and everybody just froze. And you looked above their head, and there was just a digital number that represented the membership they had, and their ARPC. The money you're making off them, per class. And you just looked at all your members, a good, packed class, if you got to pick for a second, which membership would you actually want from a revenue per class standpoint? Which membership would you actually want every member to have, based on the fact that let's say, you have a 20 person cap on class, you froze everybody.
What membership option out of these three would you want? Think critically. Everyone's frozen. You could instantly change your membership with a wink of an eye, and everyone goes to a certain membership, whichever one you want.
This is really where we get it. Mathematically, guys, are you limited by the number of credit cards you can process per month? Or are you limited by the amount of people you can have per class? Which one?
I'm pretty sure PushPress does not put a limit on how many credit cards or checking accounts you can charge per month. Do they Gavin?
Gavin Martin: No, we do not.
Stu Brauer: Okay, so you could charge one million people per month if you wanted, but how many people can you fit in a class? When you realize that you're only going to be able to sell X amount of class times per day, because unfortunately you're probably not going to have a pop-in 2:30 PM class.
You're going to have your morning pocket, you'll be lucky enough, you pull off a solid afternoon, and you have an evening pocket. And if you're sitting back 10 years into this, you're like, how do I make more money? Well, you can't fit more people in the class, unless you completely change your equipment and layout and operational capacity and all that. So when you start thinking of it, it's like, okay, I got to raise prices. That's what price raises do. They increase gym revenue without increasing people.
But when you look at memberships here, I don't want people to dislike eight times a month memberships or 12 times a month memberships, because they don't give us the bigger number at the end of the month. They give you the bigger number that you're actually limited by.
Capacity is the Limiting Factor.
Your bottleneck is class capacity, my friends. That's your bottleneck. And when you get that unlock in your brain, it's like, ‘Oh shit, that makes so much sense.’ Because when you think of that, you kind of look at eight times a month as a really good membership option. My number one selling membership at Urban was this one, because my staff to push, it was eight times a month. After that it was 12 and then it was our unlimited, which was really 16.
The reason being, is because someone coming in eight times a month, wouldn't we all agree we don't think they're going to get great great results with just coming to the gym eight times a month? I would say that. I would agree. Unless they're very young training age, they're very deconditioned and overweight.
1. Members are Doing Multiple Activities.
But someone who's only coming eight times a month, what are they probably doing outside my gym? Something else. And in today's world, as I stand here in 2023, and I've been in this industry for almost 20 years, we have never had more of a nomadic fitness culture than we do today.
You guys are not losing as many clients as you think because your programming sucks. You're losing a lot of clients because some of them are doing Brazilian Jiu Jitsu a la Joe Rogan. Or because they watched the Icarus documentary, and now they're taking on... They want to do triathlons. Or they saw that High Rocks is coming to Dallas, so they want to do that or obstacle-course racing.
Your members are going to be more involved in other fitness pursuits now more than ever. Back in the day, fitness was very isolation. I do one thing and I do one thing only. That is not the case anymore. You know what the number one growing gym in the United States is right now? Rock climbing facilities.
2. Rock Climbing and Pickleball and Triathalons... Oh My.
Fastest growing fitness concept in the U.S., is rock climbing right now. That's adjacent to what you do, but it's not what you do. So when you have frequency-based pricing, members who might have had to cancel you, if you only had an unlimited, can now downgrade, and do some of what you do and some of what their thing is, that they want to try out.
Gavin Martin: I'm in Minnesota. People are stuck in the gyms for six to eight months, and then pickleball is... crazy here. It's just huge.
Stu Brauer: 100 percent.
Gavin Martin: But yeah, you're totally right. It's like, hey, here's an option, and we understand what's going on in your life. Are they going to go train for a marathon? That's a big thing.
Stu Brauer: Yeah. Let me go back to this last side. And all that being said, and Gavin's a 1000% correct. Pickle... I totally forgot about pickleball. Pickleball's here to just mess our shit up, as cheap as it is. It's so funny. I taught a good friend of mine, he's the co-founder of a very successful fitness franchise out of Charlotte. They're doing well. Guess what he did? He hedged his bets. He also now invested in a pickleball company that's coming to Charlotte.
So let's break this down. If we're really making a strong argument for this. So I think everyone kind of gets an idea on what frequency-based pricing is, how to maybe do both. But let's make a really good argument as to why we want to think a certain way about this. To be a gym that survives into 2033.
Upselling and Downselling Options.
You have upsell and downsell options with frequency-based pricing. So you will save a majority of your cancellations into downsells. Someone goes from unlimited and an unlimited only, that is the equivalent to a marriage. When you're married, what is the only status change that could potentially happen to you? Divorce. It's the only change to your status. There's nothing else that happens. You're married. That's the pinnacle. The only thing is backwards or divorce, aka cancellation. Just a really expensive one.
When you have an unlimited only, there's only one thing to do. Cancel. Sure, you might sell them a punch card. But we all know how effective that is.
Gavin Martin: Those are rough.
Stu Brauer: Downsell them to either lower frequency, based on what they're currently doing and actually embrace it. I mentioned Brazilian Jiu Jitsu - and Gavin mentioned pickleball - and those, because I want you guys to embrace it. The gym that is cosmopolitan about how they think about their members' fitness and not scarcity minded. Ooh, no, no, you should only train here six days a week, four days a week.
I promise you, you survive with less work than those that are fighting for the members to not do other things, because they're afraid the member will cancel and do something else. Those that actually push it.
We always recommended, Urban Movement two days a week, there's a great run club. Do that one day a week. We have partnerships with these local yoga studios. Do that one to two days a week. There's your week. Because again, if I sell eight times a month membership guys, how many more memberships can I sell knowing they're only coming eight times in a month, versus if I sold unlimited, which I knew they were coming 16 times per month? Twice as many.
Gavin Martin: It definitely makes sense. Let's just play the devil’s advocate here. Like you said, unlimited guys are not going to be coming maybe not 16 plus times a month, right? Do you take that extra cash that you know they're not going to utilize that, the ultimate value of each class for that unlimited, and pocket that? We're worried about then what you think is, they're going to cancel at some point because they know they're not utilizing this fullest value and extent of taking all the classes unlimited. Is that what you're kind of worried about?
Stu Brauer: My concern on that front is more... It's not as much on the backside, it's more on the front side. Most of you guys probably own some type of group fitness. Maybe it's barbell-based strength and conditioning like a CrossFit or something.
For New Members, Frequency-Based Pricing is an Easier Sell.
Look at what’s less intimidating at the point of sale, for members getting started with the fitness journey. Trust me, show me the sales closing rates for an unlimited only gym, versus the closing rates of a gym that goes 8, 12, 16 or 8, 12 unlimited.
I promise you, frequency-based pricing beats them out. You know how much easier it is to tell Sally, who's 40 pounds overweight. "Sally, super excited you're getting started on your fitness journey, and we have a couple membership options. I'm going to recommend we start with our eight times per month membership. Getting you in here two days a week, that works with your schedule, I think is a great starting point. Generally our members, when they're getting started, will do our eight times a month membership for two to three months, until they really get a groove going. They're not as sore, they're looking forward to it, they're feeling the movements, blah blah. Then we upgrade them to twelve.”
Now you've created value ascension, you've created a goal. What's her goal? Get to 12. And we'll do that for a couple of months. Then what's your goal? Get to 16 or unlimited whatever. You've created a journey for her. Do you think she's less intimidated by going eight, and then building up to 12, and building up to 16? Versus more intimidated where, she gets hard claws into unlimited, and she's like unlimited, fuck, it took me three months just to walk in this place. I might be able to survive one to two days a week right now.
Gavin Martin: Yeah. Running definitely that client journey thing, every three months we're bumping up, we're bumping up based on the goals for that certain specific client. And it's nice to have a selling point for those that are not as deconditioned, or the goals and such. So I get you’re hitting multiple markets there. What I'm also worried about is, as gym owners, do we have a understanding of the ARM or the... I don't know, the lifetime value of the client that starts on an eight times a month? Are they going to be able to hang out for six months plus, and get that money back?
Stu Brauer: Yeah. I think, that's a great conversation. So to have that we need one metric, which is, what is your lifetime client value, and the length of membership that somebody holds on average at your gym. So what is that baseline metric? And then do we think it would increase or decrease that average length of membership in lifetime client value if we did frequency-based pricing, versus an unlimited only? Is that kind of the conversation?
Gavin Martin: Yeah, I guess. I think we can all agree that unlimited only is a very... It's a tough one to sell. But by this combination I see a lot of people are saying, have both. They have a frequency and the unlimited option. Which you talked about with the asterisk and being able to charge them additionally. The “both” scenario where they got a little bit of both.
Stu Brauer: And given a great point on this previous comment there was that, let's say they don't do 16 times per month, they don't really cap that unlimited, they really just keep it truly unlimited. What percentage of people are actually going to be taking advantage of it to the tune of more than four times per month?
And again, I think that's a great one-on-one. If you're a gym right now evaluating maybe what we've put forth in front of you today. Look at your current attendance, and let's say, you have an unlimited, and you run the numbers for yourself.
Audit Your Current Gym Numbers.
Unfortunately we can't do this for you on that front. You'd have to look at your own numbers and say, well I currently have 19 percent of my members coming in between 16 and 18 times per month. Well at those numbers I'd say, oh, them not paying for those additional classes could be potential missed revenue.
1. Unlimited Might Work Best for Your Gym.
You could say, “Well I've priced that unlimited high enough Stu, that even if they go up to that 16 or a 17 or 18 number, my ARPC doesn't hurt. I'm going to be able to make as much money as, or the same amount of money, or just as good enough amount of money per class ARC.”
And if you've ran those numbers, then more power to you. Stick with just the unlimited. If you're a smaller facility, with smaller class caps, you can't. For group fitness, I generally like to see 20 for strong financial viability, unless you're going to be more expensive.
But if you're like nine to twelve or something like that class cap, you're going to need every person's per class revenue to be at the threshold of what you need because unfortunately you just don't have as much space to work with or as many opportunities to work with.
So again, it's going to kind of vary gym to gym from that front. But I think the biggest thing, if you go with that both, even if you keep it unlimited, you don't do my recommended 16, so you could capitalize on the revenue for those extra classes.
2. Upselling and Downselling Could Be Reason Enough.
The upsell and downsell options I think are a strong enough argument. Creates obviously cancellation alternatives. Me, personally, I love being able to project every average revenue per class, knowing what my worst case scenario is, because everything is frequency-based. And then, doing eight and 12, and once you realize that client, our longest-standing clients were the ones that we weren't married to. We considered married unlimited. We considered dating eight and 12. Well I don't know about you guys, but if you are dating three people at once, while that might be annoying, you don't probably see them all that often.
So even if they are annoying or something like that, it's not that big of a headache, because you're like, I don't know, I only see them twice a month, or twice a week. I only see them do and I do this other thing too, it did this other person.
3. Catering to Your Most Frequent Clients.
But if you're married to them, which is unlimited, those are the clients, and you guys could probably all agree with this, there's a lot of good ones in there. But they're also the unlimited clients, because they're there three to four plus days per week.
You change the programming, you adjust the schedule, you move the equipment around, you do this, you do that, you fire that coach. They're the ones who have the most opinion about it, because you are such a significant portion of their weekly social calendar.
I found our highest-earning clients that made the most money, came eight or 12 times per month at my gym. Because they're high-performing clients.
4. More Visits Doesn’t Mean Best Clients.
You show me a client that comes in six days a week, works out for an hour, and mobilizes for 30 minutes after that, they don't own their own business. They're not making six figures, working in the C-suite. They're probably that younger post-college, I don't have a lot of responsibilities, I don't have a kid and a mortgage yet, type scenario.
So again, these are also broad biases I'm creating, based on my own experience. You guys obviously have to distill this through, what's going on in your market and your gym. But at the end of the day I'm hoping that at least we get a good conversation going, about frequency-based pricing or unlimited only. And if there's anything I can answer for you guys, please throw it up inside of the chat.
Q&A from PushPress Clients:
Are Classes Tallied in Advance?
Gavin Martin: Yeah, good segue. We do have some questions. Graham is actually asking, what about the baseline price and then eight per class, that is tallied at the end of the month?
Stu Brauer: You never want to collect money in arrears. You're not like a freelancer that's going to invoice someone, and once the project's done, you collect the money upfront. So I would recommend a baseline price. So the baseline price is the ARPC of the membership. If it's frequency-based. If it's unlimited, you can assume a number based on your average.
But then if someone wants to do more classes, they just tell the girl at the front desk, "Hey, I need to purchase another class." Because they can't check in. In PushPress, Gavin, if I have eight classes per month, and I've used all eight, it won't let me check in, right?
Gavin Martin: Right. So to do that with PushPress software, you have to create a punch card based on that class price that you are going to add onto that unlimited.
Stu Brauer: Could somebody come to the gym, and then tell the coach, "Hey, I'm out of my classes, can you add one to my account and then I just sell them a PIF, like a single one-off class?"
Gavin Martin: You can, yep. And you could also have that in your store app. We don't want people just buying this. So you want to probably gate that by making it a punch card, and then having it in the store app for them to purchase is a one time purchase, and could also I guess, have it in the member app. So you take that offline and certainly reach out to support within our app and talk to that scenario. But yeah, you'd have to test and try it, whichever way it works best. Where do you want these people purchasing this additional class.
How Do You Avoid Alienating Your Highest-Frequency Members?
Stu Brauer: I see. Chris has got a great question here too.
Gavin Martin: Let's see, Chris. How would you avoid alienating your highest-frequency unlimited members with an add-on sessions?
Stu Brauer: Chris, let me just make sure I'm understanding this correctly. What you're saying is, how do I let them use my services more without charging them? Well if that's a problem, again, a lot of owners may have an issue with this.
I like charging people a lot. Number one, I'd say, that's part of a me. That's a personal thing. That's a thing on you, that we need to work on as an owner. Because A, you have an incredible facility, I'm hoping. You've got incredible coaches, I got to bet. You've got a great location, your service is worth more.
I went to Chipotle yesterday, and I was hungry as shit, and I really wanted double chicken. And if I ordered double chicken from Chipotle, they're going to charge me for double chicken, because I use more of a thing that they had. I could use less if I wanted, but I chose to use more. And that thing has a cost, it has a value. I want you to think of your classes.
I don't want to say like, well they pay a flat amount of money, and they could just come as often as they want. Every class is of high value. You have a coach in there, you've been developing and working on their craft. You have a facility that you pay to be open during these hours. I would challenge you to think of it as, I want them to come as often as they want, but there's not one business you can really think of, that does service based in real life services in which, if you want more of it, it doesn't cost more.
Gavin Martin: And if it is that case, and you do pushback, then the chicken isn't that good. And you don't think you should get double charged for that chicken. And that's a bigger issue of... The relationship between your product and buying it. There's something there.
What About Utilization Rates?
Stu Brauer: And one quick thing on that, too. That also tells me another thing about utilization rates. So when you ask that question like man, I don't want to piss people off, that tells me your utilization rates probably aren't as high as they should be. Because when your utilization rates are really high, many classes are sold out, guess what you always have? Pissed off people.
Now, it's not until you start selling out classes and you have a wait list of three to four, and those members are constantly in your ear, I can never get into class. That's when you start thinking, well who's in class today? Well shit, Johnny, it's his ninth workout this week. But he's costing me money by him being in here, because I can't get these other people in. If you want to come more, that's fine guys, but you have to pay to play.
So as utilization of your classes get up, and you're hitting your cap on your capacity, you'll start thinking differently about should people pay more to come more? And the answer yes, in my opinion.
Gavin Martin: Yeah, take some analysis of the data, take some time to dig into those numbers and go track that down.
What About Different Class Formats?
Let's see here. Dane is asking, “How would you incorporate this if you offer more than one class workout time? Meaning that the plans are specific to class.” So you got a program for let's say more of a cardio class and you got a... Let's, for lack of a better term, crossing more strengths up to two different plans for each of those classes.
Stu Brauer: My recommendation is, do not make the mistakes so many of us made in 2012 to 2016, where we rolled out bootcamp and light programs in which we charge less.
It's an equal amount of money. So they have tokens, think of their credits of their eight, the 12, the 16, unlimited, they're tokens. It doesn't matter which machine you put it in, it's all the same. Do not change value of class because one isn't using a barbell, right?
Gavin Martin: It's tough to hear that. I know probably, but yeah, it's probably smart to keep your classes all valuable. Value them the same. Your training of your coaches and the coaches' training that goes with each those should be very much equal. That's hard.
Stu Brauer: Because again, Dane, you'll hit a utilization issue. Your business is going to continue to grow every month. And you're going to start filling up that hour, and you're going to be like, I got all these guys only paying an X, because they're doing the light or the easy of this other version, these people, you'll start actually having resentment towards that program, because it takes up the same space. It takes up precious limited resources. So yeah, same price across the board, Dane.
Is There a Recommended Contract Length?
Gavin Martin: Greg is asking, “When doing eight times, 12 times a month, do you still ask for a three month commitment contract?” I get this a lot. I get a lot of questions about that kind of commitment timeframe. What do you think, Stu?
Stu Brauer: I always have historically recommended an initial 90-day agreement, with a 30-day cancellation notice, which typically, because most clients are not Johnny-on-the-spot with that, or if someone's there for four months, and hopefully your product is dialed in that at the end of four months, if it renews to a month-to-month level, you're good. But I always initially like 90 days. It's easily justifiable to the customer at the point of sale.
“Well Sally, it takes about 90 days for us to create a really great rate of adaptation for you to see results, but also about 90 days for us to show you all the different kinds of workouts, and exercise styles that we do here. I know you mentioned you're coming on the eight times a month membership. So within 90 days you're going to have seen 24 great workout examples. You're going to be seeing some good results. But we want to know you're going to be here for that period of time to actually get the results.”
So I like those initial ones. If you run with contracts that are longer, 12-month whatever, I'm good with it. Just do not crush your contract price and take it below what you need. Below what's financially viable on an ARPC, because it's lower than the month-to-month. You have to increase the month-to-month and inflate it, so that your contract. Because anyone here who sells contracts, I promise you, your contracts sell more than your month-to-month pricing, because it's cheaper, okay? Your contract pricing has to be the basement. This is the lowest amount of money we can go and financially kill it. And then you inflate the month-to-month. That way if anyone pays the month-to-month, great. But yeah, I'm good with contracts of any duration as long as they don't lower the amount of... They make you still financially viable.
Gavin Martin: Yeah. I've always been more even on a month-to-month cadence, even for that first three months. Something that you can pull back on. Everyone's doing subscription, it's just how it is. Like, Netflix and them charge. Not often do you see Netflix or any of those say, “Hey, for the whole year you can pay this, and then month-to-month it’s this price.”
How Do You Know Which Option is Best for Your Gym?
Stu Brauer: Zach is asking, “How do you recommend pricing, unlimited, three days per week, two days per week, if class size are cap to 12?”
Zach, you're missing about seven numbers there, buddy. I need about seven more metrics. And I can give you that answer, but I can't give that to you with that. There's not enough data provided.
Essentially, Zach, you work backwards. Class capacity, how many people per class? Then you go back. How many classes per week? Okay. That'll give you a monthly number. Okay. Then you work back. What do I believe the average attendance is going to be or the average... What's going to be the most average membership option picked? Let's say, you think it's your three times per month. Okay, you have that data, and then I have the number I need to make.
If I want to make five percent profit, 20 percent owner pay, 35 percent payroll, 40 percent operating expenses and five percent taxes. And I want my take home to be this, again, that's seven more data points, and I could do that math for you very quickly. But unfortunately I can't do that for you here.
How Do You Determine the Pricing Gaps?
Gavin Martin: A common question. And then, what’s the separation between the different tiers? Like the dollar point for each, from eight to 12 to 16, let's say, what would be the pricing…
Stu Brauer: Oh, the gaps in between.
Gavin Martin: Yeah, the gaps.
Stu Brauer: So the default is, everyone goes $20 in between, like I did in the example. I'm actually a big fan of decoy pricing. So decoy pricing, there's a great video that National Geographic did, where they did a sales psychology study at a movie theater.
Small popcorn, medium and large popcorns, all separated by $2. Well people, when it makes too much sense, $2 down, $2 up, they get paralysis by analysis and they generally just default to the safest option. However, if you do decoy pricing, you set one here with a frequency number that they don't really want. So maybe that's like six times a month or maybe even eight times a month. They want more than that.
Then you set the one that they want significantly more expensive away from that one. And then just a couple of dollars more, and then like a number that doesn't make any sense is the unlimited.
So it might go: Eight times a month is $160. Twelve times a month is $189. Unlimited is $196. They instantly go from $160, they're like, ‘Fuck I don't want that. But like $189, okay, twelve. Well for $8 more, I could get unlimited.’
And that's called decoy pricing. Just put it in the Google. I've made a bunch of content on this, as well. And the decoy pricing is a unique strategy. I've used it... We ran it for three years as an experiment, just so I can make the content on it. It works well.
Gavin Martin: But do you want them going into that unlimited?
Stu Brauer: Yeah. Hundred percent, it depends where you are in your membership. Generally, early on, more of us... If I was starting off a gym, I want more unlimited members attending more, even if my ARPC is low. Because I need the virality of word of mouth to take hold, and we really don't see a take hold to around 150 members, as it really gets strong.
So then I might adjust everything once I'm getting closer to my utilization rates being consistently in the 80s and 85s, and then readjust my pricing model.
Gavin Martin: And it's funny. Across our clients though, we have a lot of people that are under that 150. And we are probably maybe pricing it, and pushing it forward. Just trying to get people to get eight times a month and punch cards and stuff.
In Summary: Continuing the Frequency-Based Pricing Conversation
Well this has been a really good conversation. I can tell by the chat people are fired up about this. So Stu, tell them where they can... Obviously Stu, is our guest today, and he's always gracious take the time and then put together this presentation. But Stu, obviously you've does some side coaching as well. So where can they find you, if they need to ask you some questions?
Stu Brauer: Yeah, guys, if you got any more questions, I'd be more than happy to take the time to answer them. Just shoot me an email stu@wtfgymtalk.com, kind of give me some details. I'll be more than happy to answer these.
Gavin Martin: And then I will just leave everybody with this. There's a lot of content that was covered, a lot of different scenarios. So you can go to pushstart.thinkific.com. There’s also some great fireside chats with my a colleague Michelle and some of our clients that are really doing certain things really well with the PushPress product. So you want to take a look at those as well. Great webinars and there's also our coursework, which shares the pricing one on that as well, that Stu put together.
I know Stu is a sought-after guy, and you can email him, but we can also have the PushPress team talk through these scenarios, of where you guys are at in the business. Like early-on gyms or somebody that's been doing this for years, and kind of work with you through using the products, and from our experience on our team. So I'll leave that there. Thank you so much for attending.
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