Is It Time To Increase Prices At Your Gym or Fitness Club?
With fluctuating energy prices and supply chain issues from both the Covid-19 and the war in Ukraine, it is time to tackle some of the hardest questions when it comes to running a Gym or fitness club.
We will be looking into the following questions involving price increases in the current climate:
Certain industries and sectors have little to no reservations about putting up their prices. The council is all too happy to dictate when their cut will rise, as are the trains and the petrol stations. But, unfortunately for some in the fitness sector, the rise of national chain budget Gyms has turned the health and fitness industry into an arena of constant price warfare.
As such, we will be taking a look at each of these questions in turn to try and navigate this minefield. A tone-deaf rollout of a price increase could cost your gym or fitness club more than it stands to save. As could a price increase that doesn’t reflect that of your local market and competitors.
Is it time to raise the price of your gym memberships?
In times of prosperity, the aforementioned price war is not necessarily a bad thing. It certainly leads to a lower price for the consumer and necessity will always spark innovation while warding off stagnation. But in times of budget squeeze, the ability to remain inorganically competitive will naturally come into conflict with the ever-increasing, real-value cost of running a Gym or fitness establishment.
As such, when it comes to contesting the percentage of the population who will actually purchase a gym or fitness club membership, the subject is best approached with, at the very least, caution.
With increasing property rents, interest rates, and energy prices, the time has come when the industry is wondering if even the budget chains will be able to sustain their rock-bottom price metrics.
And of course, unlike many economic factors that assail the industry, property rents and energy prices are both concerns that impact the spending habits of the consumer. The economic and societal upheaval of the last two years has left many consumers in a very different position when compared to 2019.
It is important that we keep this in mind when both considering and communicating potential price rises. More than ever, consumers will be concerned about the value they are getting for their service.
We will go into more detail when it comes to communicating the price rise but it is important to highlight in this section that your price increase cannot come with no benefits. At the very least be prepared to showcase how your Gym has improved, is improving or will be improved. If you can’t showcase this, a price increase may well result in a net loss of revenue.
To expand, it is important we reinforce that increasing the prices of your Gym or fitness club membership is not a silver bullet solution. It is possible that, if mishandled, your club could end up with less collected membership fees than before.
This is, of course, a worst-case scenario but it is a consideration that should be held at all points of a membership price review. As we previously mentioned, there is an increasingly price-savvy consumer base out there as the public starts to cut unnecessary costs. Many people will be reacting in a knee-jerk fashion. A poorly timed or poorly communicated price increase could be just the thing to causes an exodus of people looking to reduce their monthly expenses. It is also important to consider that the obligatory communication may alert sleeping members to the fact they are still paying for your service.
If either of these takes place during a price increase, it may be significant enough to reduce or even negate the benefit of a Gym membership price increase.
How much should you increase membership prices by?
While this is possibly the most important question here, it is also, unsurprisingly, the one with the most nuanced and situational answer. This will require not only a comprehensive review of your membership but also of the competition in your local area.
Before increasing the price, it is vital to research the fitness service market in your area. Understand if any of your competitors have already increased their prices. If you don’t know their price previously, merely understanding the different benchmarks for different Gyms in your area is still valuable information. Even if you feel like an increase of £x is justified, if it prices you out of the current market in your area then it is time to ask some intrinsic questions.
In regards to your current membership, it is important to understand several different aspects of your current situation. It is vital to understand how satisfied your current membership is with the gym or fitness club.
The two primary methods of achieving this will be social media, reviews, and surveying. Thankfully consumers are very willing to give their feedback in the internet era. Review all outlets of feedback for your Gym, including review sites such as TrustPilot and Google Reviews, as well as your most active social media accounts.
If your clue is not meeting the expectations of your members at the current value, it is very hard to justify a price increase, let alone a significant one. It is important to keep your finger on the pulse of your customer’s opinion. Too often we all complain of businesses being out of touch, but in a value-driven, competitive market, being in touch is paramount.
Only then will you be able to have the necessary confidence in the service you are providing to justify increasing your prices.
Should you increase the price for all members or membership bands?
The answer to this question will once again depend on the nature of your Gym or fitness club. From our experience in the fitness industry, we know that Gym membership categories are as varied, if not more varied than the number of clubs.
The reason we have decided to write this as its own section is to reinforce that you should take into consideration every membership when conducting a price review.
Even if you are perfectly happy with the price point of certain membership tiers, it is still necessary to communicate effectively across the entire business.
On the other hand, it may be that you wish to increase the price of every membership by a set amount. The difference between say, £1 per member and 3% per member could vary massively. Both are systems that have been implemented in the fitness industry to varying levels of effectiveness.
The economic logic here is simple.
Increasing everyone’s membership by a static amount, for the sake of argument here, £1, will give a sense of uniformity. However, this method will represent a smaller increase in terms of percentage for your higher-paying members.
Increasing the price by a percentage across the board will, conversely, spread the load more equally, but perhaps extracting less from your lower-paying members.
Another frequently asked question during a price review is whether or not loyal members should get preferential treatment. Or whether the price increase should only apply to new members. While this can be tempting and even effective, it is important to note that an increase only on new members may take months, or even years to have a noticeable impact on the margins.
How should you communicate to your members the facts and reasons for the price increase?
It is vital that when you start to communicate the price increase to your membership, it is done in a calm, clear, and empathetic manner. The tone and professionalism of the communication will be important to get the point across that you are not:
1. Making this decision quickly or lightly
2. Making this decision due to panic or in a reactionary manner
3. Nor that you are making this decision due to greed
4. That you have considered all possible options and avenues before making this price increase.
In order to demonstrate that the price increase is being implemented in a controlled manner, it should be communicated well ahead of time. Preferably this should be done in writing, either via e-mail or letter.
This communication should lead with an acknowledgment of the current situation. The consumer is fully aware that the price of living, energy, and rent has increased and therefore this is a solid justification for any rise.
Focus on the improvements that have been made to the Gym and how the service is different from what was being provided a year prior.
Highlight the strengths of your gym or fitness club compared to other Gyms in the area and show that the price is still competitive.
Highlight other improvements that will be being made in the future and where the additional money will be going.
Make sure to brief all staff, most importantly the managers, about this upcoming change. Make sure everyone appreciates why it is happening so that there is a unified response to any complaints. If the team running your social media is separate from your Gym staff, make sure that they are also fully briefed.
Ask staff to refer any severe complaints to the management team.
If you have more than one gym or fitness club, make sure that the price increases and the communication is tailored to the area.
Offer to arrange a face-to-face meeting for members to attend to discuss the price raise. This will give the sense that their voices are being listened to. Set an agenda that involves improvements they’d like to see given the new price.
Should you be wary of increasing your membership prices?
While it is a decision that should be taken with the utmost care, ultimately gyms and fitness clubs should not be scared of increasing their prices. In the current circumstances, it is an understandable and necessary evil. While there will be some inevitable pushback, any gym should be able to effectively articulate that these price increases do not come from a place of greed.
With all the disruption to the economy within the last half-decade, price increases have become an accepted part of life. With that being said, it is important to understand that you still have to be competitive within your local fitness market.
It is important to understand the strengths of your gym or fitness club, and what makes it continue to appeal to your existing members. If it is the advanced equipment, great location, or versatile facility, that is a solid foundation for a small but impactful price increase. If it is purely that you are the cheapest gym or club in the area, then that may make you more vulnerable to the attrition caused by a price increase.
Further, it is important not to fall into the trap of incremental, yearly rises. This will just result in a yearly exodus of customers. In these exceptional times, better to announce a one-off increase that can be justified and clearly communicated to your membership.
You may want to look into offering members options when you announce the increase. This could include offering them a year of membership at their old rate if they pay the full amount upfront. While this will represent a loss of income over time, it will mean that you collect a full year’s membership whereas otherwise, you might not.
As stated earlier, the confidence in which a price increase can be implemented should be directly linked to the sophistication of the membership monitoring systems you have in place and therefore the knowledge of your members.
If you are confident you understand which of your members are loyal and active, and which are perhaps inactive, sleepers, or non-committal, then you will understand the full implication of the decisions you take when conducting a price review.