As the world was gripped by COVID-19, it had a significant impact on not only peoples’ everyday life but on the world economy as well. Many sectors had to close their businesses completely or significantly reduce their capacity. As a result, they lost business and their revenue took a hit.
The fitness industry is one of the sectors that was hit hard by closures and many fitness operators have been struggling with financial losses.
According to research published by Bloomberg , large fitness clubs have not raised the price of their memberships in a consequential way. However, small studios have been forced to increase their pricing by 20% on average in order to cover overhead costs. And, whilst virtual classes have become about 20% cheaper during the pandemic and are a scalable solution with a low start-up cost, the revenue per member has dropped, making it a drop in the ocean for struggling fitness operators.
All in all, the financial losses have been huge all over the board: American health clubs and gyms for example lost $13.9 million in revenue from mid-March to August 31 in 2020 alone.
So as entrepreneurs look to recoup income to keep their businesses afloat, how will that affect membership pricing? If you do choose to increase your prices, how do you ensure the retention rate of your existing members? And finally, how do you stay competitive against big-budget chains and cheap and accessible home workouts?
Focus on adding value to your gym membership
As a result of COVID-19 and rapid digitization, many fitness businesses have to consider a transformation of their business model and streams of revenue.
There are many ways to go about this, but for fitness businesses, Value-Based restructuring will bring them, well, the most value. Approaching the transformation of a company from this Value-Based restructuring perspective will help entrepreneurs and teams to get the balance right between targets and set them up for consecutive and profitable growth.
So what should you take into account when considering a new pricing strategy ? This might sound counterintuitive - but don’t focus solely on profit. Do your research into external factors like your target audience, your location, local competitors, etc. But of course, also look inwards: what do you need to reach financial stability and balance your books? Which membership pricing strategy best fits your business identity and brand?
The pandemic has dramatically changed consumer behaviors and demands. For instance, the number of people who prefer online fitness lessons as opposed to an in-facility offering has grown substantially since lockdown - it gives them a more personalized experience in the comfort of their own home, a flexible schedule that fits their day-to-day lives and saves them the commute to the gym.
For the studio or gym owner, implementing a hybrid business model that gives clients a choice between online and in-facility services is an easily scalable solution. This way they can grow their customer base beyond the four walls of their facility, and offer new target audiences services that fit their lifestyle.
Choose the right pricing strategy for your fitness business
So how do you approach raising your membership prices while minimizing the risk of losing clients in the process? There is no one size fits all answer to this question - ultimately it depends on your target audience and what they want and expect from your fitness business. And there’s nothing wrong with straight-up asking for their opinion. If anything, it will strengthen their sense of community and loyalty to your brand.
1. Bundle pricing
Offer several products together and sell them cheaper than all of them would be individually. Work with your team to learn how to cross-sell and upsell packages - offer your clients the services that best fit their goals while ensuring new revenue streams.
2. Premium pricing
Implement a “luxury” or “lifestyle” strategy with high-quality products. Clients get a hyper-personalized experience - this covers everything from his/her eating habits to workout plans and wellness advice.
3. Economy pricing strategy
Some people just want to work out. Nothing more, nothing less. You can target this group with an economical membership. Offer a basic membership and charge for additional services, classes, and amenities.
4. Market penetration pricing
Looking to grow your customer base? Undercut competitors with temporary low prices or promotions. As your customer base grows you can incrementally increase membership prices.
Looking for a more flexible solution in uncertain times? Add-ons allow your clients to customize their experience. Customers can purchase workout plans, online access, and meal plans separately.
Do you want to learn more about choosing the right pricing strategy? Read our blog on What Pricing Strategy Should You Choose for Your Fitness Club?
Adding Value With a Hybrid Business Model
As the restrictions around indoor fitness are slowly but surely easing, fitness operators can now see how much the fitness landscape has changed around them. Digital fitness through livestreaming, wearables, and apps has firmly positioned itself as a flexible, accessible, and COVID-safe alternative.
According to a study published by Visualcapitalist, between Q1 and Q2 2020, health and fitness application downloads increased by 46% worldwide. Moreover, the amount of daily active users also grew by no less than 24%. This goes to show that there is a lot to win for fitness entrepreneurs in this segment of the market.
Finally, the lockdown has encouraged people to invest in home fitness equipment - according to data from NPD, retail sales almost doubled in 2020 to a staggering $2.3 billion while depleting inventories all over the continental US. Offering virtual classes or 1:1 sessions can be a solution to get customers in without raising prices. They have the equipment at home, but you and your trainers can help them stay motivated and get everything out of their workout!
Since occupancy is still limited in many places and the future looks uncertain, a hybrid solution offers clients the option to still attend classes, albeit online, when sessions are for example fully booked.
This way fitness businesses can open new streams of revenue with a relatively low upfront cost. Moreover, it will help expand their offering, so they can attract new clients that canceled their regular gym membership during the lockdown and are now on the lookout for new ways to work out.
Learn all the ins and outs of How to boost your online revenue stream with PRO+
Ways to increase revenue from existing club members
Increase the value of your memberships by offering additional services to your clients. This can range from low-cost solutions like livestreaming lessons or doing 1:1 online coaching sessions. As mentioned above, these can be implemented into bundle packages or add-on pricing strategies.
You can also choose to branch out from fitness into a more holistic wellness offering by giving your clients access to meditations and mindfulness exercises. A great number of apps offer easily accessible and cheap holistic content, for example, our very own PRO+.
Are you looking to grow your in-facility traffic? Research possible partnerships with other local entrepreneurs - a physiotherapist or a healthy smoothie bar may be open for collaboration on special offers for your gym clients. Hiring a local yoga or Pilates teacher for group lessons will also help you add more value to your offering.
Finally, gyms that have more square footage can choose to expand with more luxurious amenities such as in-house childcare, saunas, steam cabins, or even massage therapy. Depending on your target audience and location, this can give you an edge over your competitors, and maximize a solid upsell strategy.
Optimizing studio footprint
Due to COVID-19 restrictions, gyms and studios have to rethink their footprints. Depending on city, county, or even state regulation you might not be able to welcome your clients back yet at full capacity. So how do you make more space?
Earlier we explored the option of expanding into online spaces with livestreaming lessons and online training, but sometimes a restructuring of your physical fitness space can do wonders. In the FitNation Lunch & Learn webinar, Sarah Mannering shared tips on how your club’s design potential can help maximize engagement, accelerate growth, and drive revenue.
Redesigning your club can take shape in many ways: are most of your clients focussed on lifting weights, rather than the cardio machines? Then you might consider bringing down the number of machines to give more space for free weights. Do you have a parking lot that you could utilize for some of your equipment? A big party tent could extend your square footage, so you can organize group lessons or move some of your machines or weights outside.
And you don’t have to come up with the solution all by yourself - ask your clients for their input! Start a poll or discussion in your community to find out what your clients want and need from your gym. You’ll kill two birds with one stone: not only can you specify your offering to your clients’ needs, but you are also making them feel more engaged and heard, which will help your retention rate.
And while weather dependent, offering a range of outdoor classes in local parks or cross-country boot camp circuits in spring and summer can be a fun and social way for your clients to shake up their fitness regimes and enable you to become more engaged in your community. And have you considered the possibilities around marketing your boot camps to businesses for a healthy and energetic team-building day out?
The possibilities are endless. Although it may take a while for the financial state of affairs to even out for the fitness industry, steps can be taken to ensure a brighter future and a more productive present. Whatever the best solution is, your situation will always depend on understanding what your target audience needs, and making them feel they get value for their money - especially if you need to raise your membership prices.