Thomas Plummer

The business of fitness

What if your pricing system is as old as this picture?

2 Comments

(10 minute read and study)

The technique was right in 1999, but that doesn’t mean it is right in 2016.

Solving problems is situational and in the late 90s the problem that needed to be solved in the fitness world was what to do with the collapse of the mainstream fitness market? The chains were strong in the late 90s, the independent owner was small and not changing much of the world yet and the “real” gyms, such as Gold’s, World’s and Powerhouse, were at their prime. But there was a niche in the market that no one noticed, which is why the modern training gym is here today.

The 90s was the decade where the new generation training guru emerged. Sports performance had been out there for years, of course, but no one had taken the team dynamic and the already functional approach to training and applied it to the mainstream consumer and that was where the hole was in the market: small training gyms, or maybe mainstream guys who were willing to adapt, focused on a client that was tired of six-day a week bodybuilding dogma and wanted to be better at sports and life rather than just entering a show and standing as a pile of muscle on stage.

But there was no map, no model and no plan to build one of these. So we adapted. Bill Parisi in New Jersey would have been the first gym in the country to mix sports performance with the mainstream Average Joe client. In 1996 he did $950,000 in 3900 square feet, something that even today would be impressive in any market. Following right behind this breakthrough in the late 90s were Alwyn and Rachel Cosgrove in California, who were the first owners in the country to switch completely to small group coaching only doing away completely with the one-on-one concept in their first gym.

We also didn’t have the strategy to make this small group idea work so again, we adapted. Everyone prior to this time period who received any type of training in any gym in the country did it one-on-one. There was no small group training. There was no team concept. CrossFit was still 10 years away from being a team factor in the world at this time.

The first price strategy for small group training was based upon simply modifying the one-on-one idea:

  • Instead of one-on-one, we train the clients in groups
  • Everyone bought sessions in the past, so we break away and just charge the clients for coming either 1/2/3 times per week
  • All the one-on-one guys had their own workouts, so just put together a small group and each guy still does his own thing increasing our profit, although we stupidly started paying the trainer for more people in his group. In those days he did sell, but we gave away a lot to the coaches that later proved not to be necessary.
  • In essence, the client just bought an extended version of sessions. Instead of sessions based upon a package, he just bought them by the week over time. Sessions were still sessions and the client still wanted to make the individual missed sessions up next month
  • About three guys were all a coach could handle since everyone was doing their own workout at their own speed (except Parisi, who was already coaching mainstream clients as if they were on a sports team).

There was no kind of group dynamic at all. Everyone did his own thing, at his own speed, and the coach just runs around trying to keep everyone safe and moving. This type of workout was nothing more than three guys doing one-on-one workouts together, which made sense then but is fairly funny now.

The price strategy looked like this:

  • One time per week you paid $189 per month
  • Two times per week you paid $289 per week
  • Three times per week you paid $389 per week

All the memberships were on a 12-month basis, or at least the early gyms were heading in that direction and the first adapters were already doing away with sessions and packages or even doing away with one-on-one coaching altogether.

This price strategy was brilliant in the late 90s and early 2000s, but while I was right then, I would be horribly wrong now using this system. The weakness is that we created a training methodology based upon just modifying a one-on-one concept and basing it on a newer price model.

Nowhere in here did we look at the scalability of the system (could we use this with bigger groups and a lot more members?) or the time and effectiveness it takes to design three workouts for three guys and then keeping them all moving at the same time with one coach. In other words, this was a prefect system to solve a problem of transition from the mainstream gym to the first training gyms, but it is not an effective way to make money or train clients today.

How the training business model has evolved

Small group coaching has evolved into the primary category for a financially successful training gym. This is where the best results occur and this is where the highest consistent revenue per client is generated, with the biggest profit margin. Team training is still important, but the real profit comes from small groups paying a higher-return-per-client-served.

Here is what has to happen for you to be able to train a large number of clients successfully over time at the highest revenue possible:

#1…. You have to shift the responsibility of showing up to the client: In the old system, the client believed he bought sessions, such as the ability to come twice per week. The problem was that if he missed a session he wanted to make it up next month. We sold times per week instead of access to the training, which is what has to happen. Access means you can come up to so many times per month, but you do not have to use all of those times if your schedule doesn’t permit that week.

#2…. By selling access you kill the failure mode that was written into the old system. In the old days, trainers sold their own books and every trainer of course wanted to fill his time so he told the client that he or she has to be there at least three times per week or you are a failure. If the soccer mom got busy and couldn’t show up for a perfect week of working out, she felt she failed simply because her coach planted that seed in her head by telling her if you don’t get here three times per week you will never reach your goals. She failed, and then often quit, because why keep going in a system where failure was going to happen almost every week?

Here is what a modern pricing strategy would look like along with the strategy behind it, but first we have to start with the terms needed to set up the concept:

  • Unlimited means you can come up to 12 times a month with a coach. This is not a contradiction since unlimited means you always have something to do on your off day designed by the coaching team. You don’t have unlimited coaching, you have unlimited access to coaching guidance at this gym.
  • Limited means you can come up to five times per month
  • You get everything below the level you sign up for at this gym, although few people ever take advantage of this benefit
  • The average person who takes unlimited will train somewhere between 9.2-10 times per month depending on the region of this country or where you live internationally. If you live in London or New York, the average client will train more than someone who lives in a more rural part of the country. If you look at just one client, you would think the client is killing the gym, but if you average 20 clients using a number in this range, the gym will usually net about 40% on coaching.
  • The average person who takes limited will only train about 4.5 times per month. Even this group does not show up for all five workouts every month.
  • The key is that we are selling access. This means you can come up to 12 times if your schedule permits, but if you only make it in nine times this month you didn’t fail. You have to build success into every system by eliminating a false sense of how many times equates to success. If you haven’t been working out for years, but get into a gym once per week for a year, is that a success for the client or a failure?
  • The annual coaching program means the person has complete support for the year including all supplements, nutritional support, and even medical referrals if that is relevant for your business.
  • Four people in a small group is perfect. This allows you to have two sets of equipment and then train your clients as a group rather than as individuals. Most experienced coaches modify the client using progressions and regressions rather than modifying or creating separate workouts for each client. If the client has severe pain or dysfunction, he should be in 1/1 anyway and not part of this type of group until he can function. All prehab work should be done on their own prior to the workout, such as foam rolling or specific stretching needs.

Four people is where the intensive coaching lives in your gym compared to team training, which might have up to 20 people in it. In small group you can go after the complex movement patterns safely as opposed as trying to coach 20 people when they are tired doing something that no coach can truly supervise. IN team we use simple movement patterns and use the same workout for the week so the clients can chase progressions.

In small group, you could have two people doing low box jumps and two people doing heavy carries at the same time. The box jumps are where you coach and the carries are where the clients just take off since there is little coaching required at this level. By having two sets of all needed equipment, and by using the mix of a skilled movement with kettle head movements (movements that require steel, but not much brain power) you can keep four people together as a team and still get great results.

The technical movements, such as a power clean, can be done with two doing and two watching form and then alternating. This system allows you to move four, the optimal number of clients, around in a smaller space with less equipment needs.

And obviously, training four at a time is so much more cost effective than training just three or two.

The price structure:

$1499 a month for 12 months annual coaching program

$899 a month for 12 months unlimited 1/1                                                                                        $499 a month for 12 months limited 1/1                                                                                              (This 1/1 training is based upon a $100 per workout)

$289 a month for 12 months unlimited small group coaching                                                    $189 a month for 12 months limited small group training

$129 a month for 12 months unlimited team training

$89 per month for 12 months access with a template workout provided monthly

Special: $249 a month for 12 months individualized workout including full screening (FMS) and full body comp and a workout designed based upon the results of this testing and your goals. Not all gyms will offer this or have open access space. If you are 4,000 square feet or bigger (400 meters), you should have a dedicated open access space so clients can come into your gym on their off days and do their own thing, meaning doing something relevant for them individually designed by your coaches but not needing the cost of direct supervision.

This system solves all the problems of the old 1/2/3 times per week and creates a more stable business platform that is sustainable over time. This is also scalable for even the biggest training gyms, some of which are now over 16,000 square feet.

Everything evolves and this old system is no exception. People using versions of this basic structure, such as Rick Mayo, Justin Grinnell, Colin McGarty and Frank Nash, are doing numbers never before possible in a training gym business. If you aren’t making the money you want from your gym, take a look at your pricing structure. How you charge and collect from the clients may be the reason you are forever locked at a lower revenue.

 

2 thoughts on “What if your pricing system is as old as this picture?

  1. How can this pricing structure be modified by area? Is there a multiplier of some sort based on median family income?

    • Hello, Start with your team rate and what the current 1/1 rate is in the market. I want to be the highest 1/1 gym in town since most of the real revenue is created in the small group. The team rate is a reflection of what the market can bear for this activity. For example, CrossFits and Orange Theory gyms in my area of Florida charge between $149-179 per month per client, but 1/1 is only about $60. I would set my team at $149, but my 1/1 would be at $75 or using the layered prices, $375 a month for limited and $675 a month for unlimited. Perception is everything for the client with money, so I want my 1/1 to be the highest, but my team a better reflection of what the going rate is in your market. Hope this helps. T

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