You seek the future, or you constantly relive the past.
The gym industry is currently flooded with consultants, gurus, mentorships, make-six-figures-now guys and the social media obsessed who wish to be known as great influencers of trends and the future.
But what are they selling you?
You either create the future and drive change, or you search the past, or just steal from others, and repackage yet again what the industry has moved past decades ago. Here are six hot trends, which were created, used and failed over 20 years ago, that were recently dusted off and offered as fresh to an entirely new generation of owners who weren’t around when these failed the first time.
Off prime-time pricing
The idea, promoted by a financial service company in the industry, is that a gym owner should offer clients cheaper rates to work out in the non-prime time hours. The idea is to fill the gym with clients who want a deal and who will come when the gym is supposedly slow anyway.
This was a brilliant idea… back in the 1950s (yes, the middle part of last century) when Jack LaLanne first used it in his gyms. He only built one locker room back in the day and men and women used the gym on alternate days. One of the centerpieces of his early plan was that you could workout at a cheaper rate prior to 4:00 in the afternoon. Great idea, and it lasted well into the mid 70s, but here is why it failed then, and will fail now in any gym crazy enough to use it:
- The lower price became the price. For example, if you offered $39 a month for a regular membership, but sold a cheaper off prime-time membership at $34, the lower price became the price. New clients just refused to pay the full price when the gym had established its price at a lower rate and would not become members unless they too could get the lower rate no matter when they wanted to come to the gym. What is this gym really worth, $34 or $39? The lower the price, the lower the perception of quality.
- What happened to the guy who paid less, but was still there at 4:30? “Hey, didn’t get out of work on time. You don’t mind if I just get my workout in a little late, do you?” What would you do with a member paying you $34 for a membership where he has to be out of the gym by 4:00, yet there he stands at the desk at 4:30? No matter what you chose, either let him in or throw him out, you lost. You either let him workout, and now established the precedent pissing off all existing members, or you refused him costing you a member.
- Everyone finally realized that some gyms just had quiet times and trying to stuff those few lower usage hours just killed your business over time and it finally stopped in the mid 70s.
In today’s gym environment, the client might be paying much more for the class or workout, but when you discount to fill a quiet time in your business, the lower price will become the real price and again you lowered the perception of value in what you offer.
The old 1/2/3 time per week pricing schedule
Again, this was brilliant stuff back in the early 90s when I first used it with clients, but it proved to be a failure over time fading in the late 90s but resurfacing again now through gurus looking for a way to put their own ideas on a new gym owner. Here is why this too failed:
- Does the soccer mom really know today how many times a week she will work out for the next year? Talking about putting an additional hurdle at point of sale. She didn’t know, and had no way of possibly knowing, so she took the path of least resistance, which is the next point.
- They always, at a rate of about 80 percent, take the middle choice, or two a week. This lowers your overall client rate potential because you are artificially lowering your own price through your offerings. For example (think about the example, not the prices here):
1 per week at $149
2 per week at $249
3 per week at $349
About 80 percent took the middle one. They always do, and this has been part of retail strategy since the beginning of the last century, but in our business, it fails us because we really want to get a higher per client average. This system forces the client to go lower price because there is less risk and very few, or about five percent, take the highest price. In other words, you created a system where you automatically lowered your own price.
- If the client didn’t use the sessions, he wanted them back the next month. I signed up for two a week, didn’t get them all, so please add them to the next month. Managing this became a nightmare over time, because everyone missed and wanted sessions added and keeping score became an ongoing issue with the clients.
- We built failure into the system. If you don’t come as promised, then you failed, but most importantly to us as owners, the client felt that if I couldn’t make two a week, then I am wasting money and I want to quit now. This was the biggest issue with this system, and still is for anyone living in the past trying to use this yet again.
The current system that does work is to shift the burden to the client instead of the gym. In this case, we sell access instead of a set number of sessions or times per week. For example:
Unlimited access up to 12 times per month with a coach (1/1) and additional coaching support to design workouts to do on your off days
$899 per month x 12 months
Limited access up to 5 times per month plus additional coaching support
$499 per month x 12 months (based upon $100 per session)
Selling access means the client can either come up to 12 times per month, or up to five times per month, but if she doesn’t make all the session she didn’t lose anything, nor feel like a failure. The burden is shifted to her and away from the gym to come when she can, but since she purchased access, not set sessions, she determines how much and when she shows up.
Eliminating contracts and going just month-to-month sounds so seductive to an owner. If you use this magic system, sales are easier, people don’t leave, your client complaints just fade away and life is easier, which all sound good, but none are true:
- If month-to-months are easier, you screwed something up further upstream. If you are talking about price, after the client has had an extended trial, met you and your staff over time, met your members, experienced your service and has had a chance to try all of your offerings, then you either have a weak gym, terrible sales people, or most likely, skipped all of these things and just went for the price too soon when the client didn’t have any experience with you and your gym. If it comes down to price, meaning I really don’t trust you so just give me the month-to-month low risk thing, then you failed the client earlier in the process. There are legitimate people who need to come and go with flexibility in the gym, and they should have the option to pay about 20 percent more for that option, but these people are a small percentage and shouldn’t drive the entire pricing strategy.
- Month-to-month makes it so hard to ever borrow money or sell your gym. What buyer is going to pay you much for your business in the future when every client can walk out the door an hour after I buy the thing? What bank is going to loan you money when you have nothing of value to secure the note? Members on contract are worth a lot as a receivable base. Members just paying monthly have little value to a bank since it is nothing but cash flow that might just go away any day. The last blog in this series covered this topic in-depth. The short version is that month-to-month came from the 80s, was wildly copied, and ultimately faded because of the weakness it causes in the business.
The concept that is hard to kill and rises yet again. Circuit training, where the client travels through a series of machines or workouts in a standardized set pattern, started back in the 50s of last century. The gym saved immense labor costs since the client just did his own thing and didn’t need supervision or help.
Curves made circuit training popular and reached a peak of over 10,000 units worldwide and then faded. The client outgrew the technology and the company failed to evolve.
Mainstream players keep the concept alive and about 94 percent of a mainstream gym’s population practices do-it-yourself fitness doing some form of machine circuit.
And now we are on to the current circuit players, such as F45 and Orange Theory. Same concept, but is the product both companies offer anything more than a circuit where the client completes a set course under the supervision of a single trainer, or worse, just follows along on a television? Circuit training is still alive today, but has simply been repackaged again for a newer generation that hasn’t been bored to death by the repetition from the old days.
It is important to note here that single methodology gym businesses always fail over time. Circuit training, my only offering and trick in this business, gets boring and the clients move on to something else. Kettle bell gyms, cycle-only studios, most mind/body businesses and any other gym business that only offers a single method or approach always fail, and will always fail, simply because the clients evolve and the gyms never do.
One-on-one training has its place. You have a small percentage of clients who are sports specific people and need a directed approach, you have medical issues where the client needs more intense supervision, and you have the wealthy client that has so much money that he or she just has to give you some for an hour of your time.
But overall, old school one-on-one training is still the least effective thing you can offer and do in a training-centric gym business. There are not enough hours in a week you can work, and few coaches can charge enough over time, to make this concept work. One-on-one coaching is simply too labor intensive and has too low of a financial ceiling to work as a business concept in today’s market.
Yet we keep chasing the idea. There are gurus who still sell their secrets to finding the clients you need, how to charge, how to keep them paying, but all of this if even done correctly is a very small way to make a living compared to a gym owner who has mastered small group and team and that can generate $1.2 million a year or more with only 300 or so clients.
Making a $100k a year is great money when you are single and in your 20s, but add a few kids, a mortgage and a life in your 30s and beyond, then working 50-60 hours per week, six days a week, eating out of plastic bowls and working endless split shifts ultimately just to chase a hand full of one-on-one clients wears your ass out.
The old 3/6/12 pricing strategy
This another plan rediscovered after being introduced in the 1960s, failed over time and yet here it is, alive and well in small training gyms everywhere.
The method works on the strategy that the longer you commit, the less you pay per month. Sounds logical, but this method has the same weaknesses as most of the rest in that the emphasis is put on price, not what you get for the price, and as in the 1/2/3 times per week method, the client always grabs the middle option. For example:
3 months @ $99 per month
6 months @ $89 per month
12 months @ $79 per month
So is this gym, and these coaches, worth $79, $89 or $99 per month? This method makes it about price and absolutely kills your credibility as a coach or owner since your value is now placed on a sliding scale. Pricing here is a gimmick and lowers the perceived value of who you are and what you offer. And it doesn’t work over time.
The clients pick the shorter agreements and then you have the same problem as the month-to-month, where all of your clients are now on short-term agreements and can just walkout if things change and you have no time to fight back since all agreements are based on just a few months.
The safest thing you can do in your business, and the most profitable over time, is to create a strong receivable base where your clients have some type of obligation that allows you to project your income into the future.
Most of these very old methods are the result of a poor sales system and were created to overcome that major weakness. Pressuring a potential client to become a member of your gym during his first visit always leads to a reduction in your ability to charge and price logically for the business, since you have to continually lower the price to overcome the fact no one on your team can properly track, follow up and sign up a client at a fair price.
If you start every client with an extended trial membership of somewhere between 15-30 days, pricing objections should never occur. Yes, some people simply can’t afford to be a client of your gym, but that does not mean you should lower the price to the lowest rate possible hoping to attract every single person who ever walks in the door. Some people just don’t have enough money to be your client and that is fine if you understand you can’t be everything to everybody.
Any business can be fixed. Start with the pricing strategy first. How you collect, how you charge and what you get for the money is the foundation of any gym business. Get this right, and you can screw up a lot of other things and stay in business. Get this wrong, and the business will always ultimately fail.
May 18, 2018 at 3:32 pm
More great insight, as always, Coach. Thanks!
July 11, 2018 at 3:55 pm
“The safest thing you can do in your business, and the most profitable over time, is to create a strong receivable base where your clients have some type of obligation that allows you to project your income into the future.”
What do you mean by a strong “receivable base”? Thank you.
July 18, 2018 at 11:54 am
If your total amount of member payments each month covers your overhead including salaries and after collection expense, then you have a strong receivable base. Receivable base is defined in this blog as well.