The science of pricing: Clubs need to be tuned in to the quality and volume of supply and demand
NEIL HARMSWORTH payasUgym • Co-founder
“D
iscounting is a legitimate and effective pricing strategy if
services are not overpriced to begin with, so the discount is credible to the consumer. Our data suggests that 20 per cent is the optimum discount to encourage a purchasing decision, provided the original price is realistic. However, there’s a problem in the fitness industry of
clubs starting with prohibitively high prices and offering huge discounts of 50 per cent or more to impress the customer. Customers simply see through the original inflated price and consider the discounted price to be a more realistic price point. This is not so much brand erosion as an enforced, realistic price reset. If you set the right price to begin with, rather than adding a margin to make your business work, you will be better placed to discount strategically. Customers want a clear understanding of what they will pay
each month, and it must offer value for money. The industry also needs to be less secretive about how it projects itself online and be transparent about prices. People no longer want to negotiate membership on an old-fashioned tour: our research highlights an 80 per cent decline in walk-in custom in the last 18 months, while online searches for gym membership increased by 70 per cent.
” January 2014 © Cybertrek 2014
DAVE STALKER ukactive • CEO
“P
ricing is a science, inherently linked to the quality and volume of supply
and demand. If you have an incredibly high quality and effective service in an area in which people demand it, you can charge what you wish. Provide something of dubious value in a competitive market and expect to have to discount. Altering price is a strategic decision which every operator
has to make. Although it can be tempting to make a tactical discount, especially in summer, is this sustainable? Do you want to be known as an operator that reduces its monthly fees to get customers? Or should you look at pricing strategies focused on retention, to keep a member at the moment their wandering eyes begin to look elsewhere? Your service is still not valued by the vast majority of people
in your local community – that’s why we’re stuck at a glass ceiling of 12 per cent penetration. We’ve seen the dramatic success budget operators have had in attracting non-exercisers through the door, and a number of pricing promotions have also enjoyed great success in this respect. However, the challenge then becomes supporting previously inactive people to sustain the commitment they’ve made – and that, I’m afraid, is an even more complex science than pricing.
” Read Health Club Management online at
healthclubmanagement.co.uk/digital 37
©
SHUTTERSTOCK.COM/DIEGO CERVO
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