In order to get a new program up and running in a fitness facility, program directors sometimes make knee-jerk decisions and set prices without much research so that they can begin promoting the program. With a little planning, you can learn where your prices should fit within the market and avoid either over- or (worse) underpricing your services. If you set prices too high, you can always lower the fees or run sale pricing. However, it can be more challenging to wiggle out of underpricing.
If you set the bar too low at the start, it may be very difficult to raise prices without hearing complaints from your members or even losing customers.
The first step in price setting is to study your client demographic and determine your members’ fee-for-service “pain threshold.” What are clients willing to pay for similar services? For instance, what do they pay for personal training or massage therapy? It might also be helpful to research pricing of personal services outside the fitness industry. Try to determine how much your customers pay to get a haircut, a facial or other personal services.
Competitors and Customers
You’d Better Shop Around. Because your most savvy customers will hunt for a bargain, be sure you always shop your competition as part of your research. Call and visit other fitness facilities, small personal training studios and spas that offer similar fitness services. Check the prices of at least 10 or more of your competitors within a 25-mile radius of your facility. You may find that prices differ significantly for the same service.
Examine Your Program Structure. Once you have a comprehensive list of prices, how do you decide where your pricing fits? Your program structure will be a key component in your decision process. Are your group classes small or large? If you limit your classes to a certain number of participants, then you can feel justified in charging a higher premium based on the more individualized nature of the instruction. When you begin to market the program, list such details prominently, so clients know exactly why the program is priced as it is.
Train Staff to Deliver Value. Clients will be more willing to part with their hard-earned dollars if they feel supported in their efforts to improve their bodies through your staff’s service-oriented approach. Personalized attention is what makes the difference, not only in the fitness industry, but in any service industry. If you look at other service business models, you’ll discover that it’s not necessarily the company with the lowest prices that is most successful.
When you pick a personal service, do you base it solely on price? Put yourself in the consumer’s shoes for a moment. If the pipes in your house were leaking, would you necessarily trust the repair job to the lowest-priced plumber? When you get your hair cut, do you jump at the lowest price, or are you willing to pay more for your stylist’s specialized experience and “chairside manner”? Most people choose services based on relationships, not price.
The third step in price pointing is to study your front-end costs—the amount it will take to get the program up and running—and the back-end costs, which will sustain your program. Consider the following categories as part of your cost of doing business and include them in your pricing.
1. Staff Education. Structure your budget to cover either some or all of the cost of instructor training, without expecting reimbursement from your staff. (My preference is to pay only a portion of the cost in order to create a sense of value in the education.) In addition, draw up a contract with your instructors that includes a repayment clause, in case they decide to quit within a certain time period after their training is paid for. Be judicious in selecting candidates for training. Often, a facility pays for an instructor’s training only to find that the trainee cannot commit time and energy to the program because he or she is too busy in other areas of the company.
2. Equipment. This expense should include all accessories and shipping costs. Also, time spent researching equipment is often overlooked as an expense in this category. Include in your calculations any time—or the financial equivalent of the time—that directors or managers have spent on the phone with equipment company representatives, at fitness conferences and so on.
3. Room Preparation. If you have created or remodeled a space designated for mind-body fitness within your facility, include all costs, down to the smallest detail (special flooring,
carpeting, painting, lighting and music, for example).
4. Marketing. This category includes internal signage as well as print and radio ads. If you have marketing staff, and they worked on creating a campaign, include the cost of their time.
1. Labor Costs. How do you pay your instructors? If you need your staff to help with marketing the program, it may work best to give them a split of the program’s income. Giving your instructors ownership and financial incentive to make the program succeed can provide ongoing motivation to promote it. A potential downside of sharing a percentage with instructors is that if the program really takes off, you will “lose” a portion of the profits. You can always start your program by profit sharing and adjust accordingly. When the program grows, consider giving new instructors a flat rate per session. Keep in mind that labor costs should never exceed 60% of gross income.
2. Equipment Maintenance. Most mind-body programming requires limited equipment, with the exception of Pilates. Pilates equipment is surprisingly low maintenance, but it does require regular cleaning. Include weekly equipment cleaning in your instructors’ job descriptions. Regular maintenance is not only crucial to client safety; it also helps minimize breakage and downtime.
3. Equipment Add-Ons and Accessories. In the happy event that your program realizes wild popularity and profit, you’ll need to consider equipment “add-ons” to keep sessions feeling valuable and challenging for participants. Expense planning can include new items like yoga blocks, mats and foam rollers.
Once you have completed your research and totaled your expenses to start the program, you’re ready to set financial goals for the program. Identify a timetable in which you want to earn back your front-end expenses and begin to see a profit. Next, calculate the number of sessions it will take to realize this goal. This will let you determine if your goal is achievable within your chosen time frame. If the goal is too lofty, you can move the goal date ahead, add more sessions into the proposed schedule or raise the per-session price.
This type of extensive research may seem like time-consuming drudgery, but it eliminates many potential problems and helps strategize a solid game plan for pricing the program and preparing your staff.
Getting Your Staff Onboard
Helping your staff understand the psychology of customer purchasing decisions is crucial to increasing sales. Use your sales team to conduct in-house sales training for your instructors.
You can hire the best mind-body staff, but if they don’t know how to sell the program or how to up-sell customers into better packages, they may be doing more harm than good.
Here’s an example: Suppose you have a Pilates instructor who can’t get enough people signed up for a mat class. She has four people who have paid and registered on time, but on the first day of class, no one else has signed up. Would your first instinct be to cancel the class and reschedule, hoping it would fill up more? Would you actually turn away four customers whose money and interest you already had?
A good solution would be to pick a new date for the next class and have the instructor call the four members to see if she could interest them in applying their prepaid fee to a private or semiprivate session. These customers have already paid and want to begin the class, so why not try to up-sell them on a more personalized package? If you ask customers to wait, they may decide not to try the class, try a class somewhere else or lose interest altogether. Your program and your facility lose in all three scenarios. Once you capture a customer’s interest and dollars, find a way to keep them.
Marci Clark is an international fitness presenter, CEO of PowerHouse Pilates LLC and coauthor of two Pilates manuals. She regularly presents Pilates workshops and gives lectures on fitness industry business and management topics. Contact her at email@example.com.
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