Pricing to demand. Part 2

Listening to members
The demographics in the rural towns surrounding Clubfit practically dictate the dues system, Bohn says, because the blue-collar families that account for a large portion of the center’s 1,000 members would not belong to a health club if they had to pay up-front.

At the same time, Clubfit discovered that in order to serve potential members well, it needed more than a monthly payment system to encourage membership enrollment. Rather than set the payments and hope newcomers would go for them, Clubfit offers six pricing options to give members some control over their rates. Customers can choose between an 18-, 12- or six-month commitment with the same $75 enrollment fee. The monthly dues for each option decrease as the commitment time increases. Monthly dues vary for an individual, couple or family, and masters (age 55+) have a category of their own with a $25 enrollment fee plus monthly dues. Clubfit’s other membership options include a personal training package for a $250 flat rate and a non-prime-time, 18-month commitment for a $25 initiation fee plus monthly dues.

Similarly, the latest restructuring at Healthtrax added choices to the clubs’ membership options and acknowledged that consumers prefer not to pay for services they will never use. New England Health and Racquet clubs now offer the choice of paying for use of the fitness center and aerobics classes, the racquet sports facilities or the entire club with all the amenities. At the same time, Healthtrax facilities have responded to a demand for lower initial outlay by offering a deferment on monthly dues for two months, with a $129 down payment.

Both Clubfit and Healthtrax are doing what they can to make it worthwhile to sign a long-term agreement. According to Caro, this is one way clubs can exert some control over the consumer. He maintains that “pricing is a device that owners use to tell the marketplace what they want it to do.” In other words, if the market is demanding lower enrollment fees and monthly payment options, the owners answer with the yearly contracts and by telling the consumer they want a commitment. Depending on the message they want to give, some clubs may not offer discounts even if the dues are paid upfront, Caro says, because paying monthly brings some emotional commitment to the scenario.

Lombardi from Healthtrax makes this analogy: The person who buys a new home weight system works out diligently for a couple of months. “But once the pain of the sale is gone, the thing starts to gather cobwebs,” he says. A person who buys a club membership outright may feel the pain of dropping a lot of cash for two or three months and will visit the club regularly. More often than not, though, the commitment wanes and attendance is sporadic. However, the person who receives a credit card statement every four weeks showing fees paid to the club tends to recommit to working out on a monthly basis, Lombardi says.

Aero-Fitness Health Center, a corporate wellness center in Oklahoma City, Okla., inspired commitment from its members through a different sort of pricing method. The club, which serves the Federal Aviation Administration and other government employees, offered a sliding monthly fee to members who signed up in the center’s first year of operation. “We promoted the sliding fee as a first-year benefit and as a way to say thanks to those who joined us that year,” says Tom Conroy, the center’s fitness director.

FAA employees travel frequently, and the sliding fee was designed to encourage continued membership even if it meant being absent from Oklahoma City for two or three months at a time, Conroy says. After a $25 initiation fee, the monthly dues started at $15. The dues decreased each month of the first year and bottomed out at $12. The 1,000-member club now offers $18 monthly rates with no discounts.

Clubs ultimately have to make pricing decisions based on what works for the market in their area. It’s prudent to keep in mind, though, that benefitting from a fitness club takes work on the part of the consumer — he/she must be committed to actually perform the workout. And most Americans expect to be paid for their work. At health clubs that might mean through reduced enrollment fees, payment options or added services once inside the club.

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This entry was posted on Monday, October 22nd, 2012 at 2:48 pm and is filed under Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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