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Health Club Management

Health Club Management

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UNITING THE WORLD OF FITNESS
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Health Club Management

Health Club Management

features

Putting up prices

Are you charging the right price at your club? How do you know when is the right time to put prices up, and how much should they increase by?

By Kath Hudson | Published in Health Club Management 2013 issue 7

Plenty of other industries are bullish about putting their prices up, pointing to inflation and rising costs to justify their decision. But with the advent of budget clubs in the health and fitness industry making it harder than ever for other operators to get their share of the 12 per cent of the population who will pay for a health club membership, it has become a price war.

In this economic climate, and with consumers ever more price-sensitive, how can a health club operator raise prices? Is it possible to introduce an increase in membership fees without adding value in some way to justify this?

Will even the budget operators have to consider price rises in the future? One has to question quite how long they can sustain rock-bottom membership rates with rent and energy prices rising – but does a price increase go against the very ethos of a budget club?

Another consideration is whether a price increase will even improve the profitability of a club. There’s a chance that a letter informing members of a price hike could prompt sleeping members to cancel their memberships, while price-conscious or unhappy members might go elsewhere. If this is the case, will attrition – and the cost of replacing lost members – negate the benefit of the price increase?

If you’re going to raise memberships, how do you go about it? Is a letter enough, or does there need to be face-to-face discussion with members?

Should price rises be universally implemented, or should loyal members get preferential treatment? And what research needs to take place prior to a price increase? Are high satisfaction levels a vital prerequisite, and should clubs first survey members for their thoughts on the service and facilities?

What about the competition? How much do your fees depend on what others are charging locally? We ask the experts.

Giles Shapley,

Customer Development Director,

Network Research

Giles Shapley
Giles Shapley

“Prior to a price increase, it’s critical to understand the local competition and what other clubs are charging for a comparable membership, so that a price increase does not render your club uncompetitive.

However, it’s also very important that the club is fulfilling the expectations of its members at the current price. If not, it becomes very hard to justify a price increase. The only real way of knowing if members are satisfied is continuously asking for feedback. You need to know what your customers are thinking and saying about the business before progressing.

Members should ideally be informed before any price rise, perhaps notifying them in writing some time in advance. This should outline the increase and emphasise the benefits members are getting from the club, specifically those that differentiate it from other gyms in the area. Managers must also be equipped to deal with any isolated complaints.

Chains have the choice to implement price rises nationally, locally or to a specific group of members, such as new members. It’s vital to monitor the impact of raising prices and the resulting membership churn, which could be ascertained through single club trials before rolling out to the rest of the estate.”

John Treharne,

Founder and CEO,

The Gym Group

John Treharne
John Treharne

“When setting membership fees for our sites, we use data from demographic and postcode analysis pricing software and map this against local markets to ensure our pricing remains competitive. As a result, our membership fees vary geographically and even from site to site.
There’s less scope for a price rise in the budget sector. It’s interesting to note that Germany’s largest low-cost operator, McFit, has only increased prices by €1 in its 16-year history.

If the demographic in an area were to change, or the business were to be hit by significant and uncontrollable cost increases, we might be forced to consider a marginal price increase for new members. However, we believe in rewarding loyalty, so increasing the membership fees of existing members will always be a last resort for us.

Through experience gained when operating the chain of 22 Dragons Health Clubs in the 1990s, I’m conscious of the fact that the short-term financial gain achieved by a mandatory fee increase across the board is often offset by an increase in member attrition. The decrease in membership income and the increase in marketing costs associated with attracting new members often cancels out the benefits of the price increase.”

Tim Baker,

Director,

Touchstone Partners

“Clubs shouldn’t be frightened about price increases: it’s a perfectly reasonable thing to do and everybody’s aware that price increases are a fact of life. However, it’s important to understand the membership and the local competition first.

Clubs must be aware of why their members come to them and what they’re saying about them. However, if you don’t already know your members, don’t do a survey right before a price increase; it will make them wary of any future surveys. There’s more scope for a price increase with loyal members, although it’s important not to exploit them. Clubs must also do a competition audit to see how they compare.

A one-off 5 per cent rise works better than nominal annual increases. Members should be sent a letter explaining the reasons for the rise. Options for member retention could also be offered, such as freezing their membership at the current rate if they pay for a year upfront.

It’s important to monitor the impact. Members should be classified into active, sleepers, reasonably active and so on. If too many leave from one group, they could be tempted back with some special offers. One downside of a price increase is that sleeping members are more likely to leave.”

Baard Windingstad,

CEO ,

Evo Fitness

“Only monopolies and the public sector can easily implement a price increase. In a competitive market like health and fitness, it’s important to balance the costs and margins of your business against what the competition is offering. Prior to an increase, clubs should know about each of these points.

Another issue for the health and fitness industry is that historically the business is known for its binding contracts, so clubs don’t actually know much about the loyalty of their members. Evo Fitness is built on a non-binding contract, so people can leave when they like. This means we have to keep standards high, and we also have to know our members.

At Evo Fitness, we have written into the contract that we can increase the price on an annual basis by up to 3 per cent, without any notice. This means that we can easily implement a price increase, because our members have agreed to the terms and conditions. Despite this, we have not increased the cost of memberships since 2010 because of the local competition. Our costs have gone up in this time, so our margins are being squeezed. As a result, we’re planning to introduce a less than 3 per cent rise next January. It’s a small increase because the market is tough, but we’re not expecting members to leave.”

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Are you charging the correct price for your club? How do you know when is the right time to put prices up, and how much should they increase by? We ask our panel
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features

Putting up prices

Are you charging the right price at your club? How do you know when is the right time to put prices up, and how much should they increase by?

By Kath Hudson | Published in Health Club Management 2013 issue 7

Plenty of other industries are bullish about putting their prices up, pointing to inflation and rising costs to justify their decision. But with the advent of budget clubs in the health and fitness industry making it harder than ever for other operators to get their share of the 12 per cent of the population who will pay for a health club membership, it has become a price war.

In this economic climate, and with consumers ever more price-sensitive, how can a health club operator raise prices? Is it possible to introduce an increase in membership fees without adding value in some way to justify this?

Will even the budget operators have to consider price rises in the future? One has to question quite how long they can sustain rock-bottom membership rates with rent and energy prices rising – but does a price increase go against the very ethos of a budget club?

Another consideration is whether a price increase will even improve the profitability of a club. There’s a chance that a letter informing members of a price hike could prompt sleeping members to cancel their memberships, while price-conscious or unhappy members might go elsewhere. If this is the case, will attrition – and the cost of replacing lost members – negate the benefit of the price increase?

If you’re going to raise memberships, how do you go about it? Is a letter enough, or does there need to be face-to-face discussion with members?

Should price rises be universally implemented, or should loyal members get preferential treatment? And what research needs to take place prior to a price increase? Are high satisfaction levels a vital prerequisite, and should clubs first survey members for their thoughts on the service and facilities?

What about the competition? How much do your fees depend on what others are charging locally? We ask the experts.

Giles Shapley,

Customer Development Director,

Network Research

Giles Shapley
Giles Shapley

“Prior to a price increase, it’s critical to understand the local competition and what other clubs are charging for a comparable membership, so that a price increase does not render your club uncompetitive.

However, it’s also very important that the club is fulfilling the expectations of its members at the current price. If not, it becomes very hard to justify a price increase. The only real way of knowing if members are satisfied is continuously asking for feedback. You need to know what your customers are thinking and saying about the business before progressing.

Members should ideally be informed before any price rise, perhaps notifying them in writing some time in advance. This should outline the increase and emphasise the benefits members are getting from the club, specifically those that differentiate it from other gyms in the area. Managers must also be equipped to deal with any isolated complaints.

Chains have the choice to implement price rises nationally, locally or to a specific group of members, such as new members. It’s vital to monitor the impact of raising prices and the resulting membership churn, which could be ascertained through single club trials before rolling out to the rest of the estate.”

John Treharne,

Founder and CEO,

The Gym Group

John Treharne
John Treharne

“When setting membership fees for our sites, we use data from demographic and postcode analysis pricing software and map this against local markets to ensure our pricing remains competitive. As a result, our membership fees vary geographically and even from site to site.
There’s less scope for a price rise in the budget sector. It’s interesting to note that Germany’s largest low-cost operator, McFit, has only increased prices by €1 in its 16-year history.

If the demographic in an area were to change, or the business were to be hit by significant and uncontrollable cost increases, we might be forced to consider a marginal price increase for new members. However, we believe in rewarding loyalty, so increasing the membership fees of existing members will always be a last resort for us.

Through experience gained when operating the chain of 22 Dragons Health Clubs in the 1990s, I’m conscious of the fact that the short-term financial gain achieved by a mandatory fee increase across the board is often offset by an increase in member attrition. The decrease in membership income and the increase in marketing costs associated with attracting new members often cancels out the benefits of the price increase.”

Tim Baker,

Director,

Touchstone Partners

“Clubs shouldn’t be frightened about price increases: it’s a perfectly reasonable thing to do and everybody’s aware that price increases are a fact of life. However, it’s important to understand the membership and the local competition first.

Clubs must be aware of why their members come to them and what they’re saying about them. However, if you don’t already know your members, don’t do a survey right before a price increase; it will make them wary of any future surveys. There’s more scope for a price increase with loyal members, although it’s important not to exploit them. Clubs must also do a competition audit to see how they compare.

A one-off 5 per cent rise works better than nominal annual increases. Members should be sent a letter explaining the reasons for the rise. Options for member retention could also be offered, such as freezing their membership at the current rate if they pay for a year upfront.

It’s important to monitor the impact. Members should be classified into active, sleepers, reasonably active and so on. If too many leave from one group, they could be tempted back with some special offers. One downside of a price increase is that sleeping members are more likely to leave.”

Baard Windingstad,

CEO ,

Evo Fitness

“Only monopolies and the public sector can easily implement a price increase. In a competitive market like health and fitness, it’s important to balance the costs and margins of your business against what the competition is offering. Prior to an increase, clubs should know about each of these points.

Another issue for the health and fitness industry is that historically the business is known for its binding contracts, so clubs don’t actually know much about the loyalty of their members. Evo Fitness is built on a non-binding contract, so people can leave when they like. This means we have to keep standards high, and we also have to know our members.

At Evo Fitness, we have written into the contract that we can increase the price on an annual basis by up to 3 per cent, without any notice. This means that we can easily implement a price increase, because our members have agreed to the terms and conditions. Despite this, we have not increased the cost of memberships since 2010 because of the local competition. Our costs have gone up in this time, so our margins are being squeezed. As a result, we’re planning to introduce a less than 3 per cent rise next January. It’s a small increase because the market is tough, but we’re not expecting members to leave.”

Sign up here to get HCM's weekly ezine and every issue of HCM magazine free on digital.
http://www.leisureopportunities.com/images/HCM2013_7talk.gif
Are you charging the correct price for your club? How do you know when is the right time to put prices up, and how much should they increase by? We ask our panel
Latest News
In-home personal training brand GymGuyz has entered the UK market after selling its first two ...
Latest News
The fitness sector has been left "without answers or evidence" on why gyms and leisure ...
Latest News
Boutique operator Digme Fitness will open two new studios in London over the next two ...
Latest News
A government investment of £1.75bn – to pay 50 per cent of rents across the ...
Latest News
Health clubs and gyms in Catalonia have reopened their doors once for a second time, ...
Latest News
Health clubs, gyms, indoor pools and leisure centres have reopened in Wales – nearly five ...
Latest News
Today (10 August) is the last day for companies to enter the follow-up survey to ...
Latest News
A significant proportion of leisure facilities in England have not reopened since lockdown measures were ...
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Industry body, ukactive, has questioned the decision to close gyms and health clubs as part ...
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promotion
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Opinion: Up your ‘data game’ to successfully relaunch your fitness business
Opinion
promotion
Evidence suggests that over many years personal trainers have been forced to leave the fitness industry because employment patterns are erratic, earnings are inconsistent and it is difficult to build up value needed to secure an appropriate lifestyle.
Opinion: Personal trainers need support as employment opportunities diminish: FREE on-demand webinar
Featured supplier news
Featured supplier: The rise of the training pod
Belfast based gym equipment manufacturer BLK BOX designs, engineers and fabricates a range of rigs for the most elite, performance-driven organisations globally.
Featured supplier news
Featured supplier: Let's get restarted: Physical Company offers advice on keeping gym members safe
As countries around the world gear up to relax their lockdown rules, there remains a question mark over gyms and studios, which in many markets will be one of the last sectors to be given the green light.
Video Gallery
THROWDOWN
Core Health & Fitness
Throwdown® creates opportunities to push boundaries by enabling everyone to reach their peak performance. Read more
More videos:
Company profiles
Company profile: Wattbike
Wattbike is the creator of the world’s most advanced and innovative indoor bikes, developed in ...
Company profiles
Company profile: EXF Fitness
EXF offer so much more than modular systems and pick and mix installations, they don’t ...
Supplier Showcases
Supplier showcase - Speedflex
Catalogue Gallery
Click on a catalogue to view it online
Directory
Independent service & maintenance
Servicesport UK Limited: Independent service & maintenance
Spa software
SpaBooker: Spa software
Fitness Software
FunXtion International BV: Fitness Software
Flooring
Total Vibration Solutions / TVS Sports Surfaces: Flooring
Design consultants
Zynk Design Consultants: Design consultants
Trade associations
International SPA Association - iSPA: Trade associations
Direct debit solutions
Harlands Group: Direct debit solutions
Lockers/interior design
Fitlockers: Lockers/interior design
Skincare
Comfort Zone - Davines S.p.A: Skincare
Wearable technology solutions
MyZone: Wearable technology solutions
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Waltham Abbey, Essex
Lee Valley Regional Park Authority
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Diary dates
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Loews Coronado Bay Resort, Coronado, United States
Diary dates
21-24 Sep 2020
Messe Stuttgart, Germany
Diary dates
22-23 Sep 2020
Heythrop Park, United Kingdom
Diary dates
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Pinggu, Beijing, China
Diary dates
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Online,
Diary dates
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Athena, Leicester, United Kingdom
Diary dates
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IFEMA, Madrid, Spain
Diary dates
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Diary dates
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Diary dates
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Diary dates
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