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The Price is Right?
By Patricia Amend
What’s the best way to determine the appropriate price
point for your membership? Should you, for example,
“bundle” it with personal training and charge a
higher price, or charge less and sell such services
separately? Experts agree that your price doesn’t
just affect your bottom line; it tells the marketplace
what type of club you operate and who your
target market is. Here, two of the industry’s
best-known consultants discuss how to set
the “right price.”
Research your market. “People often tell me they know
their market, and yet they haven’t done the research,”
says Rick Caro, president of Management Vision, Inc.,
an industry consulting firm in New York City. “Market
research and analysis can help determine your market
potential, and may show, for example, that your
market is stronger than you think, thus allowing for
higher pricing.”
Research the area that spans 6-8 minutes of travel
time (walking or driving) from your club, says Mike Chaet,
founder and president of CMS, Inc., a health club
consultancy based in Helena, Montana. “This is your
market, from which you’ll get 80% of your members.”
Include demographics, such as educational attainment,
occupation, age, ethnicity, and family income.
Position yourself to prevent price competition. Use this
research to position yourself clearly in your market,
Caro urges. “If you don’t, the market will view you
as similar to other clubs, and you may find yourself
adjusting your joining fees and monthly dues slightly,
in an attempt to differentiate yourself from the competition.
Before long, you’ll be fighting the game of who
has the deeper pockets.”
Charge what you’re worth. Once positioned, Caro
advises doing a good job of promoting your programs
and services, and setting prices that reflect your positioning
and inherent value. “If, for example, you charge
upfront fees, you’re telling the membership that your
club is worth that initial investment. They will have a
| IHRSA Report | Club Advisor
Price
Boutique Clubs
Big Box Clubs
Larger Chains
YMCAs
Hotel Club Membership
Recreation Centers
School Fitness Centers
Free Condo/Apt. Clubs
Free Hotel Clubs
Guest
FREE MODEST MIDLINE UPPER END
HIGH PERSONAL
SERVICE
Service
Positioning Triad
www.ihrsa.org | MARCH 2008 | Club Business International 177
GENERAL
SERVICE
VERY LOW
SERVICE
NONE OR SELF
Graphic by CMS International
stake and will be less likely to resign, especially in the
beginning. If you don’t, you’re telling them that your
club is not worth it.”
Bundle memberships—or not. When it comes to setting
the actual price, Chaet points out that the more education
and income people have, the greater the chance that
they will pay a higher price for a “bundled” membership
that includes some services. He offers the “Price/ Service
Positioning Triad” (above), with high-service clubs at
the top, and YMCAs and recreation centers at the bottom.
“Americans spend an average of 1.2% of their household
income on dues and other services in a health club. A
household with $80,000 in income may spend as little
as $800 or as much as $1,600 per year. If that’s your
market, you may want to bundle your membership to
include personal training or other services. However,
if your member income level is $40,000-$80,000, and
the member education level is lower, then you may
want to offer a stripped-down membership, with
services that people can add if they choose.
Communicate price changes. When you must raise
prices, be sure to inform members of the reasons behind
the increase, so they continue to understand the price/
value relationship in your club, Caro recommends.
“Find out how members want to be communicated
with—via your Website, a flyer, a bulletin board—and
tell them about improvements that matter to them. If
you don’t, then even a $2 per month increase will be
upsetting to some.” —|