I appreciate James’ comment on my last post. I might should have been better about how it was worded, with more of an emphasis on the lack of quality coaching that was being provided and less of an emphasis on the price. Equally poor coaching can and does go on at affiliates charging $150/month. I would also like to point out that the median household income in 2007 for the town of the affiliate I mentioned is $87,000.
The pricing issue is a fairly sensitive topic for me because we ourselves underpriced our services for YEARS. We live in Chico, CA a far-from-the-beach, rural town with a median household income of $36,205. When we opened we had “absurd” rates. We were convinced that we lived in a town full of broke college students and we priced ourselves accordingly. Students could train unlimited for $40/mo and we charged $75/mo for adults.
Our poor mindset about the town’s population was one issue, and our reluctance and lack of confidence to charge what we were worth was yet another. Our pricing structure was tough for a number of reasons…here are a few things that come to mind:
For one, it’s not that much more than a regular gym…so there was no real perceived difference in the value of what we were offering. We used to hear this all the time: “Well I can take classes at my gym and they have a pool, blah, blah, blah.” This was back when CF was virtually unheard of…there were about 8 affiliates and a handful of internet geeks like my husband who were tinkering with it. It wasn’t until we offered private training first and then moved folks into group classes did they understand that our classes are FUN and alot like private training…tons of coaching and attention, and therefore worth every penny.
We got up at 5 am and trained folks from 6-9am and then went to other jobs and then were back at the gym from 4-7pm. We did this for 2 years, barely getting by. We had students that would complain about the price and then show up with a brand new $3K mountain bike and Patagonia gear. Finally, a friend of ours pointed out that there was a guy in town with a private training only business who charged $500/mo for 3 days a week of training. We were stunned. Literally. Who could afford to pay that in our town? Well, plenty of people as it turns out. It was at this point that we shifted our pricing and our model.
At $75/mo unlimited folks coming 5 days a week are effectively paying $3.75 per class. There is no other instructed/coached fitness class that is priced like that (yoga/pilates/martial arts, etc). A 15 person class earns you about $56 for that hour. The return on your time is greater if you do private and semi-private training.
Probably 1/3 of our clients are blue-collar clients and students. One of our trainers has a schedule full of elementary school teachers who pay $240/mo for small group training.
There is another important point to be made here. If your business is making enough money you have a lot more latitude to help folks that need help. You can offer scholarship memberships for kids whose families can’t afford to pay for training and you can have sliding fee schedules, etc. It’s much harder to offer these things when overhead isn’t being met.
Now if we’ve learned one lesson it’s this: Don’t raise prices on your current members. If you are thinking of raising your rates, let your members know that they are grandfathered in at their current rate for as long as they want to train with you, but that your rates for new clients are now $X. We made that mistake in 2006 and it was completely and utterly stupid in hindsight.
Now, different towns definitely have different demographics and can certainly command different price points. That said, if we in Chico can charge $134-$160 for 2-3 days/week of training, I believe most other folks can too.
So, I guess on the flip side of the pricing topic…It breaks my heart to see good coaches undervalue their services.