Called out…Some points to make about pricing

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.

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15 Responses to Called out…Some points to make about pricing

  1. Peter Haas says:

    Great post. Excellent response to James’s comment.

    As you showed, the numbers for $75/mo do not work. At that point, its a labor of love (which is fine it that’s what you want).

    Totally agree with not raising rates on your current members. We valued the sacrifice and dedication that our clients showed when they came with us to our new box. We emphasized that point when we told them that they were grandfathered in to their old rates, and they seemed to appreciate it. And by appreciate I mean they told more people about us and we added people at the new rate.

    Glad to see the flurry of recent posts and articles in PMenu. Thanks for the insights.

    Thanks Peter!

  2. katrina says:

    Thanks for the post, Nicki. Very insightful and helpful, as always. I agree 100% with grandfathering-in current members and locking in their membership rate. How do you handle members that leave and then come back in a few months? That doesn’t happen often with us, but when it does it’s hard to know how to price it.

    Thanks Katrina,
    You know, I think the way you handle a member that leaves and comes back is completely up to you…I’m inclined to say keep them where they were…unless they were a pain in the ass :)

  3. George says:

    Most helpful blog and outstanding article in Performance Menu!

    Re: On Ramp. What do you tell potential clients that insist they can only come twice a week? Do you modify the On Ramp for them?

    What distinctions do you draw between On Ramp and Elements? Do all On Ramp graduates participate in Elements?

    Do you have any suggestions for implementing On Ramp during group sessions for a box that’s less than 1,000 square feet? (other than move. )

    Thanks!

    Hi George,
    Folks either need to make the On Ramp a priority and attend all of the sessions, or they need to do private training around their schedule. Each day of the curriculum is important and if they can’t make it they need to make it up in PT.

    Difference between On Ramp and Elements:
    On Ramp – first exposure to all of the movements, gradual increase in intensity, etc. After On Ramp folks graduate into Elements….or very rarely Level 1.
    Elements – continue to build on strength and skill base and work capacity etc. An Elements client might not have sufficient pullups or strength to be in level 1. In fact, some folks are Elements clients for A LONG time. We also will recommend that some folks re-take the On Ramp before going into Elements (really out of shape folks who are struggling with range of movement, etc.)

    As for running an On Ramp during your group classes in 1000ft…it can be done if you have another coach or two, but why not just have a separate time for your On Ramp class at this point? Maybe after your last evening class?

    Hope that helps!

  4. chris says:

    When refering to the increasing old members rates, do you mean this in the general sense? For instance my team just moved into a new facility, its a bigger space, meaning more rent, we want new toys etc, want to open more classes, so we thought a possible 5-10 dollar increase isnt so bad (??) Basically I work at an Xfit and work at a globo gym, people in Xfit drop $150 for unlimited for what I think is a great/better product offered. People at globo gym drop $280-480 for private and semi private + regular f’d up gym fees. To me its seems like the economy isnt affecting everyone so bad. They keep referencing this on the main site (globo gyms shutting down, Xfit gyms increasing memebers) I totally know you are a smarter business person than me, so your opinion is way more valuable, which is why Im asking.
    Thanks for your time.
    Nicki= awesome!

    Hey Chris…I’m not smarter, I’ve just likely f*d up alot more stuff than you and learned the hard way :)
    I would be hesitant to raise rates on your existing clients. If you need to hussle more to meet overhead and new equipment expenses for your new box than that’s what you need to do…pissing off your current clients at this point is not a good idea. I know $5-10 bucks doesn’t seem like a lot but the fact of the matter is that people REALLY don’t like change…especially when it affects their pocketbook.

    Offer some private training CF style…offer a beginner workshop (On Ramp)…tell your current clients that you’re moving and it’s going to be totally righteous but you need more clients (ask for referrals). Do anything/offer anything to bring in additional revenue before you even think of raising their rates. Besides, if you tell them your rates are increasing for new folks but that theirs will not change they will feel awesome and love you more for that!

    Nicki

  5. Dave says:

    I heart Nicki

    Dave!
    I’m honored that you’re reading my blog!

  6. Graeme says:

    Hey, great blog, I’m not a trainer or affiliate owner but I find the entire world of CF very interesting including the business aspects, which is why I follow your blog.

    Regarding your last post about the affiliate with garbage coaching undercutting rates, I fear that is going to become a greater problem the more popular CF gets. As CF grows and grows, you will have a larger segment of the community which doesn’t “get” it, and is just in because of the buzz. Those are the types of people who would do something so ridiculous as not coach, because they are not passioniate about it.

    This is one of the downsides (as everyone knows) of the affiliate model. I don’t know the legal framework very well, but I assume that HQ cannot really impose quality control measures on the affiliates (or else it would be a franchise model, which it is not).

    In the end, if you believe in the market, people will seek out quality (as long as they know what quality is) and those garbage boxes will close. It should be very apparent to most, the value of real high quality coaching.

    Cheers

  7. James says:

    Thanks for the follow-up. Seems like I’m constantly getting emails from other affiliates complaining about the $75/month thing, and never have these people ever walked in our shoes.

    Here’s the real numbers for those who think it’s “impossible” to supply great coaching for $75. In a small town with cheap rent, we have low fixed costs and very low overhead. We aren’t offering a flashy, urban style crossfit like many others with a 1 to 3 trainer/client ratio, massage therapy, and a body-fat tank. We are similar to a small-town doctor in that we are still experts, we offer great training and at a rate consistent with other local, small businesses. If you go farther into Atlanta, housing prices go up and so does cost of living – but so does salary. Don’t compare your apples with my oranges. My numbers work and we are debt free and profitable after only being open 6-months. 150 members at $75/month with a 1-year agreement is plenty for us to cover expenses, pay our trainers and live comfortably. If it was all about the money, I would have kept my corporate job and stayed miserable. I’m happy reading about everyone’s success stories but please be equally happy about ours.

  8. Dave says:

    Honored?
    Why? I relish witty banter and verbal jousting.

    I know this…but the fact of the matter is there are many places you could be spending time jousting verbally…and you are here :)

  9. Dave says:

    Nicki said, “An Elements client might not have sufficient pullups or strength to be in level 1. In fact, some folks are Elements clients for A LONG time.” That would be ME. =)

    While the trainers reading this blog probably already know this, every client is different, and some of us are really stubborn and slothlike in our ability to change. I first started private training with Nicki over 2 years ago. I weighed 325 lbs, and could not do a single pushup. There was no way I would have survived the “ramp up” class. It took a long time and a lot of support from Nicki for me to even start to be able to do the basic requirements of the elements class.

    For me, graduating to the elements class was pretty much the culmination of what I was HOPING to accomplish with X-fit. I was able to again lead my life without having to avoid stairs and long walks. So while I know the general “goal” is to get clients up to a Level 1 fitness level, (which I even hope to accomplish someday), right now that IS NOT what I am working on. I am still working on being able to do my first kipping pull up. My slow and continued progress is not indicative of a failing in Nicki, but rather of an incredible success that I was not able to achieve through previous diets, work out routines, etc. So please don’t get too caught up in “How long it takes” for clients to progress”, but rather just concentrate as Nicki has done with me, and make sure that progress continues to happen, and that reasonable goals and benchmarks are set that will help encourage the client, not discourage them.

    With a whole lot of support, (i.e. Nicki pushing, arguing, and guilting me), into finally making some major changes in my diet and lifestyle, I have lost 65 lbs and am only 15 pounds away from my initial goal. For me, my wife, and our grandkids, simply having my health and the energy to enjoy life again is better than any Level 1 that I might ever achieve.

    Thanks Dave! I am truly excited by the success you’ve had in the last 5 months! As for the pushing/arguing/guilting…since I was dealing with an attorney, I had no choice but to default to those :)

  10. Billy Wiland says:

    Nicki ~ Regarding raising the price so that value is also raised: wonderful insight! And I appreciate your taking it on the chin for us so that we can now learn from your mistakes! …we will be much the wiser to grandfather in our present clients… allowing them to feel warm and fuzzy, creating more value… and more cash-flow our CF facility via the new clients :)
    Highest Regards & Semper Fidelis ~

  11. Chade says:

    I enjoyed the post (found it from the CF main site), my only comment would be that even your original or “old” members should be paying a “cost of doing business” increase each year. I whole heartedly agree you should not hammer them with a massive raise in rates, but an annual increase in 3-5% should be the norm. This raise covers your increases in rent, utilities, etc, and saves you from having to drop a huge increase on them every couple of years.

    Glad I found your blog. I’m going to be reading it more often.

    Chad

  12. Rutman says:

    Excellent! The pricing logic is spot on. People have money it’s all in how they value your service. Like you pointed out, they show up to your gym with new gear driving their BMW lease vehicles and then race off to the country club to play golf.

  13. Pman says:

    Nicki,

    Thank you for this great article. For those of us who have started what I call “non traditional” fitness facilities, pricing and the services offered are often a result of trial and error as you said in this fantastic piece. The business model isn’t avaliable so you have to make it up as you go along.

  14. adam downing says:

    i am so glad i found your blog today. basiclaly read the whole thing in the last couple of hours. you are dead on with what you are talking about. i am glad that i was able to see your pricing strategy…we get it and are on board. here’s to making crossfit better and earning a sustainable wage.

    look forward to so much more!

  15. Nicki says:

    Adam,
    Glad you like the content and are finding it helpful! Best of luck!

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