I’m sick and tired of hearing gym owners talk about wanting to change to a $10/month business model.
“Well Planet Fitness and every other cheap fitness center seems to be doing well, I think I’ll try that too.”
To me it’s laziness.
It takes a lot of effort and time to offer the best service in town. But it takes nothing to drop your price to $10 and watch the people rush to become members.
And there will be a rush, there always is when something with so much perceived value is offered at such a low price. But a) your gym is now full and everyone is pissed because they can’t get on any equipment, and b) you can’t afford enough staff to keep them all happy.
1. What stops the next gym from coming along and becoming the $9 business model in town. That will put you out of business real quick because the price sensitive people who join for $10 will certainly leave you for a cheaper price.
It blows my mind when people willingly get into a price war. No one wins in a price war. Even if you win, you lose because you’re stuck with a bunch of cheap people who crowd your gym and will question every time you try to charge them for something additional. Cheap prices attract cheap people.
2. You have no margins to be able to provide value to your members and clients. This is the biggest reason I see not to offer less than you are worth. It is 100% impossible to be the best service provider in town, as well as the lowest price. You just don’t have profits available to build a solid infrastructure.
Think about Walmart. Have you ever had an amazing customer service experience at Walmart? Of course not. Walmart makes very little profit from each store. In order to make any profit at all, they hire the worst of the worst. I hate Walmart. Not only does it attract smelly people, it attracts angry employees. If you increase profits, you increase the talent you have providing service.
3. You need volume. BIG volume. To generate 500k in revenue this year, you only need 416 people willing to buy $100 worth of your services. But if you’re a $10 model, with no extra amenities you can sell, you will need 4,160 members to reach your goal. Are there even 4,160 people in your immediate area who would join? Likely not.
4. It turns fitness memberships into a commodity. We are better than that. I know how tempting it is to make the switch if you’re having difficulty competing in your market, but you are hurting the industry. Can you name any other product that hasn’t increased in price in the past 2 years? Gym memberships are the only thing I can think of that hasn’t been affected by inflation; and by devaluing your service you are devaluing the entire industry.
Don’t think I’m naive and I don’t see how profitable this model can be. There are many gyms who have proven this model can make some serious money. In fact we even helped a struggling big box gym successfully transition to a value model (the only one in a 100 mile radius, but it made me feel icky to do it. But the conditions have to be right because aside from the “moral” reasons, it is very very difficult for an average gym to make the switch and expect the same result.
Most people demand more than four walls and some equipment. People have bigger health problems that demand better service to help them, and it’s only getting worse. Which means you have a growing opportunity to help more people. You can’t help people the way they need to be helped at $10/month. It is literally impossible.
I think Planet Fitness and the other $10 brands who are first in their markets will make some decent revenues, and it is smart business. But man do I hate it.
With the low cost/high volume model, costs will increase, facility maintenance needs will increase, competitors will undercut you, you will constantly have staff turnover, and you will have to deal with crazy stress levels trying to balance it all.
If you believe that you offer the best results and the best service in town, you need to be the highest price provider in town. If you offer average results and average service, you need to be among the average prices in town.
You answer the question, if you are the lowest price provider in town, what does that say about your results and service?
That’s right, they’re the lowest too.
I’ll say it again…you cannot provide the best service and the lowest price. You get what you pay for and your prospects know it. The ones that take the chance on you will soon find out that they get nothing for their monthly dues…and they will leave the first chance they get.
It is a very attractive business model, but it is unsustainable. Feel free to argue with me, but unless you have the financial backing and the economy of scale that PF and a few others have right now, you can’t keep up.
If you’re stuck in the middle with average pricing and average services just like most of the gyms in your market…and you want to differentiate yourself, I encourage you to increase your prices right now, NOT decrease them. It’s not as scary as you might think.
Let’s say you have 1,000 members each paying $40. If you bump your price to $44, how many members would cancel? I would argue not many, but let’s assume 100 members cancel. Guess what, you’re still making the same monthly revenues because while you lost 10% of your membership, you’re also charging 10% more.
AND all future members will be paying the higher price. This gives you the ability to provide $4 per month more value to each member…OR it allows you the ability to finally pay yourself a salary that is reflective of what you’re worth.
I encourage you to argue with me or agree with me or add your own opinions to the discussion below.