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Old 12-11-2015, 03:48 PM   #1
Sean J Hunter
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Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

Hello all,

We are affiliating soon, and just putting together our offering structure.

One debate we're having is whether to offer a 3 or 5 dpw package range or focus more on offering a 2 or 3 dpw package range.

I'd be very interested in others opinions, or any articles on the topic....

Firstly, it's important to note here, I'm talking about the "Just want to get fit" sector, not the fitness fanatic, or motivated amateur, or CrossFit sportsman. Let's face it, our largest sector, by far, is the "Fit-for-life" sector.

It seems to me that CrossFits have a tendency (at least in our area) to have package offerings that lean more towards wanting clients to come to as many sessions per week as possible?

In our area only 15% offer a 2 dpw option
and only 50% offer a 3 dpw option
40% (8 / 20) offer nothing but a 5+dpw option

Why the push towards over commitment?
Now, I'm not talking about upselling existing clients to higher packages, which is a different story.
But, why am I seeing a tendency to want new clients to come as often as possible?

Doesn't this just punch up their initial price point, scaring off the lower end of your market?
What's the benefit of scaring off the lower end of their market?

What issues are affiliates finding with the 2dpw or 3dpw crowd that is solved by them coming 5dpw?
Or what benefits are they seeing, that make them want to push commitment, and ratchet up price?

I look forward to your thoughts

Cheers

Sean
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Old 12-12-2015, 08:31 AM   #2
Brendan McNamar
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

This actually is a very difficult questions that should be carefully thought out.

Most of my experience was getting this wrong and then understanding the consequences.

When setting a membership/pricing policy here is what I would think of today:

1) I need a system that brings in new members that keeps the intimidation factor low. People want to feel comfortable that they will be able to "do" the classes they attend. Some gyms use an "On Ramp" others have a "Basics" class. For small gyms this isn't as big of an issue, but as you grow you need people to have a "safe" way to start. Quality of coaching is huge here.

2) I need a system that will produce a comfortably profitable gym when I hit my minimum target member number. Undercharging is the danger.

3) Research shows consumers faced with too many choice will often freeze and not choose. I need a simple system with no more then 3 choices. Make sure any owner or coach who talks to a prospective member has at least some sales training on closing. Nothing high pressure just make sure everyone knows how to ask for the sale so people who want to join but need a little nudge get it.

4) People hate to pay for what they don't use unless it is very low cost like $10 a month. This argues for the 2 or 3 day a week options. I had people cancel an unlimited membership because they could only make it two days week.

5) I do want to keep an eye on my local market. If I'm too far out of line with the way gyms are pricing their memberships people will wonder why and go with a gym that falls closer to the norm.

6) This is neighborhood dependent but in a middle income or lower area I never want to be the lowest priced gym in the market. I was and I ended up attracting too many people who could barley afford my services. They would have to cancel if they had a car repair or other expense. It didn't help them or me because they weren't around long enough to get the results.

This is just a starting point. There is a lot to think about.
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Old 12-12-2015, 02:37 PM   #3
Sean J Hunter
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

Quote:
This actually is a very difficult questions that should be carefully thought out.
Completely agree Brendan, and greatly appreciate your reply.

As a guy with a marketing background, my experience is pricing can be more of an art than a science, and one that tends to unfortunately require a bit of trial and error. Not ideal in a start-up scenario, for sure.

If I could pick your brain a little on the 2 dpw offering option we're considering, I’d value your thoughts.

Following is my argument doe having a 2dpw base offering… please feel free to tear it apart…

Something a guy called Richard Buchanan coined in marketing is, "Barrier Removal".
Removing the barriers to the clients “smooth walk” thru the sales pipeline.
Suspect - Prospect - Qualified - Converted - Consolidated - Believer.

You've mentioned one barrier already; that being a lack of well thought out options for client entry, such as ramp-up / elements class.

Another is the expense of CF, at least in our area.
There is a significant price difference between a typical CF minimal price offering of 3dpw at $45pw, and the typical local gym price, of less than $20pw, a 125% - $25 price difference.

Before I continue, it’s important to note that our focus sector, the “just want to be fit-for-life” crowd, is by far the largest growth opportunity in our area. We’re not perusing the flooded sectors of, the fitness enthusiast, or CF sportsman.

Now, I understand the danger of trying to compete or compare CF with gyms, but our local market research suggests that, as there is $0 spent on developing the functional fitness or CF brand (as we’re not in North America), the "Fit-for-life" sectors understanding of the value of functional fitness and CF is virtually zero, or in many cases actually in the negative, due to incorrect and unchallenged ideas on safety and effectiveness.

So this sector sees CF as a gym, maybe a weird one, that does weird stuff, but a gym all the same, and isn't a gym just a gym after all?
....whether we like it or not the market is comparing us to gyms.

So, with this in mind, our market research suggests that the typical CrossFit price point (in our area anyway) compared to local gyms is a huge barrier to conversion for a large portion of this sector, and only 15% of affiliates in our area offering 2dpw options at around $30pw, to even try ot solve this issue.

It's the kind of barrier, where a huge percentage of our sectors "possible clients" don't even end up walking thru the door or talking on the phone to a local CF, as the price on the website is just too high, and their understanding of the value CF adds is just too low. It's not so much the price difference compared to a local gym, but it's the fear they might be getting fleeced, so they don't even engage. You can't overcome a price / value perception issue with a sector who is relatively "fitness uneducated", if they don't even engage you. And the starring price offering of $45 ensures that occurs often.

I get the feeling many CF in our area, don’t even realise potential clients aren't even engaging. They say they have a great conversion rate….of people who walk thru the door….but 60% of the potential market isn’t even walking thru the door.

Hence, the idea to offer a 2dpw option as our standard go to price.

Typically $15 / class is a pricing model in our area, that allows for a sustainable profit. You can't really bring this down without sacrificing quality. So charging something like $28 for 2dpw, vs the typical gym price of $18, we believe will lessens this barrier enough, that, the potential client will at least call us. It makes us look premium (to avoid the tire kickers, and low end market) but not outrageously priced.

The goal would be to get the client on board, experience the value, and then encourage them to pick up the 3rd day per week, to get the average cheque per client up to $40+

Brendan I'd value any thoughts you have on this rant....

Basically
1) Thoughts on pursuing the "Fit-fit-life" "a little less motivated" sector?
2) Thoughts on the reality that for this sector we need to compare ourselves to gyms?
3) Any other holes in the argument?

Thanks again for taking the time to reply

Cheers


Sean
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Old 12-12-2015, 05:30 PM   #4
Sean J Hunter
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

lol, this is getting long, so I thought I’d break it up.

To continue from above

I'd also value your thoughts on any specific issues you see with a 2dpw option.

Three negatives we have considered are
1 - Lower gains (value for the client) due to only 2dpw and possibly a lower neuroendocrine response
2 - Lower community connection due to only 2dpw (an important point-of-difference for CF)
3 - Higher truancy – lower commitment = not always coming for the 2dpw, exacerbating the above two issues

NOTE: With our small group working out in the garage, (the base we’re going to use to launch the affiliate), we don’t currently offer a 2dpw option.


LOWER GAINS
With my relatively limited kinesiology knowledge, I imagine the neuroendocrine response (basically what CrossFit is trying to deliver), may be dampened with only 2dpw…..so over all gains per session are actually less?
Meaning, sure less voer all price point, but less value being delviered per class, also.


LOWER COMMUNITY + LOW ATTENDANCE
These two concern me....not sure what I think until we play with this variable
But in my mind it’s an issue, and we’ll get a lot of disconnected people at 2 dpw or less.
I see us wanting to upsell people to 3dpw pretty quickly.


In closing, It seems to me that CrossFits have a tendency (at least in our area) to have package offerings that lean more towards wanting clients to come to as many sessions per week as possible?

Why the push towards over commitment?
Doesn’t it tend to create price and time commitment barriers, as well as burnout, among other things?

My point of view always is, I’m no genius, and if 85% of local affiliates don’t offer 2dpw, there’s a reason for it, that I’m missing.
However understanding that reason, and finding a creative solution around it, can often produce an advantage….hence the questions.
Worse case scenario I’ll know why I’m wrong, and have a decision in the business that at least has some logic behind it.

What do you think of these issues with a 2dpw offering, and are there any others you can think off?

Really appreciate your input Brendan.

Cheers


Sean
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Old 12-15-2015, 07:42 AM   #5
Patrick A Horsman
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

Quote:
Originally Posted by Sean J Hunter View Post
lol, this is getting long, so I thought I’d break it up.

To continue from above

I'd also value your thoughts on any specific issues you see with a 2dpw option.

Three negatives we have considered are
1 - Lower gains (value for the client) due to only 2dpw and possibly a lower neuroendocrine response
2 - Lower community connection due to only 2dpw (an important point-of-difference for CF)
3 - Higher truancy – lower commitment = not always coming for the 2dpw, exacerbating the above two issues

NOTE: With our small group working out in the garage, (the base we’re going to use to launch the affiliate), we don’t currently offer a 2dpw option.


LOWER GAINS
With my relatively limited kinesiology knowledge, I imagine the neuroendocrine response (basically what CrossFit is trying to deliver), may be dampened with only 2dpw…..so over all gains per session are actually less?
Meaning, sure less voer all price point, but less value being delviered per class, also.


LOWER COMMUNITY + LOW ATTENDANCE
These two concern me....not sure what I think until we play with this variable
But in my mind it’s an issue, and we’ll get a lot of disconnected people at 2 dpw or less.
I see us wanting to upsell people to 3dpw pretty quickly.


In closing, It seems to me that CrossFits have a tendency (at least in our area) to have package offerings that lean more towards wanting clients to come to as many sessions per week as possible?

Why the push towards over commitment?
Doesn’t it tend to create price and time commitment barriers, as well as burnout, among other things?

My point of view always is, I’m no genius, and if 85% of local affiliates don’t offer 2dpw, there’s a reason for it, that I’m missing.
However understanding that reason, and finding a creative solution around it, can often produce an advantage….hence the questions.
Worse case scenario I’ll know why I’m wrong, and have a decision in the business that at least has some logic behind it.

What do you think of these issues with a 2dpw offering, and are there any others you can think off?

Really appreciate your input Brendan.

Cheers


Sean
Sean - you are pouring lot of though into this. I'm likewise going to do my best to articulate my reasons why we don't do it

1) We offer a 10 class punch card which would work out to being 2.5 times per week if used in one month. If used twice a week (lots of math) it would work out to a monthly rate of $121/month (but realistically there would be missed weeks in there so lets call it $115/month).

With average attendance on an unlimited membership at 2.5 ish, pricing for our unlimited membership is therefore based on 3 visits per week and costs $145 (month to month - we only discount for commitment length).

So, basically we have the punch card option or the unlimited option. 2 visits for week is in essence built in by virtue of having an appropriately priced punch card option, and our staff can articulate this to anyone who asks (e.g. if you do the math and come twice a week with 2 weeks of vacation it works out to $115 a month using punch cards vs. our regular unlimited rate).

2) Sales. Having only 2 options after foudnations has kept our conversion rate into some kind of plan or pass at a huge 91% to date. There are no what ifs to explain - and it is easier to sell an unlimited membership when the only other option is a punch card. Everyone does foundations at our gym so the intial barrier is already passed (our foundations is a month long and costs just a bit less then a monthly membership).

3) Simplicity. No one has to track visits and coaches don't have to have the awkward you already came twice this week conversation with anyone. If someone wants to come twice on the same day how is that handled? With unlimited its pretty darn simple.

4) Mental commitment. You want people to make this a significant part of their week. you want them to become part of the community, contribute to the success, refer people, bring friends, and stick around. Not saying 3 visits means this more than 2, but it sure helps.

5) Progress. You hit it. Strenght, technique, body composition.

6) Internal barriers 1: the steep stairs effect. If you ahve a client coming twice a week, will they pay $30 more to come 3 x a week? how do you transition form 2 visits to unlimited mentally? Thats where everyone got stuck before 2 x week --> 3 x week ----> 4 x week ----> unlimited. Now you have 4 memberships instead of 1.

7) Tiers of members. When you introduce retention initiatives, things they get with their memberships - does everyone get them equally even though they aren't paying for the same thing or making the same commitment? what about if you are soliciting feedback, whose opinion is worth more? Will you have "the regulars" and everyone else?

8) Internal barriers 2: the slip and slide effect. If you have a member that gets busy are they going to downgrade their membership if they know it is an option, and therefore, complete the circle and then only ever come 2 times per week? We know thoughts tend to elad to behaviours but the inverse is also true, if someone doesn't attend they will look for an explanatory mechanism, and then an out, rahter than encountering a mental barrier and changing their schedule to make better use of it.



These are jsut what popped into my head in teh last 15 minutes. We thought about it long and hard. My take is that by doing this your growth may be slower, but it will be more conistent, and the type of growth you want.
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Old 12-15-2015, 11:34 AM   #6
Sean J Hunter
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

Quote:
Sean - you are pouring lot of though into this. I'm likewise going to do my best to articulate my reasons why we don't do it
Hello Patrick,

I imagine you, as an Affilate owner, to not have a whole lot of free time. So hear me when I say how much I appreciate such a detailed reply. Thanks you for letting me tap into your experiance.

I'll like to digest what you've said here and reply meaningfully.

Cheers

Sean
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Old 12-16-2015, 07:05 AM   #7
Patrick A Horsman
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

Quote:
Originally Posted by Sean J Hunter View Post
Hello Patrick,

I imagine you, as an Affilate owner, to not have a whole lot of free time. So hear me when I say how much I appreciate such a detailed reply. Thanks you for letting me tap into your experiance.

I'll like to digest what you've said here and reply meaningfully.

Cheers

Sean
Thanks but I consider it important to routinely revisit your position on something, especially a business decision made early on, and make sure that argument holds up given your more recent experiences and ideas. I consider these types of conversations an opportunity to do so.

Also can I not edit my post? I must have been in a post workout haze yesterday. My typos are Horrendous.
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Old 12-16-2015, 08:32 AM   #8
Brendan McNamar
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

I believe your "Fit-for-life" members will pay a higher price then competitor types. Your market wants all the soft side coaching. They are not worried about how great your programming is, just that it isn't too hard, they get good coaching and scaling. They want to feel good as a member of your gym. Slow steady progress is fine.

I think you are way too focused on this price idea. Yes 2 day a week membership can help get them in the door with a low commitment but you will have to get them up to at least 3 days a week to start seeing enough results to become believers.

Of the 5 most successful gyms in our area only 1 does a lot with competitors. The rest you never see their members at competitions and they all have higher pricing. They focus on the group you are targeting and do a great job coaching them.

In almost every market the best gyms (high member satisfaction & good profits for owners) are not the cheapest gyms or competition focused.

I'm going to look at a gym that is for sale this morning. If I buy it there will be no competitor programming or members. I too will focus on the group you want to target.
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Old 12-17-2015, 05:35 PM   #9
Brian Diez
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Re: Pricing - Offering 2 or 3 dpw vs offering 3 or 5 dpw?

Be careful of too many options.

A confused mind doesn't buy.
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