Now that mind-body programming has shown to be profitable, fitness facilities need to ensure they are pricing their programs properly in order to reap the most monetary value out of their services. In order to make a profit center profitable, it is important to research your pricing thoroughly.
The first step is to look at the demographic of your clientele. What are they willing to pay for other similar services? For instance, what do they pay for a personal trainer or massage therapist? You should even check for pricing outside your industry, such as how much your customers pay to get their hair cut. Sometimes, in order to get a program up and running, we make a knee-jerk reaction and quickly set our prices so we can begin promotion of the program. With a little pre-planning, you can learn where your prices should fit within the market and avoid either over - or worse - under pricing your services. Learning the “hard way” about under-pricing is not how to grow a successful program. If prices are too high, you can always lower or run sale pricing. If you set the bar too low, then it is very difficult to raise prices without complaints from your members.
COMPETITORS & CUSTOMERS
When researching price, you should always shop your competition. Call or visit not just other fitness facilities but small personal training studios and spas that offer fitness services. Check the prices of at least 10 or more of your competitors within a 25-mile radius of your facility. You may find that prices may differ significantly for the same service. Once you have the list of prices, how do you decide where your pricing should lie? That leads us to the second step in price pointing: looking at your program structure. Are your group classes small or large? If you limit your classes to a certain number of participants, you should be charging a higher premium for those classes because it is not a class but a group personal training session. When you begin to advertise and market the program, it is important to list those details in the advertisements so clients know exactly why the program is priced that way. If you train your staff in a service-oriented approach, clients will be more likely to part with their hard-earned dollars because they feel supported in their efforts to improve their physiques. Personalized service is what makes the difference in most businesses, not just the fitness industry. If you look at other service-type businesses, the company with the lowest prices is rarely the most successful. Think about how you pick a service. If the pipes in your house were leaking, would you trust the job to the lowest priced plumber? When you get your haircut, is it from the lowest priced stylist or the one who knows best how to cut your hair – and talks with you? The bottom line is that most people don’t choose services based on price but on relationships.
Getting your staff to understand the psychology of how a customer purchases is crucial to increase sales. Your sales team should do in-house sales training for your instructors. We can hire the best mind-body staff, but if they don’t know how to sell the program or how to up sell customers, they may be doing more harm than good. I remember talking with a Pilates instructor who couldn’t get enough people for a mat class. She had four people who were signed up and paid on time, but when the first day of class rolled around, she didn’t have anyone else. Her first instinct was to cancel the mat class and try again at a later date. She was going to refund the money to the four people who paid and have them sign up for the later class. Instead, what she could have done is picked a new date for the next class and called the four who were paid for this class to explain that for the next six weeks until the new class started, they could apply the money they already paid toward private or semi-private sessions. The customer has already paid the money for the class; all you are trying to do is up sell them into a bigger package. When you talk to instructors or personal trainers about selling, their first response is usually to grimace and say they hate to sell people. What they don’t realize is they sell people every day! How many times have they explained the benefits of exercise to a potential customer? The first rule in sales is that you need to believe in your product and the price you are charging. If you truly love and believe in what you do, then your customers will believe in you too and will be more willing to pay for your services.
The third step in price pointing is to look at your costs on the front end to get the program up and running, as well as your costs on the back end to keep the program going. When calculating these expenses, you should figure in the costs from the following list:
Front End Expenses
- Staff education — Under this expense, the facility needs to have either paid a portion or the full amount for the instructor training without expecting repayment from staff paychecks. I feel that it is always best to pay only a portion of staff training in order to create value in the education. In addition, it may be wise to have a contract with your staff that includes a repayment clause if they decide to quit within a certain time period. Paying for an instructor’s education only to have the instructor quit shortly afterward has been the reason many fitness facilities don’t want to provide staff education. Include a clause in the contract stating that if the instructor does not teach a certain number of classes or sessions to essentially “work off” your contribution to their education, they then become responsible to repay the facility. Many times a facility sends an instructor for training only to find that the instructor cannot commit the time and energy to the program because they are too busy in other areas of the company.
- Equipment costs — This category should include all accessories and shipping costs. If a director or manager has spent time or money researching equipment either by phone calls or attending a fitness conference, you should include this amount into the total.
- Room preparation costs (includes carpeting, painting, lighting) — This is only applicable if you have made a designated mind-body space within your facility. If you have remodeled a room or area specifically for the mind-body program, then include all costs down to the smallest detail in assigning expenses.
- Marketing — This includes internal signage as well as print or radio ads and whatever other marketing channels you may explore. If you have marketing staff, include the cost of their time on this project.
BACK END EXPENSES
- Labor costs — How do you pay your instructors? Is it a flat rate per class or private session? Or do you split the session amount with the instructor? If you need your staff to help with the marketing of the program, it works best to give them a split of the take. If your instructors feel an “ownership” in the program, they may be more motivated to promote it because it directly affects their bottom line too. The downside of giving a percentage of the program is if the program really takes off, you are losing a portion of the profits. You can always start your program with this model and, if it grows, pay new instructors a flat rate per session. Keep in mind that your labor costs should never exceed 60% of your total income; a 50/50 split is a more common arrangement.
- Equipment Maintenance— For most mind-body programs (except for Pilates), there are limited equipment needs. Even Pilates equipment is surprisingly maintenance-free, but it does require regular cleaning. Weekly equipment cleaning should be listed under the job description for all instructors who use the equipment. If you require instructors to keep the equipment cleaned, it will minimize breakage and down time. You should also include in your expense planning to purchase new accessories each year, such as yoga blocks, new mats, foam rollers and Pilates rings. By adding new accessories to classes and training sessions, you keep adding value to the program in the minds of your members.
Once you have completed your research and looked at your expenses, you need to decide the timeframe for making a profit from the program. Set your goal for the number of months you want to make back the money you have invested in the program. Next, decide how many classes or sessions you need to schedule to make that money back in that timeframe. This will help you to decide if and how your goal can be achieved. If the goal is too lofty, then move the projected date ahead (or expand your thinking and planning!). By doing the research, you will have eliminated many potential problems. And while there are always unforeseen challenges (and blessings) in the road, research and clear planning helps to keep your staff on track and gives them well-defined goals to reach.