Pricing Strategies for Gym Retention

Discover how strategic pricing can boost membership retention rates in the health and fitness industry. From loyalty rewards to optimal payment cycles and understanding your members' needs, explore three proven strategies for maximizing customer retention and fostering long-term success.
October 28th, 2018
Pricing Strategies for Gym Retention

Updated October 26, 2023

Membership retention should be the top priority for any business in the fitness industry aiming for long-term success. With competition from other gyms on the rise and acquisition costs increasing, doubling efforts around retention makes strategic and financial sense. Especially when it costs five times more to attract a new member than to keep an existing one. Whereas increasing customer retention rates by 5% increases profits by 25% to 95%.

While creating a fun, and rewarding experience for your members is important, something as simple as pricing can be a direct contributor to your membership retention and attrition rates.

This isn't surprising as for many members, a gym membership won't necessarily be seen as a need to have.

Increasing the value exchange will help the gym membership move from the nice to have, to the need to have column. But in the meantime examining your pricing strategy can make all the difference

Let's explore the current pricing strategies popular in the health and fitness industry, and then three strategies to improve membership retention rates.

The Status Quo: Inefficient and Ineffective

Pricing speaks volumes in the fitness industry. When a gym or health center sets its prices, it is also involuntarily committing to a model of business that prioritizes either attraction or retention.

According to eConsultancy, 44% of companies focus on customer acquisition as compared to 16% that focus on retention. Taking the United Kingdom as a case study, virtually every commercial gym giant offers free trials of at least 1 day in length.

For example, Virgin Active, Anytime Fitness, Fitness First, and Nuffield Health all offer free trial schemes of varying lengths. Other household names like easyGym and PureGym also promote offers that reduce joining fees for new customers.

In addition, many gyms promote lower membership rates for new members. These establishments follow a pricing model that intends to bring in new customers with eye-catching offers. However, this pricing strategy also sorely misses the mark.

The optimal strategy for a gym or fitness center in the fitness industry is to focus its resources on member retention rather than member acquisition. However current behavior communicates to both existing and prospective members that the business cares more about its new members than its existing ones.

After all, the old members aren’t the ones getting discounts and membership benefits. Jill Avery, a senior lecturer at Harvard Business School, notes that these acquisition strategies result in higher attrition rates. Essentially gyms and fitness centers attract members who are looking for a deal, not a place where they can embark on their fitness journey:

We see this in industries that promote price heavily up front. They attract deal seekers who then leave quickly when they find a better deal with another company”.

Emphasizing price makes the relationship between you and your members transactional. The value is the money saved, not getting in shape, the facilities, or the gym experience.

In this relationship, it's very difficult to move away from the money. Especially as, once the introductory offer expires, you're going to ask that member for more.

Because these members perceive the value of the gym and the member experience within the context of the price they've paid, any price increase would be perceived as negative.

It's almost inevitable that these members will churn.

Member Retention through Rewarding Loyalty

Loyalty clubs and VIP programs are commonplace and the majority work on one of two approaches:

  • Accruing points that equate to discounts or coupons to get money off your bill.

  • Or buying X number of products to get one free.

Both are designed to encourage repeat behaviors through reward. It's not an entirely dissimilar approach to training a pet. It's especially effective in supermarkets as customers tend to stick with the stores they know or are closest to them.

The mentality is that if they're going to shop there anyway, they may as well be rewarded for doing so.

According to the Bond loyalty report, on average, consumers are signed up to 14.8 different loyalty programs but only engage with 6.7 of them. This means despite the perception of loyalty, the reality is quite different.

There is also a significant difference between benefitting from something you were going to do anyway and actual brand loyalty. And, more to the point, businesses can inadvertently move the relationship away from one of loyalty to something more transactional.

The Coffee Shop Approach

When coffee shops reward customers with their tenth drink for free the perception is they're winning loyalty by giving them a cup of coffee for free.

Except they're not. They're rewarding the customer for spending money. And the coffee isn't free because the price of that free cup of coffee has been built into the price of the previous nine coffees.

So instead of thanking customers for choosing them over all the other coffee shops, they're rewarding them (a) for spending money and (b) doing something they were going to do anyway.

So instead of feeling gratified, the consumer starts to see the relationship as transactional. Both parties understand the exchange and if prices go up then they'll simply move to another place to get their Jamaican blend.

You are motivated, through such an action-and-reward mechanism, to stay engaged with the shop you are patronizing. And it’s not just coffee shops that play the ‘loyalty card’. International clothing brand H&M has H&M Club, a loyalty program that gives regular shoppers reward points for their purchases.

These points can then go on to redeem “offers, services, events and much more”.

The problem with all of these loyalty programs is the same. None of them are about loyalty. All of them are about money.

Rewarding Loyalty in the Fitness Industry

The health and fitness industry, as a whole, doesn't offer a great deal in terms of loyalty programs. This is a missed opportunity considering gym members are effectively a captive audience.

And because gyms and fitness centers are subscription-based services, it's much easier to create a loyalty program that isn't hinged on money. Or at least by devaluing your core service and shifting the focus to transactions over member experience.

If you’re a health and fitness operation, nurturing repeat members into loyal members is relatively easy. By focusing on delivering value, you can create a series of rewards and benefits that aren't afforded to anyone else. Notably new members.

Your gym member data can help here. The more you know about your members from the first-party and zero-party data you've collected, the easier it is to offer rewards and incentives.

Free smoothies or discounts on members' favorite fitness brands reward loyalty without requiring them to spend anything. If they choose to spend more than the value of a smoothie or use the discount as part of a larger purchase, that's fine. The value lies in your understanding that the member in question likes Under Armour fitness ware. Or they always grab a smoothie after a workout.

Leveraging your data allows you to create a loyalty program that's based on what your members like, what they're interested in, and what they want.

Moreover, you're in a position to create automated email campaigns that celebrate membership anniversaries, regular attendance, or any other milestone you can target. This deepens the relationship, moving it firmly away from the transactional and solidifies the value in the minds of your members.

This will not only improve membership retention rates but could even have the happy consequence of attracting new members through word-of-mouth recommendations from your ever-growing loyal and satisfied consumer base.

Charge customers at the right time

In a recent article, Harvard Business School professor John Gourville discussed the psychology of pricing. He discussed the case study of an “average health club” that is faced with the challenge of ensuring that they both attract and retain their member base.

Gourville suggests that the owner of a health and fitness business usually makes members pay monthly, rather than yearly. In doing so, it would improve membership retention rates.

This seems odd at first. On the surface, making new members commit to a year of payments upfront eliminates the ability for them to ‘drop out’ every month.

However, the psychological element behind payment means that a monthly payment cycle incentivizes people to exercise more regularly than a yearly payment cycle. This, in turn, means that members of your health and fitness facility are more likely to reap the physical benefits that they signed up for.

This will motivate them to continue with their fitness journey and membership beyond the first year. Thus, knowing when to charge is just as important in pricing strategy as knowing how much to charge.

But, again, establishing value beyond the $X = Y level of fitness is important. Especially if members don't see the results they think they have, they're not going to renew their gym membership.

This is where the data comes into play again. Using the zero-party data supplied to you when the member joined up, you can arrange a trial with a personal trainer, or a consultation with the nutritionist.

By putting the appropriate fields in your sign-up process, and adding in some smart automation, you can seamlessly funnel members to the right people to increase the likelihood of positive results.

Be sensitive to your members’ needs

Finally, one final important element that is necessary in pricing for retention is sensitivity to your target demographic.

Every business has unique needs and a unique demographic. You know your business better than anyone and are better placed than anyone else to figure out what sort of pricing strategy will work best for your members.

Use your membership data to determine what membership package is the most popular and has the highest retention rates. Then build it out from there.

But remember to keep one eye firmly on delivering value as that is ultimately what will make your gym members transition from retained members to loyal members.

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