The Pricing Game
Part I - Determining What to Charge and How to Deliver It
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Prologue to Pricing
Ron Johnson, former CEO of JCPenney said of pricing, "Pricing is actually a pretty simple and straight forward thing. Customers will not pay literally a penny more than the true value of the product." Based on his quote, one might assume that how you price your fitness offering is quite simple. In reality, that simplicity can get extremely complex, and for operators of a fitness business, how you price your value proposition may be the single biggest determinant of whether the business succeeds or fails.
Think about it: a simple and straightforward decision such as pricing can determine your business' viability or lack thereof. Warren Buffet said of pricing, "The single most important decision in evaluating a business is pricing power... If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And, if you have to have a prayer session before raising the price by 10%, then you've got a terrible business."
The preceding dialogue speaks to the rationale for this 2-part series on pricing and how to deliver it. Pricing and how you deliver that pricing are two of the most important strategic decisions a business makes. Your approach to pricing speaks not only to the value of your offering and its ability to exert pricing power but also to the delivery model you adopt for that pricing. In Part I of this series, we begin by exploring some historical pricing trends from the fitness industry. We then conclude with a dialogue about pricing and how to approach it. In Part II of the series, which comes out next month in Club Insider's November Edition, we will discuss the various price delivery models used in the industry today and what new delivery models might emerge in the future.
Pricing in the Fitness Industry
A Historical Perspective
According to data portrayed in IHRSA's annual Health Club Consumer Reports, since 2013, the average monthly price a U.S. consumer paid to belong to a health and fitness facility has ranged from a low of $46 in 2013 to $52 in 2017, with the average monthly price increasing by 6.5% from 2013 to 2017. This rate of change over five years is less than the cumulative change in the consumer price index over the same time period. If one were to explore IHRSA data as far back as 2010, it shows that the average price consumers paid for a health and fitness facility membership has remained relatively constant.
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