Setting pricing can be one of the most difficult decisions for club owners. They often set pricing based on their competitors' prices. However, this method can lead to pricing in the middle with no differentiation among clubs, leaving middle-priced clubs to slug it out for market share.
Owners must remember that fewer prospects comparison shop clubs in person these days, instead doing more analysis online and choosing a club based on concept and convenience. They do not go down the street to save $1 to $3 per month for a similar club, although they may do so for $5 per month if the other club meets their needs.
To determine proper pricing, club owners must create a list of all elements of their club where they charge fees: enrollment fees, monthly dues for each category of membership (i.e. individual/couple/family, full vs. partial memberships, month-to-month vs. annual vs. longer-term, corporate, discounted categories, etc.), each service (i.e. child care, personal training, Pilates classes, lessons, leagues, massage, etc.), each retail item (i.e. shakes, nutrition bars, logo clothing, supplements, etc.) and other items.
Then, operators should consider whether to increase the pricing on each item. Perhaps the best option is that an individual membership rate may stay the same, but the couple rate may increase. Child care may stay the same, but children's programs, birthday parties and camps may increase. Increases should be implemented at different times throughout the year, preferably when that activity/service is busiest.
Because many club owners think pricing increases will scare away members and prospects, they increase monthly dues at a lesser amount than they should. Instead of increasing dues by $3, owners increase by $1. No one who is satisfied with their club leaves it for an additional $36 per year, but a club member who was considering leaving a club will do so for a $1 increase as much as for a $3 increase.
Instead of increasing pricing by whole dollars, the increases might be more palatable at $2.75 for an individual and $4.25 for a couple, for example. Also, increasing the fees for services and programs at a faster rate for a different number of sessions can be effective.
Some club owners have begun holding dues steady and imposing a one-time (or annual) assessment fee instead, perhaps tying this fee to capital improvements specifically. Before doing this, owners must make sure this type of fee is legally permitted per the club's membership contract. Of course, this approach can give members the wrong impression that their dues won't increase each year.
Owners must give as much advance notice of increases as members must give to cancel, per the membership agreement. To ensure that all members receive the notification, it's best to mail a letter, as e-mail records are often incomplete. Ideally, this letter should be customized by the member's usage and interests: the group exercise-only user, the tennis player, the athletics-only class user, the free weights-only participant, a parent relying on child care services, etc.
Because most club owners don't have specifics about their members, they must sell the price increase in a general letter. This letter must include a paragraph that highlights improvements/enhancements to each type of user of the club with a summary of what the club has done to increase the members' experience in the last six months in each area and what it plans for the next three to four months. Rather than feature just the physical plant and equipment, the letter should reference additional classes and programs, new hires, better member systems, changes requested on member surveys, additional services, etc. It should never explain a price change in terms of increased expenses for utilities, insurance, taxes, etc. The member does not care.
The last paragraph of the letter identifies the amount of the price increase with the effective date. If done properly, you will have made your case for a logical and proper price increase. This should be done annually and should be part of your club's 2011 marketing plan.
Rick Caro is president of Management Vision Inc., a 25-year-old consulting company that serves the club industry. The company focuses on market analyses, valuations, member surveys, club finances, expert witness testimony and operational analyses.