Why price matters, but only a little [article]
It often seems to me that retail in New Zealand is gripped with discount fever. In order to sell something the retailers believe they must offer a significant price saving to entice a consumer to purchase. Kathmandu and Briscoes regularly promote ‘50% off’ sales, and as competition in the airline industry increases so do discounts on travel. One of the country’s most successful company’s ‘The Warehouse’ has associated its entire brand with low cost, discounted products.
Discounting is also rife within the fitness industry; to entice new members many gyms use the old ‘no joining fee’ or ‘50% off joining fee’, and personal trainers get in on the act by offering free sessions with the purchase of a block of sessions, i.e. buy 4 sessions get the 5th free, which equates to a 20% discount.
It certainly appears logical to emulate the sales techniques of the major retailers (if it works for them it’ll probably work for me, right?), but does discounting really work in the fitness industry and are there inherent dangers in using it? Consider the following questions: Is your perception of ‘The Warehouse’ high quality? If Kathmandu and Briscoes can afford to discount their products so heavily are their normal prices too high? In relation to this, what does discounting tell consumers about the value of the products and services they receive from fitness clubs and professionals?
In the related article ‘The transformation economy part 1 - the importance of outcome’ we talked about how guiding clients from their current state to their ideal state was an economic offering of the highest value. This is ultimately what the fitness industry is about (or at least in my opinion what it is about!), helping the people who use our products and services to achieve the outcomes they desire. But what do consumers tell us they want from the fitness industry?
IHRSA (International Health Racquet & Sportsclub Association) research tells us that people join fitness centres and use personal trainers primarily to lose weight, to get in shape and because the club or trainer’s location is convenient. IHRSA’s information also tells us that people stay members and keep using trainers when they achieve results that validate their investment, when the staff at centres take a personal interest in them and when they are impressed by the overall professionalism of the centre and its staff. They also tell us that people leave for largely controllable reasons; that they didn’t use their membership, had lost motivation, didn’t like the club atmosphere, and were unhappy with staff and the programs they offered.
IHRSA’s research suggests two priorities; firstly to eliminate the negatives that keep people away such as unfriendly staff, overcrowded and dirty facilities, obsolete equipment and mediocre gym programmes, and secondly, to deploy customer service systems that provide every member a more personal, enjoyable and productive experience. They highlight an important lesson for the industry; that in most members’ eyes, service is not simply about being more friendly or involved; it is about helping members get results, pure and simple.
Of course pricing matters; charge too little and discount too much and chances are you’ll struggle to pay the bills. Charge too much and you risk not having enough people able to afford your services and generate the income necessary to stay afloat, let alone create a profit. But how do you know what is too much and what is not enough?
If you consider IHRSA’s research important (which I hope you do) then you might consider what it will cost you to deliver the best service you can to your customers. Service that will help them achieve results, validates their investment, and ultimately retains them. For a trainer this may be as simple as considering the income you’d like to earn (taking expenses into account) then dividing this by the hours you can work every week without ‘cooking’ yourself and thus lowering the quality of your sessions. For example; if you wanted to earn $1200.00 a week ($200.00 expenses) providing 20 high quality sessions then you’d need to charge $60.00 per session. Once you have established that this is what you need to charge, then your focus should be on delivering that value to your clients so they achieve results and keep coming back, rather than doing any ‘discount deals’.
As a gym owner/manager you may want to consider what it will cost you to improve the professionalism of your facility. The cost of having staff engaged in more regular, meaningful interactions with your customers. Developing gym programs and support systems focused purely on staff helping members achieve the results they want, that will keep them coming back and referring others to you. This is a much better use of money than spending lots of $$ on marketing a new ‘no joining fee’ campaign. If this means that you end up charging more, then you must ensure you deliver only and exactly what it is your customer’s want - perhaps its time to ask them?
The fitness industry has offerings to consumers (improved health and body image, athletic prowess etc) of much greater value than most other retailers, yet for these offerings to be realised they must be delivered effectively time and time again. When we emulate other retailers by focusing on ways to reduce the price barrier to a one off purchase then we sadly miss focusing on what it is our consumers want and need from us, in order to make our businesses successful. Price does matter, but only a little as there really are much more important and profitable things to focus on.