Dynamic Pricing — Friend or Foe of the Health Club Industry?
It has been reported that, on average, consumers waste approximately $39 of monthly gym membership dues from underutilization. On the operator side, especially single-site studios, unused class capacity represents real dollars left on the table. Most industry experts agree there are market inefficacies on both sides of the health club offering.
Moreover, convenience, value, choice and flexibility are important to the modern consumer. We have been trained to look for great deals when we travel, shop and/or are seeking out new experiences. Some are now making the argument it is in our industry’s best interest to get onboard.
Introducing Dynamic Pricing
Dynamic pricing has already been adopted in the world of sports, and purportedly is proving to be more efficient than the traditional fixed-price approach. Some argue that in the world of fitness, largely unused memberships and empty classes might soon become less common, as this novel approach has the potential to bring in more customers and maximize revenue for clubs that struggle to fill classes.
Goodbye to Membership Fees, Hello to Prices Based on Demand
Lymber, a San Diego startup, was one of the first to offer pricing technology to fitness operators hoping to price their offerings in line with demand. Their app is already being used by over 200 studios, offering users a variety of classes, at different times, at a range of different prices.
The benefit to users — similar to ClassPass — is they no longer need to commit to a single brand; they can book a class that works for them at a given time. For instance, they can grab a discounted yoga class today, an in-demand Pilates class tomorrow at a premium price and a cycle class during the weekend at the standard rack rate — all at different locations. Class pricing depends on pricing rules, existing capacity and other factors. Operators can control pricing rules based on an instructors’ popularity, day of the week or time of day. They can even adjust for random factors like the weather (e.g. it gets cheaper when it is sunny and classes are harder to fill) or when special events are in the area.
In this new world of dynamic pricing, class prices get updated in real-time, similar to how we have learned to shop for flights and hotels. One promise of this new model is that classes will fill up faster, because early bookers will get cheaper class prices. In contrast, popular classes can now be offered through surge pricing similar to how Uber rides get costlier during high demand. The technology indicates to the user if prices of a particular class are trending up or down, and users can filter through different options to find an offering that works best for them based on price, location and modality.
More Studios Opting for Dynamic Pricing
In March this year, Lymber got acquired by the business management software company MINDBODY, and MINDBODY has already started integrating dynamic pricing into their platform. At their BOLD Conference this year, dynamic pricing was heavily promoted, indicating we will likely see more and more operators use dynamic pricing as a strategy in the future.
While the dynamic pricing business model enables studio owners to fill up some of their less popular classes — for example, mid-morning and early afternoon slots — even advocates agree that this model might not suit all gym-goers and/or operators. It has the potential to entice the prospect who wants to exercise but is not interested in committing to a membership to make a purchase, adding additional revenue streams that would otherwise be lost. However, it could train customers who had previously been willing to contribute to a club’s predictable reoccurring revenue to shop on price, eating into existing profits.
Time will tell if this is a good thing, or a bad thing, for our industry. One thing is clear, it is coming. At this year’s Motionsoft Summit, keynote speaker Dan Cath, partnerships lead for reserve with Google, indicated that they are likely to add dynamic pricing to their new, novel way to book classes online (directly from Google’s search engine). No surprise, since Reserve with Google was launched in part through an existing partnership with MINDBODY.
Dr. Michael Rucker is accredited by the American College of Sports Medicine. In 2016, Dr. Rucker was recognized as one of the 50 most influential people in digital health by Onalytica. He sits on IHRSA’s Innovation & Technology Advisory Council. Dr. Rucker is a peer-reviewed author and currently functions as the Vice President of Technology for Active Wellness. You call follow Dr. Rucker on Twitter at @performbetter or visit his website: michaelrucker.com.