In this post we'll take a look at the three different types of gym memberships and a myriad of membership categories in our ongoing quest to understand and drive member retention. As we well know by now, a gym's financial success is largely dependent upon its success in attracting and retaining members. We'll explore the different types of memberships offered by the industry and the prices and structures around them.
In our industry, it's interesting to explore the differences between the concept of a club member versus club customer. Unlike other hospitality and retail industries, where financial success is reliant upon customer volume, our industry depends not only upon membership volume, but also (and largely) upon our ability to retain those members. Because we want to provide a gym experience that retains members, we need to understand and make this difference very clear.
A customer is someone who utilizes a particular service (like a pass to a health club) and pays a fee for it. It's all fairly simple. Once the fee is paid and the service met, all is finished. There's no commitment. Now a member pays a membership fee to frequent a health club on a long-term basis while building relationships at the same time. It's altogether different. Customers don't have a sense of ownership whereas members do.
Types of Memberships
There are three main types of memberships available at this time. They are:
- The Membership Contract
This type of membership commits a member to a period of time as agreed upon by the member and gym operator. A typical amount of time is 1-3 years, and a fee is determined based upon the time frame chosen. The fee is typically a discounted one because the membership is relatively long-term. This type of contract tends towards one used most often by clubs with high-volume membership sales, lower fees and a substantial amount of attrition (turnover).
- The Month-to-Month Membership
In this scenario, a members pays for one a one-month membership in advance, then decides to renew as he/she determines. It's the most popular membership around today. There's no financial commitment for the member and it alleviates a potential barrier for joining (financial commitment) for the club. It's also easier to cancel this one. However, it's a type of membership generally popular among wealthier members and clubs which offer a premium service to a more affluent population.
- The First-Year Membership Contract With Monthly Membership
This is the newest type of membership available. It provides greater financial security for the club while giving a potential member an attractive option. If a member is committed for a full year they typically commit to years beyond the first. It generally reduces the one year attrition rate that takes place with month-to-month memberships while giving a member the option to quit or stay after one year. It's the second most popular type of membership after the month-to-month option and is just as popular among the more affluent members as it is for the less affluent.
These are specialized categories of membership that work to entice and target specific members of the potential gym member population. The four main categories are:
- Individual membership - most popular in urban areas
- Couples Membership - suitable for larger metro areas
- Family Membership - provides great value for the family
- Individual Membership With Family Add-on - popular in both urban and suburban areas
Niche market memberships include:
- Singles Membership - popular with single professionals in urban areas
- Junior Membership - often offers price reductions for students or young professionals
- Seniors Membership - the typical reduced rate entices those over 55
- Corporate Membership - provides discounts for groups belonging to a company
- Off-Peak Membership - provides discounts for those willing to work out during off-peak hours
- Executive Membership - for an additional fee this VIP membership gets special benefits
- Multiple Club Membership - offered by chains for those who commute or travel frequently
We typically price our memberships in relation to these different types of memberships and categories. The type of membership + category = price point. In recent years, however, clubs have put together price points also based upon additional benefits. Examples of these are:
- A membership with personal training sessions
- A membership with discounted childcare, massage sessions, dining, etc.
- A membership with privileges to special areas of the gym
- A membership with discounts at local restaurants, dry cleaners, etc.
Strategies For Pricing
We have created a model in our industry that structures pricing for the aforementioned types of memberships. The model is based upon an initial entry fee + the actual membership fee. Initiation fees cover an extremely wide range of price points - anywhere from totally free to thousands of dollars. Some clubs require complete payment of the initiation fee upon enrollment while others tack it on to the monthly membership fee.
After the initial fee comes dues. These are the actual payments for membership that come monthly, annually or whenever the contract states. As of late, EFT (electronic funds transfer) payments have become popular for both the club and its members. Membership dues also vary widely - from $10-$500, depending. When gyms combine initial fees with membership dues, they are able to differentiate their product/service which allows flexibility and creativity in coming up with price points for various markets and niches. Various dues-pricing strategies have been developed over the years and are as follows:
- Under $20 per month
- $20-$49 per month
- $50-$74 per month
- $75 - $99 per month
- $100 and up
Over the last decade, initiation fees on average have declined, while membership dues have remained about the same.
Join us next week to explore the world of branding and marketing!
- Fitness Management by Stephen J. Tharrett and James A. Peterson
- The IHRSA Health Club Consumer Report: 2014 Health Club Activity, Usage, Trends and Analysis