Should Your Gym Implement the Bundling Pricing Strategy?

Group pricing of amenities can transform a low-margin budget club into a profitable enterprise.

The success of the high-volume/low-price (HVLP) model in the health club industry has been both a blessing and a curse. While it’s been a boon to larger fitness chains that can remain profitable with low member rates (from $10 to $20 per month) with limited margins, independent clubs and smaller regional chains are struggling to compete with the budget national chains. This has forced operators to find consistent revenue streams beyond monthly dues. That’s easier said than done.

Some enterprising club owners have devised strategies that have made a huge difference in creating non-dues revenue from selling personal training sessions, group training packages, and spa amenities. These operators are finding that the most effective pricing model is the bundling strategy.

On its face, bundling is a simple, commonly used merchant tactic. Bundling means combining a group of products/services together into one price that’s lower than each item would be if sold separately. Consumers will often opt for the bundle even if they have no intention of using each amenity.

“When consumers are confronted with what they feel are unfairly high prices, the section of their brains that is responsible for pain processing is activated. That’s right: confronting high prices can actually feel painful to people.”

Why does it work so well? Psychology experts who study consumer behavior have a couple of theories. In one study by Carnegie-Melon and Stanford University called “Neural Predictors of Purchases,” researchers found that when consumers are confronted with what they feel are unfairly high prices, the section of their brains that is responsible for pain processing is activated. That’s right: confronting high prices can actually feel painful to people.

On the other hand, when researchers presented lower prices, the medial prefrontal cortex was activated. This is the part of the brain involved in decision making. Therefore, by reducing the “pain of buying,” you can go a long way toward convincing a customer to purchase what you’re selling.

The power of “perceived value” can go a long way. Think of how bundling is used in today’s marketplace. Microsoft Office Suite and fast-food “value” meals are common examples. Of course, you’re not selling software or junk food. So how does bundling work in the health club sector?

Perceived Value with Recurring Payments

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Photo: Bob’s Gym

What can make bundling so effective for health clubs is that the billing structure for automatic recurring payments is already built into the model. You bill and collect monthly fees via a credit card or bank account number on file for each member. Adding amenities to those payments, if the bundling package is appealing enough, can create a revenue-generating powerhouse.

That’s what Wayne Ellis discovered. As manager of Bob’s Gym, a group of four clubs in Evansville, IN, Ellis had to transition his clubs into a budget model a few years ago. He needed to change his pricing structure from a single membership price of $57 per month into a low-cost, high-value offering of $19.99 per month, while still delivering a premium experience as a full-service fitness facility. He needed to find new revenue streams to make the numbers work.

Looking at what his clubs had to offer, Ellis devised a two-tier structure: a core membership of $19.99 per month that gave members access to the weight room and cardio floor—the basic gym equipment—at a single location.

Then Ellis created what he called the “Prime” tier. For just $10 more ($29.99) per month, Bob’s Gym would give you a package of amenities, including access to all four locations, basketball courts, pool, exercise classes, HydroMassage, and other services.

Ellis wasn’t sure it was going to work, but he knew his target numbers and set a realistic goal. “We needed at least 40% of members to go prime, and 60% was our dream target,” says Ellis.

He hit neither that floor nor that ceiling. Instead he rose above it. Ellis says his clubs ended up with 71% of members choosing to pay extra for the Prime tier.

Create a Zone and Bundle That Works for You

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When Ellis dug deep into the numbers, he was interested to learn which specific amenities drew members to choose the higher tier. “We figured 10% opted for the prime membership because of pool access,” says Ellis. “Then we estimated that 25% went for it because of the group X classes. Another 15% chose Prime memberships to have access to more than one of our locations.”

That’s 50% if you’re doing the math. Ellis believes that the other 20% can be attributed to allowing access to HydroMassage units in the club.

HydroMassage beds and lounges are premium recovery and relaxation massage devices that have become popular in many fitness centers around the world. First utilized in physical therapy offices and rehabilitation facilities, HydroMassage units are ideal for members seeking post-workout relief and stress management as part of their overall health program.

Ellis says that when recruiting new members, he makes sure to take them to the HydroMassage beds and lounges in his clubs right away. “The first thing we do is put them in a chair,” says Ellis. “They walk in wanting only a $20 membership, but after experiencing HydroMassage, they walk out with the $30 membership.”

HydroMassage representatives are committed to helping club owners realize their non-dues revenue goals. They will help you develop a “HydroMassage Zone,” and assist you with creating a bundling strategy that will work for your club.

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One of the ways to make bundling succeed is to present a list of each amenity price if purchased separately. This clearly emphasizes the perceived value in choosing the higher membership price that includes the bundle. Here’s an example of one.

$19 Basic membership with optional:

  • $10 monthly: HydroMassage
  • $10 monthly: group exercise
  • $10 monthly: child care
  • $10 monthly: towel service
  • $10 monthly: tanning

Then you let them know that with just an extra fee of $10 per month, they can have all of those services included in the following membership:

$29 Premium membership, which includes: HydroMassage, group exercise, child care, towel service, and tanning.

Members may not use every amenity regularly, but they love getting a deal. And when billed as a recurring service, they quickly become accustomed to the higher monthly fee.

For club operators, HydroMassage units are a cost-effective way to provide massage services with minimal investment and labor costs. Once members learn how to operate HydroMassage units, they simply see the front desk or enter a six-digit code to activate the machines. The durable lounges and beds require little maintenance beyond annual cleaning, and any repairs are quickly attended to by HydroMassage technicians.

To find out more about HydroMassage beds and lounges and how they can fit into a bundling strategy for your club, visit their website or call them at 727-536-5566.

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Jim Schmaltz

Jim Schmaltz is a contributor to IHRSA.org