The Pay-Per-Use Model for Gym Memberships

Fitness Evolution: The Pay Per Use Model for Gym Memberships

While the fitness industry is booming these days, it is also true that the industry has a high degree of churn that is really damaging to gym-owners. This high churn rate for gym payment systems can be partially explained by gyms stubbornly offering only a flat-fee monthly subscription model and not offering the alternative of the pay per use model which offers more flexibility and better retention rates.

Let us then dig into how a pay per use model works to price gym subscriptions & the role of subscription-management software in implementing this model in a way that grows your bottom line.

How the Pay Per Use Model Works for Gyms

There are two varying ways in which this model works. Let us address the first one:

Pay as you go model

In this model, you offer your customers the option of utilizing an X amount of days/classes inside your gym or fitness studio for a fixed amount of time. So, instead of charging them a blanket gym payment at the start of every month, you simply let your customers use your facilities for a fixed number of times depending on the amount that they have paid. While in the short run this may cause you to lose out on some cash since now the customer will become more stringent with how many times they go to the gym (and will only go if they absolutely feel like it)—in the long run this is the best option as it makes your customer less likely to churn away from your gym.

Pay per use model

In this pay per use gym model, you simply charge your customers a fixed amount for every time that they use your facility (and sometimes even for how long). So, if your customer comes to your gym six times a month and for each visit you have agreed to charge them $10, they will end up paying $60 dollars to you over the course of the entire month.

Again, while this may initially significantly reduce your profit margins as your customers will be paying a lot less than they would have been paying if they had come to the gym six times after paying a flat monthly fee, your business will benefit in the long run as giving your customer the option of the pay per use model will make them less likely to churn away from your business as they will know they are utilizing their money’s worth from your gym.

What type of a customer is the pay per use model directed at?

If someone is a real gym bro (or gal), they will probably visit the gym a lot more frequently than merely six times a month. This means that this particular pay per visit gym model does not target people who are avid visitors to the gym but rather targets those for whom going to the gym is not a very important part of their life. They may just be regular folks looking for a physical activity to keep them active after grinding daily at their nine-to-five.

These also happen to be people, again in contrast to your average fitness-driven gym bro/gal, who are most frugal about spending their hard-earned money on fitness. Such a reluctance to spend makes them highly likely to churn away from your business and never return if they get an expensive monthly subscription and at some point begin to feel that they are not able to utilize their gym membership fully by clocking in regular hours at the gym.

How is the pay per use model made more lucrative for such customers?

Alright, let us take stock of all that we have discussed so far: most gymgoers do not have the time to go to the gym too frequently, and since many of them are also frugal and at a high risk of churning away from your business if they feel they are not able to best utilize their flat-fee subscription to your gym, you need to offer them an alternative like the pay per use model.

The only caveat with this pricing model is that while it may help you retain a lot more customers, your customer lifetime value will be going down (at least in the short term) because you just will not be making as much money from each customer if they are only paying for six visits to your gym as opposed to paying a flat monthly fee.

So, how to do we get these frugal customers to cough up a little more cash?

Read more: How to Increase Gym Revenue without Increasing Membership?

1.   Raise the price of each visit

Your customer already knows that he is saving money by choosing the more flexible pay per use model, so they really would not mind if you raised the price of each visit a little. What this means is that instead of simply dividing the cost of your monthly subscription fee by the number of days the gym is open during each month and offering that as your price to be paid per visit, you need to have an elevated price that will only make choosing the pay per use model cheap if the customer genuinely visits the gym occasionally. Otherwise, the flat-fee model needs to be the more appealing option as it generates larger and more consistent income for you.

2.   Offer additional, value-adding services

Just because you’re cutting your profit margins to help retain the customer does not mean you cannot offer even more options to help loosen their purse strings a little. For example, most non-professional gymgoers appreciate having some sort of a guidance figure/dedicated personal trainer to help them get their form right, and a lot of these people also do not mind paying a little extra for such a person. So, by partnering with a fitness instructor or simply by hiring one, you could include a value-adding service like paying a premium for a fitness instructor as part of your suite of offers.

3.   Price clearly and effectively

This sounds simple, but it is so important a point that it warrants to be mentioned clearly (and effectively!). By using charm pricing like ending all your prices with $.99 or by including decoy prices of having a much more expensive alternative pricing option so that the option that you actually anticipate most customers choosing does not seem relatively too expensive, you will be ensuring that your customer does not feel fleeced and continues to flock back to your gym to utilize its amenities and make regular payments.

Read more: Choosing SubscriptionFlow to Implement Gym Membership Pricing Models

Bottom line

You need to offer your customer as many options and customizations as possible to not only retain them, but to also encourage some of the more frugal customers to spend a little more on value-adding premiums that they feel give a fruitful return for their money.

SubscriptionFlow functions as a fantastic subscription-management software for gym owners looking to customize their offers and incentivize their customers to spend more. It does that by offering you key insights into your customer’s spending patterns to help you discern who may be at the risk of churning, and then sends special discounts via specially tailored emails to help lure these customers back.

Book a demo with SubscriptionFlow now to see how it can help diversify and revitalize your gym’s revenue model!

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