How Willing are Customers to Pay?

How Willing are Customers to Pay?

OPEX Fitness CEO Jim Crowell Answers

Are you pricing your gym’s services correctly? In our consultation work with hundreds of gyms round the world, we have discovered that a lack of understanding on what effective pricing is, often leads to the failure of the gym in question. If the price is too high, the gym owner has very few clients and revenue sources. If the price is too low the gym may have a large number of clients, but very little monthly revenue and high client turnover.

So what is the best sustainable price that guarantees high monthly revenue and a manageable amount of clientele? The answer lies in understanding a basic concept in economics called ‘Willingness to Pay’.

While you don’t need to be an economics major in order to run a successful gym, you do need to understand the concept of ‘Willingness to Pay’ when pricing your gym’s services.

‘Willingness to Pay’ is essentially a fancy economic way of defining the exact price point at which a potential client or clients will pay for your services.

For example, let’s say you price your services at a million dollars a month and find one client willing to pay that. That means that your monthly recurring revenue is a million dollars a month. Sounds good right?

Now let’s look at what happens when you drop your services price point to $5 dollars a month and find ten million people willing to pay. By dropping the price point to meet customers demand and willingness to pay, you have increased your monthly revenue by about 49 million dollars a month.  Quite a substantial pay day, right?

The trick is to find the ‘sweet spot’ that allows you to maximize your total monthly revenue. In order to discover that price you first need to define your brand. With your brand fully defined and realized in marketing and advertisements, you should be able to determine your profitable price point.

Pricing is just one of the many mistakes gym owners make in business operation.

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