Episode Summary
In this episode, we discuss the best practices around creating an effective pricing strategy for your personal training business.
Episode Notes
In this episode, we discuss the best practices around creating an effective pricing strategy for your personal training business.
We talk about whether you should do per session pricing or EFT.
We, at Alloy, have done both. When we opened in 1992, we sold packages of sessions.
The cashflow is much easier to manage when you’re charging people by the month. And getting into the monthly payment mode landed us into EFT.
In EFT model, you simply go to the customer, you have one transactional conversation, then you move their relationship immediately to relational and personal. That’s where it should stay forever.
And for lack of better terms, the money goes away and you never have to think about it again. That’s the best relational way to set up personal training as well. And there’s never that awkwardness of asking for that sale over and over.
Stay tuned to know more.
Key Points of Discussion:
- Downsides of the per-session pricing model (2:33)
- Cashflow is easier to manage when you’re charging people by the month (4:19)
- The pain point of going back to that client saying: “Hey, your 10 pack is up…” (5:48)
- In EFT, after one transactional conversation, it’s relational and personal (6:16)
- When we switched to EFT, the frequency of the usage went up (7:42)
- Moving from one-on-one into small group training… (10:14)
- Keep it really simple (17:18)
- At the sales process, definitely use unit pricing. Every retailer does that (18:02)
- Monthly versus annual memberships (19:41)
- Three buckets of people… (22:41)
- Sit down and review those notions at times, and challenge yourself… (25:52)
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Mentioned in this episode
Alloy Personal Training Franchise
We’re going to talk about pricing strategies, pricing for personal training and small group training.
When we first opened in 92, we were personal training, and we sold sessions. And when I say sessions I mean packages, which is the common word. People would come to us and buy a package of sessions. We started out with a 5-pack, 10-pack and the biggest we had was a 20 pack.
Back then we didn’t have any software that could track all the behind the scenes logistics and pricing strategies we were using. So we did it with monopoly money. We literally just cut money and put it into envelopes. When people would buy a 10 pack, it was color-coded, we would give them the pack of 10 and it was like gold. We literally kept them in a locked safe in the office and had them pre-cut. That would be what people would turn in to have their session. They would turn those into the coaches and the coaches would turn those in for payroll. That’s the system we used at that time to sell packs. Selling per session was much easier. However, I would not suggest it. There’re two reasons.
The main reason is cashflow for your business. It’s really hard to track cash flow because you have accrued revenue, which is when you’re actually servicing it and then you have the revenue when you’re actually collecting the money. It’s really hard from an accounting standpoint if you’re not putting an expiration date on those sessions to know when the accrued revenue is happening.
What happens is, you sell a 10 pack and it’s to a one day a week person and they take a vacation and it takes 12 weeks to use all the sessions. In 1998 when we had a banner year, we were in 3000 square feet and we did over $1 million in training, $83,000 a month. It didn’t look like an $83,000 a month linear pay. It looked like January is $125,000 and then in summers, it would be much slower because again, we were only collecting money in short spurts.
The cashflow is much easier to manage when you’re charging people using the month to month pricing strategies. We didn’t come to this decision based on our business. Everything we’ve ever done has been based on in the trenches, like beat us over the head with it until we go, Oh right, that’s what you want. Same case here. We would have people that would buy 5 or 10 and then our regular clients would say, well, you know, I’m doing 20 sessions. Then somebody would say, well, can I buy 50 sessions? And we’d have people saying, ah, you’re always dinging me for money. How about I buy a hundred sessions?
Wow, that’s a lot of sessions. Right? However, why would we not do it?
Well then the question was if I buy a hundred can I finance that too? Do I have to pay for it all at once? They’re still looking for a discount. We would say, well, as long as your money stays ahead of your sessions, that’s fine. We’ll let you finance it. So they might make four payments throughout the year and they would have to have money or credit on the account. Then you look at that and you’re like, well that looks a lot like my monthly payments did. That didn’t exactly, so we just sort of backed into this and said, why don’t we just charge people by the month based on the frequency that they want to come in. That’s how we landed on EFT.
I will also say from a customer experience standpoint, and this isn’t why we did it, this is what we discovered later, is that when you have one discussion about money right at the start and there’s sort of a perceived exchange of services for money, that’s it. It goes away forever.
Any of you guys that have been in the industry for a while or you’ve ever sold packages of sessions, you all know the pain point of going back to that client saying, Hey, your 10 pack is up. Can you bring me a check? And by the way, it’s not even a 10 pack, because remember when you late canceled on me last week at 6:00 AM I used that one. So I know you’ve only used nine but you don’t have another one left. You’re actually out now. It’s like you’re forcing your customer to make a buying decision every month or every two weeks.
Whereas with EFT pricing strategies, you simply go to the customer, you have one transactional conversation, then you move their relationship immediately to a more relational, personal exchange. That’s where it should stay forever. For lack of better terms, the money just in a way disappears and you never have to think about it again. That’s the best relational way to set up personal training as well. And there’s never that awkwardness of asking for that sale over and over. As you know you never know what kind of day you’re catching people on.
Pricing side, EFT monthly getting your sessions, it almost forces the clients to come in and use them as well. That’s what we saw when we switched to EFT was our frequency of the usage went up.
The reason that we do that honestly is not from the simplicity of the accounting, which is nice, but it’s from the additional accountability that comes along with, we sat down and made an agreement between me as your coach, you as my client, I told you if you’re in here two days a week, I could help you. If you’re not in here two days a week, I’m not going to be able to help you.
EFT pricing strategies force you into a structure that holds them accountable to a certain frequency. That’s the right thing to do by them as a coach.
How do you price your personal training or small group in your market?
Let’s first speak to small group training because that was a tricky one. For those of you guys that maybe haven’t heard prior podcasts, we were 10 years as a one-on-one training business. If you’ve done this for a while, you understand how this works. It started out as one hour or 60-minute personal training sessions and our market at the time, which I think was around $60. Then we found that we were wanting to charge more, but $60 seems to be the threshold at the time.
If we could move people to half an hour, maybe tweak the programming a little bit for things to happen quicker, we could then charge $40 for half an hour, which the customer would pay less. We could actually get 90% of the work done because the 60-minute session had a slower pace to it. We knew we had a lot of filler time. Then you multiply 40 times two, now we’re making $80 an hour. A lot of people went to 30 minutes one on one training and clients loved it too because there’s less time working out if we’re honest. When we looked at moving to that 30-minute construct we then started to see that people would come in and work with friends, partner training, things like that, it was like, wow, this is where it’s at.
A lot of them would want to partner up in 30 minutes. Sometimes we felt like, well, if we had one or two, maybe three people, we take it to an hour just because we were moving around and we had more moving parts. It took a little bit longer to get everyone serviced. If you’re in a market where you’re moving from one-on-one, which happens, you’re moving from one-on-one into small group training, use your market rate for 30-minute one-on-one training. So in other words, when we went from 30 minutes one on one training, we did like 300 sessions that year. It was a really good year. We moved into the small group setting. We kept our prices the same. The selling point was that you’re getting more time for your money.
It is much easier to sell someone on a month-to-month membership. Sadly thinking, well, this is the way everyone does it, or this is the way we’ve always done it.
I would just challenge anyone here to sit down and review those notions at times and challenge yourself to say, is this really the right thing that we should be doing? You don’t want to be seen as salesy when you’re in a service business because you’re trying to keep the relationship personal, not transactional. So you wear the white hat at the point of sale and then just get on with the more important part, which is servicing people and keeping them happy. say hello. Connect with us at www.alloypersonaltraining.com and sign up for our free newsletter to receive additional resources.