As we continue The Business Plan series of blogs, we move into providing operation strategies for your affiliate gym. Today we will discuss pre-opening memberships, what to charge when you first open, when to raise rates, and what calls to action work.
Determine What to Charge When You Open:
You’ll want to take advantage of membership sales opportunities before you open your doors to help in both spreading the word that you’re opening, and to create cash flow from Day 1. Determining what to charge members is a key component of effective pre-sales strategy. From the information provided in previous Business Plan blogs #3 and #7, you should have a solid idea of how large of a potential member base you can achieve, and based on the demographics, what they’ll be able to afford in membership dues. You’ll want to take these numbers and work to develop a pre-opening sales strategy that will accelerate your growth and provide working capital.
Suggestion: At our first box in West Hollywood, we aggressively marketed pre-opening membership specials. We had calculated our maximum capacity at 500 potential members, and based on the demographics and competition in the area, has estimated a top rate of $175 per month. For our pre-opening promotion, the first 100 new members were offered a heavily discounted rate of $125 per month which was locked in for the 1st year. It was not a grandfathered or lifetime rate – we had the ability to increase the rate after the first year. You can structure the initial rate to be locked in for 3 or 6 months if you like – just keep in mind that the longer the lock period, the less likely they are to cancel their membership knowing they have a great deal.
Knowing what your member capacity is from your business plan, consider giving 15% to 20% of your members an amazing pre-opening discount. YES you are discounting your rates but your growth will be exponential. You’ll immediately create 100 brand advocates who will tell their friends, colleagues, and family about your great gym and what a deal they got.
Call to Action
Memberships must have a call to action, “if you purchase by this date or if you are this number” you get this discount. If not, you will need to pay the higher price. There are two strategies to call to actions.
- Time: Set a specific time frame. “If you purchase the membership by February 1st, 2014, you get the $125 rate.” The negatives to this call to action, is that it gives people a set time period to purchase in. They know that they have until the deadline to secure the deal, reducing their incentive to make that impulse purchase.
- Quantity: Set a specific number of discounts for this promotion. “The first 50 people who sign up for this membership get the $125 per month rate.” I much prefer this method as it motivates people to move faster, in fear that they will not be one of the select group to sign up. The beauty behind this call to action format is that only you know how many people you signed up. If growth is fast and the call to action is overly effective, you can raise rates at 40 members. If growth is slow, keep the promotion until you hit 60 members. No one but you will know that number.
Within our business plan, we created a strategy on timing of rate increases. Rather than increasing rates based on set time periods, we raised them based on our membership numbers. It’s great to have a strategy, but expect to modify it as you progress with your business. Our goal was to raise rates every 100 members. As we got closer to member capacity, we increased our rates beyond our original expectations. Our membership strategy looked like this.
First 100 members - $125
101-199 members - $150
200-299 members - $165
300-400 members - $175
401-500 members - $185
Using this model we were able to reach breakeven within three months of opening, by quickly generating cash-flow and creating a referral machine. Within 16 months we had achieved 500 members with a blended membership rate of $165 per month, and had a membership waiting list with 50+ names on it.