As Seth Godin said, “the problem with the race to the bottom is that you might win.”
Consider two models that seem similar on the surface but are actually quite different: most fitness chains (model #1) and CrossFit (model #2).
- Model #1: Low ticket, low utilization
- Model #2: High ticket, high utilization
Most fitness chains charge on the cheap and hope you don’t show up. They may charge $30 – $90 per month and have an average of 2,800 members.
Maybe 10% of those members show up on a daily/weekly/monthly basis.
Those gyms don’t WANT all of their members to show up. Can you image if 60% of them used the gym every week?! They don’t have the capacity!
Those same gyms are hoping their members don’t bother to cancel, because their memberships are relatively cheap.
Contrast that with CrossFit. The good affiliates charge about $200 a month. A good target is 200 members… and those affiliate owners WANT high participation.
Higher participation = personal results. Results translate to higher retention/lower churn, and more sustainable recurring revenue.
The good ones get that through a fanatical focus on customer service.
When you provide great value and great customer service, your prices should reflect that. You’ll start with a lower customer count.
But that’s okay, because the higher your customer count, the harder it is to provide great customer service.
Which means your churn rate will start to rise. You’ll need to get more customers… fast. And you might be tempted to lower your prices.
But, when you race to the bottom, your resources get diverted towards sales, your cost-per-customer rises, and you tend to focus on volume at the expense of quality.
We made that mistake in the past and paid the price for it. We don’t play that game anymore.
Now, with good systems, you can scale AND continue to provide outstanding value and service at a higher ticket price. But that comes later.
Raise your prices.
You’re worth it.