As the boutique fitness industry continues to thrive, it is becoming increasingly competitive for studio owners to fill their classes, retain members and ultimately bring in enough revenue to keep their doors open. In an industry inundated with a variety of classes ranging from yoga to bootcamp to piloxing (yes, that’s a thing!), consumers are asking themselves:
- How do I choose which studio is best for me?
- How do I know which workout will give me the best results?
- Do I have to choose only one?
Consumers are craving a variety of classes with the least amount of commitment at the lowest price until they choose the community or fitness routine that’s the perfect fit. On the other side, studio owners are asking themselves:
- How do I keep my members happy and coming back?
- How do I create a studio community that thrives, so I can build and maintain my business?
ClassPass for Consumers
ClassPass®, a New York based started up founded by Payal Kadakia and originally called Classivity Inc, aims to maximize the consumer’s fitness routine while offering studios a way to fill their unfilled classes. Seems like a great idea, right? But at what cost? Who actually benefits? And do they have the studio owners’ best interest in mind?
To answer these questions, you first have to know what ClassPass is and how ClassPass affects you as a business owner. ClassPass offers consumers a flexible way to stay fit at a lower cost than buying drop-in classes or monthly memberships at individual studios. ClassPass does this by offering memberships consisting of three, five and 10 classes per month, valid at any studio within their network in select cities. If the consumer is maximizing their membership, their per class expense is anywhere between $7.50 to $15, depending on the city, which is significantly less than a drop-in fee at any of these studios. Can you see the appeal for the consumer? Side note: ClassPass has had to change their pricing model a number of times since they launched as they’ve struggled to manage costs and generate enough revenue.
ClassPass for Studio Owners
So what about the studios using ClassPass? ClassPass partners with studios, offering an easy way to fill empty spots in their unfilled classes and bring in revenue that otherwise might be lost. Each studio individually negotiates a per class payout rate with ClassPass, so essentially the studios are offering their classes at a discounted price. The negotiated payout price is based on a general formula based on the studio’s lowest package. ClassPass then takes the per class rate of that package and agrees to set the payout price to a percentage of that rate.
For example, if your studio charges $150 for a 10-class pack, your per class rate is $15. If your negotiated percentage is 40%, your payout rate will be $6.00. In comparison, if a member bought your 10-class pack and maximized their package, your revenue per class would be $15. And imagine if your member didn’t maximize their package, you’d be retaining even more. So in this specific instance, the studio would be losing 60% of potential revenue by using ClassPass. Further, this pushes studio owners to inflate their rates for their regular paying members just to cover the difference they are losing from ClassPass members!
Is ClassPass Right for Your Studio?
Are these ClassPassers really worth it? While this is just an example, it is important to note that ClassPass is aiming to negotiate the lowest possible payout to increase their profit margin. While the exposure on ClassPass can be positive, our research shows that businesses who discount typically have a significantly lower average revenue per member than businesses who avoid discounts. Discount buyers take advantage of deals and cycle through studios without becoming loyal members. ClassPass knows this and allows studios to limit the number of ClassPass spots per class. ClassPass also restricts which classes their package can be used for, which is essential for keeping discount buyers from disrupting your community.
Ultimately, you should do your own research and decide for yourself if this partnership is right for your business. ClassPass has not proven to have a strong foundation. Bottom line: ClassPass a business, just like yours, that needs to make money to stay afloat. However, it has recognized its shortcomings and has evolved to create more stability in the business as a whole. If your goal is to have a community-focused and committed member base, ClassPass is not the right avenue to help fill your classes. The nature of a discount buyer is to dabble where it’s most convenient and least expensive. This type of consumer isn’t committed to a studio’s community or style, and you’ll end up spending time trying to welcome them into your culture and ignoring the more valuable customers who pay more for your time and energy.
For tips on how to market your studio and build a healthy, organic member base, check out our 10-Step Marketing Guide.