4 ms·
This article smells more of self-aggrandizing attitude than sound business reasoning. I'm amazed that he would bother with the artifice of negotiating when he'
by bonsaitree 17y ago
This article smells more of self-aggrandizing attitude than sound business reasoning. I'm amazed that he would bother with the artifice of negotiating when he's essentially unwilling to budge from his friend's price tier. That's not negotiating.
FWIW, contract strikes work just as well (sometimes better) on gym memberships as for any other legal agreement. If he's willing to pay the "full price", but doesn't want to deal with a cumbersome cancellation method, strike that clause and see if they will still approve the membership. That's a give and take. That's a negotiation.
Either he is deliberately feigning ignorance as fodder for a blog post (likely) or Mr. Steinberg is unaware of how modern gyms, especially ones located in dense urban environments, actually make money.
Mainly it's through un/under-utilized memberships and revenue-sharing from ancillary services (personal training, first-aid classes, childbirth classes, etc.) and seminars which can best leverage the uncommon properties of the real estate.
What's one business's "Price Discrimination" is another's "Flexible Pricing Strategy". A classic example are the near orders-of-magnitude margin differences for the same 1oz. of Coke depending on the customer (vending machine, supermarket, restaurant, stadium). Same customer, different channel, same product. For those who remember, a similar strategy was leveraged successfully (for a limited time) by AOL to manage subscriber churn.
In this specific example, I highly suspect "Dan" joined the gym during a lull point in the calendar year (low-demand) or was a so-called "charter" member (pre-paying). Though likely the same physical space and equipment when "Dan" joined, the financial profile & goals of the company which own the facility may be very different today--and, hence, reflected in their membership pricing.
That said, there's clearly a market for a "hassle-free" gym, but that business model is going to have roughly the same fixed capital costs of other gyms, but get squeezed between low/no-margin YMCAs & county/municipal facilities at the low-end and high-end "clubs" (like Crunch) where, sadly, part of the business model's revenue is the social and life-style exclusivity afforded by that membership fee. In big cities, high-end gyms are the modern equivalent of country clubs.
- philk 17y agoYou're right, trying to get discounts from gyms in January is less likely to succeed. You can also generally get better deals by trying to join just before the salespeople have to make their quota each month. That said, all he's really asking is whether he can get exactly the same deal his friend has. Obviously they're making money off his friend so it's not like he's marched in and demanded that they lose money on the deal or something.
- bonsaitree 17y agoActually, they may not be making ANY money off of his friend. Most 'charter' deals and seasonal specials are loss-leaders for gyms. The former, as part of the initially pre-financed membership drive and the latter when they're already below break-even capacity on a per-membership basis. Keep in mind he's asking for more than a 8.5% discount on the stated price even before excluding the bogus initiation fee.
- philk 17y agoYes but the vast bulk of costs for a gym are fixed costs. You've got large fixed costs in the form of rent, machines and staff just to have the doors open. Sure there's the idea that he'll be taking up space in the gym, but, statistically speaking, that's unlikely after the first couple of weeks.
- jonsteinberg 17y agoDan was not a charter member. But I think you're right about "lull period." Yes I understand the whole 80/20 usage scenario. My point is just that it's price discrimination that doesn't work. Soda at a supermarket vs. restaurant works because of location. This is just a bluff on the gym's part.
- OmniLarry 17y agoI was actually a charter member at the Union Square Crunch gym (the one on 3rd anyhow). Quitting was easy though, they only asked why (because I hadn't been going) and that was that.
- psyklic 17y agoDefinitely. I got an even better deal than Dan by joining Crunch over the summer (including no enrollment and month-to-month). Part of the appeal is definitely the "exclusivity" via the pricing -- in LA, for example, the nearest (location-wise) choices are a 24 hr fitness ($199/yr) which gets terrible (1-2 star) reviews online, Equinox which is twice the price of Crunch, and quite a few private gyms. But in all fairness, the gym does offer justifiable perks for the price -- for instance a huge selection of classes which appeal as a middle ground to people who don't want to spend even more on yoga studios or personal training.