Between now and the end of the year we’re going to take a look at 5 areas to help you Get 2023 ready. Follow us on Facebook, Instagram, Linkedin or Twitter to be sure you don’t miss our follow-up posts.
In our second blog post in the series, we looked at how to set a pricing strategy. In this post, we build on that topic to think about pricing tactics and what incentives you may consider both to bring in new customers but also to increase spending and retention from your existing ones.
Broadly these incentives fall into three types:
- Incentives to try/join
- Incentives to commit
- Incentives to refer
Incentives to try/join
These incentives are well-known and would include ‘First class free’, ‘First month free’ or ‘Free PT consultation’ etc.
When thinking about these types of incentives it helps to think about three questions.
First, consider how long is needed to determine whether they’ll benefit from your services. This also, of course, should take into account how long you’re asking your customer to commit. For example, if you’re requiring a yearly contract you may want to give a potential customer longer to decide than if you are offering pay-as-you-go classes.
Secondly, consider how long you think a customer needs to become an engaged customer. How long do they need to build a routine or habit that ensures you’ve converted them?
Thirdly, consider the cost to you of the offer. Can you afford a strong take-up of the incentive? The cost to set up and administer the offer should also be factored in.
It is also worth noting, that if you don’t feel a free or longer free period is justified, a discount can work just as well for many, especially in relation to more expensive services. This approach can also place a higher perceived value on quality and demand which for less price-sensitive buyers may be desirable.
Incentives to commit
These incentives are more business model considerations and would include decisions around whether to offer memberships, courses/blocks and class packs etc.
The consideration here is how much you want to require or even incentivise a bigger upfront commitment as against short-run or even per-session payments. For many smoothing and visibility of future income is desirable, but in an age where customers increasingly value flexibility, this can be a difficult balance to strike.
For some businesses with high demand or waitlists, the right decision here will be to not incentivise commitment at all, but rather just enable a regular full-priced (e.g. membership, or course/block) for customer convenience of buying or securing a space.
A second option where demand is strong or artificially creates that view is to incentivise commitment based on the access. For example, you could give members or course buyers priority access to sessions, or an existing course buyer priority over a space on the next. This can create an incentive to commit without costing you anything.
Where offering a price incentive to commit is desirable, matching that to your customers’ cash flow and own schedule is a good idea. For example, if your customers generally have children, would it be a better fit to offer term-time blocks rather than year round memberships? Or perhaps if you want to keep a premium pay-as-you-go pricing model just offering a small discount on class packs that expire based on a date from purchase may make more sense than a discounted membership.
Incentives to refer
Finally, we consider incentives you may wish to offer to customers or local partners for referring new customers. These are often more costly than standalone free trial products, as it generally makes sense to also include your standard offer for the new customer.
Examples might be a free class pass when you bring a friend, a month’s free membership for a successful sign-up, a gift card on success or even straight cash. Generally, it makes most financial sense to offer incentives where you can absorb your margin as part of the cost (i.e. it’s not an additional hard cash outgoing), but this of course is only the case if the incentive proves sufficiently motivating as against offering something more tangible like a gift card or cash.
Given their additional cost, we’d recommend carefully considering when and for how long these types of incentives are used, as well as meticulously tracking how successful they are. The one big advantage they have is that it’s very likely that your existing customer base has good access to potential customers with a similar demographic and set of needs/preferences. As such, whilst these incentives cost more, there’s every chance they’ll convert well and, indeed, may be less costly than other more outward-facing marketing initiatives.
Thinking more widely than your existing customer base for referrals can also be beneficial. Perhaps there are local businesses with a large employee base, a service provider or even a coffee house/restaurant that has a client base that would match up well to your services who you could create a more bespoke offer for. There’s every chance there are businesses that you may even be able to partner with to offer something in return to reduce or even remove the cost entirely.
With your pricing strategy and incentive tactics now thought through, in our next blog post, we’ll move to thinking about operational efficiency strategies, including cancellation policies. Follow us on Facebook, Instagram, Linkedin or Twitter to see when it drops in the coming week!
Ollie is the founder of Gymcatch, a booking and customer management software company with monthly pricing starting at £/$10 per month.
Ollie founded Gymcatch in 2015 with the aim of making participation in fitness easier for all. As founder, Ollie served as CEO since Gymcatch’s inception. He’s currently focused on growing the platform through strategic partnerships, corporate development and growing the team. Prior to founding Gymcatch, Ollie spent 10 years at Barclays, latterly as a Director covering the TMT sector. He gained an MBA with Honours from the University of Chicago in 2013 and higher class honours in Philosophy and International Relations from the University of Bristol. Outside of the office, Ollie enjoys travelling, playing and watching cricket and spending time with his young family. He supports a number of charities focused on increasing physical participation.