Question

Assume you are the marketing manager for a gym of your choice (e.g., Equinox, New York Sports Club, Crunch Fitness, Synergy, etc.).

Prepare a response for your Vice President on your suggested pricing strategy for your sports membership/services.

Be sure to include the following in your response:

• (1) Identify your competitors.
• (2) Determine your price objective with your justification.
• (3) Determine the demand of your service and how this influences your pricing strategy.
• (4) Estimate your cost elements and discuss how this will influence the price of your service.
• (5) Prepare a competitive price analysis.
• (6) Select your pricing method and determine your final price along with your justification.

Answer 1

To: Aaron Hood, VP, New York Sports Club

From: Nera Vent, Marketing Manager, New York Sports Club

Date: 12 April, 2020

Subject: Pricing strategy for the Club

Dear Aaron,

I was conducting a study to analyse the market conditions and the price strategies prevalent in the market. Pricing decision is quite crucial for the club as it will help in developing a customer base for the club. It will also help in developing a competitive advantage for the club in the industry.

I studied the demand pattern for fitness services in the region for the last 3 years. It can be observed that the demand pattern has seen an upward trend. The primary reason behind this can be the increase in awareness level as well as increased inclination of consumers towards health and fitness. With increase in demand, there has been increase in competition in this segment. There were around 300 gym and fitness clubs in and around New York in 2019. Apart from the services rendered by these institutions, another factor which serves as a point of differentiation is the pricing strategy pursued by the gym and fitness clubs.

Pricing strategy is quite critical for attracting customers to the gym. I was analysing and benchmarking best pricing practices followed in the industry. Crunch Fitness and Equinox are the major players in the segment. They entered the market with value based pricing strategy and once a customer base was established, they switched to premium pricing strategy. They have a loyal customer base, who cannot be poached easily.

Hence in my views, our gym can also pursue value based pricing strategy as the market penetration strategy. The services offered by the gym can be evaluated and priced based on the efforts put in the service delivery as well as value addition brought in the lives of the customers. Introductory membership packages can be developed based on value based pricing strategy. This will be a great way to attract millennials who like affordable and genuine pricing for products and services.

The introductory membership packages can be priced as the following:

· 1 month membership with dietary guidelines and personal assistance: $120

· 2 months membership with dietary guidelines and personal assistance: $220

· 5 months membership with dietary guidelines, personal assistance as well as guaranteed weight loss of 5 pounds: $500

Do let me know your valuable feedback on this pricing strategy.

Regards,

Nera.