by Joe Galea, Member Solutions, The Official Tuition Billing Company of MATA

It’s generally a good sign that you can increase your membership price if more than 15% of your memberships are paid in full.

Another time to comfortably raise prices with members: when you can justify the increase. Have you purchased new equipment recently? Invested in new instructors and staff? Added new services or Fitness programs? These improvements can be highlighted in the member price increase letter and serve as tangible enhancements that validate a price increase.

How Much Should You Charge?

When you raise your prices, you have to be extremely careful not to raise your prices by too much, otherwise you could lose members and be worse off than you were beforehand.

Here’s an example to illustrate my point:

Let’s say you have 100 members paying $100 per month. That’s $10,000 in monthly dues. You decide to increase your membership fee to $150 per month. If everyone accepts, your gross jumps to $15,000 and you have a positive cash flow gain of $5,000.

But what if half of your members feel that’s too much and drop out? Then you have 50 members paying $150 for a total of $7,500 or a net cash flow loss of $2,500.

Here’s an interesting fact to keep in mind: if you lost 30 members due to the $50 membership price increase, you would be left with 70 members at $150 … in other words, $10,500 in monthly dues. That’s a $500 monthly cash flow gain. You may be thinking … “that’s great!” But wait. Yes, you’ve gained some money but you’ve lost 30 members. That’s 30 fewer members that can refer new business, buy retail, attend events and purchase additional services.

Here are two steps to take to help determine your price increase:

Know what your competitors are charging. Search the web. Most Fitness businesses post their rates and specials on their websites. If they don’t, give them a call or have a friend of yours reach out. You could also send a “silent shopper” to the competitors in your area. Not only will you find out what they charge, you’ll also get a sense for the quality of service they provide.

Know what your members pay currently. It’s easiest to track the current rate your members are paying by using a software product like our member management software or the member reports in theMember Solutions billing portal. If you have a price difference of $10 from your highest to lowest rates, then you have less room to move. If your members are paying somewhere in the middle, you have a lot more room to move your membership rates.

How Do You Let Members Know About the Change?

Give as much notice as possible. I recommend notifying your members at least three months in advance to the increase if you can. This gives time for members to accept the change. Keep in mind that many members will forget about the change when it comes into effect. You should immediately update your marketing materials to reflect the new prices so new members have the new rates.

Write a letter
. You’re in a relationship business and have developed close relationships with your members. That said, you shouldn’t just send an email out. It lacks that personal touch. A personalized letter is a key part of delivering the news. A letter is more professional than an email or poster.

Be sure to explain the increase and address when the rates were last changed. Let your members know that they are important and that they can speak with you if they have any questions or concerns. Doing so opens up the lines of communication where you can address concerns individually and perhaps offer exemptions to those that cannot financially make the change.

Also make sure you justify the change in your letter. If you have invested in new equipment, added new services, or launched new classes, point that out.

If you cannot highlight the pros and differences that your services and facility offers over your competitors, then a rate increase may not be the best thing to do. This leads back to being better than your competitors, knowing their rates and why you’re better.