Using the Decoy Effect to Structure Your Fitness Studio’s Pricing Plans

Decoy effect pricing structurePicture yourself at your fitness studio. A new person visits your gym for the first time, and after class, they want to talk about membership options. You explain every option in detail and they seem really into it.

Then you ask which plan they’re interested in. What do they say?

Of course you hope they pick a plan and sign up right away. But if you’re like most fitness studio owners, you probably get a response like one of these:

  • “I need to check with my spouse before I make a decision.”
  • “I’ll need to look at my budget before I choose an option.”
  • “I’m not sure what my schedule can accommodate. Let me think about it.”

Sound familiar?

Common Membership Pricing Mistakes

What most fitness studio owners don’t realize is that this response usually has nothing to do with your business, your coaches, or even how comfortable that person felt around the other members.

Almost every time I’ve seen this, it’s due to 1 of 2 reasons:

  1. There are too many membership options to choose from
  2. The pricing makes too much sense

I know that may not sound like it makes sense, but let me explain.

The first one is pretty simple. Too many options means it’s harder to pick just one. I always prefer to keep it simple with 3 options (I even price my own services and products this way).

The second reason sounds more confusing, but it plays on the same reasons as the first: It’s easier for people to make a decision when the decision is a no-brainer. But when it’s not a no-brainer — which is how most fitness studios structure their pricing — potential members have to delay their decision to weigh the pros and cons.

Here’s an example of a pricing structure that makes too much sense:

Pricing Model 1

And here’s another pricing model that makes too much sense. The difference is this one works on a contract basis instead of a set number of visits:

See what I mean? In both of these examples,the pricing makes too much sense. The ratio of price to value is about equal for all tiers, which means people have to stop and think:

  • “Will I actually come in more than 3 times per week?”
  • “Do I actually want to stick with this for more than 6 months?”

Remember, most people who come to your studio aren’t gung-ho fitness enthusiasts. Most simply want to nail down a routine that includes working out at all. So it’s harder to choose a plan based on the pricing models above because they don’t yet have a routine that matches up with any of the options. And you want to remove all obstacles that can possibly come up in the sales process.

So they say they need to think about it, and then leave without purchasing a plan. Or worse yet, they’ll purchase an option you don’t really want them to choose.

Decide On Your #1 Pricing Option

Yes, that means you need to know which option you really want them to buy. If you’re like most fitness businesses, you probably want them to choose the $159/month unlimited plan above. Or if you operate on a contract basis, you want them to choose the $99 12-month contract so you keep them for a longer term.

Once you know that, the other options serve only one purpose: Make that one option look like the best one – the no-brainer.

How to Structure Your Pricing

So let’s say you use the first pricing model above. In order to make the unlimited package more appealing, change your pricing to:

Pricing Model 1 BETTER

See? It doesn’t make sense to the outside observer. And when your potential new member looks at the price sheet, the first thing they think is:

“Wow, it’s only $5 more for unlimited visits!”

If you work with the contract model above and want them to purchase the 12-month contract, here’s how you’d restructure your pricing:

Notice on this one how we switched places with the 1st and 3rd options? That helps build anticipation toward the option you want them to choose, and it seems like an even bigger bargain in contrast to the previous 2 options.

So just like with the previous model, new members will read this and think:

“Oh, wow! It’s only $99 for a 12-month contract. That’s such a great deal!”

The Decoy Effect

Now you’re probably wondering, “But what if they don’t want to do a 12-month contract or unlimited visits? Won’t the other options look so unattractive they won’t want to buy?”

The short answer is no … and we know that thanks to a proven model called the Decoy Effect, or the Asymmetric Dominance Effect. It’s something that’s been studied in marketing for years, but unfortunately, only the most successful businesses actually use it. The majority simply do whatever “make sense.”

Here’s how the Decoy Effect works:

As it turns out, the Decoy Effect is everywhere. You may not have noticed it because usually you don’t see if from the perspective of a business owner (like you do right now). Usually, you’re the consumer who just sees a great deal.

That’s the goal for your potential members as well. Remember, the decision should be a no-brainer, and the no-brainer should be the option that you want to sell. The other two options exist only to make the other one look like the most logical option.

Check out this compilation of testimonials from people who have implemented the Decoy Effect in their business:

 

Does it seem irrational? Yes. But one of my favorite marketing books is Predictably Irrational by Dan Ariely. This book goes over not only the Decoy Effect, but also many more strategies that every fitness studio owner should know if they want to sell more memberships and class packages.

So if you have trouble getting new members to sign, I encourage you to take a look at your pricing structure. And if you restructure your pricing to use the Decoy Effect,  let me know how it works for you!

Mike Arce
Mike Arce is the CEO and founder of Loud Rumor, a lead generation company for fitness studios and independent gyms that supports their customers with sales training and techniques to grow and scale.

Mike has spoken for companies like Infusionsoft, the Better Business Bureau, ASBA, and Local First – all on the topic of Local Business Internet Marketing. He has a passion for local businesses and helping them grow. You can get fresh, updated tips from Mike here.