Case Study: Community Fitness Center

Case Study: Community Fitness Center

 

Problem
This multi-location community center was constructing a new health and fitness facility and renovating an existing one. The management needed to reassess membership pricing of various types of membership packages. The pricing decision was particularly difficult due to the timing, which was during the early stages of the national financial meltdown and recession.

The objective of this project was to develop a tool that enabled them to make informed decisions on how best to drive membership while maximizing monthly and ancillary revenue and minimizing lapses, i.e. maximize the lifetime value of each member.

Approach
To understand how customers and potential customers responded to various membership offerings with respect to price, we implemented an IdeaMap® study. This research tool was designed to:

• Gain actionable market feedback that indicates which approaches will be most successful – and to which audiences
• Determine if a dual approach (membership at multiple locations) strengthens or weakens appeal among current and prospective customers of each location.

IdeaMap® is based on conjoint (trade-off) analysis that:

• Measures the “algebra of the mind.” For example, when you make travel plans, you make implicit trade-offs between a number of elements – time of day, direct vs. connecting flight, carrier, cost, etc. Conjoint analysis quantifies these trade-offs and identifies the most important combination of elements.
• Significantly reduces costs and time requirements through web-based, on-line survey tool.

More than a simple preference survey, this tool used sophisticated conjoint analyses to determine the most effective pricing plans. IdeaMap® provides element scores representing how different price levels and messages impact overall interest. The result was clear, quantitative data on which to base decisions.

Results
A price sensitivity curve was created, showing anticipated response to various pricing structures with specific benefits. The range of acceptable prices was considerably higher than current pricing and somewhat higher than management had anticipated. The evidence from this study provided management with the confidence to significantly increase membership pricing and optimize revenue.

 

In-market experience: since the new pricing went into effect: acquisition of new members has been greater than anticipated and attrition of existing membership at the new pricing has been on budget.