I recently received YMCA publication that talks about all programs and membership benefits. The single version, single price ($47 a month) full-service membership with loads of benefits looks very good on the surface but definitely could use improvement. I am referring to improvement necessary for profit maximization – even though YMCA is a non-profit. Because pricing right is not just about profit maximization but fairness – charging customers only for the services they value and use.
For $47 a month the full-service program offers
- Complete use of fitness centers, lap pools
- Free access to fitness classes
- Free access to facilities for children under 13 with couple membership
- Free open gym time in Kindergym
- Free Childwatch (babysitting) services for children (ages 8 weeks to 7 years)
- Free Fit Kids program for children (ages 6-13)
- Free family circuit classes
- Free Babygym
- Free family swim
- Free towel service
- Free validated parking
A moment’s consideration will convince you that
- There just are many free offerings
- Almost all of them are targeted at families, especially those with children
The questions YMCA needs to ask are
- Is $47/month the right price – are they leaving money on the table by giving away too many things for free or are they pricing out other people who do not require all these freebies and would become members at a lower price?
- Are there opportunities for further segmentation within the family segment? Is there a value differential across families with no children, 1 child, multiple children, very young children, etc?
- Is it primarily serving the family with children segment or wants to reach others as well?
- Should they be offering multiple versions with different feature set and at different price points so the customers would self select themselves to the right version?
- Should they offer unbundled pricing for certain features?
I believe the answer to all these questions is yes. But before making any changes they need to start with te enormous data they have on facilities usage and member profiles.
For example, find how many customers use each of these freebies, how many use all 10, 9 out of 10, etc. Those that get used the least are ideal candidates for either elimination which would result in cost savings or separating them from the full membership and offering at an additional charge.
In addition they should also find out the relative utilities of these freebies to its customer base, in other words how the different sub-segments value the individual features. Once they find the sub-segments and the utilities of individual features for these segments they can find customer willingness to pay for each and then design multiple versions at different price points.
For example, how parents with one three month old child value Kids Fit program is is going to be different from those parents with two children in the 6-13 age group. The latter group obviously values Kids Fit more than the former group and hence must be charged for it. The segmentation can go even further including usage of pools vs. exercise equipment, but you get the picture.
This is not just about charging customers for the value they get, this is also about fairness – those who do not use certain services should be given a version that does not charge for the features they do not use.
The net is, whether the business is for-profit or non-profit there is room for improvement and profit maximization based on segmentation and targeting. If one price is good, two prices are better.
Iterative Path 