New Gym Business Model: Work Out More, Pay Less

At traditional gyms, you pay the same dues whether you visit the facility twice a day or twice a year. This makes a lot of sense for gyms, but doesn’t give you a financial incentive to actually go. But what if you had one?

Behavioral economics tells us that people are more motivated by short-term effects than theoretical long-term ones. Losing money now is a better motivator than the promise of maybe losing weight in the future.

Gym-Pact, an experiment run by two recent Harvard graduates, takes advantage of this. The program is intended to find out if “motivational fees” will help customers keep to their workout schedules. Groups of exercisers at two different gyms receive a free membership–if they keep to their workout schedule. If they don’t, a $25 fee applies for every week that they slip up.

Harvard grads turn gym business model on its head; fitness plan members pay more if they don’t work out [Boston Globe] (Thanks, Patrick!)

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  1. Hi_Hello says:

    25 a week… that’s is expensive.

    I know that some healthy insurance will give you around $120 a year if you go to the gym 3-4 times a week. I was good for 6 months until spring hit and I end up biking more than going to the gym…

    • FatLynn says:

      My former employer would pay for our gym memberships at a really fancy place downtown, but we had to go at least 10 times/month or they’d take them away. Believe me, this worked.

      • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

        My current employer would never do that. In fact, when we bought this building we’re in, there was an employee workout room. it was promptly divided into an office and work area.

    • Loias supports harsher punishments against corporations says:

      Agreed, $25 is a bit steep, but otherwise this is a good idea.

    • Etoiles says:

      That’s the point. If it was a $5 fee for not going, you’d shrug it off.

  2. kt says:

    No gym is going to adopt that, it ruins the whole get as many people to sign up and not use it business model that makes them profitable. If everyone who was paying for a membership showed up even once a week they would be overwhelmed.

    • Rachacha says:

      As evidenced by the health clubs the first two weeks after January 1 when everyone “resolves” to go to the gym more often, you can’t move in most gyms. You wait a few weeks and the place has gone back to normal.

      • hotdogsunrise says:

        Ahh, the resolutioners. How I love and loathe thee. They want to change their bodies and try for a while. They realize it’s too much work and give up. Yeah, how well did that work last year?

        /rant

    • veritybrown says:

      That’s what I was thinking. The reality is that a gym’s BEST customer is the one who pays their dues regularly and on time, but rarely if ever shows up to work out. This kind of program is great for customers, but crappy for a gym’s financial success.

    • fourclover54 says:

      That’s why it’s an experiment – to test the hypothesis.

    • okt says:

      But really, it is the same business model. Make money off the people who don’t come to the gym. Maybe with this setup, people will be less likely to cancel.

  3. SkokieGuy says:

    At traditional gyms, you pay the same dues whether you visit the facility twice a day or twice a year. This makes a lot of sense for gyms, but doesn’t give you a financial incentive to actually go

    It doesn’t? The more you go, the lower your per visit cost is. The less you go, the higher the cost per visit.

    What would make more sense for gyms it to charge an annual fee and a per visit charge, so those that use the facilities most, pay more.

    • MamaBug says:

      except then they’re essentially financially punishing their best customers, which makes no business sense.

    • Tim says:

      That’s punishing people for exercising. The point of the article is that they’re trying to reward people for exercising, because exercise is good for you.

    • qwickone says:

      But the idea of a sunk cost applies here. You signed up for $x per month, so you pay that no matter what. It’s considered a sunk cost, and therefore the equivalent of no cost (in this scenario). Therefore, it costs more to go to the gym (time, gas money, replacement cost of workout clothes/shoes, etc.). Your argument makes logical sense, but that’s not the way people actually think about it.

    • jesusofcool says:

      I do think it would be nice if gyms offered a per visit charge. Personally, the way my schedule is, I can really only make it to an actual gym once a week tops. That doesn’t justify the expense each month though at any of the gyms located close to me, so I end up not going at all and making do with biking, hiking etc in the summer and at home exercising in the winter.

  4. rpm773 says:

    I think the study needs more carrot and less stick.

    Charge a base fee, and then give an $X credit for each time the patron shows up, or loses a pound, or some other metric.

    I can’t see how charging a fee for not showing up could ever be applied in the real world.

    • qwickone says:

      +1, I like it!

    • summeroflove says:

      +1 for me too.

    • BuyerOfGoods3 says:

      “I can’t see how charging a fee for not showing up could ever be applied in the real world. “

      Really? You’ve never missed a doctors appointment? :) Those sting! Full price of the visit!!

      • coren says:

        But if your doctor goes skiing and cancels on you…

      • rpm773 says:

        Your example isn’t even in the same ballpark as the issue in the article

        The doctor sets aside time to see a patient. If the patient skips out on the appointment, and the doctor can’t fill the time slot, he loses revenue for the time slot. So a policy is instituted that says cancellations within X hours of the appointment are billed, because the practice needs ample time to find a replacement.

        The healthclub isn’t faced with the same issue. In fact, if you consider that the cost of goods sold in the transaction is the wear/tear on the equipment, the club’s best customer is the one who pays his dues and doesn’t show up. The club is making 100% gross margin on him.

        That’s why any customer with half a brain in his head would take a look at the terms proposed by clubs in this study (ie, penalties for *not* showing up), laugh in their faces, and walk out.

  5. sonneillon says:

    Meh, Gyms that have a good class load can be a good deal if you do the classes, but if you just use the gear only, it is generally a rip off.

    • madanthony says:

      Depends how often you work out and what you like to do. I go pretty much daily and use a bunch of different equipment, so it’s worth it to me.

      Plus it’s full of cute girls in short shorts.

  6. MattO says:

    i have said this time and time again – i work at a company with a gym in the building that the company runs – they are VERY pro-wellness, yet we get no incentive to join. I think they should charge you something like $50/month, but if you go min 10x, it is $30 – or something like that – i dont have that issue as i am usually there 3-4x/week anyways, but i think this would be a great incentive.

  7. Hands says:

    The reason most people start going to gyms is because they want to get in shape. The reason most people stop is because they don’t like that type of exercise and don’t want to stick with it. My guess is that no financial incentive will keep them doing something they don’t really want to do.

  8. jesirose says:

    The bootcamp I joined gives a discount for people who come 80% of the time. It’s a huge incentive!

  9. Khayembii Communique says:

    This is an absolutely terrible idea. I don’t want people going to the gym just to stand around or hog machines just to get their discount. Mine is crowded enough as it is.

  10. Rebecca K-S says:

    I think the basic idea is a cool one, but I agree with others that $25 a week is pretty steep, and a reward system is better than punishment. Do I get punished if I go on vacation? Can I call ahead and schedule a week off? What if I injure myself? The risk of having $100/mo tacked on would keep me from signing up at all.

  11. Blueskylaw says:

    Get more for less? What’s the catch?

  12. Rectilinear Propagation says:

    That’s like the opposite of Virgin HealthMiles where you’re getting money if you do exercise: http://us.virginhealthmiles.com/fresh_approach/Pages/FreshApproach.aspx

    Of course there’s a fee to be in the program so if you join but don’t work out it ends up costing you money.

  13. slappysquirrel says:

    Seems like that incentivizes crappy gyms with problems (e.g. Non-working TVs on the treadmills) that make you not want to work out.

    • jesirose says:

      … If not having a TV on the actual treadmill makes it a crappy gym, then you must be a gym snob.

      I was delightfully surprised when the elliptical at my gym automatically picked up the signal from my HRM. If it hadn’t, I wouldn’t have thought what a crappy gym. If you need a TV ON the treadmill it might be time to actually take a break from technology…

      • BuyerOfGoods3 says:

        +1 thank you.

      • Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

        TV not working is often an indicator of other problems at the gym.
        I played a “try all local gyms free membership” game last year, and I found that if the TV / sound systems had problems, usually the equipment did, too.

        • hotdogsunrise says:

          True. But you’d also be surprised what kind of things gyms can hide.

          But generally, yes. If equipment is not well maintained and the gym is generally dirty, steer clear.

      • profauck says:

        I dropped cable and if there’s something I want to watch, I go to the gym and watch it on the treadmill.

  14. Eli the Ice Man says:

    The irony is the more you work out, the more you wear down the equipment, and the more the gym has to spend to maintain. Good idea though. Maybe we can eliminate all the flabbyness in today’s society with ideas like these!

  15. MB17 says:

    The Consumerist should change its slogan: “The same shit as Gawker, just a couple of days later.”

  16. Consumeristing says:

    Going to Equinox i more than $25/week. It’s a little more than $40/week. Oh yeah, that’s why it can be as packed as a 24-hr fitness because people who’ve paid show up.

  17. SgtBeavis says:

    I love the idea. I hope it works out for them.

  18. iMinnesotan says:

    After joining and quitting the Y twice we were eventually able to go more than four years without ever missing twelve workouts a month. This is because we got a fitness reimbursement from our health insurance, making it a $40 financial penalty for not going enough. Worked for us.

  19. bioflava says:

    Why don’t you put all the machines to work by generating electricity for the gym. That way, the more you work out, the more electricity you generate and this cost is deducted from your dues.

    This would be a win-win for both parties and potentially could give you free gym use and an energy credit to the gym.

  20. prismatist says:

    There’s a gym that my friend in a different city belongs to that has a great motivation program – free DVD rentals. In the gym they have a DVD library. You can borrow one at a time for a short time – two or three days – for free. If you keep them longer than that, it’s $5 a day for late fees. It rewards you for working out with a free movie for the evening, and then makes sure you are physically present at the gym again soon thereafter.

  21. paul says:

    I believe this is how Weight Watchers has worked for quite some time. If you stop going or if you gain weight, you have to pay more membership fees. If you keep going and stay at or lose weight, you don’t pay any extra.