The Discount Death Spiral (And How to Avoid It This Black Friday)

Feeling pressured to run a Black Friday deal at your gym? Don’t do it.

Your gym is a premium service provider, and it should compete on results and relationships, not price.

In this episode of “Run a Profitable Gym,” Two-Brain founder and CEO Chris Cooper breaks down the dangers of discounting and explains why most gym owners who offer sales end up trapped in the “discount death spiral.”

Black Friday deals attract the wrong clients and weaken your brand, and you have better ways to grow your gym during the holiday season.

Coop shares simple, high-value alternatives, including running bring-a-friend events and adding bonus offers that don’t undercut your pricing.

Tune in to learn how to make this Black Friday your most profitable yet—without slashing your rates or cheapening your brand.

Links

Gym Owners United

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1:20 - Why not offer discounts?

2:43 - 5 dangers of discounts

7:26 - Focus on value instead

8:07 - Run alternative promotions

13:36 - Use the Prescriptive Model

Transcript

Chris: 0:02

Hey, Black Friday is almost here, and every year, gym owners feel pressured to offer discounts because everybody else is doing it. But should you? I'm Chris Cooper. This is Run a Profitable Gym. And today I'm going to tell you why you should not be offering Black Friday deals and discounts and sales and what you can do instead. You know, every single year people come into TwoBrain and they say, I'm just not making enough money and I need more clients. And we look at how many clients they have, and they have about the industry average. Their problem might be that they need more clients, but more than anything else, it's that they're undercharging. This is actually the most frequent problem in micro gyms today, I'm thoroughly convinced. And our data shows that's true. They compound the problem, though, by offering deals and discounts and special offers for people who don't really need it. And I'm going to talk about the problem with that today, how to solve it, and what you can do instead right on this podcast. If you want more ideas, just go to gymownersunited.com and we'll be talking more and more as we get closer and closer to the Black Friday BS. Now, if you've been following T-Brain for a while, we know that we never recommend discounts. And today I'm going to tell you here's why, and also what you can do instead. So, first, why not offer discounts? Well, point A is that there's a difference between services and products. Products are physical goods, and the more of these physical goods that you sell, the more money that you can make because you push down the cost of production. With services, that's different. You don't have more hours in the day. You have to hire more staff if you want them to work more hours. Or you have to extend your premises. You have to get bigger space, you have to buy more barbells, et cetera, et cetera. Adding more clients comes with more costs. That's not true with products. And that's why products or places like Amazon or Walmart have Black Friday deals because the more of the good that they sell, the more incremental gain they make. And that is not true with services. People who recommend doing a Black Friday deal at your gym do not understand this premise. They think that you're a product company, but you're not, you're a service company. It's also true for software. You know, the cost of production does not ramp up with software. With software, if they can get a thousand more clients at a $1 a month margin, that's good for them. That is not good for us. So coaching is not a commodity. It's a high-value service. It's finite and it's time-based. Discounts only cut into your profit for no reason. They do not improve your marketing either. And I'm going to get more into that in a moment. But there are really five dangers of discounts. And this is point B. First, you're probably already underpriced. Almost every gym that comes into TubeBrain is already underpriced, especially if you've got a big, you know, group model. And that just means that the problem is made worse when you offer a discount. So if you're already charging less than you should be, you're charging 30 bucks less a month, and then you offer a 30% discount because you think, oh, it'll make the sale easier to close or something. Now you're just compounding the problem. And what happens is you need more and more and more clients, which again pushes your expenses up and up and up. And that margin that you're chasing just gets smaller and smaller and smaller until you get to an unsustainable business model where you just cannot bring enough people in to replace the people who are leaving. So the first problem of discount or the first danger is that discounts just make your real problem worse. Second, they attract the wrong people. The bargain hunters come in because they've got this little price break, and then they find a better deal and they go somewhere else. I mean, if you've ever worked with Yelp or ClassPass or anything like that, you know exactly what I'm talking about. And it doesn't matter if the discount comes from you or from somebody else. Like people who chase discounts will come in, take advantage of the discount, and then chase the next discount. That is not the client that you want. The third danger of discounts is that they teach the right people bad habits. So when you offer a sale, your current clients who are already willing to pay your real rates will look at that sale and say, hmm, I might as well pay now. You know, these are the big pay in full for a year in advance discount problems. The people who buy these programs or the paid in full deals are the ones who would have most likely been there anyway for the next full year. And so if you offer 20% off, you're just burning that money for no reason because you're not incentivizing people who wouldn't be around to pay for it. And let me ask you this: if somebody gets to the eighth month of their contract and says, hey, I paid for a full year, I got to quit, I gotta leave, will you give me back the difference for four months? You're probably gonna do it. I mean, you're basically signing a contract with this person that you have no intention of enforcing. So these discounts teach the right people bad habits and attract the wrong people. The fourth danger of discounts is that they devalue your professionalism. Like your dentist is not offering a 20% off coupon. A brain surgeon is not gonna have a Black Friday deal. You are not a cheap alternative. You are a premium service provider. And the way that you set your prices sends a message to people about how you value your own service. And the fifth danger of discounts is that they trap you into a discount death spiral. By lowering your average revenue per member, you have to increase your clients, which increases your expenses. And then you have to offer more discounts to bring people in because you don't know any other way. And your churn rate increases even more. And before long, you wind up becoming this marketing machine where you're constantly chasing more leads, more leads, more leads instead of chasing people's fitness. And then eventually you run out. Your client numbers continue to go down because you've still got the same churn problem, but your expenses don't. And now you're losing money and you're on your way out the door. That's the discount death spiral. And this happens when you're running a big group training model, most often. It happens when you're underpriced, it happens when you confuse discounting with marketing, and it happens a lot in the CrossFit community, unfortunately. The C point here is the values problem. See, most of us are first-time entrepreneurs when we open a gym. And that means we don't have any experience in pricing our product. The only experience we have with pricing is that of a consumer. And so we base our product based on what we would pay or what we could afford or the discounts that we would want. But we are not our own best customers, not yet. We're broke gym owners. We're desperate entrepreneurs. And so, you know, our wallet is tiny. Our actual clients, high-value clients, seeking professional coaching, they do not have that same budgetary problem. And so usually when we set our rates, we do it projecting our problems onto our clients, but they don't have those problems. And so we set the rates based on what we think we could afford instead of what's best to build a professional business. We think, I couldn't afford that, so nobody can afford it. But in reality, your best clients want value, not bargains. Okay, hopefully I've made that point. Don't do discounts for Black Friday. I'm gonna give you something to do instead. Now, first, a lot of gyms last year listened to this podcast where I was talking about the Black Friday death spiral, and they decided to call their day Bright Fridays instead, which I love. And so I'm gonna be talking about that a little bit more here. But here's what to do instead of offering Black Friday deals and discounts. First, focus on value, not price. Compete on results. Measure your clients' results, make them famous, talk about their results in your media. You can also interview them to talk about relationships, but the term community is vague and doesn't have much meaning, especially when you're using that to promote your business. So compete on results and relationships, not discounts. Second, position your service as worth every penny because it is. The way you do this is you give knowledge away for free, like I'm giving you knowledge for free right now, and then you sell coaching. That is how you position yourself as a premium service and the best in the world or the best in your town. Now, here's what to do. You can run alternative promotions. So, first, you can run a bring a friend day on Black Friday or Bright Friday. Uh, there's no point in running a bring a friend week. It's not gonna get you anybody more than a run a friend day, bring a friend day. You need to set this up appropriately. So just having a day when people can bring their friends for free, that is not gonna get you more customers. What that's gonna get you is new faces in the gym. You have to set this up with intent. You need to promote it with intent. You need to have people register for it in advance, and you need to book those people for a no-sweat intro before they leave. You still have to convert them. Sorry, you're not Costco. Like offering a free sample is not gonna convince people to buy anymore. And so what you need to do is bring them into the gym, make sure they sign a waiver so you've got their contact info for long-term nurture, you have them try the class, and then you have enough coaches around that you can get each of the new people one-on-one, have a conversation with them, talk about their goals, and make a prescription. And that's how you get new clients. Now, what this does, instead of leveraging a discount or a deal, it leverages trust, it builds community, and it usually produces high-quality clients who stay long term. You can also do value-added offers. So instead of dropping your price, add little bonuses. If you really feel like you got to do something special for Black Friday or make it a bright Friday and add some bonuses. So if you sign up now, you'll get our nutrition habits challenge for the next month for free, $99 value, or a free mobility clinic. Uh, you might add in some extra goal review sessions or some extra accountability check-ins for 30 days. Um, you might offer a two-for-one personal training session where a member can bring a spouse or friend on that specific day. Um, you know, you can also do cause-driven campaigns. I'll come back to that in a moment. One caveat, though, when you add some value, never give away for free something that another client is paying for. This is a kindergarten level lesson that most of us don't learn until we go into business. But if somebody is paying you for this thing, do not give that thing to a newcomer for free. Because what you're telling your client is that the new person is more important to you than they are. Your existing clients are always more important than a lead or a potential new client. So, what you can do is make a special habits challenge that you give away to newcomers for free, you know, if you want to. Or you can make like a special workbook, you know, uh AI can help you out with this. I'll give you a recipe guidebook if you sign up in this date, something like that. Something that you're not charging other people money for, but has inherent value to the new client. Now, I mentioned a cause-driven campaign. So, what you can do is tie Black Friday revenue to community impact. So, what you can say is that if you sign up on this date, a percentage of sales will go to a local cause. Now, this is something that you should be supporting anyway, not just something that you pick out of the air like youth sports or charities or memorial events. It does build goodwill and it does strengthen your brand. But remember, you are not a not-for-profit. There are a lot of gyms out there who do stuff like this and, you know, bless your heart. But if you're not making any money, you're not going to be around to help these other charities for long. And so when you collect this money from your clients and just give it away, but leave yourself with a weak foundation, you're not helping yourself. Use some of these other things instead. My gym is stable, it's profitable, it's paying everybody well. And so we can afford to do stuff like this. Depending on your stage of business, you might want to try some of the other examples, like a bring a friend or a two-on-one workout to bring people in for bright Fridays, instead of just doing a charity event that raises money but leaves you broke and tired. Now, how do you talk about this stuff? Because I know that other people around you are probably going to be offering, you know, Black Friday deals. Well, first, use humor and honesty in your messaging. So I make this post every single year on Facebook. You can find and copy it if you want to. And I say, our Black Friday deal is that if you buy any membership at my gym, I will invest 35% of it into hospital, roads, and schools by paying my taxes on time. It just kind of treats the thing with humor and lets people know that you're a professional service, not a bargain bin product. I'll be, I'll give you a cautionary note here though. Sarcasm doesn't always play well. You have to be very deliberate about it. And if it's not actually funny, you can come across as whiny or just somebody that people don't want to be around. So be careful about your messaging. But you can also say things, you know, when people ask you about deals, like we don't play those games. I learned that from working with a high-level professional years ago, we were selling very high quality treadmills against the department store crap. You know what I'm talking about, the junky, rattly treadmills and spin bikes. And when somebody would come in and say, hey, Sears has 30% off, you know, this store has 20% off, she would just say, We don't play those games. And what that would do is it surprisingly didn't turn anybody off. They said, Well, what do you mean? And then she would say, Look, we're selling high value stuff that's gonna have a long lifespan. It's gonna feel good when you're using it, it's actually going to encourage you to use it instead of stuff that you're never gonna use and touch because it's clunky, it's rattly. And by the time you get it home and set up, you never want to see it again. So she reframed that really well. You just have to be careful when you're online that you're not making caustic comments because when you're on that social media platform of Instagram, TikTok, Facebook, you're on stage and you need to put your best foot forward. And if your best foot is not humor, don't try to use humor. Here's the bottom line: the step-by-step playbook for actually making a valuable service is to deliver a value through a model like the prescriptive model. So you want to offer a real solution instead of a discount. When people come in, you want to have a goals conversation. You want to build them a customized plan. You want to walk that client through their plan and then say, Are you ready to start? You want to schedule a check-in every 90 days where you measure their progress and tweak the plan. And then you want to celebrate their progress and adjust as needed. This is what people actually want when they're seeking out a coach, and that's what makes them stay. The opposite of this is selling a commodity service where you're running a coaching program, but you're trying to get 300 people in, and people can just walk in off the street and do a free trial or get a discount. And you're sending all these signals that you're not professionally coaching them, that you're just kind of choreographing them, or you're running a group class that they might enjoy for a couple of months until the novelty wears off and then they're gonna go do something different. In short, you're competing with people who are on a race to the bottom, who are gonna undercharge you and will be okay with a high churn rate. That is not your battlefield. And that is why you do not want to fall into the traps of trying to offer discounts on Black Friday. To recap, discounts weaken your foundation. You're probably already undercharging. Discounts are not marketing. Value builds your brand and strengthens your foundation, allows you to charge what you're worth, and creates a gym that's gonna last. Every year, gyms that fall into discounting for Black Friday regret it. Gyms that stand strong win long term. Don't chase headcount. Don't chase discounts just to try and get as many people in your gym as you can. Build value. And if you want help building the systems and skills to make every season profitable, book a call with my team. I'm Chris Cooper. This is Run a Profitable Gym, and I hope and pray that you are not one of these gyms who aren't sure what to do or they add a Black Friday deal because everybody else is doing it and it hurts their gym long term.