How Can You Possibly Give Away A Gi FOR FREE With A Jiu Jitsu Trial? Arenât You Losing Money?
Dec 16, 2024How Can You Possibly Give Away A Gi FOR FREE With A Jiu Jitsu Trial? Arenât You Losing Money?
This is one of those rare questions that gets asked by both our coaching clients AND our prospective jiu jitsu students. On the surface, the deal sounds too good to be true. But itâs 100% real! No tricks, no bait & switch. On the surface, the answer is YES.. we are losing money. BUT, if you dig a little deeper and understand how this strategy can fit into the right system, youâll see how itâs a win for both prospects AND gym owners.
First, a little background⊠Every gi costs us around 30 bucks. If you were paying a mat fee for each individual class at our academy, theyâd be 20 bucks a piece. So, our 3 class trial plus the gi is valued at around $90 bucks.. So how can we afford to give it away?
Our trial is whatâs called a âloss leader.â A âloss leaderâ is a pricing strategy where you place the retail cost of a product or service well below the wholesale value. You accept a loss on that item knowing that the attractiveness of that offer will bring you a ton of attention and prospective clients.
The key to not losing your rear here is CONVERSION. Upsells, upgrades, and additional purchases will more than make up for the initial loss you incur on the gi and the trial.
Costco is famous for itâs use of loss leader pricing strategy with their $5 rotisserie chicken. Most grocery competitors charge double for a similar product. Costco is willing to lose money on their chickens because they know that itâs almost impossible for customers to walk in and âjust buy a chicken.â Costco places the chickens in the very back of the building, forcing you to walk in a full circle through the entire store to get one and check out. They know that the longer a customer is in the building, the more products they are going to see and sample. The more they sample, the more they are going to buy. (Leave a comment if youâve ever gone into Costco for âjust a chickenâ and ended up dropping over 50 bucks!)
The best loss leaders sound too good to be true. But, as I said before, they are NOT a bait and switch. Customers could absolutely walk into Costco, buy their âloss leader chicken,â and walk out. But most wont.. Jiu jitsu prospects could absolutely walk into our academy, take a gi, train for three classes, and never come back.. But most wonât.
When loss leaders are part of a well thought out system & strategy, they work & they increase profits. The biggest retailers in the world wouldnât use them if they didnât.
But use them wrong and you can lose money. So how do you know if this strategy is right for you?
First, you HAVE TO know your numbers. How much money does it cost you to get a lead? an appointment? a trial? a new student?
Know the REAL numbers at every step of your sales process. (The ârealâ ones⊠not the âego numbersâ that make you feel goodâŠ) How many of your leads become appointments? How many of your appointments show up? How many of your prospects who show up actually become students?
And lastly, get good at money math.. How much are you collecting from new members on the day they join your academy? How long does a new member usually stay at your gym? What is the average lifelong value of your client?
When you understand the total lifelong value of a client and subtract the amount it takes you to acquire one, you will be left with a chunk of money which makes up your ACTUAL lifetime client value. Thatâs the range you have to play with to cover your initial loss leaders.
Companies with deep pockets like Guthy-Renker will take HUGE losses on their most popular product, Proactiv, and spend so much to acquire a client that they donât start turning a profit until month FOUR of a customerâs auto-renew! But.. they know their numbers and they know how much they can spend. And Proactiv is one of the most successful and profitable acne skin care lines in the world.
As martial arts owners, we operate on a MUCH smaller scale, but this strategy can still work. (Although I wouldnât recommend going that deep into a clientâs monthly membership before turning a profit..) The best martial arts loss leaders can be covered by the initial down payment or during the first monthâs billing. So, in 30-60 days, each client who stays becomes profitable and covers any losses caused by people who dropped out earlier in the process.
By simply knowing, tracking, and understanding your numbers, you get to offer something that no one else in your town is brave enough to offer prospective clients. Your prospects will be totally wowed. And YOU will make more money.
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