The law of supply and demand is an economic theory that states that, all things being equal, an increase in supply will lower prices and an increase in demand will raise prices.
Makes sense of course… as more competitors move into a given market (increasing supply) prices for memberships tend to fall as owners and managers compete for a limited membership base.
Interestingly, the diversity of offerings and lower prices in the marketplace can actually stimulate additional demand and prices will settle at a new equilibrium point... although usually lower than the initial market price.
Why then do owners and managers discount their memberships during the New Year period… when demand for memberships is supposedly at its highest?
If the law of supply and demand holds true shouldn’t we be charging a premium, or at the very least not discounting our prices, during the New Year rush?
I recall one manager who recently boasted to me that he was discounting his memberships by a full 30 percent during the New Year rush but his competitor could only offer a miserly 20 percent discount.
Of course, many owners and managers today rely on the cash flow generated by the New Year rush… in fact without it many would not survive.
And because most of these New Year’s resolution members are not profitably retained owners and managers are forced to participate in the annual cash grab, and competing means discounting… and most often the biggest discount wins.
When you don’t know where your next member is coming from the pressure to compete, even when demand is high, is always present… and competing in our industry almost always means discounting.
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