When Your Rate Increase Hits the News (and It’s the Best Ad Ever)

Magnus Bjorsvik

Mike (00:02):

Increasing your rates is stressful, and it’s even worse when a local newspaper does a story about it. Magnus Bjorsvik reports on the results of that story next.

Chris (00:11):

Hey guys, it’s Chris Cooper. Your members are buying supplements somewhere, so they should buy them from the person who cares about them the most: You. And you should work with my friends at Driven Nutrition. Jason Rule and the Driven team put customers first, every time they’ve got a ton of products with high margins and they’ll even train you so your retail program adds revenue to your business. Kirk Hendrickson from Iron Jungle CrossFit says Driven Nutrition has some of the best support I have seen from any company we’ve partnered with. To make more money with supplements and retail sales, visit drivennutrition.net. Now back to the show.

Mike (00:43):

We’re back on Two-Brain Radio. It’s Mike Warkentin. I did a rate increase a few years back and I felt ill as we pulled the trigger and sent the email. In Norway, Magnus Bjorsvik owns CrossFit Uvær in Tromsø, Norway. When he increased his rates, it actually made the news. The article even said, several members were reacting to the increase and some wanted to quit the gym. That’s stress city in Norway. So I’ve got Magnus here on the show and Magnus, I’m going to ask you this, lots of gyms do rate increases, but most of them don’t result in news stories. So why did yours end up in the newspaper?

Magnus (01:18):

Hi, Mike, thanks for having me on the show. That’s a good question. You know, I think it was probably because of the reaction some of the members had to the rate increase, because there was not really another way that the newspaper could have had the information about our rate increase, but I don’t know this for sure, but I’m pretty certain that some members contacted the newspaper about the increase in the rates. But, we were lucky though, because it turned out to, I mean the angle of the article ended up very positive for us.

Mike (01:52):

We’re going to dig into that article in just a minute, but I want to get a few details from you about your rate increase. So talk to me about how long you’ve been in business, what your rates were and what you raised them to.

Magnus (02:05):

Yeah, we opened CrossFit Uvær about, yeah, it’s almost four years ago now. And we did probably the same mistake in the beginning as a lot of the new gym owners do, instead of looking at the service that we were going to provide and what it was going to cost us to deliver that service, we looked at what other gyms in the area took for their service. So we started out charging, I think actually the first year we charged, 699 for regular membership and 599 for student membership.

Mike (02:47):

Sorry, just to give people perspective. These are Norwegian kroner.

Magnus (02:51):

Yeah, for people in the US or in Canada, I don’t think there’s probably no CrossFit gym over there that charges that insane low price, because it’s not sustainable at all.

Mike (03:07):

To give you perspective, listeners, right now a hundred kroner are about 12 US dollars. So your rates of like 799, 699, 599 were well under $90 US. All right, please continue. And tell me a little bit more about the details.

Magnus (03:23):

Yeah. So back two and a half years ago, after approximately a year and a half, we raised the prices, about a hundred, to 799 and 699.

Mike (03:39):

That 799 sis $96 for perspective.

Magnus (03:41):

So still this was a, you know, it was based on what other people were doing and not necessarily based on the service that we were providing. So because, you know, raising prices is difficult because you’re always afraid that, everyone’s going to go for the cheaper option. Fortunately that’s not how people work. So, luckily for us, we started, Two-Brain Business with our mentor Per about, yeah, it’s now over a year, year and a half ago. So, and when we did that, I think we were able to show, much better how, I mean, the difference between what we were doing and what other gyms were doing. And we also had different process for onboarding members. We had a different way of keeping the members as well, you know, keeping them engaged with our goal review sessions and keep people active. So after that, it was much easier for us to also be confident that we could raise the prices to a price that was sustainable for us.

Mike (05:04):

So you increased the value of your service and you took all the steps that we recommend at Two-Brain to make sure that you were delivering excellent service. And then with your mentor, did you guys sit down and say like, OK, the value is here, our rates don’t reflect that, they weren’t set correctly in the beginning. Is that the process that you guys went through to make the calculation that you decided to use for the rate increase?

Magnus (05:24):

Yes, that’s right, Mike. So this is the great thing about having a mentor. You have someone to talk with about the difficult stuff, because I was aware of this before we started Two-Brain that we weren’t charging what we were worth, because the numbers were weren’t adding up, you know, there was me and my partner. We were working 10, 12 hour days. And we had 250 members at some point even more, but we weren’t, you know, making a proper paycheck. So it was obvious to us that we had to do some sort of increasement in the price that we were charging. And when you have someone to talk to, it’s so much easier to reflect over that and execute on it.

Mike (06:17):

So what did you decide on for the new rates and how did you bring them in?

Magnus (06:21):

Yeah, so the new rates were actually calculated from the amount of members that we were able to deliver the service that we had to. I mean, the maximum amount that we could could have in our gym and still provide great service. And then we divided the costs and the revenue that we needed in order to continue doing that and divided that by the amount of members.

Mike (06:50):

Oh, that is music to my ears. That is like, that is brilliant math, but it’s so funny because it’s so obvious now, but I didn’t do that back when we started our gym in 2010, I made the exact same mistake as you, I made up my prices and it cost me probably a hundred thousand dollars over eight or 10 years. Cause I just didn’t do it properly. And then when we actually did do it properly, eactly like you, did life changed. So tell me what you decided on for the new rates.

Magnus (07:18):

I just wanted to add to that, you know, in addition to the, you know, you talk about the amount of money that you lost, but I’m also thinking the amount of extra work that we had to put in. I mean, we had to work so many long days and extra hours to keep doing what we did when we weren’t charging enough for it. So it’s sort of a lose-lose situation if you don’t charge enough for your service because you have to work more, but it doesn’t make any difference. You know, you’re working more, but you’re not making more money, because you’re not charging enough.

Mike (07:55):

I wanted to leave the fitness industry because I wasn’t making enough and I was working too much. I didn’t see the point. And it wasn’t until we made that step to change it and make it rewarding for me. And I’m not saying like we’re millionaires because of it, but to actually make the wage that you need to live on, when that started to happen, then the stress goes away and you enjoy the fitness business, whereas before I was looking for a way out.

Magnus (08:15):

Yeah, exactly.

Mike (08:16):

So details.

Magnus (08:18):

So of course, you’ve probably heard of something called the coronavirus over the last year and a few months. So, the rate increase was actually planned already in end of 2019. And the plan was to implement a stepwise increase from the 1st of April in 2020. So we were going to increase by 15% over three periods to get to the price where we at now.

Mike (08:55):

15% each period or total?

Magnus (08:57):

Well, no, the total was almost 40%.

Mike (09:02):

That’s an interesting point because we always recommend not doing more than 15% at a time. So I love that you’ve got a stepwise plan to get to your actual number in a series of steps. OK, great.

Magnus (09:12):

But, so that was the plan. That was the plan, Mike, but you know, nothing has gone according to plan over the last year and a half because of the coronavirus. I’m not saying that things haven’t worked out because they have worked out pretty well for us, but maybe not like we planned a year and a half ago or almost two years ago. The plan was, you know, first increas 1st of April last year, and then 12th of March last year we got the order to temporarily shut down our business. And the first order was to shut down for two weeks. So we thought, OK, no worries. We’re going to do a bit of a, you know, home training and online Zoom classes and stuff like that. And we’ll be back in business before Easter.

Magnus (10:08):

Of course, that didn’t happen. After two weeks came another two weeks and then another two weeks. And then I think in the end, maybe a month, and then we were actually lucky. We were able to open again, 15th of June last year before the summer holidays in Norway. But anyways, I mean, obviously because of the being shut down and not delivering the same service that we had used to do, we chickened out of the 15% increase last year and we thought, OK, we’re gonna do it when we open again. And then of course, when we opened again, so came the summer holiday. We thought, OK, people haven’t been to the gym for three months. They’re going to be, you know, working twice as much on their fitness this summer as previous years. But that didn’t happen. People took holidays, like they used to.

Magnus (11:08):

So we waited until fall. And then we, I mean, things were so uncertain that in the south of Norway, they had to shut down again in October. So we wanted to wait and see what happened. We didn’t want to increase in case, you know, after two weeks, we’re going to get a notice to shut down our operation again. So we waited, and we passed, you know, the second step of the increase and we passed the third date where we were supposed to be on the price that we have today. And we hadn’t done anything with the increase.

Mike (11:48):

And with good reason. I mean, that was an incredibly stressful period where gym owners around the world had to adapt their businesses in a heartbeat and change things. So like you can be forgiven for missing that schedule.

Magnus (11:59):

Yeah. But then what happens of course is at this point, we’ve already increased the price for new members. So, over a year and a half ago, we increased the price for people coming in to train with us for the first time. So it wasn’t a big deal yet, but we were already getting questions from newer members about, you know, I’ve heard that this person is paying this much and then is this the right price or is that the right price? You know, consistency needs to happen. So, April, no, I think it was February this year or March. We just decided with, well, actually, you know, another thing happened because we again had a plan to increase the price in March, we had the email ready and everything. We were going to send it out.

Magnus (12:50):

And then we had to do a second lockdown, like a local one in Tromsø. So we had the email ready for that. We were going to send it. And then actually the day before we were going to send out the email, we got the order to shut down for a week. And then that ended up being two weeks though, but we were able to open up after two weeks. So, and then we thought, OK, now we’re just gonna do it now. Finish off and increase all the way until where we’re supposed to be, because now we can’t increase with only 15% because then the new members are going to ask us, OK, well, why are they still not paying the same amount as me? I’ve been here for over a year. And the people that were here before me are still not paying the same price.

Mike (13:39):

Yeah. You got backed into unique situation there.

Magnus (13:42):

Yeah. At that point we just had to pull the plug and, or I don’t know, put in the plug I guess. And just, yeah, get everyone up to the same price basically. And then for some people that meant an increase, you know, in one step of something like 37%, which is a lot.

Mike (14:06):

So what did you decide on for the new rates?

Magnus (14:09):

So we ended up at 1,099 for the new rate.

Mike (14:14):

1,099 equals about 133 US dollars just for perspective. And that’s up from a rate of like, you know, under 90, before something like that, 80, in some cases, US dollars, just so listeners have some ideas. So a 37% increase, which again, we don’t normally recommend as a one-step thing, but you got backed into a spot where you had planned to do all this other stuff, you had already increased rates for new members, which is a key step that we always recommend people do to justify it in their own minds that yes, I can sell at this rate. And then you had this discrepancy between current members and new members and you needed to make a correction. So you, how scary was that when you had decided to do it?

Magnus (14:52):

Actually I was scared, I was really stressed about this last year and then this fall and then new year’s came. And in February the first time, and then at the point where I actually sent out the email, I was sort of finished being stressed about sending the actual email. I was just like, OK, we just have to do it. But of course, when we did get some replies to that, it ended up being more stressful than I thought when I actually sent it out, obviously.

Mike (15:22):

So let’s dig into that.

Chris (15:24):

Back to Two-Brain Radio in just a minute. Your gym members will love O2’s hydrating, non-carbonated beverages after a tough workout. Even better, O2 is a community-based brand that wants to give back to gyms. If you sell O2 at your gym, you get a free sponsored event every year. Gym owners who wholesale O2 also get their first order for a dollar. Visit wholesale.drinko2.com to apply for an account today.

Mike (15:50):

That’s the meat of this. And I want to hear this now. So you start getting some pushback from some members, and then you start hearing that an article is coming in the news. Tell me that story.

Magnus (15:59):

Yeah, well, it’s funny. Obviously we had some initial reactions, you know, people just responded immediately after reading the email, which is understandable. I mean, it’s a substantial increase from the price that they had before. A lot of people knew that newer members were already paying this price, so they weren’t surprised, but then some people thought that the increase was going to come, you know, not now, but at a later point or something like that. So, actually I didn’t know about the article until the reporter called me. So, yeah, I got a call, not the morning after, but two days after, so a full day had passed for people to read the email and get the initial reactions. And then morning of the second day, I had a call from a reporter asking about the rates and how we calculated it. I mean, what the reasoning behind increasing the prices were and et cetera, you know, and then they also said that they had insight into the fact that maybe some people weren’t so happy about the increase.

Mike (17:16):

Here’s a question. Before you did the rate increase, I bet you did the calculations to figure out how many members you could lose. And I bet you kind of targeted certain people. Did the people that you expected to be upset, were they the ones who were upset in the end?

Magnus (17:27):

Well some yes, but then some not at all. The surprising thing was that some of the people that, you know, spent a lot of time in the gym, like almost coming into work out like five, six times a week, had the strongest reaction. So the people that were getting the most out of their membership, paying, you know, the lowest price per if you could say, like per visit or whatever, had the strongest reactions, which was kind of surprising, but I guess, you know, people aren’t doing the same calculations for their private economy that we were doing for the business. So, yeah.

Mike (18:10):

  1. So after you hung up and we’re going to talk about the exact contents of the article in just a sec, but after you hung up with a reporter and answered the questions, what did you feel like? Like, did you feel like this was going to be a good article or bad article? Or how did you think that interview went with the reporter?

Magnus (18:26):

Actually I thought it went pretty well because, you know, we had a reason behind the rate increase. It wasn’t something we just, you know, figured out in a few hours and said, OK, let’s just increase the rate by 37%. This was a thought-through process that had, you know, it had happened over a year and a half. So it wasn’t something that we—there was a reasoning behind it. So when I could explain that to the reporter, I felt confident that the article should also represent that.

Mike (18:59):

So what was the name of the publication? I’m not going to say it properly. Would you say it for me?

Magnus (19:03):

It’s Nordlys, so that’s the Norwegian word for Northern lights.

Mike (19:09):

Oh, I love it. So I ran this article, you sent it to me. I ran it through Google translate. So you’ll forgive me if there’s any kind of misquotes here, but this is generally, you know, what Google translate told me about the article. I’ll give you a couple of lines. The first line that I see is “they’re the city’s most expensive, but have waiting lists and bursting capacity,” which I thought was really cool. They’ve immediately said that you are the most expensive gym, which I thought was super cool. They give some stats on what—they explain a little bit about what CrossFit, is and just talk about the history of the gym and some of the increases and so forth. And then the really cool part here is that they give you, Magnus, a chance to respond and talk about exactly what and why you did this. And you’re talking about the work that you put in, you know, you talked about, I think you said you were unloading fish to make the money that you needed. Like is that correct?

Magnus (20:00):

Yeah. I mean, that’s probably not a known profession where you live in the middle of Canada, but so Tromsø is on an island on the coast in Norway, sorry. So, there’s a lot of fishing industry around in the county. And so there’s freezer boats coming into the docks in Tromsø, and then people have to unload the fish. So there’s blocks of frozen fish, weighs between, like each block weighs between 40 and 80 kilos. And we have to actually, you know, people have to go in and lift it from the storage room and load it onto pallets and bring i into the docks and into freezers. It’s very physical, physical work.

Mike (20:46):

A bit of deadlifting there. So that’s, you know, that’s in the article, and then it talks about that, you know, you’re doing a great job providing all these different things. So you’ve adjusted the prices to reflect that. And then it talks a little bit about, you know, just CrossFit as a general form of exercise. There’s some more details. And it does explain that CrossFit is a niche, right? So it’s not like your standard gym. So it definitely sets you apart and says, it helps you actually anchor your value. Right? This article is very cool about that. It talks about the follow-up you offer to your members, your group training, the personal attention that they receive, phone calls, and it gives you a chance to kind of respond to some of the people that are are upset. And this is cool and forgive me, correct me if I get this quote wrong from Google translate, but I believe you said “we only want room for 200 people anyway, and we’re not dependent on everyone in Tromsø wanting to train with us.” Is that accurate from Google translate?

Magnus (21:43):

Yeah.

Mike (21:44):

I love that. So what you said right there was basically that we’re not looking for everyone. We have this valuable service. We want this many people and we’re going to make their lives so much better. And then it’s got, the article goes on to give some other perspective from other cities like in Oslo and other gyms and so forth. And the end of this, it talks about waiting lists at other gyms and so forth. And, you know, it says at the end that you have two vacancies at your gym and you’ll probably be fully booked. So this article actually comes out as like, just, it’s basically your announcement of being the best steakhouse in town. And tell me what happened, you know, like it’s so great. Like it’s just such a cool thing where it must have been, you know, people were like, oh they’re raising their prices. You got a chance to tell the entire country that you are the best, most expensive gym in town. And tell me what happened when that article was published.

Magnus (22:35):

Yeah, it’s funny. You know, I was surprised of the positive angling on the article. I mean, I thought that we had explained everything pretty well, but it angled it from the quality point of view and not necessarily from the price point, even though that had a fairly big part of it. And actually they, so what I did is as well, they wanted to use some pictures that they had from before, but I told them to just, you know, come on over to the gym and take some new pictures. So, they had some new pictures of me, you know, smiling, being happy with the situation, everything. So we had a lot of messages from clients that were very happy that we were increasing prices, you know, to actually be able to continue to provide the service that we have, you know, to continue to be there for them also in the future.

Magnus (23:29):

And I had messages from, you know, other parts of Norway and friends that not necessarily work out at the gym and everyone was really excited. So it was pretty cool. And then of course, because of the article as well, we got all the positive feedback from the members who had no problem at all with the rate increase, which was pretty cool because normally the people that are the least satisfied or the least happy with something are always going to be the people that speak the loudest, you know, or scream the loudest. But it turns out most of the people that also had their rates increased by 30%, 37%. Most of those people were actually happy and, you know, so satisfied with the service that we provide that they thought it was just cool to see it in the newspaper.

Mike (24:20):

Yeah. They don’t want you unloading fish. They want you in the gym making their lives better, you know, like literally that’s what they said to you is like, dude, we want you here and we want this gym here and we’re willing to pay for it because you’ve created the value. So congrats on that. Tell me what the general public did when they saw the article.

Magnus (24:35):

Yeah. So, of course a lot of other gyms that have gone through the, implemented the Two-Brain system. We have, everyone that wants to start working out with us, they have to go through a no sweat intro that we call it, a talk just about their background and their goals and in fitness and in life and so forth. And, we have a set amount of spots that can be booked through the week. And the two weeks after the article was published, we had 55 people book no sweat intros. I mean, it was basically filled up. So that was pretty cool for us as well. Cause then we took the opportunity to, I mean, previously, mostly me and my partner were doing the no sweat intros, but now, because of all the interest, we also included two other coaches in the intro process. I mean, doing the intro, no sweat intros and talking to people, and onboarding them. So, that was pretty cool. Yeah.

Mike (25:51):

So you basically announced to the entire country or your city that you’re the best, most expensive gym in town, and we just added 40% for our rates and 55 people contacted you and said, I want to know more about your gym. That’s so awesome.

Magnus (26:05):

And what we did is as well, you know, we booked so many of them into our OnRamp process and our membership and on as members that it was completely filled up. We didn’t have any more capacity. So what we did is the two spots that were available. We booked those, and then the rest of the people that wanted to begin. We did like a staggered start if that makes any sense. So we still, summer holiday is coming up in Norway. So most of the July is going to be a bit less activity and people go on vacation traveling and stuff, but already now in the beginning of June, we have people booked to begin in August, like mid August with us.

Mike (26:54):

Wow. So do you know how many people signed up on from that 55?

Magnus (26:58):

A good question. I just did the stats now for May. So in May we had 17 new members and then obviously there were quite a few new the first week in June. So I think, something like, between 30 and 35 people out of those 55.

Mike (27:21):

Wow. So considering what you had to go through here in terms of all the chaos and the scheduling issues with the COVID nightmare. And then the article and the pushback. This is kind of one of the great all-time wins for rate increases.

Magnus (27:38):

I think so. I mean, in the end, even though, obviously it’s probably a wiser to increase over several steps instead of doing 37% at once, I mean just the amount of PR and attention that we got from doing such a large increase, it was worth it, yeah.

Mike (28:02):

And again, like you were forced into that move, that wasn’t a move that you planned to do, you had to do it because you had already instituted the rate increase for new members. So it was just like, this was a coronavirus thing that you had to deal with. I’m going to ask you one last question about this. What would you say, there are gym owners that are listening to this right now, and they’re scared to increase their rates. I would have been one of them a few years back. The process that Per led you through, the Two-Brain process for rate increases, is that going to ease their minds or how can they get through this without, you know, stressing and tearing their hair out?

Magnus (28:31):

Yeah, I think, just being confident that the service that you’re providing is a really good, high quality service. That’s the one thing. And then of course, the process with Two-Brain and being led through it, this is a good one as well, but just having, you know, someone to talk to like the mentor that I have in Per, having him to talk with about, you know, the rate increase and the service that we provide and all of these things surrounding it as well and the running of the business, that’s probably what made it the most easiest, you know, it’s one thing to sit and, you know, tell yourself that, OK, the quality of my service is so and so good. But when you have like someone on the outside, that’s not necessarily in your gym but can see it from the outside and see what you do and compare that to what they do other places and tell you that you are doing the right thing. That is probably like the best thing ever for difficult decisions like this one.

Mike (29:46):

Per of courses, he is a pardon me, a successful gym owner in Sweden, very close to where you are. He runs a great gym. He knows tons of people. He works with tons of clients. He has lots of perspective. And then beyond that, he’s got access to the gigantic Two-Brain data set, where we have data on thousands of gyms where we know the best practices, we’ve tested everything. And when we tell you to do something, it’s not a, you know, a guess, it actually is backed by data and it works. So, you know, Magnus, thank you so much for sharing this story. Again, I love sharing positive stories right now because the COVID nightmare is still affecting a lot of gym owners, but I’m so happy to hear this, that you’ve got your rates in a great spot. And, you know, do you remember your last shift unloading fish? Do you remember it? And did you walk out and throw the gloves in the garbage?

Magnus (30:32):

It’s actually a long time.

Mike (30:35):

OK, well that’s good!

Magnus (30:39):

Yeah, it was, probably like a few months after we started with Two-Brain.

Mike (30:44):

So you’re living a better life now.

Magnus (30:46):

Yeah. Like it’s over a year ago now that I did any loading of fish.

Mike (30:52):

I love it.

Magnus (30:53):

It’s better now to, you know, focusing just on the gym, running the gym and my family and having more time with my family outside of work than I did before. That’s probably like the number one thing now is I have, yeah, I have a life outside of work, which I probably didn’t have for at least two years after starting the gym. And I think a lot of people are in the same boat, you know, and probably for even longer than two years, they stay, you know, pushing on and working 10, 12 hour days and you know, barely making ends meet and they think that that’s how it’s supposed to be because they see people elsewhere doing the same thing. But it’s not how you should run your business.

Mike (31:38):

Thank you so much Magnus. I’m going to let you get back to your life outside the gym and enjoy the fruits of your labor. I appreciate your story.

Magnus (31:45):

Thanks so much for having me.

Mike (31:47):

I’m Mike Warkentin and this is Two-Brain Radio. If you know that you need to increase your rates and you’re worried sick, Two-Brain can help. We have an exact playbook with relentlessly tested tactics that work. Don’t stress. Book a call with the mentor today using the link in the show notes. And we’ll guide you through this process and help you to remove your stress. And now join the Gym Owners United group on Facebook. You can literally ask your gym business questions in there and get answers from other certified Two-Brain mentors and Two-Brain founder Chris Cooper himself. It’s the only public forum where Coop offers his insight. That’s Gym Owners United, it’s on Facebook. Join it today, and I’ll see you in there.

 

Share on facebook
Like
Share on twitter
Tweet
Share on google
Share