How to price membership tiers

To price membership tiers, start with what each tier costs you to deliver, adjust for how much members will use it and how much of your space it takes at busy times, then set the gaps between tiers so the step up is clearly worth it to the members most likely to take it. The top tier changes how the others look, so price the tiers as a set.

The figures in the examples are hypothetical, so swap in your own costs and usage before setting real prices.

What does each tier cost to deliver?

List every benefit in each tier and put a cost against it. Some benefits cost little to give, such as access to a lounge that is open anyway or a member rate on a room that would otherwise sit empty. Others cost money every time they are used: classes with a paid instructor, spa treatments, parking spaces you could otherwise sell.

Included credit needs particular care. Say a tier includes £50 a month to spend on food and drink. If members redeem £40 of it on average, and the food and drink cost the club 30% of menu price, the credit costs £12 a month per member plus the staff time to serve it. Credit that expires unused lowers the cost further, although members who keep losing it tend to notice.

Add a share of fixed costs, such as rent, salaries and maintenance, to reach a full cost per member, then decide what margin each tier should earn.

How do usage and capacity affect the price?

Two members on the same tier can cost very different amounts. Someone who comes in every day uses far more than someone who visits once a month, so a tier priced on the average makes money on light users and loses it on heavy ones. That is acceptable within a tier, as long as the tiers separate the extremes, for example with an off-peak tier for people who only come at quiet times.

Capacity puts a ceiling on the most popular benefits. Say a studio's peak-time classes hold 20 people and run 15 times a week, giving 300 peak places. If members on the unlimited tier each book two peak classes a week, 150 of them fill every place, and anyone else on that tier finds classes full. Price and cap the top tier for the number of members your busiest hours can hold, and sell off-peak access more cheaply to everyone else.

How far apart should tier prices be?

Each step up should add benefits worth more to the target member than the price difference, judged by what they will use. If the middle tier adds two guest passes a month and gym access, ask whether the members who want those would pay the difference. The gap needs to be wide enough to protect the higher tier's margin and narrow enough that upgrading feels reasonable. A hypothetical club might set it out like this:

Anchoring affects how people read a table like this. A Premium tier at £240 makes £150 look moderate. A club can use that deliberately, but only if the top tier is real and some members buy it. A tier nobody takes looks like a trick to the members who notice.

Keep the number of tiers small enough that members can compare them at a glance. Beyond three or four, the differences start to blur.

Monthly, annual and joining fees within each tier

Decide the payment options once and apply them the same way to every tier. If paying annually saves members two months' fees, keep that rule across all tiers so the comparison stays simple. Joining fees can be flat or scale with the tier. If they scale, decide whether a member who upgrades soon after joining pays the difference, or people will join at the bottom tier to save on the fee and upgrade a week later.

How to design upgrade paths

Members upgrade when they run into the edge of their tier: their guest passes run out before the month ends, they keep paying for classes the next tier includes, or they want to book further ahead. Watch for those moments and make the upgrade easy at that point.

• Pro-rate upgrades mid-cycle so members don't have to wait for renewal to move up.
• Let downgrades take effect at the next renewal, so members keep what they have paid for.
• Show members on a lower tier what the next tier would have given them over the past month.
• Decide before a price rise whether existing members keep their current price, and for how long.

How to test and review tier prices

Look at the mix of members across tiers each quarter. If almost nobody buys the middle tier, the gap below or above it is probably wrong. If the top tier fills its capacity, it is underpriced or needs a cap. Track how much of each included benefit members use, upgrades and downgrades, and cancellations by tier. If the club has more than one site, count members, usage and cancellations the same way at each site, or the comparison between them won't tell you much. Test new prices on new joiners first, then move existing members at renewal with notice.

Check what your terms allow before moving existing members to a new price. Schedule 2 of the Consumer Rights Act 2015 lists a term that lets a trader increase the price without giving the consumer the right to cancel as one that may be unfair, so give notice before the renewal and a clear way to cancel or move to a cheaper tier.

Building tiers in Tiquo

In Tiquo, each tier can be its own membership plan with its own price and a weekly, monthly or yearly billing interval, and members are billed automatically on the plan's schedule. A plan can be assigned to individuals or to companies, can carry permissions for member areas of a website, an app or member-only services, and can be sold through a public signup page embedded on your own website. The memberships page explains how plans connect to bookings and payments, and how gyms and fitness clubs use them.