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Value Proposition and Business Model<\/u><\/p>\n
The idea behind ClassPass is that subscribers will enjoy value from the variety of classes in the ClassPass network studios. The number of times a subscriber can visit a specific gym is limited to three times a month to encourage trials of new gyms. The price of the membership (currently $119) is cheaper than some luxury studios that may cost up to $200 per month. Subscribers can also try a few classes before committing to a full-time gym membership.
\nSample of User Interface<\/p>\n
In terms of the value proposition to gyms, ClassPass convinces studios to participate in the ClassPass network with the promise of new customers who would then pay full-price for a class after initial trials. ClassPass members also fill spots in classes that would have otherwise been empty. As an incentive to participate in the ClassPass network, ClassPass compensates the studio per class per participant (at a wholesale rate lower than what the customer would have paid directly to the studio).<\/p>\n
Operating Model<\/u><\/p>\n
In terms of operating assets, ClassPass does not own gym infrastructure. Its main asset is the technology behind the online and app platforms.<\/p>\n
The technology platform coordinates with studios to list their classes and the number of open slots, connecting subscribers to the studio class schedules. In addition, the platform has a feedback system for studio partners, as subscribers are required to rate their satisfaction of each class that they attend.<\/p>\n
<\/p>\n Areas of Misalignment As ClassPass does not own gym infrastructure, it relies heavily on existing studios to provide services and value to its subscribers. This requires ClassPass to convince gyms that customers will convert to loyal customers who will eventually buy higher-margin packages directly.<\/p>\n However, once studios realize the ultimate value of gaining loyal customers, the value chain is disrupted. Firstly, ClassPass loses their monthly subscribers, as members have replaced their ClassPass membership for membership to the studio. Secondly, ClassPass loses a studio partner, as the studio has succeeded in converting customers, and can now rely on in-house marketing and word-of-mouth to expand membership.<\/p>\n ClassPass also faces challenges in providing value to its subscribers in a financially sustainable way. Since ClassPass compensates gyms on a per-visit basis, ClassPass loses money on high-users (if ClassPass pays a gym approximately $20 dollars per visit, ClassPass loses money on those who visit studios more than 6 times a month). In order to be profitable, ClassPass must rely on the unenthusiastic (or lazy) gym-goer, who pays the monthly membership but never actually goes to the gym. This is hardly the type of customer that ClassPass should target. The unenthusiastic gym-goer is less likely to provide feedback to the gyms, and is less likely to promote a gym that they enjoyed to their friends.<\/p>\n <\/p>\n Implications of Misalignment<\/u><\/p>\n Because of high subscriber-churn and high payments to gym studios, ClassPass has raised the price of membership. Two years ago, a monthly membership cost approximately $79 dollars (with certain promotions). The membership price has since increased 50% to $119. With each increase in price, two possible death spirals happen:<\/p>\n Death Spiral #1:<\/p>\n Customer value is eroded, causing existing subscribers to cancel their ClassPass memberships for their local gym. ClassPass\u2019s membership base shrinks, making it less appealing to gym studios who are attracted by ClassPass\u2019s exposure and reach amongst millennials. Studios then leave the ClassPass network. High price also deters potential new customers from joining.<\/p>\n Subscribers are more intent on \u201cgetting their money\u2019s worth,\u201d and will attend more classes, increasing ClassPass\u2019s payments to studios, worsening ClassPass\u2019s profitability, causing ClassPass to further increase its membership price.<\/p>\n Areas for Improvement<\/u><\/p>\n ClassPass needs to change its compensation model and its value proposition to studios.<\/p>\n Instead of paying studios per visit per member, ClassPass should give partner studios a fixed monthly payment. Currently, ClassPass bears all of the risk of the high-users. By shifting some of the risk onto the studios, the studios would be more strategic about which slots they open to ClassPass members. Perhaps they only open one class a day only to ClassPass members. This can be an opportunity to train a new instructor, who charges a lower amount per class.<\/p>\n ClassPass should also monetize the vast amounts of data they can provide to studios on their subscribers. ClassPass has a variety of valuable data, such as the ratings of specific instructors, daily\/monthly demand patterns, or workout preferences. Given that ClassPass is available in 36 different geographic locations, for a nation-wide studio such as FlyBarre or Barry\u2019s Bootcamp, this information is valuable for improving studio service.<\/p>\n <\/p>\n <\/p>\n Sources:<\/p>\n http:\/\/techcrunch.com\/2015\/11\/11\/confirmed-classpass-raises-30-million-series-c-from-google-ventures\/<\/a><\/p>\n http:\/\/www.nytimes.com\/2015\/03\/05\/magazine\/classpass-and-the-joy-and-guilt-of-the-digital-middleman-economy.html?partner=rss&emc=rss&_r=1<\/a><\/p>\n http:\/\/money.cnn.com\/2015\/04\/29\/smallbusiness\/classpass-small-business\/index.html<\/a><\/p>\n![\"ClassPass\"](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/ClassPass.jpg\")
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\n<\/u><\/p>\nDeath Spiral #2:<\/p>\n<\/p>\n