Paying Not To Go To The Gym
Takeaway Points:
One economic study of gym membership usage found that, contrary to expectation, members often overpaid significantly for their regular gym memberships, in comparison to the much cheaper cost of individual day passes.
Their hypothesis for this phenomenon is overconfidence - when they measured how often people thought they would go to the gym, they found that members believed that they would attend about twice as often as they actually did, which would actually have been a fair deal.
In short, members tend to choose membership contract options based on ideal, rather than actual, likelihood of attending. This cost them a lot of money, long term.
This reveals an optimal pattern for gym membership that you can use to avoid overpaying.
Last week, I shared a post about how pro natural bodybuilders train a lot less than people think. In fact, the study reviewed in that post found that those who trained less, on average, actually had better results.
This advice is great for over-exercisers on one end of the spectrum: people who work out way too much and need to allow their bodies more time to recover in order to see results. But what about people on the opposite end of the spectrum?
One of my absolute favorite studies of all time is called Paying Not To Go To The Gym. This study found that, on average, gym members overpay significantly for their gym memberships by choosing sub-optimal membership options. Here’s how the study worked:
The researchers selected a group of 7,752 people who took up a gym habit, tracked their gym attendance habits for 3 years, and compared this up against their purchasing habits (in other words, how much money they actually spent on the gym vs how many times they actually used the gym) to get an average cost per gym visit. What they found was that “The observed consumer behavior is difficult to reconcile with standard preferences and beliefs.”
Here are some of their findings:
“First, members who choose a contract with a flat monthly fee of over $70 attend on average 4.3 times per month. They pay a price per expected visit of more than $17, even though they could pay $10 per visit using a 10-visit pass. On average, these users forgo savings of $600 during their membership. Second, consumers who choose a monthly contract are 17 percent more likely to stay enrolled beyond one year than users committing for a year. This is surprising because monthly members pay higher fees for the option to cancel each month. We also document cancellation delays and attendance expectations, among other findings. Leading explanations for our findings are overconfidence about future self-control or about future efficiency. Overconfident agents overestimate attendance as well as the cancellation probability of automatically renewed contracts. Our results suggest that making inferences from observed contract choice under the rational expectation hypothesis can lead to biases in the estimation of consumer preferences.”
Another important bit, buried a bit further down:
“On average, 2.31 full months elapse between the last attendance and contract termination for monthly members, with associated membership payments of $187. This lag is at least four months for 20 percent of the users.”
And another:
“In the annual contract, average monthly attendance for the initial group in the first year, 4.36, is significantly lower than for stayers in the second year, 5.98.”
And still another:
“Average monthly attendance in the first six months of a monthly contract, 4.36, is 20 percent higher than in the next six months and is significantly higher than in any of the later six-month periods among stayers.”
The theory of these researchers (and an interpretation I tend to agree with) was that overconfidence can explain most of these findings. What they found was that on average, people believed when purchasing their membership that they would attend about twice as much as they actually did.
This, of course, would have halved the effective cost per visit, making it less than the $10/visit cutoff to get value out of a monthly membership. In their overconfidence, first time gym goers select a payment plan that seems to be in tune with their expectations. Of course, you don't need a rocket scientist to guess that most people, starting out a gym habit for the first time, probably don't know what to expect, and probably have unrealistic expectations.
The reality is that this overconfidence tuckers out. For those on a monthly rate, the average tendency is to attend a lot in the first few months, but then over time they slowly start going less and less, until they eventually cancel out entirely (on about a 2-4 month delay after their last visit) after a little over a year. For those on a yearly rate, the average visit rate is lower than those on a monthly rate, but those who stick around in the second year are much more likely to visit.
These findings tend to make sense. When someone takes up a gym habit, they’re usually highly motivated for a few months. Then, their results slow, they get tired of going, and they go less frequently, maybe stopping entirely. Since people on a monthly contract have to actually go into the gym to cancel (and this is, in a sense “admitting defeat”, making it feel shameful), their memberships may continue for several months after they stop using the gym before they finally motivate themselves to cancel.
However, since a yearly contract typically expires automatically at the end of 12 months, this means that no action is required - making it easier to simply drop off the map.
To put on my extremely amateur psychologists hat, I’d say that it’s likely that members on the yearly rate go less frequently because they see the money spent as a sunk cost rather than an ongoing one. If you see the money coming out of your bank account every month, you feel encouraged to follow up on that money with effort. If you pay in one lump sum, that money is already gone, so there’s no ongoing stimulus to keep going to the gym. You think of that money as “already spent” regardless of whether you go or not.
At the same time, members who renew their yearly membership for a second year are significantly more likely to go - this is probably because this group is primarily composed of the “true believers”. You’ve weeded out all the people who don’t really want to work out, and serious, habitual exercisers will probably switch over from the monthly to the yearly rate sooner or later (or keep the yearly rate) to save a bit of money.
Ultimately, this makes sense, and jives well with my years of experience of working in gyms. In the first gym I managed, we had about 20-30 new members per month, on average. Each month, we would lose (on average) an equivalent or slightly smaller number, whether due to payment issues, contracts ending, or simple cancellations. Most people would only last a few months, cancel out, and be replaced by the latest crop of members, and a few people would last much longer, becoming serious regulars. For the people who lasted much longer, they often cancelled only due to serious life events - losing a job, moving, a serious injury, and so on. I can't tell you how many people signed up for memberships, saying that they're ready to make a big change, only to never come back and show up on the cancellation list a couple months later.
I think that this study does a really good job of helping us understand how people really use gyms, as opposed to how much we’d like to think we use them. This may not be terribly shocking to serious exercisers (who have been at it for many years, and have seen how it all works out), but it’s probably somewhat shocking to many beginners. The reality is that people really do spend a lot of money, *not* to go to the gym.
This is kind of a “well known secret” in the fitness industry. Gyms stay afloat because they have a lot of members who don’t go to the gym. Many gyms have too little floor space to be viable if all their members were to go to the gym at once, so in essence, the people who are paying but aren’t going are subsidizing the memberships of the people who are going - generating more profit for the gym owners, and reducing the overall cost of individual memberships for everybody.
Ultra cheap gyms like Planet Fitness make less per member, so they have to make it up by having more members than usual per square foot - and that means that they have to have an even smaller percentage of their members using the gym regularly, or else they would be overflowing constantly. Some of them are! Planet Fitness gets a lot of crap for advertising itself as "the non-gym" but ultimately, it has to - because it needs to attract a lot of people who are paying not to go to the gym for its business model to work.
There’s no serious recommendations that I can make for beginners, in terms of money. It seems unlikely to me that your choice of gym plan will have a huge impact on your long term success - based on this study, it would seem that the smartest thing to do is try out day passes or a monthly rate for 6-12 months to see if you’re ready to commit, and then switch over to a yearly rate once you’ve successfully survived.
I know that in some of the gyms I've worked at, day passes cost $15-20 instead of $10, making them a less worthwhile option. However, many gyms don't really advertise their day pass costs (or don't offer day passes) because they want to get you on a full membership - so I recommend contacting your gym and directly asking about day passes, so you can compare for yourself if it's a good deal in your situation.
It's also important to remember that the cost of assembling a home gym, provided you have the space, is much less than most people think, and is a far better deal, long term, than paying for a gym membership. Attending a gym also incurs hidden costs (including a lot of travel time and gas money) that could be saved by owning a home gym.
If you're one of those "true believers" forking over for a yearly pass after 2-3 years of consistent training, consider dropping that money on a home gym instead, especially if you're a competitive or semi-competitive athlete. My home gym guide covers a lot of the basics.
I would argue that getting over that 6 month hump is the far more important part, and has little to do with exactly how you’re spending your gym membership money. This relies on stuff like seeking proper motivation, guidance via training or coaching, and your gym’s ability to foster friendship and community.
I’ve written a lot before about the process of getting started. I recommend What To Expect When You Start Lifting for a good idea of the challenges you’re going to face as a beginner. If you’re looking for a guide to start lifting weights, my beginners guide should help. Whatever the case, many people are unprepared for the challenges they face, and fail when they go it alone.
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