LA Fitness Pricing System - Case Study Example

LA fitness pricing system

Introduction

The most paramount aspect of human beings is having a healthy body to be in a position to do many other activities in life, both for entertainment and commercial purposes. As such, it is common for people to have organized centers for training on various skills such as self-defense as well as for entertainment and keeping physical body fattiness. LA Fitness Club was established in the USA on these bases. Put differently, LA Fitness is a health and fitness club, with chain operations in USA and Canada, with quite many locations in the two regions. LA Fitness was established in 1984, offering a widespread of the state of Art facilities at very competitive prices, which has seen it, grow in popularity, with increasing membership year after year. The current essay explores the LA fitness pricing system as well as the membership process, and how price discrimination is depicted in the two, mainly the third-degree price discrimination.

LA Fitness price and Membership fee

At LA fitness, prices are charged based on several variables; this is to mean that, there is no agreed price for various services identifiable with the firm. Prices are charged based on variables such as the location of the facility, the age as well as the gender factor; however, the minimum billed amount for all the services in all the categories is $99. Besides, upon cancellation of the membership, across all the classes and types of membership, there is no fee charged, there are free entry and exit upon the will of the individual.

The membership at LA fitness is comprised of several options. Members subscribe to the services of their interest for different options available at LA Fitness club in all the locations across USA and Canada. In this regard, one may subscribe on a monthly basis, annual basis as well as on limited access options where ones pay visits at predetermined timings.

Aspects of price discrimination in LA pricing

Several management practices in the LA fitness are a clear indication of the widespread price discrimination in the market as well as the third-degree discrimination. Third-degree discrimination is the process by which, prices for the same commodities or services are charged differently on the basis of variables such as the age, location, and gender. Third-degree price discrimination is implemented for helping the firm meet some profit margins, since, different market segments are supplied the same products at the same marginal cost for various marginal revenues.

The welfare effects of third-degree price discrimination consist of several outcomes. To start with, the firm may have no change in the welfare or on the other hand it may be made better off by the third party price discrimination as compared to the event when it is offering a common price for all the markets segments. The adverse effects of the third party price discrimination, is that the portion of the population who are price inelastic, are adversely affected by the pricing policy, since they are in a position to buy the products at such high prices, while the consumers who are more elastic to the prices are favored because they are in a position to obtain goods at a much lower price in the market as compared to their inelastic counterparts.

By the means of a generic example, for museum XYZ, where entry fee is charged differently for both adults and the students, it can be shown that, (as in the graphs below) the customers with inelastic demand are adversely affected by the third degree price discrimination (the Middle graph) while the more price elastic consumers are highly favored by the third degree price discrimination (the graph on the left). The total population of the Museums visitor’s consist of the sum of the adults and the students. For the Museum managers to effectively administer third-degree price discrimination, it is a basic factor of consideration to analyze their market so that the economic objective of the pricing policy is met sufficiently, avoiding the adversities associated with the policy as discussed above.

Price discrimination can be defined by several aspects to the customers who visit the LA Fitness for a wide number of services at the disposal of the company. Price discrimination may occur in the form of offering some cash discount to regular customers to the business but not the new one-time visitors to the company premises or offering a higher discount to the female customer and less cash discount to the male counterparts. For the firm to practice third-degree price discrimination, it is an indication of market command by the firm, which is the case with the LA fitness company, given that, it has a wide market reputation in offering exceptional fitness service to the largest population in both USA and Canada.

Notably, at LA fitness, prices for the services are dependent on the nature of the service you want from LA fitness. There are a wide range of services at LA fitness, such that, every customer has to define what he or she want so that their prices may be calculated and charged appropriately. This is a form of discrimination evidenced in the service industry, which ends up charging more for some facilities and charging seemingly low fee on some services as depicted in the LA fitness centers. On the same note, customers shifting from one service to the other, they are charged a different higher or lower price.

The membership criteria adopted by the LA fitness, also imposes some elements of price discrimination, in the sense that, for an individual to register as a new member of the club, one is charged at least $99, across all the LA Fitness location in USA and Canada, however, if the member wishes to add a family member to the club, he or she is charged no entry fee or registration fee since a member of your family is already a member of the club, what remains is only the monthly or yearly subscription fee to all the members. This is a third-degree price discrimination, whereby, those that belong to a given family lineage to whom one of the family members is an LA fitness registered member, the rest don't have to pay the registration fee. In this regard, such a policy is not only a pricing policy objective but also a point of Inc. marketing, since all that are related have an ease entry to the LA fitness services. This is one of the greatest contributors to its continued growth and development and acceptance in the USA and Canada markets.

The third-degree discrimination at LA fitness is identifiable, where the prices for all the services at different locations in the USA and in Canada are charged differently. The regions that are well off economically are charged more for the same facility that is charged a lower price in a different place. The implication of this is that people who can afford such high prices for those facilities go for them in their places. The price dictates where you go for the body physical fitness exercise at the end of the day, rather than which branch of the LA fitness is close to your place of residence. The third-degree price discrimination will thus be deemed effective in the event, where the consumers can identify themselves with a given price tags to the services provided by the companies, which forms the basis for profit maximization strategies of the firm.

It is also noted that LA Fitness charges different prices for the same service to different consumers in different locations. This depicts third-degree price discrimination. The bases for the price differentiation in different locations is based on the market analysis about the capacity and willingness of the consumers to pay higher prices while other are able and willing to pay less for the same service. As an assurance of higher quality, some consumers will be willing to pay higher for the same service that is offered at a much lower price on the other side of the market. The argument remains varied in the corridors of lifestyle and prestige economic discuss.

Some aspects of price discrimination at LA fitness are depicted and brought about by the market shareholding of the company. It has been explained that the LA Fitness, has over time has grown in popularity, with its reputation building up, due to excellent body fitness training and experience they offer to their clients. The LA Fitness Inc. is said to not only provide training to the consumers about the usage of the training machines but also undertake a healthy training requirement and process, which make the LA fitness very competitive in the market. Essentially, market dominance comes along with the company’s capacity to dictate market prices and power to command the pricing in the industry, which forms an important aspect of price discrimination in the long run. The LA fitness operates in monopolistic market competition, with more characteristics skewed to the monopoly that monopolistic competitive market structures. This is the major contributor to the effectiveness of the third-degree price discrimination as well as the overall price discriminatory system in the industry biggest market shareholder.

For the groups pursuing the physical body fitness training together, the charges with LA Fitness Inc. are much lower as compared to individual charges. Basically, before starting the actual training, there is a 30 minutes session on healthy training techniques by the trained experts in the field, which is done collectively by those getting into the exercising session in the club. As such, the charges are even lower because of the collective approach to pre-training and health training session time management. Most outstanding services at LA fitness is that their training services are not only the healthy and body fitness exercise, but they also constitute of some military training workouts with drills, which forms a very fulfilling training sessions for all groups of people in the society.

Conclusion

In conclusion, body fitness is critical in upbringing a healthy individual. The facilities for enhancing body physical fitness is not only for boosting the bodily health but also facilities for entertainment. The pricing and quality of the facilities offered are critical in building the organization reputation and popularity that enhances the brand equity.

Price discrimination can be very effective policy to organizations in enhancing income as per the clients served each time, however quite a complex mechanism to develop, since it calls for sufficient market analysis to determine that, different market segments will be comfortable with differentiated market prices for the same service.

The greatest contributor to the effectiveness of the third-degree price discrimination system with LA fitness is the fact that, they have the largest market shareholding in the sector, with a wide range of activities ranging from normal training sessions to military conditioned workouts with drills. This forms the basis for LA fitness to operate as a price maker rather than the price taker in the industry. The 30 minutes free session before the machine exercise start, is a major plus to the LA fitness success in price making in the very competitive market pricing structure.

Finally, the welfare effects of the third degree price discrimination, can be positive or negative to the different consumers experiencing different types of price elasticity, with consumers who are price elastic, having hard time in the purchase of such services, which call for sufficient knowledge and understanding of the nature of the consumers for such services, to avoid the adversities associated with third degree price discrimination.