How Can You Possibly Give Away A Gi FOR FREE With A Jiu Jitsu Trial? Aren’t You Losing Money?

How Can You Possibly Give Away A Gi FOR FREE With A Jiu Jitsu Trial? Aren’t You Losing Money?

This is one of those rare questions that gets asked by both our coaching clients AND our prospective jiu jitsu students. On the surface, the deal sounds too good to be true. But it’s 100% real! No tricks, no bait & switch. On the surface, the answer is YES.. we are losing money. BUT, if you dig a little deeper and understand how this strategy can fit into the right system, you’ll see how it’s a win for both prospects AND gym owners.

First, a little background… Every gi costs us around 30 bucks. If you were paying a mat fee for each individual class at our academy, they’d be 20 bucks a piece. So, our 3 class trial plus the gi is valued at around $90 bucks.. So how can we afford to give it away?

Our trial is what’s called a “loss leader.” A ‘loss leader’ is a pricing strategy where you place the retail cost of a product or service well below the wholesale value. You accept a loss on that item knowing that the attractiveness of that offer will bring you a ton of attention and prospective clients.

The key to not losing your rear here is CONVERSION. Upsells, upgrades, and additional purchases will more than make up for the initial loss you incur on the gi and the trial.

Costco is famous for it’s use of loss leader pricing strategy with their $5 rotisserie chicken. Most grocery competitors charge double for a similar product. Costco is willing to lose money on their chickens because they know that it’s almost impossible for customers to walk in and “just buy a chicken.” Costco places the chickens in the very back of the building, forcing you to walk in a full circle through the entire store to get one and check out. They know that the longer a customer is in the building, the more products they are going to see and sample. The more they sample, the more they are going to buy. (Leave a comment if you’ve ever gone into Costco for ‘just a chicken’ and ended up dropping over 50 bucks!)

The best loss leaders sound too good to be true. But, as I said before, they are NOT a bait and switch. Customers could absolutely walk into Costco, buy their ‘loss leader chicken,’ and walk out. But most wont.. Jiu jitsu prospects could absolutely walk into our academy, take a gi, train for three classes, and never come back.. But most won’t.

When loss leaders are part of a well thought out system & strategy, they work & they increase profits. The biggest retailers in the world wouldn’t use them if they didn’t.

But use them wrong and you can lose money. So how do you know if this strategy is right for you?

First, you HAVE TO know your numbers. How much money does it cost you to get a lead? an appointment? a trial? a new student?

Know the REAL numbers at every step of your sales process. (The ‘real’ ones… not the ‘ego numbers’ that make you feel good…) How many of your leads become appointments? How many of your appointments show up? How many of your prospects who show up actually become students?

And lastly, get good at money math.. How much are you collecting from new members on the day they join your academy? How long does a new member usually stay at your gym? What is the average lifelong value of your client?

When you understand the total lifelong value of a client and subtract the amount it takes you to acquire one, you will be left with a chunk of money which makes up your ACTUAL lifetime client value. That’s the range you have to play with to cover your initial loss leaders.

Companies with deep pockets like Guthy-Renker will take HUGE losses on their most popular product, Proactiv, and spend so much to acquire a client that they don’t start turning a profit until month FOUR of a customer’s auto-renew! But.. they know their numbers and they know how much they can spend. And Proactiv is one of the most successful and profitable acne skin care lines in the world.

As martial arts owners, we operate on a MUCH smaller scale, but this strategy can still work. (Although I wouldn’t recommend going that deep into a client’s monthly membership before turning a profit..) The best martial arts loss leaders can be covered by the initial down payment or during the first month’s billing. So, in 30-60 days, each client who stays becomes profitable and covers any losses caused by people who dropped out earlier in the process.

By simply knowing, tracking, and understanding your numbers, you get to offer something that no one else in your town is brave enough to offer prospective clients. Your prospects will be totally wowed. And YOU will make more money.