ClassPass, the subscription service for boutique fitness, has today cancelled its unlimited membership option, the most expensive tier offered by the company.
This comes in the wake of a major price hike from ClassPass that fragmented its $99 unlimited plan into three tiers: Base (5 classes for $75/month), Core (10 classes for $135/month) and Unlimited ($180/month).*
Today, however, ClassPass users can say goodbye to any unlimited tier from the NY-based startup.
Here’s the issue:
When ClassPass originally launched, it was called Classtivity, and it was more of a marketplace for à la carte classes, letting users sign up and pay for a class from a listings board. Turns out, people need a bit more of an incentive to work out (like a steep discount).
Thus, ClassPass was born. The more recent pricing structure came from a promotion in May 2014 where ClassPass users could start with one month of unlimited classes for $100. After overwhelming success as a promotion plan, the company turned the subscription model into an actual business plan.
Unfortunately, that business model is simply unsustainable at the Unlimited tier.
ClassPass pays boutiques for each class its users take. These payments are at a steep discount to what an average consumer would pay, but even with the discount, active ClassPass users could (and did) easily cost the company money each month.
This meant that low-usage users were subsidizing high-usage customers. You can find a more in-depth dive into the price change here.
In April of this year, ClassPass made the hard decision to switch up that business model with the introduction of cheaper tiers, including Base and Core. Meanwhile, the Unlimited tier was bumped up to nearly $200 in some markets.
Though the company had to sacrifice 10 percent of its user base during this transition, it was the right decision to make. With tiers priced according to usage, each user was bringing in a relatively equal amount of revenue, making the platform more fair to its users and offering healthier margins for the company.
But it seems that even with additional tiers, unlimited fitness subscriptions simply aren’t sustainable, even at a relatively high price.
Here’s what ClassPass founder and CEO Payal Kadakia had to say about it:
The truth is there is a fundamental problem with the Unlimited plan. It can’t be a long-term membership option because it doesn’t align our business with our promise. What kind of business would we be if we wanted our members to work out less to reduce costs? We’d be sabotaging the vision at the very heart of this company.
As part of the new pricing structure, ClassPass introduced à la carte classes for purchase within the app, as well as a three-pack add-on package (ranging from $25 to $40 depending on the market). That way, when a Base user wants to take a sixth class in a month, they can simply purchase it directly from the boutique of their choice without upgrading their entire membership.
“I began to envision each one of you having a customizable and flexible ClassPass membership best suited to your monthly routine,” wrote Kadakia. “Seeing that you could work out exactly how you wanted to was the clarity I needed to say goodbye to our Unlimited plan.”
ClassPass users are very attached to the brand and the service, which is both good and bad news for the company. The price hike in April yielded a lot of negative feedback across social media, and ultimately cost the company one in 10 of its users.
However, ClassPass continues to grow both financially and in terms of users. The company is seeing more than 1 million reservations per month and has achieved around 20 percent margins, as of September. But yet another pricing change may grind existing unlimited ClassPass users who were paying a ridiculously low fee to go to daily workout classes.
Still, sustainability is the most important factor to consider for the five-year-old company, which has to date raised a total of $84 million, according to Crunchbase.
You can read Kadakia’s full open letter to the community right here.
*Prices based on New York