ClassPass on Trial: Who It Helps, Who It Hurts, and Why It Divides the Industry.

- Those past past motherfuckers took my name. - Yeah. - I've got no skin in this, right? But I am the Tracer Grimshawian. If I'm a studio and I jump on, it's part of the terms that when you're running one of your retro promotions, you're able to use my studio as part of that? - Yes. - You know what we think? - I know you wait for it. - About three trials, why? Are you offering free sports? - I mean, ultimately, the class pass value proposition is to revenue maximize. - For the studio? - Yes. - It feels like it's more incremental revenue rather than maximizing it. If they wanted to maximize their revenue, they should be just running pit hot deals. Who's your biggest modality on class pass? Typically, like the line chair is lighting. - The line is, oh yeah. - It might as well just be flight pass. - The line is pass. - When anonymous asked, when are you going to pay Jim's fairly? What's your response to that? - My response would be. - Our clients and my audience. What I'm hearing them scream at me right now is, the class pass user comes to my studio two or three times a week. The members talk and when they say, "How much did you pay to get into this class?" And they say, "I'm on class pass, I just come three times a week and it cost me 20 bucks, whereas it might cost someone else 40 bucks." What's happened there? - Class pass users typically go to two to three studios in a month. So they're not going with the same frequency as a direct user. And it's rare that a class pass user is going to convert into direct member. - I've got a message from, it's a long email, from one of our clients who uses class pass. Are you ready? - Ready. - Can Z? - Does it? - Welcome to Do you want a month filtered? - Thank you. - Now, do you want to just quickly introduce yourself? - I would love to. So my name's Kinsey Lewinston, and the VP of Sales at Playlist, which is the parent company of mine, body and class pass and Booker, and I'm based here in Sydney. - Right. So I asked my audience what they thought of class pass, and they knew that you were jumping on this week. What do you think they said? - You know, I think it's a love, hate relationship with a lot of our studio partners. Unfortunately, and we've got a lot of partners that we have incredible, positive relationships with, and we've got a segment of partners that are not so happy with their relationship with class pass. So I can assume it was probably a little bit mixed. - Yeah, it was absolutely mixed. It was absolutely mixed. I'm going to write out some responses in a second, and then I'd love to get your response to the responses. But before we get to that, you mentioned that you've got a segment that lobby guards in a segment that don't love you guys. If we go one side first, the ones that love you, what are they doing differently to the ones that don't love you? - Oh, great question. Okay, so the studios that are working well with class pass, first and foremost, I think they understand what the purpose of class pass is, and their expectations are met with the reality. - What is the purpose of class pass? The purpose of class pass is to, it's really designed to be a tool to help studios fill their excess inventory, okay? So it's not a lead generation tool. It is an excess inventory liquidation tool. And I think one of the misconceptions and where we have a lot of missed expectations is that a lot of studios join class pass thinking, "Oh, okay, this is a great free way for me to generate new leads. I'm going to see all these class pass users coming in, and they're all going to convert to direct members 'cause they're going to have a great experience with me." And that's really not the purpose of class pass, right? We have tools within the MindBody ecosystem that are meant to drive direct utilization and drive your direct business. But class pass is not meant to be a lead generation tool for studios, and I think a lot of them hope and wish that it were. - And is that the ones that love you? - This is the ones that I would say don't love it. - Yeah, the segment. So the segment that loves class pass understands the purpose, right? They understand that they have to really focus on their direct utilization. Class pass can be kind of the cherry on top and they accept class pass for what it is, right? Class pass is an audience of people who are a bit more price sensitive than typically your direct members. They are variety seeking. So they may want to go to a Pilates class today, a hit class tomorrow, cardio the next day, a massage the day after that, a sauna recovery, and that's what class pass is great for, right? It's a great tool for people who are variety seeking and a little bit more price sensitive. It provides access to people who may not be able to pay full membership rates at a bunch of studios, and the studios that love class pass understand that. They sort of embrace those users. They treat them like very nice, right? Just like their own users. And they don't get frustrated that they're actually paying a lower rate. They understand that those class pass users are making a trade-off. What's that trade-off? So a direct member is going to get into the class that they want, the time that they want, the instructor that they want, right? They kind of have first dibs on your schedule and the inventory that you're offering. Class pass users, the trade-off is, they're kind of last in line, or what's available, right? So if I want to get into a five o'clock class at Core Plus, I may not get into that class because it may already be booked with your direct members. There may already be a wait list for that class in many cases there is. And a class pass user's not going to get access to that class at all times. Now, I might get access to a 10 a.m. class. That's not very full. I might get access to a 7 30 p.m. class that may not be full. But because of that, I'm filling an excess spot that would have otherwise gone unfilled. And the thing about studios or appointment-based businesses is those spots are perishable, right? So if the class happens and nobody fills that spot, you get $0 for that spot. But if class pass is able to fill one of those spots even at a discount, that's revenue that the studio earned that they potentially wouldn't have earned otherwise. - I understand. And how does class pass determine how much they pay out to a studio? - Yeah, so we negotiate rates with our partners we have terms of service. Typically, those rates start at 40% of their floor, a 40% floor rate of what their 10 pack might be or whatever they're offering. - I casual some of that. - And then it's typically a 40 to 90% payout based on the demand in that class. So if that is one of the more popular class times, there's a lot of demand happening for the specific class. The rate should surge if it's a completely empty class. Let's say it's 30% full, which on average in the fitness industry, it's about 38% fill rate overall with direct utilization. So this is an industry that does. - So does that mean for the direct member? So if I run a politage studio, my members, my community only fill up 38% of the classes. - That is on average across all of our genres on class pass. - I don't want to be able to say. - Not the million dollar businesses there, right? - Thank you. - So then when anonymous asked, when are you going to pay Jim's fairly, what's your response to that? - I think my response would be, we do pay Jim's fairly. We negotiate this rate. Studio's agreed to the rate. I'm pretty sure that if they're on class pass, they need that revenue, right? Because those spots are going unfilled. They can leave class pass at any time, right? They're not locked into their contract. They can leave. The truth is like any other aggregator or an airline industry, right? Airline industries surge rates when the demand is high and rates go down when they need to fill their spots on an airplane or a hotel. And class pass works in the same way. So really an Airbnb, right? Airbnb works in the same way. So you go, there's a bit what? So my luck is it surges if it's raining, if it's busy. And so really like we are paying studios fairly. They aren't paying anything to be on class pass. So if you think about it, if they are trying to get direct members coming in, they have to pay marketing fees for that, right? They have to spend on Google or Facebook or Instagram or social on class pass. They don't pay anything. So the trade off is I don't pay anything. I have exposure and visibility to millions of people, thousands of people on class pass. And in exchange for that, I do have to offer a lower rate to fill this excess capacity. But the best studios are going to see higher rates on class pass, right? If they have higher direct utilization, their rates are going to go up. So an interesting stat is that of our studios on class pass if they're 80% direct utilization, then you see 45% higher payout rates than studios who have around 50% direct utilization. Hang on. Can you explain that? Yeah, yes. But I think that's going to be really important for the audience. OK. So Plotty Studio. Yeah. On average, let's say they're filling their class 80% direct utilization on their own. So that's just so their members themselves, 80% filling up all the classes. Yep. About 20% excess spots. Yeah, and that might be the 1230. It might be for working on Friday afternoon. It might be a Sunday or PM. Exactly. They put that excess inventory on class pass. Yep. Those spots are more likely to surge because that class is filling, filling, filling. Compared to a class who's at 50% direct utilization, that class is only half full. We're not able to charge the same amount of credits for a class that's only 50% full. Right. So those credits are typically around 45% lower than a class that's full. And that's why we say, look, class pass, it's not here to drive all of your income and be a direct business generator for you. Sometimes that happens. We-- you know, one of our clients mentioned that-- and this is-- you know, this is on a filter. So this is real. And I think it was less. You know, like the real truth was, like she said, by eight class pass. But we make $16,000 a month from class pass. So we can't turn it off. So there's the sort of-- like, that is a bit of a-- I guess the word is kind of like, it's an awkward position for a business owner to go, oh, god. That her belief is your-- you know, her belief is class pass is devaluing the plighters in your industry. At the same time, you're making good money from it. What do you see for that? Yeah, it's so interesting, because you might ask another studio that's making $16,000 a month the same question, and they might say, it's great. Yeah. I was able to open a second location. I was able to expand my studio space as additional revenue I was receiving. And I understand that I probably haven't received that revenue otherwise. And so you ask yourself, what if class pass didn't exist? What if class pass didn't exist? Would studios be able to fill their classes to 100% capacity with their casual rates, with their monthly memberships, with their weekly memberships? I don't know, but before class pass, they weren't doing that. And we did a lot of market research before we launched in new countries. We understand the direct utilization of studios before we launch in new countries. And Australia was similar to everywhere else, which was-- business studios were not filling their classes. And the average was still around 35% to 40% direct utilization if you look at all class times. Yeah. And so without class pass, I think studios would be having a really hard time getting that additional revenue. Now, I don't think there's a limit to how many users are out there who are willing to pay direct membership fees, right? There's always going to be people who are not price sensitive, who are loyalists, who want to go to that studio five times a week. Class pass users are just not the same. They might go to a-- you know, on average, they go to the same studio two to three times a month, not necessarily two to three times per week. So is that a case stat? So a class pass user, how would you define a typical profile of a class pass user in terms of their attendance and how they use your platform? Yes, great question. So a class pass user, typically in their first three months on class pass, we consider that they're tested out period. They're typically going to a whole bunch of different studios in their first three months on the platform. But after that three months, they habituate. And they choose of the places that they went in their first three months. What are my top three to four favorite studios or favorite venues? Maybe they're not studios. It could be, you know, like I said, a recovery center. A lot of you massage. Yes. And those are the two to three places. They end up spending the majority of their credits in their monthly billion cycles after that. So they end up habituating, but they only really choose, you know, three to four places. So if I'm channeling our clients and my audience, what I'm hearing them scream at me right now is, yeah, but what happens is a class pass user comes to my studio two or three times a week. And then the members talk. And when they say, how much did you pay to get into this class? And they say, I'm on class pass, I just come three times a week. And I cost me 20 bucks, whereas I might cost someone else 40 bucks. What's happened there? What have they just not a typical user that slipped through the cracks? Or is that an opportunity for that studio owner to figure out how to convert that client if they've been two or three times a week into an actual member? Yeah, sorry. Let me clarify. Class pass users typically go to two to three studios in a month. And so that means of those two to three studios, they're usually going two to three times per month to each studio. Yeah. So they're not going with the same frequency as a direct user who probably goes two to three times per week. But they could. But they could. Yes, absolutely good. And some probably do. I think, you know, probably less than 5% go with that type of frequency. But for the most part, they're going to a couple places and they're going with less frequency than a direct member. Now, if they were going with that, yeah, then they often end up converting. That is rare, very class pass member. That they, which part is rare, that they convert to a membership or that they go two to three times a week to that same studio. Both. It's rare that they go with that type of frequency. Now, I think a lot of studios join class pass going, oh, I'm going to get in front of so many people. This is going to be a great lead gen tool. This is going to be great for my exposure, which it is. It's great for your visibility. It's great for your exposure because there are tons of people on class pass. However, it doesn't mean that they're going to come to you and then convert to direct. Some will, but most won't. And so that's why I say, like, the best studios who really love class pass have just accepted that, like, this is the demographic. This is the profile of a class pass member. It's unlikely, you know, I can try to convert them with all my might can really, really try. And you might, you might coach some of your customers to try to do that. And they might do so successfully, but the majority of users won't. Now, I've been using class pass for a really long time. Have I converted? Yes. Are you happy? So what? Absolutely. Why did you convert from class pass to a direct membership? Well, I do both. You do both. And a lot of people do that. So about 30% of our class pass members also pay for some membership. Whether it's like a big box gym membership or they do some other type of workout could be running outside or it could be spending money on a Pilates studio. And the reason why is that they want, typically, that first dibs access to the inventory, right? Like, I love this studio so much. I want to go at the 6 a.m., and I'm tired of not ever being able to get into that class be a class pass. So I'm willing to pay for a membership. Now I have my favorite studio that I go to all the time and then I have my class pass membership where I habituated a few others. And I think Chloe could say the same. I know she has a direct membership somewhere. She also uses class pass a lot of people do that. When we survey our class pass members, we say it's class pass your only method of exercise, your only method of wellness. And a lot of people say, no, I supplement this with an additional membership or an additional style of working out. So do you have a clue there for studio and is listening that a thinking, OK, maybe I need to adjust my strategy here with class pass? What should they be doing instead? Like one of the most common mistakes that they're making in terms of their approach to class pass right now, and what should they be doing instead? Yeah, I think I would spend any energy that studios are using trying to convert class pass members into direct members and focus it on just trying to acquire direct users separate from the class pass audience. They should be focused on direct utilization, growing their direct member base. It is a different demographic. It's a different type of user. We have even surveyed my body customers or my body users who are on the my body app looking for studios if they would be interested in doing like a variety seeking class pass option. They don't want that. People who are on my body want to buy a direct membership and they want first tips access to those classes. So people who are searching in the my body app, it's a different user. And so that would be my advice to studios is accept the class pass members for what they are. If you're able to convert a few, good for you, but I wouldn't focus your time and energy into doing that. Usually in order to be able to convert a class pass member, studios have to give them a discount anyway. - Why? - Because they're more price sensitive. They're more price sensitive and they're willing to make the trade-offs to go to class times that they may not be able to get into otherwise. So I think that's where a lot of the frustration stems from is you're sort of like working against the model. And you know, I've done webinars with some of our class pass partners who are obviously they love class pass and they've used us for years. And again, they have these amazing like success stories and growth stories of being able to really expand their business. They attribute it to the additional income that they receive on class pass. But they have learned and they've, you know, they've said like, look at the beginning, I thought this was a lead gentle and I treated it as such. It was so frustrating. Once I said, okay, I understand these people aren't going to convert. I just took the revenue. Is that great? This is like incremental cherry on top. That's what it's meant to be. The most successful strong direct businesses, those are the businesses that are going to see the best success on class pass because they have strong businesses to begin with. They have great reputations to begin with and they're not relying on class pass to drive their business. - Yes. - It's just extra revenue to fill these access spots that are really challenging to fill, right? It is really hard to fill 100% of your spots, 100% of the day and if you are a studio who is able to do that, class pass isn't for you. 'Cause even if you did integrate with class pass in your booking system, class pass would never be able to open up spots. - 'Cause you limit which spots. - Yeah, because we read your direct fill, whatever integration, whatever software you use, we read that and we only open up what's available in class pass. And so for studios at 100% capacity, they're never gonna have spots available in class pass. - And so my members will be able to fill that spot first before a class pass user? - Correct. - Yes. - How much does it cost to be on class pass as I'm going to illustrate? - Oh, there's different tiers. So you might pay, you know, $19 a month, $39 a month, $79 a month, depending on how many credits you want. - And what does a credit equal? - A credit equals somewhere. - This is a question that people had, is like how do you work out the credit system? - Yeah, the credit exchange rate is fluctuating all the time. So people try to do the math. You can never really do the math into what the credits are. They're fluctuating based on supply and demand. - At that particular studio? - No, in the country. - In the country on the platform. - Yeah, yeah, yeah. - So if it's September and it's spring and everyone's, let's get back into the studios, does it change the exchange? No, a credit exchange rate isn't changing all that frequently. It's typically pretty steady, oftentimes for years, like it won't change. People do try to do the math and back into it, which is fine, you know, in the US people are like, "Okay, $2 per credit." And maybe it's like $215 or $197 or something like that. But yeah, typically you can like kind of calculate on average what a credit value is. I don't even know what it is off the top of my head. But at the end of the day, the purpose of credits is to obfuscate the price of the class so that a class pass, you don't want class pass users being able to calculate how much it is to get into the class because that affects the studio's pricing power, which is why we use the credit system. If we just said, okay, this class is $8 and their direct pricing is $20, that would really impact their ability, their pricing power. So that's why we use the credit model. Studio, like we don't want class pass users to be able to figure out exactly how much they're paying, right? And when credit surge from eight credits to 12 credits, they're like, I don't know, is that $5 more? Is that $7 more? I don't really know. But how does it compare to other studios that I'm seeing within the class pass network? And how do I make that decision, right? And that's where, that's the other thing is like, studios get really frustrated about their credit price, right? And so we say, okay, look, we have credit prices and they're meant to maximize your revenue, right? In the same way, like I've been an Airbnb host before, right? I listed property on Airbnb. You could either choose your own right on Airbnb and I would get way less reservations or I could opt in to Airbnb's tool, smart tool, basically. Algorithm that says we'll price it for you based on the demand. And guess what, I got a lot more bookings that way 'cause I let Airbnb do it 'cause they have all the data of what people are booking when people are reserving. And class pass works the same way. Now, if you're a member and you're like, okay, I see Bloody Studio A offering a class at five o'clock for 12 credits, Bloody Studio B offering a class at five thirty or loving credits, you know? Maybe I really want to go to Bloody Studio A. Even though it's one credit more and maybe I'm not that price sensitive, so I'll do it. Or maybe I am price sensitive and I just want the cheapest option. So I'm gonna pick the second one. And so when studios like, I want a higher credit price, like, okay, but what will happen is some people, your bookings are gonna go down because some people are just like, I just want to choose the lower rate at this time, whatever's available. And so we do trials all the time, right? If a studio comes to us and they're like, so this is something that your users, your viewers and your listeners should know, the studio comes to us and they say, I really, really want to test a higher rate on class pass. We are always willing to do that. They say, okay, let's test a higher rate for 90 days. Let's increase your credit price and let's see what happens. If your revenue goes down, then let's have a conversation. If it goes up, great, you can command a higher rate. And so that we do that all the time. We have tons of tests going on in Sydney right now with studios that were like, sure, let's test it out. Let's see what happens. Let's look at the data at the end of it. - Is that okay though? Some studios don't mind, right? - If the whole point is it's not meant to be your core revenue-generating activity. And if I'm a perceived value brand or studio, that I want to attract a different top of market, I might want to make sure that I'm a bit on the more premium side, even within class pass on the credit side of things. So that even my members know that they're kind of still getting a better deal by just walking straight in with us. - Yeah, if a studio is like, look, I don't care. - Yeah, it's like if I get it, I can get it, but I feel better about it. If I know that it's even more premium in terms of the credit on class pass. - Yeah, I mean, ultimately the class pass value proposition is to met revenue maximized, right? That is the class pass value proposition. - For the studio. - Yes, like, hey, we want to maximize your revenue and the way that we maximize revenue is finding the best price that people are willing to pay, right? - Yes, some studios are like, I don't really care about maximizing my revenue. If they wanted to maximize their revenue, they should be just running shit hot deals in the market in our way, not, you know, we hate free trials. But actually developing, like what I'm hearing is, like if studios actually develop their own signature acquisition system into their video, that built their own strength into your point, like a lead generation. If they actually figured out how to do a lead generation, then actually there's a world where class pass is like bolt on on top of that or the bits that are harder to fill. 'Cause even if we have studios in our academy that are like, they're redlining towards the top. They're there, like all the morning blocks are full. The lunchtime is, we could probably do, fit a few more in the lunchtime. The first two in the evening or four, there's a 645 that is generally the ones who are late from work. It's a 645. - Grab that, yeah. - So like is that one that they can just go, okay, we'll chuck the 645 on and a bit of the lunchtime. Can they do that? - Look, the way that class pass works and the way that the best studios use class pass is we fully integrate with your booking system. - All right, so it's free for all. Like if I'm a class pass user, I can jump into it. I can try to still jump in on the 6AM, even though that's really waitlisted from the members. - No. - Okay, cool. - If it's full, you can't get in. So the integration reads your direct fill. If that class has historically been filling over the past few weeks, it's not even gonna open a spot on class pass. - Right. - And so it is, class pass is meant to protect your direct business. We are not trying to take spots that a studio could have sold directly. - Do you think people can agree with that? - I sure hope so. That's literally the entire business model. We would not survive as a business if we were taking studios entire book of business and offering it at a discount. We wouldn't survive 'cause studios wouldn't survive. Our goal is not to take as much revenue or as many spots as we can. It's truly to protect studios' direct fill. That's why we have these algorithms, right? They can read the historical fill. Say, look, this class, this 6am class, has been 95% at capacity over the past two to three weeks, class pass can't have a spot. It's not the point. It's really truly for excess inventory. And so if this is one of the main things that I really wanna get across, we will not survive if studios don't survive. We are in business to help studios succeed, right? And that's where I think this friction comes from sometimes. The studios are like, class pass wants to kill small businesses. - Yeah, I'll absolutely know. - I'll literally everything he's saying, why are you trying to do value of the industry? - Yeah, it's absolutely not, right? And this is why I ask, you know, what would these studios be doing if class pass didn't exist? Because it's probable that they would have excess spots. And those would be not told, right? They would be zero dollars. Class pass is not preventing studios from building the direct business, right? They're like, go build it. There's again, plenty of people out there. There's plenty of people out there who are sitting on their couch who've never tried fitness before, who've never walked into a studio. The other thing that class pass really aims to do is get those people who've never tried boutique fitness, make it feel accessible and make it feel less intimidating. It gives people the option to say like, let me look at this entire class pass network, what are all the studios around me? Which one do I feel comfortable giving it a go? I've never been to a reformer class before, never been to a boxing class before. Which one feels like I could just walk in and like, I'm not gonna feel weird, I'm not gonna feel uncomfortable. And we're really trying to reduce the barrier to entry to studio fitness. And now to wellness, right? There's a lot of like cold plunge. A lot of people never done it. How can we reduce the barrier to entry for contrast therapy? So there's all kinds of things that people have tried for the first time and we hear it from our users, right? We hear like class pass has changed my life because I was too intimidated to ever go to XYZ Studio. But this made it feel less intimidating. I tried it, I tried a few different places, I found my favorite spot. And yeah, I think that's really the main message is like, hey, we're not here. I can't save a business that isn't already doing well on their own with their direct. We're definitely not trying to take any direct spots, right? The best studios, again, are gonna crush it but they're strong, they're strong business, direct. Again, that's what my body's for. That's what the booking softwares are supposed to do, right? They give you marketing tools. Not just my body, any booking software, it's supposed to help you acquire new direct users. And then class pass is just, like you said, a bolt-on. Where it's like, here's my, here's my direct business. This is this thing on the side that operates. Kind of set it and forget it. Looks at my direct fill, it surges my rates. And again, we want to be, we want to hear this feedback from studios. We have account managers, they work with studios all over Australia. We listen to their feedback, we try to work with them. If they're not happy with their rates, we're like, all right, let's trial something. Usually what happens, going back to that trial, we trial a higher rate for 90 days. And the studio usually says, at the end, okay, put my rate back down. - Right. - Like they want the revenue, they need the revenue. - Even though it should be incremental revenue. - It is incremental revenue. Is there not paying to be listed on class pass? You know, sorry, one other thing on this, is that a direct user might be paying $40 while a class pass user is paying $28, let's say, for a class. - Yeah. Hang on a second, I said that again. - That's great. - So let's just say like a direct user comes to class and they paid $40 for that class. - Yeah. - And a class pass user gets in for 28, last minute. You know, there's a spot, they get in last minute for 28. Sometimes what the studios aren't doing is calculating what was the opportunity cost, right? Or how much did I actually pay to acquire the person who came in at $40, right? There's some marketing component, usually, right? Attached to that. - Yeah. - And you have to do that math too. Like, class pass costs $0 to acquire that customer and they came in at a discount. But the one who came in at $40 did cost you something. - There was some kind of hack. - Yeah. - Yeah. - And so-- - That makes sense. - You know, and most studios that we work with, our top studios are like, yeah, my average direct user clap, like, spend is actually this amount, like, on the website, it says $40, but really, once we take out marketing hack, it's maybe more like 30 or whatever it is. And so sometimes they end up being pretty much the same at the end of the day. - Do you guys offer free spots? - We do. - What? - And this is another big topic, which I'm sure you heard. - You know, what we think, they're free. - I know you hate free. - What free trials is what we know. - What, why, Lindsey, are you offering free spots in these classes? - So, first and foremost, it goes back to what I just mentioned about how do we get people into fitness in the first place? - Yeah. - How do we get people, you know, trying something new, joining the wellness trend, you know, it's obviously becoming more and more important in the world, more than ever. And, you know, there's like, Osfit. I saw it was just in Canberra this week. Really trying to campaign to get government support for fitness studios because it just has never been there. Like, it has not been a thing that people have valued in the way that it should be. And, and now it is. And we want, we're investing millions of dollars of marketing to get people off their couch and into studio fitness and into gyms and into wellness centers. And the only way we can do that is if we partner with studios, you know, most people who join class pass get a two week free trial. They get, you know, X number of credits in that two weeks and they can spend those credits at classes. And so, what typically happens is in that two week period, they can't go to the same studio multiple times during that two week period for free. So, let's say they go to one studio, they get a free class at that studio only during their trial. - But you negotiated that with that studio? - Yes, that's part of our terms now. It's part of the terms that when, if I'm a studio and I jump on, it's part of the terms that when you're running one of your free trial promotions, you're able to use my studio as part of that. - Yes. - So just for the audience, there was a question from SOF from the cheap seats. We're getting a lot of our clients saying, "Yeah, people, people are rating duplicate accounts. We're different email addresses, different whatever's just so they can access more of these free perks." - Yes. - And what I'm hearing is it's part of the terms, like what can you just do about that? - That's a big problem that we are combating. - You know about that. - Intensely. Yes, and we have a whole team, a whole fraud team. - A fraud team. - That's dedicated to making sure that that doesn't happen. We have lots of vendors that we work with that prevent trial fraud. - trial fraud, that's a fucking thing. - If you would be surprised-- - Does your fraud name do they wear like trench coats? - Sunglasses. - Sunglasses, and it looks like a minute. - It looks like a minute. - And we'll hang with the pipe gum. - Yeah, I mean, we have engineering spots dedicated to this. Like it is, it's a problem with any service who offers free trials. You know, Netflix offers free trials. Apple Music offers free trials. Most subscription, meal boxes, meal delivery boxes, offer a free trial. I was talking to Chloe, like she used to work in makeup. You walk into a beauty store, look at all the free samples out there to get people to try something and purchase it, right? Now you hate free trials, but for us, we actually see that for the studios, if they can offer a free class and somebody enjoys that experience, they're going to come back and spend a lot of money with them. - Buy a class pass. - Buy a class pass, and sometimes what sometimes happens, which again, not a lead gen tool, but this does happen sometimes, is that someone might do their free trial and class pass, explore a bunch of studios, and then not even convert to a class pass member. They might just go by direct. They might hop out of the free trial and go by direct. So we see a lot of that happening. We don't even call that, we don't take credit for that, right? We're not like, that's a class pass user converting, 'cause they never actually ended up becoming a class pass subscriber. They just tried your studio via class pass. And then went direct. So studios will see that happen too. - I think what's happening there is, I'm not gonna use a word conflict, but I think it's a, there's the acquisition strategy for class pass as a tech platform versus the acquisition strategy for a bricks and mortar who takes studio, that are actually what they should be thinking about is how do I get people into this place that will be in pay full price and be 12 months from now. And like actually build my community lifetime value. But that's how I'm gonna be able to sleep better at night knowing that I've got my call base. And I know how to grow that base. Like yes, we can use class pass as a tool to fill those spots and to make incremental revenue. But the stronger I get, I'll actually figure out my own way 'cause to your point, it shouldn't be used as a lead gen tool. That's what you're saying, right? Well, if people know how to do that and build a million dollar studio because they've, because they've installed a lead gen tool, that's profitable and brings in the highest quality members from the market or highest quality prospects from the market, get them to raise their hands. So if someone something that is actually profitable from the start, so they get, you know, that liquid they, they cack at point of sale. And then everything from there is pure growth. And that's awesome. That's the, that's what they should do, right? Absolutely. Until then, or as well as that, incrementally, if there's some, if there's some dead spots in the time table, that's to be honest, like I'm a studio owner. In fact, class pass, your first photos and videos were shot at my studio way back in a hundred years ago. We used class pass at the start. That's back when body pass, class pass, there was all the other passes as well. And then it got banned from the network that we were part of. Because, and we were one of those studios where we didn't need it. So it actually didn't bother us that much. But there are other studios that tried to skip the whole part of like how to run a successful business and just try to grow their business via these little packs, the class passes. I mean, we've had studios literally come to us and say, I don't wanna do any direct marketing. I just wanna use class pass, and we're like, don't, don't do that. - Yes, shut your business down. - Yeah, and they'll come to us sometimes even before they open. And I'm just like, that's not the point. It's really not. And you cannot, again, class pass can't save a business, right? - Not yet. - That's not strong. - No one can. It has to have strong direct utilization. So yes, I understand that like not every studio is gonna like first class free. But the data shows that it actually does benefit them longterm and it does on class pass anyway. Really help the class pass user lifetime value at that specific studio. - I've got a message from, it's a long email from one of our clients who uses class pass. Are you ready? - Ready. - It's actually a good one for you. - It's like, is it gonna make me cry? - That is not right here. That's my job. At our studio, we've been able to generate eight to $10,000 a month using carefully controlled entry just for class pass with no free trials and minimal peak time access. We're consistently converting 10 to 20% of those class pass users into full studio members each month. So it's delivering value both short and longterm. She's based in the city. So she's found class pass especially effective as many corporate companies offer it to their staff as employee wellness packages. Yeah. That adds a high quality user base who were often booked last minute and we're regularly seeing $30 per visit for last minute bookings on unfilled spots which is a great example of your dynamic yield working in per favor. What still needs clarity though? Can we ask you this? Is studio education around rates and the control? So one of the biggest gaps is education. Many studios don't realize that they can actually influence their rates through infantry control. Scheduling strategy and class restrictions. Without this understanding, it can feel like class pass is sitting all the terms. When in reality, there's a lot of room for studios to tailor to their benefit. Really think about that. - Look, so the way we have optimized terms, right? Our standard terms of service and agreement is that studios work with class pass they use the smart tools, right? And the smart tools are two tools. Smart rate, which dynamically surges your rate based on demand and smart spot, which is meant to protect your direct fill and only list spots that historically go unsolved. Those two tools work together to make sure that each spot is priced at the spot the price that we think we can sell them, right? And we want to sell them for the highest price because we know studios want high prices but we also know we just put them at the top of the rate card. They're not gonna get the revenue, right? Because there's other studios that they're competing against. Now, yes, do some studios sort of like legacy terms with us, worked with us for 10 years. They have, they've worked with their account manager. They've sort of said like, look, if you can command a higher rate, then let's negotiate a higher rate. But the optimized terms on class pass are 40 to 90% of your 10 back, right? So that's the negotiated rate. It's a range, 40 to 90% of your casual visit. And fully integrate with your booking platform so that pass pass can read your direct fill. Now studios who want to turn those tools off, the challenge with that is that they spend hours every week manually, like tinkering. And in the past, some of them would literally hire somebody, like pay for a full head count at their studio just to tinker with class pass every day. And it's never going to be, it's the same, same example as me. - That sounds slow, fucker. - When I was trying to manage my own Airbnb, and I'm like, I'm just turning on their tool, you know? And that's really what we recommend as the best way to work with class pass. Now, this studio clearly, it's like 10 to 20% conversion. That's awesome, good for them. Like commanding high rates, still getting a lot of revenue. That's great. We would even say that like, look, if there are some studios where it doesn't make sense to work with class pass. - Who are those studios? - Those are the studios that are so full, right? They're getting so much business. They don't need class pass. Or the studios that don't have great ratings, you know? The ones who don't get great feedback from customers and they have like low-star rating on class pass. They're not going to get very much revenue. - Right. - And so you do have to provide a great service. And, but yeah, like I really appreciate what this user is saying. But it's not really what most studios have the time and energy to do. - Etsy. - Right? It is a lot of work to, if you can imagine every single class time, you're like, okay, how many spots, and I don't really know like how they're operating it. Like maybe they have somebody doing it, maybe they're doing it themselves. But if an owner is trying to spend their time guessing, how many spots do I think like I should release to class pass. It's a lot easier to just like call up your account manager and be like, hey, can we? Let's figure this out. Yeah, let's figure out what's going to work well for my business. And we also can provide tons of data like, you know, I joined meetings with, with our account managers with studios recently in one in the CBD right by our office. And I was like, let me hear all your concerns. Let us show you the data so that you understand 'cause I do think a lot of this is like misconceptions. And once you see the data, then we can decide what you want to do about it. - Okay. - But it's oftentimes once they see the data, the felt experience is not actually what's happening. Right? Like cannibalization, okay. Here's another huge concern. - Let's talk about that. - Absolutely. - Okay. - Yeah, let's talk about that. Is that the, is that the here is? Why is that the spossiest one? That's probably the one that, like prospects of class pass are most concerned about, right? They don't want to join because they're, they're fearful of cannibalization and even, even partners of ours who have been with us for a long time are still fearful of cannibalization or feel like it's happening a lot. - Hmm. - And so we always say, I get it. You saw someone who was your direct member, then come through class pass with afterwards, right? - It fucking, like that is the thing when, you know, so I've got some video responses. I won't play them 'cause they're a bit spossy. But they said that those class pass motherfuckers took my name. - Yeah. Yeah. So I'm not saying it doesn't happen. But I am saying, it is more rare when you look at the data than studios think and the perception. - It hurts. - It hurts. - It hurts that, you know, you have someone who's like, "Oh, they've come, they've come in here for six months." And then next week, they come in through class pass. And you're just like, it does not help us, right? I'm like, that's not a good situation. Like, that's not what we're trying to do. But sometimes it happens. And the truth is though, it happens on average, two percent of the time. And so we've done all of this date, all of this data analysis now with our mind-body class pass customers combined, which we have thousands of. We look at all the data. We can see all the users who come directly. We can see all the users who come from class pass. We can see how many people switch from class pass to direct. How many people switch from direct to class pass? We can see how many are spending on both at the same time, which is many, right? Some people are on class pass. Some people are supplementing with direct. All of that combined, the data shows. 100 members, let's say a studio has 100 members. Two of those will be cannibalized by class pass on average, two of those. It does happen and when it does, it sucks. Four people who were on class pass end up converting to direct. So that typically offsets the two cannibalized members. And then in addition to that four to switch, studio see an additional 29 people coming from class pass on top of their 100 direct. Okay, so that's like a 29% increase in users. Not revenue. Not revenue. Two leave. Four you gain. 49. Four out of 100. You know, we can never say for sure for a studio, how many direct members they're gonna get from class pass? I always say it's single digit percentages. Doesn't really matter what your genre is. I would never expect more than double digit percentages to convert from class pass. So the one thing I would say about my buddy studios is that they typically tend to, right? Studios that are using a booking software tend to be a bit stronger, right? 'Cause they have pretty strong direct utilization. There's a lot of studios that class pass that don't have booking software. What about you? Nothing. You do have to consider that again, there's like stronger businesses that can afford to pay for a booking software. There's some businesses who just, you know, maybe they're just like small. They run plotties out of their home. They have five classes per week, something like that. And we have those on class pass, right? But again, like if we're looking at a whole conversion is not gonna be huge for the stronger businesses, it's not nothing. Get it? So I do, but I do think cannibalization is a concern that studios, it's a felt experience that's really painful but we're always happy, especially like the mind-body customers. We can look at the data. We can look at it for 90 days. We can say, hey, look. Okay, so if someone is concerned about that data and they're hearing this and they're saying, nanana, it is way more than 2%. Then I should reach out to their account managers. But yeah, and if they're a mind-body customer, we can literally show them both their cannibalization rate is. - Okay. - And so what we do, this is like the mind-body guarantee. So when my mind-body and class pass came together as one company, we said, look, we have done the data, the data analysis. We can guarantee that a mind-body customer who joins class pass will see an increase in overall revenue. And if you don't, we will pay you 2x your revenue loss by joining class pass. And that is how confident we are that the cannibalization that studios think is going to happen is just very rare. And it's typically offset by the four people who end up joining direct. And in some cases, that four people might be more for a stronger studio, but for all of our studios combined, it's a low percent. - Is that awake or a month or what time period? - That's like in a given month, if you have 100 average clients in a given month, here's what you'll typically see. The mind-body guarantee analysis, we look at over 90 days because we want to see someone's coming to you a month one, what are they doing in month three? - Yeah. - And have they swapped, have they? And actually, some of the ones who again are perceived to be cannibalized by class pass, we actually might consider as a win-back, right? Because sometimes they leave the studio for six months and studios like, I don't know where that person went. They might come back through class pass six months later. So is that a cannibalized user or is that the studio, they lost the user and then that person came back six months later on class pass, like I don't know, it's just-- - As a studio owner, that would still-- - That's a lot of eyes cannibalized. - It's, you know what, it's still stings. Like, you know, when you get a cancellation email, like I can, my owners, like they work, they just give their heart out to these guys, right? They've changed their lives, you know, and the mental health sort of things, like it stings every time, even still to this day, I still remember, like it stings every single time. Even though like our studios, like our owners, we get their churned down to 2%, monthly. - It's amazing. - No, and these aren't people that have got less than 150 members of which case churnes typically not an issue. It's people that have got 400 members, 300 members, like we've got them up to 300, 400, 500 members, and 2.3% churn during winter, it's fucking not through, right? - Mm-hmm. - It's amazing. - But that 2% stings, it's my point. Like it's like, fuck, and no, we've worked so half of that break. Like, and they still leave. And then so it wouldn't even matter if in three months, I'm not walking in, hey mate, how you been, so good are you coming back? No, no, I'm just here on class pass, not your fault. As I'm saying, like I'm just saying, like I was mad at you before, and I'm even more mad at you. - It's like, come on and walking back, you dog, but also, what do you mean you're on class pass? Again, not your, that's not your guys' issue. I just know how that feels to be owner. All right, so let's. - But look, I do think most of us know that fitness is an ab and a flow, right? And people aren't motivated 100% of the time to be going to classes every day. And so if someone drops off their fitness routine, we would love to help get them back in, right? - I understand that, yeah, I understand that. - I know a studio doesn't always get that. - Yeah, I know that. - Again, they're gonna do something to try to get them back in anyway. They're probably doing some life cycle marketing or whatever you're coaching them to do, hopefully to get people back in. - Yes. - And if that person doesn't come back, then like, let us help. - How do you make money? - Class pass? - Yeah. - So we make money when studios make money, you know? Like, it's a good thing. We want to drive more revenue to studios because we make a small margin on the credits. - You make a margin on the credits and the platform access for the end user. But like the monthly payment. - Yeah. - So they spend their credits every single month. We take a small margin on top of that. - Okay. - It's really simple. We don't benefit when users don't spend their credits. We want them to spend more credits. It's better for our partners to gain more revenue. And so we're like, here's your, yeah, here's your possibility. Possibilities are endless. And now, like, okay, so you mentioned the corporate wellness, which I think we should touch on that for a second 'cause I don't know if every customer knows about that. - That's good, yeah. - So class pass has a corporate wellness benefit. And we work with lots of employers like around here, you know, can with a KPMG big employers, those employers subsidize a class pass membership for their employees. Some of them subsidize 100% of the class pass membership. So I'm doing a portion. We work with smaller companies. They might do a portion. The larger companies might do 100%. And the reason that employers find it useful to subsidize a class pass membership is because there's something for everyone, right? And their employees, it's not like, you know, 10 years ago, five years ago, really. Employers might subsidize a big box gym. - Yeah. - And not everybody wants to go to a big box gym. But on class pass, you could go to a big box gym. You can go, yoga, you can go to massage, you can go to recovery. And there's lots of options. And now we have like salads. You can buy in smoothies, you can buy on class pass. - What do you mean? You can use your credits for food and drink and beverages. It's great. - At gyms, like at studio. So just like-- - No, at restaurants. So you could look into your yoga studio and then reserve a smoothie for after next door and like go and pick up your smoothie after with your class pass credits. So you know, some of our users had like a couple of extra credits at the end of the month. And they're like-- - It's not enough for a class. - Yeah, like I only have three credits. Like, I can't afford going to a class. So what else can I spend this on? And before, you know, we might see breakage on that. We might just like keep those credits and class pass would might benefit from that breakage. We're like, why don't we just let them use it on a salad? And again, something that's perishable, right? The restaurant's-- - I like it's unused food. - Yeah, they're like, we have the food. We're either gonna toss it or get rid of it. And then restaurants can say, hey, between like two to five PM, we want to offer salads or whatever, or-- - But whatever's left to have a between two to five PM, it's like, it's staring at one another, right? - That's just one example. But like-- - Interesting. - And then I do think, so there's the corporate while in this benefit, right? Which this studio is experiencing and many do. Or it's like, these employees are going to have a class pass membership because it's paid for by their employer. - Right, sure. - So take advantage of that, you know, beyond class pass so that you get the corporate users. They're subsidized, the lifetime value of these employees, these, you know, KPMG employees, for example, in class pass is high because it's being paid for, right? They're not like spending their own money on their fitness membership. And so there's no reason for them to churn off of class pass. And they have the ability to, again, try different studios. We also do, you know, we'll partner with one of our corporate partners, like KPMG or Canvas. And say, hey, we want to bring in, you know, this studio partner for a class for your employees. So we can do that as well. So if any of the, of our partners are interested in that, we're always happy to do that too. Match you up with a company to go in and like do a class. And so yeah, that's a great benefit. And then now that we have more sponsor on businesses on, we're starting to see that we're acquiring class pass users, a different demographic of class pass users that potentially we didn't acquire before. 'Cause we were a fitness first platform. So now we might acquire a user on class pass who's not really a fitness user. But they love getting their nails done. And they really want to use class pass to get their nails and hair done. It's boss, lungs. Now we're acquiring a different user on class pass that perhaps is an interested in fitness at all. But suddenly once they're in the class pass ecosystem, it's like a little buffet. It's so easy to spend your credits, you know? - It's strong. - Exactly. And it reduces the barrier to entry 'cause you've already paid for your membership. And you're like, oh, it's so easy to just like-- - Your class pass membership. - Yeah, so easy to use my credits on this studio. - All right, so let's bring these home. Yeah, the question is, why would you take the $15 like cancellation fee and not give that to the studio? So that's a busted myth. - They are not getting paid for no shows. They definitely reach out to us. - Okay, that's good win. - Yep. - For the audience, so that's your different way to just save you some money. That's a fifth myth. What's the second myth that we've busted today? - The second myth is that class pass does not cannibalize all of your direct members. The third myth is class pass is a greatly gentle. - That's a myth? - Yeah, I would never tell a studio, you should join class pass to generate more direct business. - Who should they join to generate more direct business? - Jeronimo. - That's a hook. - Of the myth? - It is a myth that first class free does not provide any long-term value for a partner and class pass partner. Again, we have the data to show this. We can work with any partner and show them their reservation data. What percentage of their first class free users have come back? What their lifetime value is from those members? We have so much data and I think it's truly that this data is power, knowledge is power. When the studios see it, they're like, oh, you know, 90% of the time you talk to the studio and you're like, hold on. Is that what you experienced or are you seeing that in the data? Let's look at the data together and make sure that, if it's true, again, if it's true. - You guys are willing to work. - We are willing to work with you. - Yeah, so do you often have people that like start off kind of fucking hide you guys? You got like class passes, kind of lots of my business, class passes do value in the industry by class pass. And then I reach out and then you guys, okay, talk to me through that. - All the time. And I, again, I think it's like we really, really try to set the expectations very clearly from the get-go, but we also have partners who've been working with us for years now, who they don't remember. What happened at the beginning and look like eight years ago, class pass was a different business model. Like it has evolved, it has changed. It is very different, pre-COVID versus post-COVID. Things are different. And we didn't have first class free eight years ago. And now we realize that look, we're going to invest a lot in marketing. The only way we can do that is if studios partner with us offer first class free in this trial period, but we also see that it delivers them great results. And so, you know, it's like let us show you the data that we have for your studio. And again, truly, if it's not working either A, you shouldn't be on class pass. And we'll be like, we agree with you, you know? But if we are able to drive you incremental revenue, which for most studios, we are able to do it right. If a studio makes over $75 a month on class pass, I'd call that a win. The strongest studios make way more than that. - How much do people make in class pass as a studio owner? Typically, I want to get this one answered. So if I'm like class pass at the start, and then I do reach out to you guys, like they actually swim towards you guys. And then they end up, oh, actually, it's pretty good. I'm back now, and I'm like, okay, and I'm making 30 grand for class pass now, I'm up. What are the shifts that happened on the, like, what were they missing? Was it as misstep we just busted? Or was it something else that they were kind of, they just really figured out how to use it properly? - Usually misstep expectations, right? That's often times what it is. Sometimes there, you know, who knows what they're frustrated by? It varies by studio, of course. Some of them are upset about their rates, which again, we're like, okay, then reach out to us. To be honest, some studios have increased their direct rates. If they tell us they've increased their direct rates, we will then increase their class pass rates. So, you know, that's good for everybody to know. Some studios will, I mean, hopefully most studios are increasing their rates as the economy changes and the rent goes up and everything. And I'm sure that's something that you recommend that people do too. - For Thomson, the fifth six weeks. - So if you increase your direct rates, we will also increase your class pass rates. No questions asked. Like, it's not a negotiation. It's just we will do it if you increase your direct rates. Okay, on top of that, if you're like, okay, I want to trial a higher rate. Reach out to us, we'll work with you. Let's try a little, let's see what happens. We're all about the data. So we are very, very data centric. We're willing to show you all the data that we have and work through things together, right? Typically, class pass studio that hates class pass comes and talks to us. We explain, we show the data and it's, the friction goes away, right? If they can see the numbers and they can see that this is driving them incremental revenue and this is not hurting their business and they understand like we are not in the game to hurt small businesses. Like, that wouldn't benefit us, right? We all work at this company because we love small businesses and we love this industry. None of us would want to work here if we really felt like we were hurting small businesses and, you know, we obviously hear from the partners who are pissed off all the time, but there's thousands of customers out there who love class pass and we have the fantastic relationships with. - And the core difference between those two is that they're understanding of class pass as a tool or how they can drive incremental revenue for the unused inventory or spots in their business, not as the only way I'm going to grab this place. - Correct. You have to invest in your business directly. You have to do whatever you need to do on the marketing end to acquire new business directly. It's a different demographic than the class user. - Yeah, the class pass user is a different class of user for that studio. That should be traded differently from a humane way. - Okay, I was going to say some studios do treat them differently in a humane way, which causes more problems. - That's a bit hard. - You know, like they treat them as inferior. - They treat them from the dog ball. - Exactly. And again, like I'm thinking of this webinar that I did with a customer who loves class pass and she was like, I treat every single class pass user who walk through my door just like I treat my direct members. I kill them with kindness, I give them hugs, I celebrate their milestones. Don't you think you're going to have a better chance with that person? Don't you think you're going to get a better brand reputation? You're going to get better star ratings on class pass. You're going to have a better, even the partners who, like I don't want class pass anymore, I don't want to be on class pass anymore, but I want you to keep my class pass page live 'cause I have so many reviews on there that I want people to still see it. And so it's like, yeah, you want to have a positive reputation in the world. No matter who your users are, like give these people a chance and maybe they will convert one day, but why wouldn't you just treat everybody with kindness like they're part of your community? - Yeah, that's what they do with it on that. - Yeah. So yeah, I would just urge everybody like, reach out to us, we have an amazing team. We're here to help Studio succeed. - Yeah. - We really are in this to partner together and we want it to work for you. Like we want this to be a win-win relationship. - Yeah. - And we're definitely not here to like make anyone hurt or suffer. You know, that is not the goal. - So. - We win if you win, really. - Yeah, we actually wrapped, but there's some stuff that happened off camera in terms of like some really great stuff. So we're actually back on and we're probably in a part two now. - Part two, off the sequel. Yeah, I feel like I got a little bit more unfiltered. Like once the camera stop any typical kind of unfiltered form, that's what we want to catch. Hi Chloe, welcome to, let's get you, yeah, there we go. So do you want to just quickly, again, just introduce yourself? Hello, bye-bye. - Hi. - Good to have you. - Good to be meet you. Hi Chloe, I run the sales team for Class of Australia. - Right. - And New Zealand. (laughing) - We can't forget about that. - No, of course not, we love the carries. So, we were talking about like, it didn't matter for me, right at the start using class pass, because we were already making million dollars at the studio. And fuck, if there was a bit of a gap in the 930 or a 1230 on a motherfucking Friday, who cares? Like, I had my way to bring in my ideal members, sell them at a high rate, charge them for pro, we were 77 bucks a week, and like, they were staying for years. So I had that. This was just like a, yeah, I knew that it was like, yeah, like the cost of quarry customer, like the cat from CPL's zero, and I was getting something from them. It was just cream. But most people don't think like that. The people that we hear through a lot, the ones that are trying to use class pass as their only source of revenue, they're the ones that are probably the chirpiest the most about you guys. I don't, I don't necessarily think it's because of you guys. I just think, they just haven't found the right way to bring in their own members. Now, you guys said, if it wasn't us, it'd be somebody. It'd be somebody. What did you mean by that? I would say to that that the class pass customer is a segment of the market that exists. So, you know, essentially, you know, the class pass customer wants variety. They love the social element of class pass. They love being able to discover the variety, invite their friends to it. It kind of reduces that very eventually. It's more accessible to them. So, I would say that whether we did it and other, you know, there's plenty of other competitors to class pass out there, not so much in Australia. Maybe there were, you know, five to 10 years ago. But we exist, we do what we do very well for our customers and for our partners. We wouldn't exist without our partners, right? So, we want the exact scenario that you described there. A thriving studio that utilizes class pass to weave traffic to their off-peak time and their less desirable times that their members aren't booking. That's the ideal scenario and that's what we want. And if a studio comes to us and they're frustrated and they're feeling the emotion because that isn't happening, we will work with them. But we also want to recommend that they also continue to focus energy and effort on growing their direct business through marketing, through member of acquisition and retention. The class pass user loves class pass for lots of reasons, right? And one of them is the social element. We make it fun. We make it really fun to bring friends, invite friends to class. And you said, like, that's how you hang out with your friend. Talk through that. I want to, like, let's hang out. Let's go to the bathhouse together. Let's go and do a politeist class and grab a coffee after. Like, that is how I want to spend my time. They're the people that I'm connecting with on the day to day. And class pass makes that very easy for me. We have an invite friend feature. I have, like, my friends there. You can see, you know, I can see how many classes I've done, like, there's that kind of almost like gamification element that we bring to our customers that hold me accountable through winter. And the times where I'm, like, maybe lack of motivation or I'm not feeling as social, like, it holds me to that. And that's why I love it. I've been a member now for, I think, seven and a half years. Were you a member before you were in play? Yeah, I've been an employee for less than two years. And that, but I've been a customer. The whole time I lived in Melbourne, the year and a half, I live back in London. I took classes on stopovers on my long journey back to the UK. I've done reformer in Malaysia and wherever I've traveled through all by this app. Which studio did you end up still signing up as a member too? I'm with Total Tone. And why do you have a-- why did you decide to still-- so were they on class pass? Yeah. And then why did you decide to-- Because I like to book in advance. I like the accountability that a membership brings for me. And I like to plan my week out. Whereas class pass is a bit more on the fly. If I'm just on class pass, and I have done that in London, I was just on class pass. And my routine was all over the place. There wasn't one. It doesn't give me the accountability that I need exclusively. Because I can't book in advance. I can't secure my favorite instructor. And I don't get that. But what I do get is variety. I get to move with the mood, with my cycle, with whatever I am feeling that day. That's why I can pick. It's at my fingertips. I want to do a class tonight. Where do I want to go? Look on my discover page. Oh, yeah. I fancy hot yoga tonight off I go. Fancy hot yoga. [LAUGHTER] But yeah, look at the-- I guess they've come under scrutiny for a tax driver might not necessarily love Uber. And the customer of class pass exists. People want variety. The fitness industry in Australia has grown quite significantly, franchises have grown and scaled very, very quickly, and use us as an ally. Because we help them grow the business. Incremental business. I just think that's a really key point if I represent owners. Incremental. I think that's the word he that uses native. That your users need to hear. And my listeners, my audience, I want them to hear this. It's like incremental users. Like it's incremental revenue. It's not how you build a million dollar business. On its own, it is incremental business. And I think in that case, as a tool for that, it could be really useful. It could be really useful. For people then, I would normally-- one of the first things that happened. So when people come to us, this is the other first six weeks that happened. So in the first way, people generally come to us around 150 member mark, 100 to 150. They're a bit stuck, slow, and figure that shit out yet. And typically, is that because of the same as you guys? With your student partners? OK. Yeah, so somewhere between 100 to 150 members, they're a bit stuck, right? And typically, we say that they're in level one. And in level one, it's the money devil. And the money devil is because you haven't figured out a way to actually-- well, we call it an acquisition system. Most people is unblockingly flow, make sales, and have an offer that actually is profitable, which is where we say, fuck free trials. Because I can step through the maths on that. And it's a negative cash flow. If you run the free trial, two people funnel. So the first thing we do with those guys is we unplug their lead flow within about a week. And we do that because they choose different offers and they actually work to advertise. So that's one of the very first things that he, in our world, from a marketing perspective is like, what the fuck is an avatar? And then we explain it through them. And then once they realize who their ideal member is, it's this person, it's this person, it's this person. This is what they're looking for. This is a problem that we're solving. And they come up with an offer that actually attracts that person in all of a sudden, like the heavens open up, but Ryan starts to pull, like they're in touch about how to make the sales. When point of all that is, that's attracting your ideal member who will pay full price, they get what you do, they love what you do and they're going to be here 12 months from now. That's that funnel, that's that flow. You absolutely need that in your business. And I'll rumble anyone that thinks otherwise. Yes, it's like the other avatar, which-- - It may not be your ideal customer-- - Don't focus on it. But if it comes through that way for a zero-calc, zero cost per grade, and just fills the excess unused spare spots, in which case you're going to get zero for it, you may as well get something, $14, $20, whatever the 40 to 60% of your session pack is. Is that about right? Is that the synopsis from you guys as well? - Absolutely. And I think as well, you know, you're branding, you're messaging, your reviews, what you offer, even within class pass, is going to retract a certain segment of the class pass user. So whilst, you know, it's not that you're just going to have any, you know, Tom Dick and Harry coming in. It's still going to attract a customer that's very drawn to you and your brand. And again, they might not come to four or five times a week like your members are, but they will come to you probably once a week, once a fortnight, twice a week. And yes, outside of that, there might be anomalies. Like we, we're just talking like the averages of what we see. And that is what we see. That is the class pass user. - So you were one of the four, out of 23 or 29. - One of the four conversions. - Yeah, and I'm still a class pass member. And I still, I'm very, I'm a very typical class pass member. I've got the same four studios that I see on road, that I go on rotation, that I like, that I repeat visit. - Oh, they all, so like what type of studios are they? - So reformer, I love, I've got one favorite reformer studio. - Yeah. - I've got a favorite hot mat studio. - Yeah. - I've got a favorite hot yoga studio. - Yeah. - I've got a favorite bathhouse that I go to for my sauna, and on Sunday, can't wait. - Yeah. - And then I'll, you know, occasionally discover outside of that, but they're the ones you're gonna see, if you were looking through my reservations, that's what you're gonna see on rotation. - On rotation. - And you now have an membership at one of them. - Yeah. - I only go to them on the membership. - What's the stand on the people that I've got split, like they're on class pass and they remember somewhere? - Around 30%. - Of class pass users also have a membership. - Have a secondary membership, yeah. - Is that a full time membership? Well, they're buying additional packs at that studio. - They, they have a, a rolling membership. - They have a rolling membership. - Twice weekly or a, you know, depending on what the studio offers, but they have a secondary membership. So what I'm hearing is in real time, is that 30% is actually a way bigger number than four or 10 or 12, whatever we've kicked around here in terms of converting people off class pass and into your studio as a direct member. But there's also another segment, which is like, there's actually 30% that will stand class pass and can still be available to confer as a full time, because it's like that's what you've done. - Yeah, and like, you know, the workforce and the, like, has completely changed. So for example, you know, the reformist studio that I mentioned I go to, you know, once a week, I would love to go to them more often, but I only go into the office once a week. - Is that the studio? I mean, this is at the office. Like, this is in the office. - On my office day, that's the studio I'm going to, because I love it there, and it's an amazing class experience every time. I never feel treated differently going in as a class pass member. - So if I'm, and which pretend you were not working in class pass, which membership option on class pass would you be on small meeting, my large? - In London, where I didn't have a membership, I was, I think I was paying like 80 pounds or something a month, I was paying. - But like in Australia, like here. - And yeah, the average one is about $69, $70 a month. - So you pay 70 bucks a month. - Yeah. - Which you're, at a bathhouse one Sunday, you get your hot yoga, your mat, and your reformer. - Yeah. - A week, so you get four sessions a week. - Yeah. - And you're doing that for 70 bucks a month. - So I would use my credits however I could, but it's also, you can buy credits. You can buy credits. - You can top up, you can top up. So if I wanna do an extra class, if I run out towards the end of the month, I would start buying more credit. - So for you to achieve, I just wanna kind of get to a calculation here. For you to achieve what you're doing right now, as a non-staff member on class pass, how much would that cost me a week? - I'm probably right now, 'cause I've got my membership, I'm probably using class pass once, twice a week. So right now, I could probably get by on the $70 a month, I'd maybe have to top it up towards the end, bathhouses, experience appointments, are always gonna cost more credits. - Yeah, and how much is the top, so if you were to do those things, would I get above 100? - Yeah, yeah. So if I were to do those four a week, yeah. Okay, and you would have membership at, - Yeah. - Yeah, and how much is that? That's 55 a week. - Okay, so you could be up to $155 a week. - Yeah. - Yeah, yeah. And that way, you get your bath house, you've got your hot thing, you've got your mat thing, you've got your reformer thing. - I would do for a week through class pass right now, because I'm on my membership, but yeah. But yeah, ultimately. - What other stats are you guys saying? Even like US versus here, like what are some big trends that you'll see coming over from the US that our Australians in the K, we should know about? - I would say the stats in Australia are pretty similar actually to the US. So, I mean, the biggest, most obvious is the Pilates trend, which is six X has grown six X in reservation volume on class pass in the past four years. - Run me through, I saw a, I saw a Tom, like an image get thrown around. I think it was back in the last year, the top five workouts as per class pass in the world. Top one was Pilates, second one was, it wasn't even in the top five. It was yoga, strength training, spin. - You were talking about global. - Yeah. - Yeah. - Cycling and. - In the US. - Yeah, because it's not. - I wish it was bigger here. - Do you? - Yeah, I think cycling's so fun. - So six X, Pilates is six X in 2025, is that? - It's 2021 to 2025. - So in the last. - Australia, no, this is similar trend in the US, but it's even steeper in Australia. - So in the last four years, Pilates is six X, in terms of reservations. - Reservations. - Yeah. - What are him at ease? - You know, I think people have realized, first of all, I think the barrier to entry has gone down. Right, I think there was a lot of intimidation around Pilates that felt very like medical, I think, 10 years ago, and not only is it cooler now, like a lot of brands have made it cool, but I think Matt Pilates has allowed people, this like barrier to entry into Pilates, or has reduced the barrier to entry into Pilates that has then made people comfortable trying reformer. Like we have employees who have admitted to me recently that they've never tried reformer before. I'm like, what? - I did the other day, and I feel through the machine. - This is why people don't try it. - It was awesome. - It's intimidating, but yeah, you got, it's like, and now that it's a little bit more trendy, I think people are like, okay, well, everyone's doing it. I better do it, and I also think people have realized like all the health benefits. I mean, you're an instructor, are you telling us? - Are you a Pilates instructor? - Yeah. - You don't think it's a bubble? - Absolutely not. - All right, let's go. Yeah, she's grabbed the mark now. Over here, she's like, I don't want to get on, and she's like, fuck this. - No, but I mean, I, I don't, I've never finished a Pilates class feeling like shot and span is in my, like, my central nervous system. I feel energized, I feel good. I feel strong and connected, and I feel really present the entire session. And whilst I am trying to, like, get more into strength and weightless lifting, and I think it definitely, it's always gonna be good and complimentary to have Pilates as part, whether you're a weightlifter, whether you're in competitive sports, we work on balance, coordination. I think it's become more accessible, and I do feel like we have had a bit of a part to play in that, and making it more accessible in reducing the barrier eventually and taking something that, you know, historically, it's been very much either kind of, like, one-to-one or, you know, equipment Pilates, it's been harder to kind of get in. And now, you know, the industry has really changed, and, you know, there's a lot more of, like, a cardio element to it. There's a lot more of a, you know, fitness element. Now, we've got hot Pilates. - We're seeing kind of, you know, obviously, I was part of the F-45 thing, right? We were the, you know, studio 7 back in 2014, and so we've seen the whole thing. And now, there's, it's, say what you want, but F-45, like, they paved the way for these, like, the boutique franchises, okay? - Awesome. - Yeah. So, so, and there was always, so then there was, like, the big box, and then the boutiques. And I meant, pff, both things. And now we're seeing it kind of come towards this way, and a convergence, and so things went niche, and now they're like, oh, actually, and so a lot of the independents have started to converge, and, you know, what was typically a strength-based studio, or a heat-based studio. Now, there's strength classes, and there's reformers upstairs. - Yeah. - Do you guys see that as a threat to class pass, like, this convergence of the modalities and the formats? Because, if I wanted to be on classes, because I wanted to do strength, heat, and plighties? - Yeah. - Well, fuck, now I can just be a member of this joint. That's got all three under the one roof. - Yeah. - Where's your thoughts go with that? - I mean, I personally think that's fantastic. Like, I love to see when, like, a gym or a studio, we're working with, they're like, right, well, we have wellness facilities now, and we have this, like, if you can add more modalities, it's because you know that your customers want variety, and they now realize, okay, this hype of plighties, there's merit behind it. People want variety, and they want to have access to all of that. So if they can offer that all under one roof, great. Who does? - Yeah, I mean, some of our best partners are the ones that have multiple modalities, you know, upstate, eight, crash it. We've got boxing, reformers, hot yoga, all the things. And so yeah, I think it's a great thing for the industry, and also great for them if they're trying to grow their direct-to-member base, like, you know. - Okay, so what are the trends that people need to hear about? Might this kind of extra, extra helpful? - Yeah, I mean, I don't know that this is going to be new to anybody in this industry, but recovery is obviously, like, a huge trend right now. But which part, like, there's all this everyone doing recovery. What are they all recovering from? Like, what's the-- - What's the-- - They're a work day. - This podcast. - My work is making me like log my recovery. - I know. - I'm like, I need to recover. - I'm like, Zodia and my sleep, because of this thing. - I'm ready to break up with it, like, it's-- - It doesn't even tell you a time that it's-- - I know, that's my point. I'm like, do you notice when you wake up in the morning? Like, whether you feel tired or not? - Like, it's determined by with-- - You look at it, and now you're in bed, man. It's like, well, I kind of like this thing fucking happens. - I told you that you had bad sleep. - I don't look, like, I haven't looked yet. - But-- - Okay, so even small studios are like, how can I earn an extra buck? I'm gonna put in a sauna. It's not staffed. - Oh, fucking hype. Yeah, do you want me to tell you why I hate that? - Why do you hate that? 'Cause customers seem to like it. - Yeah, we saw one the other day. No, that name in name is a studio who's not doing very well at the moment at your end. And then on there, like, we know what they need to do. Like, just fucking do that and call the fucking leads. Right, the reason why you don't have members is not because you don't have an inflatable ice bath, which is what they got, and they put on their stories, they're like, let's go! And I'm like, you're fucking broke. Call the leads. Like, go. - Does your, the lead generation's tool that you guys work with, that you recommend for studios? What does that cost? A studio that's trying to grow, that's trying to become a million dollar business? - Well, it's not a tool. The tool is their brain. - Okay. - And we're just teaching them how to market. That's why when everyone goes, our competitive advantage is our community. As long as everyone's got one of those, you know? Like, your actual competitive advantage is when you can figure out how you can market for free and get customers out of market for free. So, the same pitch as you guys, but there's the ideal members. - Well, it's actually funny 'cause that kind of sounds like our mind body pitch, which is zero class software. You know, if you use mind body and you use the marketing tools within mind body, your software should be free. - 'Cause it's paid for itself. - Yeah. - And we recommend using the revenue that you earn through class pass to reinvest into your business in that way. - We reinvest back into my body software? - My body's off-way. - Oh, yeah. - Into your company. - Yeah, if you're still using a post-it note and some, yeah. - Definitely do something. That is crazy. We met a studio and, well, all be it, they're in a different country. And we said, "What's your turn rate?" I said, "25 percent." I went, "No, no, your turn rate." And I went, "25 percent." I go, "No, for the third time, your turn rate." Meaning, like, a number of people invited by the ones that you had and they're 25 percent, I went, "What?" And I went, "Yeah, where, where we live?" There's no payment providers that service the country. So people have to turn up. We have like, you know, a donkey and cash every single week and go, "Yeah, I have fun with the bishop." So anyone that's, yeah, this is, I'm not obviously plugged in and talk about you guys. But if you're all not using a software, then fucking use something. Because you are, whatever money you think of costs, you're losing that in turn. - Yeah, if all my body mentioned, your animal was crying, you were going to get a stomachache. - No, no, no. I love that. I love that. Incremental. I reckon that's the. - The studios that love class pass also say that we love that class pass members make the studio feel full. They bring the vibe. - Talks, yeah, because, hey. - Everyone wants to go to a full class. Nobody wants to go to an empty class. - Dude, I would have paid, I wouldn't give it anything. When we first opened the envelope for a studio, like, I would, this is, and we were my body. I remember, it was their very first year, 2014. I was still working like a real job, so I was doing 100 hour weeks. And, but I was up the night before, creating fake profiles in my body. So it looks like there were more people booked into that class because there were more fucking, I had more trainers on than members. At that point, it's like, who was they going to a dead restaurant? So I totally understand that, at that stage, but again, not your only. That's not your business plan. Like, class pass is not your business plan. - No. - I think we can all agree on that, right? - Absolutely, but again, if you have five extra spots in a class that has 30 spots, let's fill it up. - Yeah. - You know? That's all we're trying to do. And again, we're just like, we really want to get win-win. - I think that's the other thing. - Yeah, yeah, I think that's the thing that I think a lot of, well, I think a lot of the viewers have probably changed their mind. I think they've gone, I think they've gone, okay, I get it. Like, it's not my business plan. It's not how I skip learning how to grow business and skip the skills and the characteristics required to learn about marketing and understand my business and confront the ickiness that they might feel about sales, particularly in the wellness, you know? Like the parties people that we deal with, they're actually fucking weapons. Once they get taught how to do it, and there's a little bit of mind shifting and just stuff that the team needs to do with these guys, they are like, you know, they can make 200,000 in two months of their ideal members. And they're like, this is the best thing ever. I had a profit, our friends from the yoga faculty. There's a lot, they're gonna need to work on their sugars and then whatever's to kind of like pick up the phone. So, why are you laughing? - Oh, I was just about, yeah. - But once they get to it, it's hard, it's not, it's not, they can't do it. - It's not, it's not the, but once they get to it, like what are, I seriously, like just side note, what do I mean, as a guy that owned a gym or a couple of gyms, with like equipment, you look around there in the squat racks, like those games are, to an off-ground pop, like they break every five seconds. A yoga place charges the same amount of money per week and look around the room, what's the equipment? None, but if I can bring your own that, like it's like, if they just picked up the phone, like if they just worked out their marketing and picked up the phone, they'd kill it if they were in a line with that. But that's just, - That's why one of my favorite books is to sell as human, because everyone thinks that sales are so scary. - So what is scary? - What is scary? - Being fuckin' broke. - That's scary. - Yeah. - But it's like, to sell as human, basically says no matter what you do in your life, you have to be good at selling, no matter what you do. Whether you're a yoga studio owner, whether you're an entrepreneur, whether you're a parent, trying to sell your kids on- - Veggies. - Veggies. Like you gotta be persuasive. And so how can you, yeah, get aligned with, or just like accept that like that has to be something that you've got to be good at to get ahead in life and be successful, no matter what you do, not just being in sales. - Who's your biggest modality on class paths? Like if I get that people couldn't use it for massage, sauna, and now I'm salad, but typically, like the lion's chair is, a lot is? - A lot is, oh yeah. - Yeah. - The massage will just be played as pass. - A lot is passed. (laughs) - Yeah, totally. We should just change it. A lot is passed plus everything else. - Second. - I mean, look, it goes back to your list. You know what's an interesting trend that we're starting to see though? - What? - Is this, so class pass is social, right? You can invite your friends. - Yeah. - You can go to class with your friends. It makes it very easy to refer friends to come to class with you, which is why a lot of partners also love it, 'cause they're like, oh, if I've been in front of these people on class pass then they're gonna invite their friends and they're gonna bring new people in. But now we're seeing the social element go beyond just bringing your friend to class and people want to play more sports and they want to go to, you know, be able to go to pick a ball to a court together or go play volleyball together or go play soccer together, which is super interesting 'cause it's like not your, you know, that wasn't as popular. I don't think a few years ago and now we're seeing those searches in class pass where people are searching for more sports related things. - And what is there a sport, can I do that? - Well, they just find a team. - Yeah, yeah. So I just recently signed one up seven locations across Melbourne, Pickleball. And they-- - I've never dropped it. - I'm so-- - Same. And I really want to go. - I want to try. - We'll go. - Okay, well there we go. Why a class pass? - Yeah, why a class pass? Well, we have to go to Melbourne. - I'm there next way. - I think there is a couple in Sydney as well. And yeah, they have it open spots and you can just jump in and it's a social come and play. There's no limit to how many people can, like you don't need like a minimum amount of people. So people can drop in and into spots, make new friends, it's social. And more importantly, they're not sitting inside on their phones, on their laptop, watching TV. And that is what we're trying to do for our customers. - The class pass is kind of like the spare economy. Like spare spots, spare inventory, spare spare spaces. And I feel like it's very revenue. You know, revenue that you wouldn't have really generated. - Yeah. - Yeah. It doesn't replace plan A. - No. - But it's a bit of cream on the cup of tuna. - Yeah, I like that analogy. Yeah, I always say cherry on top, but I think I'm gonna change it to that trademark. - You're welcome. - Yeah. - You are very welcome. Yeah, if you're, I've got no skin in this, right? I am, you guys don't know, but I am the trace of cream, I'm sure you. And if you're a class pass user, just remember that this is my take on it. Not for sale, this is just my take on it is, it's not your plan A, it's not actually how you build, you know, on its own, a thriving community that are paying you top dollar every single week, that are right for expansion revenue along the way. The ones that are turning up to your end of challenge parties, or your end of your parties, and the ones that you can actually forecast, you know. And make sure that you've got members there to pay the bills and to actually give you the thriving life that you actually wanted when you open the businesses to start with. But I do believe if you use it properly, it is a great tool to facilitate incremental revenue and a couple of other benefits as well from a financial perspective, but also from a, if we just kind of come back to why you open this business to start with, and if it was to actually help people and transform some lives and to be part of the good side of, you know, helping with mental health, you know, as what we all do as the industry, then I think it's taking that box as well without it cost you anything. So, bit on the fence, but it's like, if you're using it properly. - Yeah. - Worth a shot. - Yeah, and I think the last thing is just embrace it for what it is. You know, embrace it for what it is. If you have the right expectations on what class passes designed to do for your business, then I think we can really meet that. - If you're using class passes plan I for lead generation and sales and to grow your business, then. - You're gonna be disappointed, I think. - And you should just send me a message instead. - Exactly, please. - LeadGen, Access. - Well, $1,000 business, AccessBots. Like incremental. $1,000 revenue, incremental revenue. That works, right? - Yes. - And we're gonna go play pickleball. If people want to get in touch with you guys, they know which channels to go through. - Yeah, I mean, if you just go to your partner dashboard, or if you are a partner, you have a partner dashboard and can go through the partner support flow. - Get in touch with our account management team. - And if people are interested in joining class paths. - And if you're interested in joining class paths, go to classpass.com, give us a shout. It'll come right to Chloe's inbox. - That's a good one. - Awesome, thank you. Thanks for tuning into today's episode. If something resonating with you, then do one of two things. I'll deliver a view. I'll send this episode to her mate, who's in the industry, who might need to hear this. But if you want more right now, because your head might be spinning, and you're like, all right, those, that what the hell do I do right now? Then in the show notes, you'll find a link to where you can book him for a free 15 minute checker on your studio. We'll be get to have a look at how you're going right now, and where some of the kind of quick win opportunities are to get you moving faster. But can't wait to be back in your ears next week. And if you're listening to this right now, I'm what you to know that I love you. I appreciate you. I'm grateful for you. And I'm in your corner. You are on the right track, and I believe in you. So keep going, and I'll see you next week. (upbeat music)