ClassPass Business Model | How Does ClassPass Make Money?

Classes Pass is a fitness subscription service developed in 2014 in New York City that connects subscribers to fitness classes and gyms available in 36 countries. 

According to them, an active lifestyle benefits the mind and body and should also be easier to maintain. The company hopes to help people find experiences that matter to them, challenge them, and move them forward. 

With top-tier venture capital backing, they have grown enormously over the last year, are expanding the team, expanding the company, and improving how members live their daily lives.

ClassPass is an online fitness class provider that offers a flat-rate monthly subscription. 

ClassPass earns money through subscriptions and offers its users different options ranging from $15 to $199 per month. 

It also offers enterprise services to large organizations such as Under Armour, Morgan Stanley, and Google. 

In addition, ClassPass charges a $15 cancellation fee if a cancellation is made less than 12  hours before the start of the program.

What is ClassPass?

ClassPass is a fitness platform that offers classes in collaboration with local gyms and fitness studios. Yoga, cycling, and boxing are just some of the available classes. 

The service is available through ClassPass’s Android and iOS mobile applications as well as its website.

ClassPass Business Model

The business model of ClassPass is based on subscription fees. Once the user registers for ClassPass, they receive credits that they can use to register for additional classes. The credit amount varies according to the plan selected.

The company has experienced phenomenal growth within its core business area since its inception in 2012. Nearly 100 million reservations have been made through ClassPass in over 2,500 cities worldwide. 

While the company has been successful, it has suffered from instability with the departure of its CEO and founder in 2017, as well as the shrinking of its partners’ revenues.

How Does ClassPass Work?

ClassPass is a subscription-based service that provides members with access to a number of studios, gyms, and wellness locations. Users can access the service through the company’s website or its Android and iOS mobile applications.

ClassPass Business Model

A customer who registers for a class is reserving a single session of their choice in the activity and location of their choice. Here are a few categories:

  • Boxing
  • Cycling
  • Yoga
  • Crossfit
  • Rowing

… as well as a large number of other workouts. Users book classes with the credits earned through their subscriptions. ClassPass partners serve more than 2,500 cities across the globe.

How Does ClassPass Make Money?

ClassPass earns money via a credit-based subscription model in which users pay a monthly fee.

While traditional gyms charge customers a monthly fee for unlimited access, ClassPass charges customers via credits redeemable at the gyms and studios with which it partners.

Every ClassPass workout has a dynamic credit price that is determined by several factors, including: 

  • The location.
  • Booked date and time.
  • Using equipment.
  • Whether the booked activity is prevalent.

The plan selected by the user establishes the maximum number of credits that can be disposed of in a given month. ClassPass earns a 5% commission on the price of each class that users attend using their credits.

Along with consumer plans, ClassPass offers bundled access to classes to its enterprise customers. A partnership with ClassPass enables businesses to provide all of their classes to their employees.

Among the clients are Google, Facebook, Under Armour, and Morgan Stanley. Pricing is not disclosed publicly and is almost certainly determined on a case-by-case basis (again, depending on location, number of employees, classes’ popularity, and so forth).

ClassPass offers a free 14-day trial period. Alternatively, they may choose one of the following five plans:

  • $15/month – with 7 credits for 2 classes.
  • $49/month – 23 credits for 8 classes.
  • $79/month – 38 credits for 13 classes.
  • $159/month – 68 credits for 24 classes.
  • $199/month – 100 credits for 35 classes.

ClassPass only provides subscription services; it does not run fitness classes.

A user enrolls in a class, and the company deducts 5% from the total price charged by the fitness provider. 

This arrangement benefits both the consumer and ClassPass, as unused credits can be carried over from month to month.

Enterprise Solutions

ClassPass enterprise clients include Under Armour, Morgan  Stanley, and Google.

Large enterprises can purchase bundled access to provide employees with near-full access to all classes on the platform. The pricing depends on the organization’s size and location.

Late and Missed Fees

If the cancellation is made less than 12 hours before class starts, ClassPass charges a $15 cancellation fee.

If a reservation is not canceled and the customer does not show up without canceling, a fee of $20 may be charged. When a virtual class is left unattended, the user loses the credits associated with the reservation.

ClassPass Business Model

The majority of people join the gym with the best intentions but abandon their attendance once their initial motivation wanes. If you are ambitious about working out, you may want to consider attending select classes at various gyms. 

However, one-time attendance fees are frequently prohibitively expensive, sometimes reaching $30. As a result, both methods are ineffective and financially inefficient for both parties.

A gym or fitness studio loses money when it cancels memberships or when classes are not filled. In the same way as airlines, fitness classes are not canceled because a few yoga mats are empty.

Gyms and consumers can solve problems with ClassPass subscription-based products. The company offers monthly memberships to consumers, corporate wellness programs, and two virtual services called ClassPass Live and ClassPass Go.

An Affordable Flat Fee For Consumer Wellness

One of the main innovations of ClassPass is its monthly subscription model, which provides access to a range of fitness classes at partner studios. 

These events provide businesses with spaces that would otherwise be vacant and consumers with various options for exercising. 

With this platform, fitness studios can offer customers customized fitness regimens and an influx of new clients without incurring any financial loss.

There are three tiers of ClassPass subscriptions. Customers who purchase the entry-level plan, which costs between $39 and $49 depending on the city, receive either 21 or 27 credits. 

Fitness classes normally cost six credits each, so that the credits can be used for these classes. Accordingly, the lowest-level ClassPass will grant access to two to five or three to six classes per month,  depending on the location. 

Higher-level subscriptions have the same pricing structure, ranging between $59 and $79 and $119 and $159 per month, depending on location. 

Currency exchange rates affect prices in international cities like London, Singapore, and Melbourne.

Although ClassPass is not significantly less expensive than many traditional gym memberships, it offers a level of diversity that traditional gyms do not. 

Members of ClassPass can reserve classes ranging from yoga and pilates to rock climbing and strip aerobics with the tap of a screen. 

The disadvantage is that members are only able to attend three classes per month at any one location. Despite this, ClassPass members are never satisfied. ClassPass processed over 1 million reservations in 2014. In 2018, that number exceeded 60 million.

Corporate Wellness

ClassPass now offers the same level of customization for corporate wellness programs. 

A business that partners with the service agree to offer ClassPass credits to its employees instead of individual memberships. 

These credits, on the other hand, are not bought in advance by employers. Employees are only charged when the devices are actually used. 

Employees participating in ClassPass’s corporate programs are encouraged to increase their physical activity levels. The more credits an employee uses in a month, the more credits he or she receives.

ClassPass Live and ClassPass Go

ClassPass Live was launched in 2018. Members can access live-streamed and on-demand fitness classes from the comfort of their homes for an additional fee of $10 to $19. 

A custom heart rate monitor is included in the service that keeps track of a user’s fitness progress. 

Additionally, ClassPass launched the ClassPass Go mobile app in 2018, which is free for members and $7.99 for non-members. Audio-based fitness classes are offered through the application.

Success Story of ClassPass

Paisal Kadakia and Sanjiv Sanghavi co-founded ClassPass (formerly Classtivity) in 2012. In order to book a dancing class for herself, Kadakia, a recent MIT graduate formerly with Bain and Warner Music, came up with the ClassPass concept.

Kadakia was an accomplished dancer in her youth. When she was three years old, she began dancing. She envisioned herself performing both classical and folk Indian dance by the age of five. Although she had a lot of responsibilities, she always had time to dance.

Her efforts led to the creation of Sa Dance Company, an Indian dance collective comprised of women from diverse backgrounds, which earned her an article in the New York Times.

As a result, when she wanted to improve her dancing skills, it took her countless hours to find a  suitable dancing class. Further, none of the websites he visited provided any information about the student’s skill level or the quality of the classes.

To simplify this process, she co-founded ClassPass with Sanghavi. Months later, the pair was accepted into New York City’s prestigious startup accelerator TechStars.

Aside from that, ClassPass originated in New York City, the city it was founded in. Over 8,000 NYC gyms were added to the company’s platform within a few months. Later, the service was expanded to other cities, including San Francisco and Los Angeles.

In 2014, the company had accumulated over 100,000 reservations on its platform and raised a  $2 million seed round. Over the years, the company expanded globally, acquired competitors such as Fitmob or Guavapass, and reached a valuation of over $1 billion.

Despite this, the path to exponential growth has not been without setbacks. Kadakia, for instance, resigned as CEO in 2017. One of the company’s early investors, Fritz Lanman,  assumed those responsibilities.

Most recently, the company has faced severe backlash from the gyms and studios that support it. An article in Vice Magazine describes how the company is “squeezing studios to the point of death.” 

This frequently resulted in studio owners barely profiting from any ClassPass customers who joined their sessions.

Meanwhile, ClassPass maintains that its business model benefits both the company and its studio partners, citing a 90% retention rate.

Also read, The Stitch Fix Business Model.

What is the Valuation, Funding, and Revenue of ClassPass?

Crunchbase reports that ClassPass has raised $549 million in venture capital funding over nine rounds. ClassPass was valued at $1 billion in its most recent Series E round, which raised $285 million. As a result, they were firmly placed in the unicorn club.

Temasek Holdings, General Catalyst, Thrive Capital, GV, and Apax Digital are among the company’s investors. 

Temasek is believed to be the primary investor in the company, having participated in its majority of funding rounds.

ClassPass does not disclose its revenue figures publicly, as is customary for any venture capital-backed company in full growth mode (and spending mode).

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