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SoulCycle Has Found a Brilliant Way to Monetize Loyalty

The company is taking a step toward classes in class. Photo: Yue Wu/The Washington Post/Getty Images

Last month, I got an email from SoulCycle informing me about a new opportunity available to customers.

Normally, all the bikes for a week of SoulCycle classes are released simultaneously for booking every Monday at noon, and for the most popular classes, there’s a rush to book bikes right when they become available. This is such an ingrained part of SoulCycle culture, the company has even made “Noon on Monday” tank tops. If you wait too long, you may be stuck in the back of the studio or far to the side — or maybe you won’t even be able to get a bike at all.

But now, the company is offering a product called Soul Early. For an extra $15 per class, you can book your bike starting Sunday at noon. Since a SoulCycle class typically costs about $30, that’s a significant markup. But there’s another way to get Soul Early certificates: If you ride 15 times in a month, the company will give you three Soul Early certificates for the next month — free.

“We’ve been hearing from a portion of our devoted community that they’re interested in a way to book their favorite bike, with the instructor they love, before Monday at noon,” says SoulCycle CEO Melanie Whelan. “Soul Early was created for specifically them.”

Of course, giving some riders the opportunity to book early will make it even harder for those who wait until Monday at noon to get their preferred bikes.

“I think Soul Early is such bullshit,” says Ben Dreyfuss, the editorial director for growth and strategy at Mother Jones magazine and a vocal SoulCycle fanatic. “Already this week a bunch of first-row center seats were booked early in my classes. I just took a Karyn class at NoHo where I had to be front-row left side.”

Dreyfuss says lately he’s been riding only 10 or 12 times a month — not enough to make the cut for free Soul Early certificates — but he’s considering riding more often so he can be the one booking those premium bikes out from under others.

This, of course, is the genius of Soul Early. 15 rides a month — one every other day — is a lot. But giving frequent customers like Dreyfuss a little push to ride more often could turn them into even more frequent (and even more lucrative) customers.

“Creating a way for our loyal community to earn Soul Early certificates was incredibly important,” said Whelan. She added it’s just one of many ways SoulCycle cultivates its most frequent customers, noting that “our most loyal riders also receive invitations to special events like our Sound by SoulCycle concert series, our Las Vegas instructor residencies, or our Destination Soul pop-ups.”

The terms “rewards program” and “loyalty program” are often used interchangeably, but they don’t mean quite the same thing, and SoulCycle appears to understand the distinction. Rewards promote customer frequency by offering rebates or discounts. By promoting frequency through discounting, they increase revenue from a given customer, but at the cost of a lower profit margin on each transaction. And just because a customer who participates in a rewards program is frequent, that does not mean she is loyal: Her frequency may be driven solely by the rebates and discounts, and if a competitor steps in to offer better rewards, she may be gone.

Ideally, companies want to cultivate true loyalty: Relationships where the customer feels an emotional attachment to a brand and will choose it even when it does not offer the best price proposition. Because loyal customers are both more frequent and less price-sensitive than other customers, they are especially profitable and desirable customers to have.

One way to cultivate loyalty is to offer benefits to frequent customers that do not have a clear monetary value and can’t easily be replicated by competitors. This was a core competency for Starwood Hotels, which wowed frequent customers by carefully tracking their preferences and relaying them even to hotels those customers were visiting for the first time.

As I wrote for the New York Times in 2015, SoulCycle prices above its competitors and promotes loyalty by cultivating a sense that its offering is more than just a workout. While many start-ups lose money, fast-growing SoulCycle had at the time filed documents for an IPO showing a strongly positive pre-tax profit margin of 23 percent. (Ultimately, the company did not go through with the IPO, and it remains majority owned by Equinox Fitness, which is in turn owned by The Related Companies, a real estate developer.)

Still, SoulCycle doesn’t just compete with Flywheel and other studio cycling brands. It competes with other modes of working out, some of which are cheap or free. It also competes with the option of not working out at all on a given day. The promise of free Soul Early certificates makes a lot of sense as part of a strategy to take SoulCycle’s already-loyal customers and get them to choose spinning (at SoulCycle) as a workout activity on a higher fraction of days. And best of all for the company, they administer this push with something that appears to be free to give away. Customers earning and using Soul Early certificates still have to pay for their rides; the company sells the same bikes it was already going to sell in its most-demanded classes, at the same prices, just at a different time.

Except: Are those early bike assignments really free for the company to give away?

They look free because every SoulCycle bike within a given market has historically been priced the same — prices are different across cities, but do not vary by date, time, instructor, or position of your bike within the studio — but one thing SoulEarly demonstrates is that not every bike is equally valuable. More customers would like to ride at 5:30 p.m. than at 4:30 or 7:30. There are certain studios that are more desirably located. There are certain instructors who are more popular. And there are better places within the studio to sit — if you look at a partly booked-out SoulCycle class, you’ll see riders typically want to be in one of the first two rows, closer to the center, and not on a bike that faces the instructor from the side.

The option to buy Soul Early certificates for $15 is a small step toward variable pricing, as is a longstanding product called Super Soul, where some New York customers pay $70 per class (in a package of 50 classes for $3,500) and get not just early bookings but also concierge service and priority when riding standby.

Packing ‘em in. Photo: Stephen Lovekin/Getty Images

But what if SoulCycle went full airline, realizing it can make the most money by setting a custom price for each class, each instructor and each bike? Instead of handing out plum seat assignments to frequent riders as a thank you, it could just sell them to the highest bidder.

Finding a way to charge for every little gradation in desirability is a trend across industries that sell products and services whose appeal can vary with date or time or location. Ski resorts and theme parks are increasingly varying their ticket prices across the calendar, offering discounts for less busy days and charging extra on holiday weeks. Some high-end restaurants have taken to selling seat reservations through Tock, with higher prices to eat the same food at a more desirable time. Airlines pioneered this flexible pricing approach, but even they are getting more granular, offering micro-upgrades like a seat assignment near the front of the plane for as little as $9 on a short trip.

In economics, the “surplus” of a transaction is the difference between how much a buyer values a product or service and how much it costs the seller to produce. The difference between cost and price is the “producer surplus” and the difference between price and the customer’s subjective valuation is “consumer surplus.” Increasingly customized pricing — higher prices for what customers value more — increases the share of the surplus that goes to the producer. No wonder companies are so focused on honing these strategies.

But competition is a countervailing force that stops companies from totally eating customers’ lunch. Delta may know you’re willing to pay more to sit near the front of their plane than the back, but if United will sell you a comparable seat for less, you may not end up on Delta’s plane at all. So pricing strategies where the producer aims to capture more of the surplus are likely to be most effective when used by companies whose offerings are perceived as unique and irreplaceable. So Disney has more flexibility on pricing than other theme park operators, and SoulCycle is more likely than other fitness brands to retain its customers even if some of them, like Dreyfuss, think changes to its pricing structure are “bullshit.”

I can think of some reasons SoulCycle would resist the urge to squeeze all the juice out of this orange. Imagine a SoulCycle class where every bike has a custom price. The “sidebar” riders — the ones at the front of the room, facing the instructor from the side — are already on display, with riders in the main section of the studio staring at them. Now, they’d be on display with everyone knowing they’d chosen to ride on a value-priced bike. Would that be awkward? Would such an explicit price hierarchy undermine SoulCycle’s “pack” ethos that has customers thinking about class as not just fitness but a communal experience?

Maybe. But on the other hand, the extremely explicit price hierarchy on airplanes is awkward, and the airlines don’t seem to have any qualms about it. And customers don’t just put up with it — some elite flyers derive a perverse sense of self-worth from their ability to stride across a special carpet and board before the “regular” customers.

And SoulCycle might be able to charge a lot more for those primo bikes. In time, the company may find variable pricing is a hard temptation to resist.

SoulCycle Has Found a Brilliant Way to Monetize Loyalty