ClassPass and Payal Kadakia: A Pivot Isn’t Just a Dance Move

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We don’t get most things right the very first time. For example:
 

  • When it comes to starting a business, it’s incredibly rare to get things right the first time. A typical startup’s business model will undergo several iterations. And, as many startup founders learn, it’s often our failures that pave the way for our successes.

  • In web and mobile app development, the first version of your app simply won’t be perfect. You can only achieve a “perfect” version of your app by getting that imperfect version out on the market. Once it’s in the hands of your first users, they can help you identify the improvements needed and uncover the issues that need to be remedied.

  • When you’re trying to find a new gym or fitness class that fits your needs, you’re unlikely to guess right the first time, either. Instead, you’re more likely to find yourself navigating an Alice-in-Wonderlandscape in which things are simply not quite right. The class is too challenging, or not challenging enough. The studio is too crowded, or too empty. There’s an instructor who’s too in-your-face, or not in-your-face enough. Or maybe you just thought the showers were gross.

Increasingly, we live in a world in which an appropriate amount of trial and error is prerequisite for success. Often, our success is predicated on our acceptance of the fact that we don’t get things right the first time, and on our ability to stay flexible, acknowledge when something’s not working, and know when it’s time to pivot. “Just try something else” isn’t the shiny, sexy advice trumpeted in success-focused books and seminars. But maybe it should be.

While the examples above may seem an odd trio on first glance, they work together to provide an effective lead-in to the story of New York-based ClassPass, the subscription-based service that lets you try out classes at more than 8,500 studios in 50 cities worldwide, and to the company’s indomitable founder and executive chairman, Payal Kadakia. Under Kadakia’s leadership, ClassPass has changed its business model and supporting technology several times, but with good reason. It’s how she can continue giving ClassPass’ users the ongoing ability to change their minds about their fitness regimens.

ClassPass’ vision statement is “Every life, fully lived,” and Padakia takes that mission incredibly seriously. She wants ClassPass to help people find activities they love that make their lives richer. In an interview with Oxygen, she explains, “I feel like I was put on earth to do this.”

Finding Her Mission via Her Passion

New Jersey-born Indian-American businesswoman Kadakia doesn’t fit the description of the average startup CEO. (Kadakia acted as ClassPass’ CEO until 2017, when she moved to her current role.) At 4’11“, she’s a classically trained dancer and self-proclaimed barre addict. She rarely drinks coffee, advocating for green tea, and she does her best to get at least seven or eight hours of sleep per night. Even though she helms a fitness startup, she’ll freely admit that she didn’t own a pair of sneakers until she was 25 years old.

As the child of parents who immigrated to the US from India so that they could give their children lives laden with more opportunity, Kadakia was always encouraged to pursue her passions. After graduating from MIT in 2005 with a degree in Operations Research and Economics, Kadakia worked first as a Bain & Company consultant and then in Warner Music Group’s Digital Strategy and Business Development group. In 2009, she founded the Sa Dance Company, her first entrepreneurial venture, as a way for her to continue following her passion for dance. But — with her business career increasingly dominant — it was becoming harder for Kadakia to carve out time to pursue her devotion to dance.

One day after work, in the hopes of finding more opportunities to dance, Kadakia decided to find a ballet class. She quickly became frustrated by how difficult it was to find a class that would work for her needs. So she decided to do something about it. In 2011, she quit her job at Warner Music Group to focus on creating a solution that she hoped would help people find the classes and activities that would fuel their passions and help them become their best selves.

If at First You Don’t Succeed…

After going through NYC’s Spring 2012 TechStars startup incubator program, Kadakia and Co-founder Sanjiv Sanghavi launched the first incarnation of her idea. Originally called Classtivity, the concept was a web portal that would provide users with an online fitness class search engine and fitness studios with a better registration system. It had worked for OpenTable; why couldn’t it work for fitness classes? Unfortunately, it didn’t.

In a Livestrong Stronger Women interview, Kadakia explains that they essentially spent a year building the supporting technology before they put it out on the market. Based on the positive feedback they’d received through TechStars and from friends, they assumed demand and projected success. But when they launched the product, they heard only crickets: In its first year, fewer than 100 classes were booked through Classtivity’s web portal.

Kadakia explains, “When you’re building something like a marketplace or a product, your number one thing is, is someone going to buy it? How do you know? Product-market fit — how do you get to that as quickly as possible?” For ClassPass’ business plan, answering the question of “will people go to class?” was the only thing that mattered — because as she learned, without actually getting people to go to classes, she had no product and no company.

Having learned this painful but crucial lesson, Kadakia explains, she now performs all web and app development “in a really scrappy way” so that she can get it out there and begin gathering actual user feedback and data. She adds, “I’m not giving it to an engineer until I know it works.” (In the web and mobile app development process, Distillery always advises clients to do exactly this, developing a “minimum viable product” [MVP], getting it out on the market, getting user feedback, and making changes based on that feedback. As Kadakia learned, development in the dark gets you nowhere.)

So Kadakia pivoted, and pivoted, and pivoted, and pivoted, her dancing skills clearly evident as she kept her balance even through the most discouraging periods of the company’s evolution. She’s refreshingly pragmatic about the fact that her startup didn’t get its business model right the first time, the second time, or even the third time. But she’ll never stop trying to get it right. In an interview with TechCrunch, Kadakia explains, “I think failure is one of the most amazing data points. It tells you which direction to not go. It kind of opens the doors into saying, here’s all the opportunity that does exist.”

Solving Fitness’ Fit Problem

Before we look at the rest of ClassPass’ evolutionary trajectory, let’s look at where the company is now. ClassPass offers a solution to the bad-fitness-fit problems described earlier, because it doesn’t force you to commit to a single gym or sign up for a package of classes before you’ve tried even one. With ClassPass, you’re incentivized to try out several different classes at several different studios. That way, if something isn’t a fit for you, you simply move on and try something else. Essentially, it’s a single, highly flexible membership that supports access to nearly any type of fitness activity.

In overview, ClassPass’ current pricing and membership model works as follows:

  • ClassPass is accessible via desktop or mobile. Users can read reviews, search for and book classes, track favorite classes and studios, maintain their workout schedules, and check out friends’ schedules via ClassPass’ iOS or Android mobile apps or desktop website. The app’s location-based technology lets you use search filters and/or a map view to find nearby classes that fit your schedule. It also offers personalized recommendations based on your habits.

  • You can choose from three different subscription plans. The lowest-cost plan gives users access to booking approximately 2 to 4 classes per month, while the second-tier plan allows 4 to 6 classes and the highest-tier plan allows 8 to 12 classes.

  • A credit system allows gyms and studios to assign different values to their classes. This means they can price more in-demand classes at higher credit values while putting lower credit values on classes to which they wish to attract more people. As Kadakia explains, the credit system has allowed them to offer popular classes that were previously unavailable — an option ClassPass users had requested.

  • Subscription costs vary by city in accordance with each market’s average costs. For example, as of press time, in Los Angeles, the packages are $40 (24 credits), $60 (36 credits), and $115 (70 credits) respectively, while in Denver/Boulder they’re $35 (20 credits), $50 (30 credits), and $89 (60 credits). While this keeps things fair from a supply-and-demand perspective, the sizable variances do occasion a good amount of grumbling from consumers in the higher-priced markets. Of course, the variances also extend to the quantity of options available: In LA, you’ve got access to more than 900 studios, while in Denver/Boulder you’ve only got around 250.

  • No matter your subscription plan, you always have the option to purchase additional credits. In other words, if you’re typically a three-class-a-month user but you want to spend the month before your wedding hitting the gym hard core, it’s easily done.

  • You can use ClassPass while traveling. While subscription pricing is based on users’ home locations, they have the option to use credits to attend classes in other cities.

  • For a low additional cost, you can also stream unlimited workouts anytime via ClassPass Live. Introduced in March 2018, ClassPass Live workouts are guided by top trainers from studio partners and feature a real-time leaderboard, keeping you motivated even when you can’t get to the studio in person. (Fitness tech trends show that, increasingly, people want access to classes from the comfort of their own living rooms, so ClassPass is smart to add the capability.) Live workouts are ultimately made accessible on demand.

The following allowances, limitations, and stipulations are worth noting:

  • There’s no cap on how many times you can visit a given gym or studio. Prior ClassPass subscription models limited users to three visits to any given location — a limitation users hated. The new credit system aims to make it fairer to studios, so that they can continue benefiting from ClassPass traffic while maintaining ongoing control of class pricing and headcount.

  • If you don’t use all your credits in a given month, you won’t lose ALL of them. ClassPass automatically rolls up to 10 unused credits each month. This is another user-requested change from the prior model, in that previously, there was no rollover.

  • You can put your account on hold. If you know in advance that a certain month will be tough for scheduling workouts, you can pay a lower-cost “hold” fee that effectively keeps your account active while saving you a little cash. While your account is on hold, you may attend one class that month. The “hold” option is attractive for those who balk at the $79 reactivation fee charged to those who elect to reactivate cancelled memberships.

  • Credit values are customized for users based on their usage histories. So if your usage history shows that you’re way into cycling classes, ClassPass may offer you barre classes at lower credit values to entice you to try them out. And if you’ve visited a single studio several times that month, credit values for those classes may go up.

  • Flexibility doesn’t mean you can be a no-show without giving notice. In general, if you cancel more than 12 hours before the class, there’s no penalty. If you cancel within 12 hours’ time, you’re charged $15. If you’re simply a no-show, you’re charged $20. While these penalties may seem steep, it incentivizes you to show up and — when you don’t show up — keeps things sustainable for the studios who’ve held space for you.

To date, ClassPass has achieved some impressive figures, including more than 45 million classes booked and a current roster of nearly 25,000 classes on offer. The company estimates that 90% of its users have tried a new workout type. Kadakia is thrilled, because getting people to class was always the ultimate goal, and ClassPass’ model is indeed helping to make that happen.

Kadakia is also expanding ClassPass’ offerings beyond fitness, slowly rolling out access to classes focused on art, music, cooking, or mediation as well as the ability to book massages or concert tickets. Says Kadakia, “It’s really about living an inspired life. We want to connect people to experiences which make them feel great.”

Striving for Sustainability

So what’s the problem? Well, as ClassPass has struggled to find a sustainable business model, its users have struggled to keep up with the company’s frequent changes to its subscription models and policies. In overview:

  • Following Classtivity’s 2012 failure to launch, in 2013, the company began offering a $49 one-month-only, ten-class “Passport” that let users try out classes at different studios. Even with the promotion, however, their customer retention rate remained abysmal.

  • They quickly saw that users wanted more options and more time to explore those options. Kadakia and Co-founder Mary Biggins went door to door pitching studios on a new business model and pricing structure… which the company hadn’t yet proven successful. Fortunately for Classtivity, fitness studios are nearly always interested in strategies to help them increase traffic to their classes. Thus, in late 2013, the company moved to a subscription-based 10-class-per-month model, calling it the Classtivity ClassPass.

  • In May 2014 Classtivity began offering a $99 “unlimited” option that allowed users to book as many classes as they wanted each month, with a three-visit cap per studio. Unsurprisingly, the option quickly became quite popular. In 2015, they rebranded to the name of the product that was proving successful: ClassPass.

  • In April 2016, finding that — with their vastly expanded user base — they couldn’t continue to support the low-priced subscriptions without putting the company’s future at risk, ClassPass massively hiked the prices of the unlimited plans, occasioning uproar in many cities. The company simultaneously introduced a range of subscription plans at different levels.

  • Less than nine months after the unlimited price hike, they discontinued the unlimited plans entirely, retaining only the tiered subscription plans. While the initial outcry was sizable, the company ultimately experienced a bump in new subscribers.

  • In March 2018, they unveiled the variable credit system, occasioning yet more dismay among an already confused member base.

Clearly, balancing the needs of its fitness studio partners and users has been challenging for ClassPass. To their credit, however, it’s a balance they seem determined to find. After all, while the initial inspiration was focused on providing access to consumers, consumers gain nothing if the studios themselves — and ClassPass as the facilitator — can’t stay afloat. Kadakia sees the irony, admitting in the Livestrong interview, “Every company dreams to have this much engagement. And then we’re like, ah, but it’s hurting our business.”

While Kadakia understands consumers’ frustration, she’s unapologetic about the need to make sure she’s building a business with a sustainable future. If you’re out to disrupt an industry and change people’s lives for the better — and, like Kadakia, you’re in it for the long haul, and not just for the short-term buck — business sustainability must remain central to your business model. Given the company’s exponential growth, it’s unsurprising that sustainability has been a moving target.

Tweaking Their Technology

ClassPass’ ongoing innovation also extends to technology upgrades, including web portal updates and mobile app development. Originally accessible only via the web portal, ClassPass first added mobile functionality in December 2014 with the launch of their iOS mobile app. The Android app launch followed in January 2016. With the move to mobile, booking classes became easier than ever.

While ClassPass’ iOS app is highly rated, the Android app continues to receive mixed feedback. In particular, Android users call out general glitchiness and improvements needed in the app’s location-based functionalities. Luckily, ClassPass has established a decent track record of listening to user feedback, adding new features and making tweaks in response. For example:

  • In mid-2016, they added to both mobile apps the ability to see class ratings and reviews from the ClassPass community.

  • In late 2016, they rolled out a massive update to the Android app that included a refreshed interface, a streamlined user experience, and several new or improved features (e.g., an improved “Recommended classes” link, a “Book it again” feature, the ability to see all upcoming classes in map view, the addition of usage stats to user profiles).

  • In January 2016, they added social features to the iOS app, allowing users the ability to find friends, view friends’ upcoming and past classes, suggest classes to friends, and book the same classes as friends. (ClassPass’ social feature addition was honored as a finalist in the Health & Fitness, Health, Fitness & Medical Apps category in the 2016 Shorty Awards.)

  • A few months later, they added a “Friends” tab to the Android app featuring similar capabilities.

In other words, ClassPass’ iOS app nearly always seems to be several paces ahead of the Android app. But the work clearly continues within ClassPass’ app development team, so Android users may just need to hang in there a bit longer. (Anyway, they’re just doing their best to build smart and “scrappy.” As we always recommend here at Distillery, the right app development cycle is to build, launch, measure customers’ reactions, learn from feedback, and then start the cycle again. For startups and enterprises who seek to attract and retain users, mobile app development is never totally done.)

Thriving Through Change

By embracing change, listening to consumers and studios, and focusing on ensuring sustainability for all parties, ClassPass is on its way up. In 2014, the business was limited only to two cities; today, less than four years later, they’re in 50. In 2015, they acquired direct competitor FitMob, maintaining their dominance while supporting expansion into new markets. In 2016, ClassPass was recognized by Forbes as one of the “Next Billion Dollar Startups” and Kadakia was recognized as one of Fortune’s “40 under 40.” While their “scrappy” way of doing business will likely still cause consumers a few more headaches, they seem genuinely determined to get it right in the long run. And investors’ willingness to pony up more money speaks volumes: With $154M in total funding, ClassPass could be on its way to being the next tech-industry unicorn.

In 2017, Kadakia made another brave pivot, voluntarily moving to her current role as Executive Chairman as long-time investor Fritz Lanman took on the role of CEO. Lanman and Kadakia are insistent that the change simply reflected how their roles had organically involved. Indeed, it all ties in with Kadakia’s overall philosophy as she explains it in the Livestrong interview. She advises, “Surround yourself with awesome people that free you up to focus on your own magic,” because “That is your way of being your best self, learning to lean on good people… in all aspects of your life, it helps you thrive.” And if Kadakia has her way, her best self is going to find a way to get you to a class that’s going to help you thrive.

Want to learn more about how Distillery helps startups and enterprises to build “scrappy,” pivot at the right moments, and ultimately thrive? Let us know!
 
 

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