SO WHAT TO DO?Fortunately there are some things you can do to compete without crippling your profits. That’s the good news…The bad news is that you’ll need to make major strategic and operational changes, and you’ll need to rethink how you engage and communicate with members and clients. Taking on a low-price competitor and competing against a truly disruptive business requires a careful rethinking of how your business operates and to fundamentally rethink and challenge your business model.The changes required may not be for the faint of heart, but they’re better than the alternative.
Both strategies are right because strategy has to synchronize with what you deeply believe. Remember, this is likely to be a long-term journey so the ‘fuel’ required to drive the business every day will come from an exuberance and passion for what you are pursuing. clarify the purpose of the business first and the profits should follow. Low-cost gym operators passionately believe they are helping to ‘democratize fitness’ by lowering joining barriers and making it easier for consumers to embed physical activity into their lives. You may not believe this, but what does your business believe in? What is the underlying purpose driving this business?What do you want my business to stand for?What type of business are you passionate and excited about developing?What will be your personal legacy to the health-club industry?What difference are you trying to make?These are challenging but vitally important questions, so do not rush to the first answer. SUGGEST 3 SOURCES OF READING: “Start with a Why”, “Drive”, and “The Upside or the Irrational”.Test your answers with your team, industry colleagues, friends and family and constantly refine them.
Focus on achieving ultimate members engagement and attendanceHigh attendance leads to higher levels of loyalty, referrals, higher membership and higher membership fee…You can prevent the people from wanting to leave and you can get back those who have left.70 to 80% of low-cost clubs member have been a member of a club before… ‘Low attendance’ is the #1 reason why they left – you can get your members to value their membership in your facility more by increasing their attendance. A survey on ex members of Gym Group in the UK shows only 6.8% of members stayed longer than 12 months; 27.4% left in their first 3 months; and another 34.9% left within 6 months. Nearly 40% of them joined another facility…Attendance should be your number-one KPI.Evaluate your service and member engagement metrics, benchmark yourself against top performers and set some challenging goalsWeekly club attendance and average attendance per member - What % of your members attend once, twice, three times and three+ times per week? Aim for a BHAG of 2 club visits per week per member as an average. What is your GX attendance? Your team training attendance? 90% prefer to exercise in a group. Making exercise social/building bonds is a key strategy to differentiate against low-budget clubs. Aim for a BHAG of 50% of your club attendance to go to your group exercise classes. People coming to GX attend their club twice more than others – start from there. Secondary KPIs: Consider net promoter score (NEP)Online reviewInvestigate the percentage of walk-ins converted to sales to get a feel of the appeal of your value propositionSurvey your members to find out what they feel is most important and implement accordingly.The question is: how do you increase attendance? WOW YOUR MEMBERS!
Review and rethink your value proposition:To compete, you need to get the customer to value your product more than the competition’s, regardless of the price…What do you sell/promise/deliver to members? Is the difference between your club and low-budget offerings clear enough?Is the additional value/difference to low-budget clubs strong and clear enough? Is it obvious to your members? When customers prefer the lower priced of two options, it’s usually because they don’t feel they get the additional value they should get for the price difference, or they don’t value the extras they get. Challenge what you currently do and consider new options – what do people want? What do they value? What is it that we don’t provide them with that led them to leave our facilities after just a few weeks? How do you make them come more often and stay longer?
The answer is: results and motivation… growing member engagement, attendance and therefore membership and profit. Doing all you can to deliver these to members. Why?1. Research – see the recommendations in AC Nielsen’s White Paper entitled ‘Future of Fitness’ for example 2. Customer trends – look at Cross Fit’s success… and those of all the micro-gyms…
You can deliver these in many ways – through:A highly motivating workout environment, the activities you offer, the social relationship between staff and members, your goal-setting tools, the educaiton you provide, your coaches. It’s even intangible things like your member culture, and how easy it is for members to sign up and feel like they belong.It’s not about the machines. It is about becoming more than just a place where people come to pump iron and run on treadmills. Leave that to the low-budget gyms which charge $10 a month.
AIM FOR EXCELLENCEWhatever value proposition you decide to focus on, you have to deliver high satisfaction to be the best. Aim for excellence. Play on your strengths - identify what you are really good at, what truly sets you apart from the competition and what you love to do. If there are enough customers willing to pay for it, or if you are better to be a smaller company, focus on that and leave the rest out!A large list of activities delivered in an average way is NOT what consumers are looking for today! Customers will pay more if they’re convinced that what you have to offer is demonstrably better than that provided by the competition.
AIM FOR EXCELLENCE. Take a close look at the operations side – how good are you really? Benchmark yourself against the best in that specific game and set a plan to bridge the gap (set specific goals, allocate serious human and monetary resources etc).Get the very best of everything that you can afford. Show members you care enough about them to offer them the best option – treadmills, equipment, GX classes, interior décor, staff, cleanliness. Hire successful specialists and co-brand with premium brands.Don’t be different by being worse. Every club or facility wants to be that little bit unique, to have a stand-alone value proposition that compels people to choose your club over the competition. Sometimes this causes club owners to choose difference over excellence - and members vote with their feet. There’s a reason that sports shop all stock NIKE, and all supermarkets stock COCA-COLA, and all bars offer ABSOLUT VODKA – it’s the price of entry to the game.Partner with the best available and then compete on all the extra-value services your team bring to every workout experience.
RUN MICRO-BUSINESSES INSIDE YOUR BUSINESSIf you choose to focus on several things (multi-activities), make sure you excel in all of them as much as you would if they were your only value proposition.This means lifting up the level of your game… but also charging for it - and vice versa.Consider creating micro-gyms inside your facility, or specialized satellite clubs, ie launch a premium HIIT/Functional Fitness studio, mind/body, hot Yoga, PT, cycling studios in your club (or nearby)Offer the best-possible programmingBuild a dedicated space with specific design, look and feel, and equipmentHire highly specialized coaches fitting the essence of the activityBuild a community – have a dedicated Facebook page, events, activities, uniforms etcSell it on top of your basic membership and promote/open access to non-members 5,000+ Cross Fit studios charging $15 to $30 per workout…Hot yoga $25 to $35Soul cycle $32 per ride + an extra $32 to pre-book for your ride…LMNZ Auckland generates NZ$10,000 per week of additional revenue through charging a $5 booking fee per ride (even if the membership is the most expensive in town)
Many health-clubs were conceived and built in the last century and must ensure they remain relevant to the lives of today’s customers. There are numerous examples of very good businesses that get ‘side- swiped’ by a new entrant. A big but common mistake is to rely on the expertise and experience that made you great in the past.Staying relevant therefore means ‘paying attention’ to how consumers of ‘today’, and tomorrow, are accessing health and fitness solutions, because the threat from substitutes has never been greater. The millennial generation and Gen Y don’t want what you want… do you know what they want? Do you offer highly motivating and HIIT solutions? Team training?Keep up with the trends… or, even better, become a trend-setter! Beware of the ‘status quo’ orientation. Leadership teams who want to survive have to question every aspect of their operations. Be brave enough to ask ‘what if’ questions. Michael Silverstein, The Boston Consulting Group
Harness technology and social media – your consumers do!Automatize what you can – ie the part of the consumer proposition that provides low levels of value. How can you bring value to members using technology and social media?
This is not about taking your prices down…Yes, you want to make sure your prices match the value you offer, but you might even have to consider increasing prices to present a higher-end option…Come up with a pricing strategy that offers:Real value for money to members – can you justify/demonstrate why you are more expensive? Can customers explain it themselves and do they agree with you?Flexibility optionsNo ‘one size fits all’ Provide customized solutions or make sure the solutions you present feel ‘unique’ by means of smart pricing presentation strategiesOffer specific membership for specific activities – ie gym and cardio equipment + virtual GX classes only, live GX, team training only etcNo commitment - people are willing to pay more for that. Take the example from the phone companies – offer a more expensive membership without commitment, a cheaper one with much more benefits with a higher level of commitmentEven when they choose a higher commitment option, people should be able to reverse back – ie a member has to leave after 6 months instead of 12. You stop their membership but they have to pay the difference between what they paid because of the longer commitment ie $45 per month and what they would have paid without the 12 months’ commitment ie 6 months x an additional $20.
Recruit the best-possible talents, train constantly, motivate and inspire.People are your best assets in this fight – this is what low-cost businesses don’t have.But make sure their interactions with members bring real value - ie if the role of the membership consultant is to take prospects through the membership options, just set up some iPads at reception and use your website… If you worry a virtual GX option might affect the numbers in your live classes, work on building up your instructor team’s quality big-time! The rise of the European low-cost operators has focused me on our specific proposition - why become a member of Holmes Place? To get a premium experience. More than anything, a premium experience relies on people to deliver it - premium brands cannot survive without exceptional teams engaging with customers. Neil Burton, CEO, Holmes Place Central/Eastern Europe
What’s your point?To unleash company performance and profit, you need to unleash staff motivation, performance and loyalty.
Strongly suggest they take the time to evaluate their specific situation and to come up with 3 to 5 actions they think they should take asap to remain competitive…A good thing to do is a SWOT analysis – an analysis of their strengths, weaknesses, opportunities and threats in the context of that specific situation…We can also support them in their analysis process and with their strategic plan if they want….
Competing Against Low Budget Facilities
Taking on a low-price competitor and competing against a truly disruptive
business requires a careful rethinking of how your business operates and
to fundamentally rethink and challenge your business model.
Rethink how you engage and communicate with members and clients.
The changes required may not be for the faint of heart, but they‟re better
than the alternative.
Harvard Business Review – Strategies to Fight Low-cost Rivals
Clarify what your business believes in, it‟s purpose, your „why‟ … what contribution to the
fitness industry and to people do you want to make? What legacy do you want to leave?
Do all you can to achieve the highest possible level of members engagement – attendance
should be your #1 KPI
Review and rethink your value proposition…
Focus on providing people with results and motivation
Aim for excellence – be the best at what you are specialized in!
Run micro-gym businesses
Pay attention, remain relevant
Harness technology and social media
Evaluate your price and review your membership options
People, people, people…
MOST VALUE PER DOL
THE QUALITY OF PROGRAMS,
THE ATMOSPHERE, THE ATTENTION TO DETAIL,
OR THE RELATIONSHIPS FORGED,
UNIQUE QUALITIESTHAT CAN SET YOUR FITNESS BUSINESS
APART FROM YOUR LOW-COST
WHETHER IT IS THE
THERE ARE MANY
THE STAFF, THE RESULTS YOU PROVIDE,
PLAN EARLY,AND MAKE YOUR MEMBERS AND
PROSPECTS UNDERSTAND HOW YOUR
FACILITY OFFERS THE