How The Fitness Industry Is Changing And What To Do About It
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How The Fitness Industry Is Changing And What To Do About It

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    How The Fitness Industry Is Changing And What To Do About It How The Fitness Industry Is Changing And What To Do About It Presentation Transcript

    • becoming more competitive how the fitness industry is changing and what to do about it 1
    • Bryan K. O’Rourke, MBA Bryankorourke@me.com - Fitness Professional & Club Owner connect with me @Strategist, technologist, entrepreneur and club owner with thirty years of proven results in awide range of roles and industries.His background includes serving as CFO of Al Copeland Investments former owner of Popeye’sFried Chicken and Church’s Fried Chicken brands; CFO and shareholder of Smoothie KingFranchises; and CEO of Applied Realtime Systems, a technology innovation company, amongother roles where he has help build national and global brands.Bryan advises governmental agencies, non-profits and for-profits both domestically andinternationally and is active in the Mary Bird Perkins Cancer Foundation. He serves as theMedical Fitness Association’s education committee chairperson and is an author & speaker.His education includes a BS in Finance from the University of New Orleans, an MBA from SELUand received the Crescent City Scholarship for the pursuit of a Ph.D. in Financial Economics.He has focused on fitness and wellness during past 12 years and is a shareholder and executivein The Health Club for Women, Fitmarc, Integerus, and the Flywheel group.. 2
    • change across all industries How is the Fitness the fitness industry is no exceptionchange is not just cyclical its also fundamental Industry is Changing ? 3
    • <3> demography technology globalismmany industries experiencing change 4
    • Check Out This DVD For MoreInformation on Technology’s Impact technology5
    • demography globalism 6
    • Today : How the Fitness Industry is Changing1.U.S. Fitness Facility Marketplace Overview2.Prevalent Business Models & Trends 7
    • in response to rapid change What Should You industries are reinventing and innovating creating new opportunities Do About It ? 8
    • ...andWhat to Do About It3.Evaluating Your Competitive Position4.Planning A Course of Action9
    • #1 U.S. Fitness Facility Overview 10
    • 1 U.S. Fitness Facility Market Overview•Emerging Consumer Factors•Emerging Economic Factors11
    • Emerging Consumer FactorsHealth club consumer & PRIZM profilesIn 2009 IHRSA’s completed a nationwide survey of U.S. households. A total of 15,013 individualand 26,487 household surveys were completed to create reliable profiles of members includingPRIZM segmentation. PRIZM means “Potential Rating Index for Zip Marketers” 2009 Health Club Consumer Report 12
    • Emerging Consumer FactorsHealth club consumer & PRIZM profiles Report Includes: •Trends in Club Membership •Attendance •Activity Participation •Member Profiles •Typical Consumers •Profiles By Club •Profiles By Activity •Club Fees •Cluster Analysis •PRIZM Profiles 2009 Health Club Consumer Report 13
    • Emerging Consumer FactorsHealth club consumer & PRIZM profiles •PRIZM is a geodemographic profiling system developed by Claritas. Each PRIZM divides the U.S. consumer into 14 different groups and 66 different segments. As the classification is household based, we can compare different areas according to the likelihood of joining a health club. For example, the highest indexed PRIZM segment is “Blue Blood Estates,” so we can target “Blue Blood Estates” households within the health club’s immediate vicinity to recruit likely members. •PRIZM analysis is more valuable than generic demographic data and provides more meaningful insights into membership profiles. 14
    • Emerging Consumer FactorsHealth club consumer & PRIZM profiles 15
    • Emerging Consumer FactorsHealth club consumer PRIZM profiles 2009 Health Club Consumer Report 16
    • Emerging Consumer FactorsShare of Current US Health Club Market Urban Uptown Elite Suburbs Affluentials 33% 11% Landed Gentry Country Comfort Middleburbs 13% All Eight Others 7% 10% 6 of 14 Segments 11% 14% Represent 67% of the Market 2009 Health Club Consumer Report 17
    • Emerging Consumer FactorsShare of current US health club market Penetration Rates = 17% Overall 50.00% 41.70% Combined 6 of 14 Segments 37.50% Represent 67% of the Market 25.00% 25.10% 25.50% 23.20% 20.70% 16.40% 12.50% 10.77% 0% Urban Uptown Elite Suburbs Affluentials Landed Gentry Country Comfort Middleburbs All Eight Others moving this would have big impact 2009 Health Club Consumer Report 18
    • Emerging Consumer FactorsHH “Upper Income” & education key drivers 2009 Health Club Consumer Report 19
    • Emerging Consumer Factors“Price” is main objection or “perception of value” Too expensive 61 Exercise elsewhere 52 Feel out of place 18 No available club 13 Dont exercise 16 Too crowded 12 Don’t know anybody 12 0 17.5 35.0 52.5 70.0 2009 Health Club Consumer Report 20
    • Emerging Consumer Factors - Existing CustomersReport ID’s 5 key clustersPredominantly Male:Focus on strength & resistance - 84% MaleMixed Low Use:59% use club less than 1 time a week - Less affluent25% non-members - Even male female mixPredominantly 50+:Slightly more female - most affluent - 60% over 50 years of ageSuper Avid Hi Spend User:67% female - Highest participation especially group exerciseFemale Low Spend:80% female - 67% participate in group exercise 2009 Health Club Consumer Report 21
    • Emerging Economic FactorsMixed low usage largest market share of members 11% 18% Male Strength 7% Mixed Low Usage 50+ Group 22% Super Avid High Spend Female Low Spend 42% largest group of existing consumers least affluent and least participative 2009 Profiles of Success 22
    • Emerging Consumer Factors - Michael SilversteinTreasure Hunt - Inside the Mind of the New Consumer Compa nies will thrive , Silverstein a rgues, by catering to the penny- pinching impulses of consumers, or by "spanning the poles" and appealing to both the high and low ends while avoiding anything else- theres only "death in the middle." 23
    • Emerging Consumer Factors - Michael SilversteinTreasure Hunt - Inside the Mind of the New Consumer The “New Consumer” Seen in All Industries. Important to Understand “Value” 24
    • Emerging Consumer FactorsAlternative fitness options - digital technologies Consumers are getting accustomed to the “long tail” affect - anytime, anyplace, anywhere. Estimate 2 million in US utilize some type. 25
    • Emerging Consumer FactorsPrevention - monetizing the wellness The emerging health care mess is creating new customer needs to reduce costs of traditional care via prevention 26
    • Emerging Consumer FactorsConsumer’s don’t trust advertising The Days of Traditional “Sales” and “Marketing” in Health Clubs is Coming to An End 27
    • Trends - Emerging Economic Factors Profiles of Success 2009 2009 Profiles of Success 28
    • Emerging Economic FactorsNational growth has stalled for several years now2009 Stagnant As Well2009 $19.9 Billion2009 45.3 Million Members2008 $19.1 Billion2008 45.5 Million MembersRelated to economic factorsLimited supply increaseRestricted financialenvironment 2009 Profiles of Success 29
    • Emerging Economic Factors Customer retention key to revenue sustainability Attrition Rates Lifetime 38.20% TSI 39.60%Profiles of Success 30.60% 15.00% 21.25% 27.50% 33.75% 40.00% 30
    • Emerging Economic FactorsWhat are customers telling us ? 24% Left the Industry 50,000 46,668 45,570 37,500 25,000 12,500 10,268 0 -11,386 -12,500 -25,000 Total 2007 New 2008 Left 2008 Total 2008 2009 Health Club Consumer Report 31
    • Michael SilversteinTreasure Hunt - Market “Bifurcation” “I have seen that consumers will always trade down and buy the cheapest product in a category if suppliers fail to deliver a stream of innovation and build loyalty based on product superiority.” 32
    • #2 Prevalent Business Models & Trends 33
    • 2 Prevalent Business Models & Trends •Growth Scenario •Core Economics •Competitive Landscape •Emerging Segments34
    • Business Models & Trends - Growth ScenarioUS facilities - rapid growth since early 90’s 35
    • Business Models & Trends - Growth ScenarioFacility growth has slowed 2009 Profiles of Success 36
    • Business Models & Trends - Growth ScenarioGrowth mostly in top MSA’s & Sun Belt - Regional 37
    • Business Models & Trends - Core EconomicsAverage membership dues flat since 1980 Today = $49.95 1980 = About $40.00 2009 Profiles of Success 38
    • Business Models & Trends - Core EconomicsAverage membership dues fairly flat since 1980 Car Today = $28,400 | Car 1980 = $7,210 39
    • Business Models & Trends - Core EconomicsDevelopment & operating costs nearly quadrupledsince 1980 40
    • Business Models & Trends - Core EconomicsROI in the “average” model under pressure What drives growth in any industry are ROI’s that sustain growth and attract capital The “average” is feeling most pressure this is driving “bifurcation trend” 41
    • Business Models & Trends - Core EconomicsEconomics has driven discounting for certain brandscapacity strategy 42
    • Business Models and Trends - Competitive Landscape Face Off of Top 100 Clubs - Club Industry - July 2010 http://clubindustry.com/ forprofits/top-100-health-clubs/ index.htmlClub Industry July 2010By Editor Pamela Kufahl 43
    • Business Models and Trends - Competitive Landscape Prevalent Business Models & Trends 1 $1.4 Billion 4 $812 Million 2 $1.0 Billion 5 $485 Million 3 $837 Million 6 $344 MillionClub Industry July 2010 ByEditor Pamela Kufahl 44
    • Business Models and Trends - Competitive Landscape Prevalent Business Models & Trends 7 $134 Million 8 $130 Million 9 $110 MillionClub Industry July 2010 ByEditor Pamela Kufahl 45
    • Business Models and Trends - Competitive Landscape Bifurcation of the market - Ray Algar Modelhttp://www.oxygen-consulting.co.uk/ 46
    • Prevalent Business Models & Trends - Emerging Ray Algar - UK Budget Markethttp://www.oxygen-consulting.co.uk/ 47
    • Business Models and Trends - Competitive Landscape Bifurcation of the market - Ray Algar Modelhttp://www.oxygen-consulting.co.uk/ 48
    • Prevalent Business Models & Trends - EmergingBudget competitors emerging 49
    • Prevalent Business Models & Trends - EmergingNew niche trends - engaging personal experience “drop-in” fees unlimited $89 - $17 - $40 $140 month 50
    • Prevalent Business Models & Trends - EmergingHospitality brands reflect market bifurcation 51
    • Prevalent Business Models & Trends - Emerginghttp://futureoffitnesswhitepaper.ning.com/ 52
    • Prevalent Business Models & Trends - EmergingOn line retail continues surge - fitness models follow"People are just shifting their dollars to theWeb," said Sucharita Mulpuru, vice president andprincipal analyst for Forrester Research  Inc.Online retail sales will grow 10% a year for thenext five years, accounting for 53% of all U.S.retail sales by 2014, according to ForresterResearch. 53
    • Prevalent Business Models & Trends Wellness Model - potential to dwarf extant fitness•Huge $2.7 Trillion Opportunity•Health care spending isunsustainable.•Prevention as a strategic positionfor employers and ultimatelygovernments is inevitable.•Key is outcomes and integration. 54
    • Prevalent Business Models & TrendsGrowth - new emerging niches and models requiring new ways of doing things.... 55
    • Recap Of Trends 56
    • Recap Of TrendsConsumers:•Value perception is key barrier to increased membership•Most affluent & educated have greatest penetration levels•Low user cluster is largest segment - they are least affluent & least engaged•Consumers increasingly trading up and down•Consumers are becoming accustomed to digital delivery•Advertising is distrusted by most consumers•Wellness is growing needBusiness models:•Several large well financed competitors continue expansion•Over 20% of market controlled by 9 key players nationally•Top 30 MSA’s are key expansion markets - regions vary•Discounting widely being applied in market•Average ROI pressure - prices stagnant while costs increase•Market is “bifurcating” moving upward and downward along value scale•Emergence of budget model, hi-end and medical niches•Technologies providing increasing options•Requiring existing players to do new and different things to compete 57
    • What are your going to do about it ? #3 Evaluating Your Competitive Position - Think Strategically 58
    • 3 Evaluating Your Competitive Position•SWOT•Internal - capabilities and resources•External - market opportunities and threats59
    • Evaluating Your Competitive PositionConduct a SWOT analysis of your club business Internal Review: •Current position •KPI’S - member execution •What is your niche? •What is your technology platform ? •How are you marketing ? 60
    • Evaluating Your Competitive Position - Internal SWOTWhat is your niche ? Where are you positioned now ? •Price •Features •Competitive abilities •Wellness Option 61
    • Evaluating Your Competitive Position - Internal SWOTCompare numbers to industry figures - benchmark 2009 Profiles of Success 62
    • Evaluating Your Competitive Position - Internal SWOTWhat is your technology platform ? customer focus ! Technology Platform: •CRM or just billing ? •Cloud based ? •Web site integrated ? •Mobility ? 2009 Profiles of Success 63
    • Evaluating Your Competitive Position - Internal SWOTHow do you market ? Social media ! The “NEW” Marketing: •Social media strategy ? •What is your spend ? •Campaign effectiveness ? 2009 Profiles of Success 64
    • Evaluating Your Competitive PositionConduct a SWOT analysis of your club business External Review: •Calculate Demand •Calculate Supply •Evaluate Pricing •Review Existing Members 65
    • Evaluating Your Competitive Position - External SWOT Determine Demand - www.sitereports.comEliminate your “gut” - quantify ! 66
    • Evaluating Your Competitive Position - External SWOT Drive time psychographics - www.sitereports.comForget “radius” use drive time ! 67
    • Evaluating Your Competitive Position - External SWOTMarket assessment drive time - www.sitereports.com Drive Times Run 10 minutes Might want to adjust 68
    • Evaluating Your Competitive Position - External SWOTBy utilizing PRIZM you can better estimate demand 69
    • Evaluating Your Competitive Position - External SWOT Estimate Market Demand - Use IHRSA research ! Fictional Trade Area Households Estimated Urban % of HH National % IHRSA % 2009 Households HH Demand U1 - Urban Uptown 6.81% 8.30% 25.10% 7,000 1,757 U2 - Midtown Mix 21.37% 4.33% 16.90% 5,000 845 U3 - Urban Cores 25.46% 4.96% 7.10% 3,000 213 Total Urbans 53.64% 4.96% 17.40% 15,000 2,610 2nd CityUse the IHRSA 2009 Consumer C1 - 2nd City Society 6.24% 4.63% 30.10% 15,000 4,515 C2 - 2nd City Centers 7.04% 7.85% 11.70% 7,000 819Report to calculate estimated C3 - Micro City Blues 4.16% 6.64% 9.00% 3,000 270demand Total Second City 17.44% 19.12% 15.59% 25,000 3,898 SuburbsThis provides you a good S1 - Elites 2.60% 5.21% 41.70% 8,000 3,336estimate for your market S2 - Affluentials S3 - Middleburbs 6.86% 7.71% 23.20% 7,000 1,624 7.23% 6.15% 20.70% 4,000 828potential S4 - Inner Suburbs 12.21% 4.53% 8.50% 2,000 170 Total Suburbs 28.90% 23.60% 32.76% 21,000 6,880 Total Estimated Market 13,387 70
    • Evaluating Your Competitive Position - External SWOTEstimate Market Supply - Under-serviced ? Change ? Shop the Competition Web Research Estimate Memberships Evaluate Offering Demand = 13,387 Supply = 5,075 GROWTH POTENTIAL ! Brand Location Estimated HH Percentage of Adjusted Trade Estimated Trade Share 24 Hour ABC Drive 2,645 50.00% 1,323 26.06% Anytime Sierra Lane 820 75.00% 615 12.12% Anytime Veterans Blvd 735 50.00% 368 7.24% Snap Fitness Jone Road 640 50.00% 320 6.31% Bally’s Laredo Ave 1,300 50.00% 650 12.81% Jane’s PT Studio MPT 300 100.00% 300 5.91% Your Club Your Club 1,500 100.00% 1,500 29.56% Total Total 5,075 71
    • Evaluating Your Competitive Position - Internal SWOTWho are your existing members ? PRIZM Membership Mix by Psychographic Segments by uploading household addresses U! Urban Uptown 170 U2 Midtown Mix 80 U3 Urban Cores 75 S! Elite Suburbs 497 S2 Affluentials 249 S3 Middleburbs 107 S4 Inner Suburbs 104 C1 Second City 397 C2 City Centers 127 C3 Micro-City Blues 25 T1 Landed Gentry 80 T2 Country Comfort 12 T3 Middle America 8 T4 Rustic Living 6 0 125 250 375 500 2009 Profiles of Success 72
    • Evaluating Your Competitive Position - Internal SWOTWho are your existing members ? PRIZM Membership Gains & Losses by Psychographic Segments by uploading household addresses U! Urban Uptown U2 Midtown Mix U3 Urban Cores S! Elite Suburbs S2 Affluentials S3 Middleburbs S4 Inner Suburbs C1 Second City C2 City CentersC3 Micro-City Blues T1 Landed GentryT2 Country Comfort T3 Middle America T4 Rustic Living -15.00% -11.25% -7.50% -3.75% 0% 3.75% 7.50% 2009 Profiles of Success 73
    • #4 Plan & Take Action 74
    • 4 Plan Your Course of Action•Develop Your Plan•Resource & Execute75
    • Plan Your Course of ActionSWOT gives many answers If you decide to reposition doing it and SWOT Delivers This executing it is hardest 76
    • Plan Your Course of Action - Where do you want to be ?What must you add or take away ? Analyze ROI •Proforma •Capital •Realignment •Expertise 77
    • Plan Your Course of ActionR=G - Prahalad - Use global resources There are a large number of experts, products, services and solutions from vendors able to support and advise you on your fitness business. “Executives are constrained not by resources, but by their imagination.” -CK Prahalad, Ph.D. 78
    • Plan Your Course of ActionSeek guidance from experienced professionals 79
    • Recap - What to Do About The Changing MarketEvaluate Your Competitive Position:•Use SWOT approach•Use IHRSA, RMA, FDD, SEC and other resources to benchmark•Evaluate your current market offering including pricing, features, service•Assess your technology platform - customer facing & integrated•Assess marketing practices - spend, return and the “new” methods•Calculate market demand in trade area using IHRSA and PRIZM•Calculate market supply in trade area•Evaluate current base of membership and changes•Think strategicallyPlan & Act:•SWOT generates road map•Conduct in-depth proforma analysis•Prioritize actions - do nothing or reposition•SEEK HELP - IHRSA, global vendor pool, expertise•Implement and execute 80
    • In Closing - Our Industry Holds Great Promise “Without change there is no innovation, creativity, or incentive for improvement. Those who initiate change will have a better opportunity to manage the change that is inevitable.” C. William Pollard ““Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.”” C. William Pollard 81
    • Thank You Bryan K. O’Rourke, MBA Bryankorourke@me.com www.bryankorourke.com 82
    • 83