The Fitness Industry Is Going Through Tremendous Change. Health Clubs Are Going Through Market Bifurcation As All Other Consumer Oriented Businesses. Consumers are Trading Up and Down While the Emerging Health Care Crisis Is Creating Greater Opportunities.
2. 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 a
wide range of roles and industries.
His background includes serving as CFO of Al Copeland Investments former owner of Popeye’s
Fried Chicken and Church’s Fried Chicken brands; CFO and shareholder of Smoothie King
Franchises; and CEO of Applied Realtime Systems, a technology innovation company, among
other roles where he has help build national and global brands.
Bryan advises governmental agencies, non-profits and for-profits both domestically and
internationally and is active in the Mary Bird Perkins Cancer Foundation. He serves as the
Medical 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 SELU
and 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 executive
in The Health Club for Women, Fitmarc, Integerus, and the Flywheel group..
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3. change across all industries How is the Fitness
the fitness industry is no exception
change is not just cyclical its also fundamental Industry is Changing ?
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4. <3>
demography technology
globalism
many industries experiencing change
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5. Check Out This DVD For More
Information on Technology’s Impact
technology
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12. Emerging Consumer Factors
Health club consumer & PRIZM profiles
In 2009 IHRSA’s completed a nationwide survey of U.S. households. A total of 15,013 individual
and 26,487 household surveys were completed to create reliable profiles of members including
PRIZM segmentation.
PRIZM means “Potential
Rating Index for Zip
Marketers”
2009 Health Club Consumer Report
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13. Emerging Consumer Factors
Health 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
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14. Emerging Consumer Factors
Health 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.
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17. Emerging Consumer Factors
Share 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
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18. Emerging Consumer Factors
Share 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
20. 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
Don't exercise 16
Too crowded 12
Don’t know anybody 12
0 17.5 35.0 52.5 70.0
2009 Health Club Consumer Report
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21. Emerging Consumer Factors - Existing Customers
Report ID’s 5 key clusters
Predominantly Male:
Focus on strength & resistance - 84% Male
Mixed Low Use:
59% use club less than 1 time a week - Less affluent
25% non-members - Even male female mix
Predominantly 50+:
Slightly more female - most affluent - 60% over 50 years of age
Super Avid Hi Spend User:
67% female - Highest participation especially group exercise
Female Low Spend:
80% female - 67% participate in group exercise
2009 Health Club Consumer Report
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22. Emerging Economic Factors
Mixed 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
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23. Emerging Consumer Factors - Michael Silverstein
Treasure 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-
there's only "death in the
middle."
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24. Emerging Consumer Factors - Michael Silverstein
Treasure Hunt - Inside the Mind of the New Consumer
The “New Consumer” Seen in All Industries.
Important to Understand “Value”
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25. Emerging Consumer Factors
Alternative fitness options - digital technologies
Consumers are getting accustomed to the
“long tail” affect - anytime, anyplace, anywhere.
Estimate 2 million in US utilize some type.
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26. Emerging Consumer Factors
Prevention - monetizing the wellness
The emerging health care mess is creating new customer needs
to reduce costs of traditional care via prevention
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27. Emerging Consumer Factors
Consumer’s don’t trust advertising
The Days of Traditional “Sales” and “Marketing”
in Health Clubs is Coming to An End
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28. Trends - Emerging Economic Factors
Profiles of Success 2009
2009 Profiles of Success
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29. Emerging Economic Factors
National growth has stalled for several years now
2009 Stagnant As Well
2009 $19.9 Billion
2009 45.3 Million Members
2008 $19.1 Billion
2008 45.5 Million Members
Related to economic factors
Limited supply increase
Restricted financial
environment
2009 Profiles of Success
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30. 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%
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31. Emerging Economic Factors
What 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
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32. Michael Silverstein
Treasure 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.”
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35. Business Models & Trends - Growth Scenario
US facilities - rapid growth since early 90’s
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36. Business Models & Trends - Growth Scenario
Facility growth has slowed
2009 Profiles of Success 36
37. Business Models & Trends - Growth Scenario
Growth mostly in top MSA’s & Sun Belt - Regional
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38. Business Models & Trends - Core Economics
Average membership dues flat since 1980
Today = $49.95
1980 = About $40.00
2009 Profiles of Success 38
39. Business Models & Trends - Core Economics
Average membership dues fairly flat since 1980
Car Today = $28,400 | Car 1980 = $7,210
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40. Business Models & Trends - Core Economics
Development & operating costs nearly quadrupled
since 1980
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41. Business Models & Trends - Core Economics
ROI 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”
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42. Business Models & Trends - Core Economics
Economics has driven discounting for certain brands
capacity strategy
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43. 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.html
Club Industry July 2010
By Editor Pamela Kufahl 43
44. 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 Million
Club Industry July 2010 By
Editor Pamela Kufahl 44
45. Business Models and Trends - Competitive Landscape
Prevalent Business Models & Trends
7 $134 Million
8 $130 Million
9 $110 Million
Club Industry July 2010 By
Editor Pamela Kufahl 45
46. Business Models and Trends - Competitive Landscape
Bifurcation of the market - Ray Algar Model
http://www.oxygen-consulting.co.uk/
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47. Prevalent Business Models & Trends - Emerging
Ray Algar - UK Budget Market
http://www.oxygen-consulting.co.uk/
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48. Business Models and Trends - Competitive Landscape
Bifurcation of the market - Ray Algar Model
http://www.oxygen-consulting.co.uk/
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53. Prevalent Business Models & Trends - Emerging
On line retail continues surge - fitness models follow
"People are just shifting their dollars to the
Web," said Sucharita Mulpuru, vice president and
principal analyst for Forrester Research Inc.
Online retail sales will grow 10% a year for the
next five years, accounting for 53% of all U.S.
retail sales by 2014, according to Forrester
Research.
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54. Prevalent Business Models & Trends
Wellness Model - potential to dwarf extant fitness
•Huge $2.7 Trillion Opportunity
•Health care spending is
unsustainable.
•Prevention as a strategic position
for employers and ultimately
governments is inevitable.
•Key is outcomes and integration.
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55. Prevalent Business Models & Trends
Growth - new emerging niches and models
requiring new ways of doing things....
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57. Recap Of Trends
Consumers:
•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 need
Business 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
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58. What are your going
to do about it ?
#3 Evaluating Your
Competitive Position - Think Strategically
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59. 3 Evaluating Your
Competitive Position
•SWOT
•Internal - capabilities and
resources
•External - market
opportunities and threats
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60. Evaluating Your Competitive Position
Conduct 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 ?
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61. Evaluating Your Competitive Position - Internal SWOT
What is your niche ? Where are you positioned now ?
•Price
•Features
•Competitive abilities
•Wellness Option
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62. Evaluating Your Competitive Position - Internal SWOT
Compare numbers to industry figures - benchmark
2009 Profiles of Success
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63. Evaluating Your Competitive Position - Internal SWOT
What is your technology platform ? customer focus !
Technology Platform:
•CRM or just billing ?
•Cloud based ?
•Web site integrated ?
•Mobility ?
2009 Profiles of Success
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64. Evaluating Your Competitive Position - Internal SWOT
How do you market ? Social media !
The “NEW” Marketing:
•Social media strategy ?
•What is your spend ?
•Campaign effectiveness ?
2009 Profiles of Success
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65. Evaluating Your Competitive Position
Conduct a SWOT analysis of your club business
External Review:
•Calculate Demand
•Calculate Supply
•Evaluate Pricing
•Review Existing Members
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66. Evaluating Your Competitive Position - External SWOT
Determine Demand - www.sitereports.com
Eliminate your “gut” - quantify !
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67. Evaluating Your Competitive Position - External SWOT
Drive time psychographics - www.sitereports.com
Forget “radius” use drive time !
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68. Evaluating Your Competitive Position - External SWOT
Market assessment drive time - www.sitereports.com
Drive Times
Run 10 minutes
Might want to adjust
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70. 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 City
Use 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% 7,000 819
Report to calculate estimated C3 - Micro City Blues 4.16% 6.64% 9.00% 3,000 270
demand Total Second City 17.44% 19.12% 15.59% 25,000 3,898
Suburbs
This provides you a good S1 - Elites 2.60% 5.21% 41.70% 8,000 3,336
estimate for your market S2 - Affluentials
S3 - Middleburbs
6.86% 7.71% 23.20% 7,000 1,624
7.23% 6.15% 20.70% 4,000 828
potential 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
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71. Evaluating Your Competitive Position - External SWOT
Estimate 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
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72. Evaluating Your Competitive Position - Internal SWOT
Who 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
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73. Evaluating Your Competitive Position - Internal SWOT
Who 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 Centers
C3 Micro-City Blues
T1 Landed Gentry
T2 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
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75. 4 Plan Your Course
of Action
•Develop Your Plan
•Resource & Execute
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76. Plan Your Course of Action
SWOT gives many answers
If you decide to
reposition doing it and
SWOT Delivers This executing it is hardest
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77. Plan Your Course of Action - Where do you want to be ?
What must you add or take away ? Analyze ROI
•Proforma
•Capital
•Realignment
•Expertise
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78. Plan Your Course of Action
R=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.
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79. Plan Your Course of Action
Seek guidance from experienced professionals
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80. Recap - What to Do About The Changing Market
Evaluate 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 strategically
Plan & 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
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81. 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
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82. Thank You
Bryan K. O’Rourke, MBA
Bryankorourke@me.com
www.bryankorourke.com
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