The document discusses a proposed merger between two gym chains, NG and DMV. Key points of the merger include combining operations under a single parent company while keeping individual branding, implementing a new CRM system to reduce costs, introducing tiered membership plans and day passes, and installing smart machines to improve the user experience. The merger aims to leverage the strengths of each company by combining NG's lower expenses with DMV's better growth opportunities in urban areas. Financial projections estimate the merger could save $6 million annually through the new CRM system while raising additional capital through long-term membership deals. An implementation timeline outlines steps over 1-2 years to finalize the merger and integrate new systems and technologies.

1. Deloitte Case Study
Competition Spring 2014
ISTeam
Colin Balickie
Tyler Focht
Mike McCarren
Fiachra McDermott

2. Suggestion: Merger of equals
• NG
• Better profit and revenues
• Lower expenses
• DMV
• Better growth opportunity
• Higher retention rates
Being in a more urban area, DMV’s geographical location is better suited to membership growth
and retention, while NG’s more rural location is better suited to lower expenses and less
competition.

3. NG vs DMV Cost Comparison
• NG
• Total expenses: $16,805,869
• Total revenue: $36,312,944
• Total # of gyms: 20
• Avg. expense per gym: $840,293
• Avg. revenue per gym: $1,815,647
• Avg. retention rate: 48%
• Avg. member growth rate: 5%
• DMV
• Total expenses: $14,742,856
• Total revenue: $26,686,956
• Total # of gyms: 15
• Avg. expense per gym: $982,857
• Avg. revenue per gym: $1,779,130
• Avg. retention rate: 58%
• Avg. member growth rate: 5%

4. Merger details
• Keep individual branding while being under the same parent company.
• All members of executive board will remain in their positions for 1-2 years
while restructuring takes place. After, decisions will be made by the board of
directors based on success of each brand.
• Both companies will switch to the same CRM system and
advertising/marketing plan, cutting overall costs.

5. CRM System
• Suggestion: Switch to Salesforce Enterprise
• Savings of $6M annually over Siebel 8.0[1]
• PCI DSS certified at Compliance Level 1[2]
• Low cost and time implementation compared with similar systems[3]
• Advanced integration with Social Media and Marketing, including SMS support
[1] Wendy Davis, research director at Gartner
[2] Salesforce Blog:Announcing PCI Certification
[3] Zach Bacon, owner LifeTime Fitness

6. Technical
• Most critical aspect
• Developing and integrating new systems
• Salesforce CRM
• Social Media/AdWords
• SMS alert system
• HTML 5Website
• Mobile compatible
• Smart Machine integration

7. Organizational
• Eliminating redundant positions in:
• InformationTechnology
• Administration (eventually executive board)
• Locations
• If certain high-cost locations (NG gyms 5, 12 and 17; DMV gym 8) cannot become
profitable, determine strategy for consolidation or closure

8. Financial
• Reducing expenses, as advised by CFO
• Reducing personnel through Smart Machine and integration

9. Cultural
• Keeping individual branding to avoid confusion
• Current members are familiar with the current brands
• Different demographics prefer different gym cultures

10. Security
• Members have option to opt-out of data collection
• Keep customer information on current physical servers to maintain data
privacy
• Salesforce’s PCI DSS Certification Level 1, as suggested by CSO
• These systems pass the most rigorous security requirements PCI has to offer

11. Suggestions for future
• Smart Machine integration
• Tiered membership levels and one-day passes
• Long-term membership deals

12. Smart Machines
• Tablet-based fitness tracking and analysis
• Machine tutorials for beginners
• Workout plan recommendations
• Integrate with personalized website
• Similar system to Koko Fit Club

13. Tiered Membership Plans and One-day Passes
• Basic - Cost: Current membership cost - Access to all equipment, Fitness
data tracking (No analysis/guidance), initial fitness evaluation by trainer
• Plus - Cost: Basic + $10/month - Basic + full fitness analysis
• Premium - Cost: Plus + $50/month - Plus + Unlimited personal training
sessions.
• $50 per personal training session on any plan (except premium)
• One-day passes starting at $5

14. Long-term Membership Deals
• 6 months paid upfront 10% off total cost
• 12 months paid upfront 15% off total cost
• This will help raise initial capital and increase retention rates

15. Expenses and Savings
• +$6M - Salesforce Savings ($7.2M Siebel cost - $1.2M Salesforce cost)
• +$1M - Gym expense reduction (5, 12, 15, 17)
• +$---- - Sale of old gym machines
• -$200K - Salesforce implementation @ .75x to 1x license cost for 2 months (includes
Salesforce implementation partner) [1]
• -$100K - Initial advertising budget (Using GoogleAdWords andYouTube advertising)
• -$10K -Website design (50-60 hours @ $180/hour)
• -$7M - Purchase and installation of new tablet-integrated machines @ $200k per gym [2]
[1] Zach Bacon, owner LifeTime Fitness
[2] Koko Fit Club franchise start-up costs

16. Timeline
• 1-2 Months
• Finalize merger
• Begin Social Media campaign
• Development of Integrated Website
• 2-4 Months
• Purchase/Installation of Smart Machines
• Salesforce Implementation
• 1-2Years
• Board of Directors vote
• Deloitte evaluation of success
• 6-12 Months
• Executive Board performance review