Differentiation Strategies For Health Club Competitors

I get to speak with a lot of health club operators, along with other fitness participants, and a big question they ask is "how do I compete with budget competitors?" Concepts like Planet Fitness and others are offering memberships as low as $9.95 a month - this is concerning for many (see video below). I share the view that 80% of the U.S. market will be in the $19.95 monthly membership tier within a few years.

The Budget Gym trend is her to stay (check out How the Bricks and Mortar Fitness Business Is Changing), and therefore the issue of how to compete is an important one.

A key way to combat this price oriented competition is through a marketing differentiation strategy. A facility owner can create the perception of uniqueness in the minds of customers. Marketing differentiation strategies can be based on price, service, a unique focus or a different product mix. For more on being different check this out.

Differentiation marketing helps you stand out in a crowded marketplace. It can be an important strategy to implement, especially if there is a lot of similarities among competitors. An effective differentiation strategy gives customers a reason to choose your facility by pointing out subtle or less obvious differences or benefits that customers may not be aware of.

There are several types of marketing differentiation strategies. With a pricing strategy, you attempt to position your business as the low-price alternative - which is what the budget facilities are doing. A high-price strategy can also be used to create a perception of prestige. A product/service strategy emphasizes your program offering, outstanding group fitness via Les Mills is a good example of this. A customer service strategy points out your superior service. With a focused strategy, your marketing emphasizes a unique feature like a convenient location, or attempts to appeal to a specific market segment. But there is something even more important when it comes to differentiation for health clubs.

As Jonathan Fields recently commented with respect to health club differentiation:

It’s a clone club. And, that creates a big challenge for both the folks in marketing and sales. With a few exceptions, beyond the window-dressing, you could swap one brand for another fairly easily, leaving price and convenience as the primary selling points. In a market where there’s little competition, that’s survivable. But, as soon as more clubs with similar features arrive, you’re left with price as the primary differentiator and that’s a bad place to be. In an attempt to try to overcome clone club syndrome, club owners task marketers, advertising agencies and PR people with “positioning” their solution as bigger, better, cooler, cuter, edgier, hipper, funnier and different, when in reality it’s not.

Jonathan is right. Many clubs are very much the same so differentiation is difficult So what to do ? Why not focus your differentiation and marketing strategies on what prospects want - results. And by the way, why not utilize social media instead of high pressure sales tactics and old school direct mail ?

Watch the IHRSA Live Video below from IHRSA's Ask An Industry Leader Program. What do you think ? How should fitness facilities and health club operators use differentiation strategies to compete with low price budget gyms ? Contact me, Bryan O'Rourke, and share your views and experiences.

Comments

[Tom]

Brian, I read your article with great interest. While I agree with some points I do not think the discount model will last, at least as it is today. For example, as a club owner simply dropping my prices to compete or relinquish the budget minded consumer to the budget club is out of the question. I have to much investment in the way of finishes, amenities, payroll etc., etc to just give up 25% of my member base or revenue. Further, the budget minded fitness consumer is not interested in the bells and whistles that marketing differention efforts focus on.
So what to do? I would rather compete against myself than the guy accross the street. To that point, I would rather keep a member at a "discounted" rate vs no rate at all. However, for the member it's not without sacrifice. The "Amenity Based Fitness Model" can help retain those that like your place but can't beat the price at the budget gym. Appeal to the consumer to only pay for what they use. So, while 10.00/month may not be viable but 24.99 may be just enough to keep them. Now, you are in direct competition for that bare bones members that may like that fact that you have actual fitness professionals on staff or higher end finishes and amenitiy upgrades if they want them.

With technology and personnel training it is easy enough to monitor and now the discount club down the street doesn't get 10,000 members, it gets 7,500 or 5,000 and that spells trouble at 10 bucks a month.
Most clubs are giving discounts for seniors, corporates, students etc etc any way so why not give the discount for what PF has shown people really care about! Pay for what they are using! Amenities such as pools, basketball courts, classes, towel service, play care can all be added on to a membership at an additional fee for each and financed by those that use it as well as the additional volume you capture/retain at the buget price.
The high end people that enjoy the amenities will willingly pay for them....the fact is that no more people join gyms today than did 20 years ago so why on earth would us as an industry simply relinquish such a large part of the market. As a consumer I relate to someone saying "All I need is a treadmill and some weights, so why pay 50 bucks a month especially when the guy next to me is pay the same price and he takes classes, swims, uses the playcare etc etc?"
FINALLY, a quick look at other industries shows that it can and does work....Does Toyota only sell 90,000.00 fully loaded Land Cruisers or can you get a Rav 4 for 29k? I doubt they feel as though they are undercutting themselves. Simalarly, does cable or cell phone companies only sell premium packages in fear of the high end people down grading to basic packages......Ah No, but as usual the fitness industry lags way way behind....I think the budget gym is just what the FITNESS industry needs to get out of its own way in terms of the traditional rigid one size fits all model.....Before you know it, PF will be offering more amenity upgrades just to compete with us..Thanks.