The Price of Competition
Other operators might decide to include tanning or massage chairs. This creates slightly different variations, or “low-cost flavors,” but the essence of the proposition remains tight and lean, with the business based, primarily, on a large exercise area.
In addition to its five common characteristics, there are six drivers that are crucial to the growth of the low- cost segment. They are: a changing consumer; digital infrastructure; simplicity; affordability; consumer senti- ment toward traditional clubs; and sporadic attendance at traditional clubs. These factors are explored in detail in the 2011 Global Low-Cost Gym Sector Report.
Figure 2: Key market drivers
However, at the same time, the low-cost movement has had a disruptive effect on many sectors, including the automobile, telecommunications, and healthcare equipment industries. To calculate its impact on the fit- ness industry, the 2011 Report solicited insights from a number of individuals in other fields. The key themes that emerged from those interviews were:
• The middle market in many industries is under attack from both the low-cost and premium segments. The “monopoly of the middle” is coming to an end.
• Consumers are becoming increasingly comfortable with self-service and the use of digital tools—core components of a low-cost proposition.
• Consumers are no longer embarrassed by their low- cost purchases, but, instead, talk about them openly and boast about their savings on social networks.
• Those parts of any business that provide low levels of value run the risk of being automated. For instance, a position that involves producing printed marketing materials could change or disappear altogether as com- munication goes digital in the form of e-mail, blogs, and social networks. As a result, some club roles will change or, ultimately, be eliminated.
• Consumers have high expectations even when the price they pay is low. In the case of low-cost gyms, every element of the member experience—from Website usability to the temperature of shower water—must be executed flawlessly. It’s the sum total of all these touch-points that ultimately determines the verdict a consumer renders.
THE LOW-COST ENVIRONMENT Most consumers, by now, have had some experience with low-cost offerings or providers—whether it’s an airline, hotel, or restaurant. The approach can provide clear benefits both for producers and consumers. Com- panies are excited by the strategy, in part, because it creates a degree of “uncontested” market space. When, for instance, the Nano, a low-cost car from India, was launched and dubbed the “people’s car,” it was positioned not to compete with other autos, but, rather, as an alter- native to purchasing a motorcycle.
Consumers profit not only from lower prices, but also
from the development of new products. For example, Siemens has developed a low-cost MRI machine, the Magnetom Essenza, for use in small clinics and rural hospitals. Its sale pitch: “Easy on your budget.”
TOTAL ACCESS
To register, discuss, and download a complimentary copy of either the U.K. Low-Cost Gym Sector Report or the 2011 Global Low-Cost Gym Sector Report (supported by Precor), visit
oxygen-consulting.co.uk/think-tank. The author, Ray Algar, is the managing director of Oxygen Consulting, which provides strategic business insight to organizations serving the global health and fitness industry.
48 Club Business Internat ional | DECEMBER 2011 |
ihrsa.org
THE LOW-COST EXPERIENCE To develop the 2011 Report, two online surveys were created for current and former members of U.K. budget facilities, including FitSpace. Individuals were asked to agree or disagree with a series of statements about their club experience, employing a five-point semantic- differential scale. The statements addressed such topics as safety, club atmosphere, staff support, and value-for- money. Among current members, there was the most agreement on the following three statements:
• The monthly gym price provides excellent value for the money (4.5 out of 5).
• FitSpace is helping me to become a healthier person (4.2 out of 5).
• I always feel safe when using the gym (4.2 out of 5 rating).
Existing members were also asked to rate, on a scale of 0 to 10, the likelihood that they’d recommend FitSpace to a friend or colleague. The average result was 7.9, with
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