Saturday, April 7, 2012

'No Joining Fee'. The Fitness Industry Epic Fail.

Fourteen years ago the first health club I worked for had a leaflet offering 'no joining fee'. Last week I got a leaflet through my door from Virgin Active, and guess what the offer was, yep, 'no joining fee'. In over a decade the fitness industry hasn't moved on, its still churning out the same unimaginative, trite messages that have been proven to not work.

Even a company like Virgin Active that must have whole teams of marketing personnel and more money to spend than the average club regurgitates and persists with a failed strategy.

In this article, I'll look at what the fitness got wrong and continues to get wrong and may be come up with a few answers and suggestions for a better way. I don't pretend to have all the answers, but there just might be a better way.

(Note: this is a long post, if you don't feel like reading the whole thing, I've done a handy summary at the end, though you will miss out on some top notch info and references).

Why is there a joining fee in the first place?

Whether you call it a joining fee, an admin fee, a starter fee or whatever, most clubs which contract you in can't come up with a good reason why they have one. Probably twelve years ago, no joining fee offers seemed like good value to the public and consumers. The industry was still expanding, everyone was following more or less the same health club model and it seemed there was money to be made.

The joining fee is no more than a sales tool now, the public got wise to it. Joining fees and price presentations are the tactics of double glazing salesmen ten years ago. Everyone now knows that as soon as the sales advisor/person/ manager panics about not meeting their sales target for the month there will be a no joining fee offer. Sure enough, last weekend of the month, the offer banner will go up, no joining fee weekend, the text messages will go out to the prospects, a few people will join and the cycle will begin again.

Here's, the first thing the fitness industry can do now. Have transparent pricing. Have faith in your product and pricing. Stop discounting. If people know you discount, they will wait until you discount to join.

These days, everyone is fond of using Apple as a model for success (unless you happen to be one of the people working in their Chinese factory, then you probably don't feel so great about it, see here ). So throughout this article, I will post the question every so often, what would Steve Jobs do? Well, firstly, as you've probably noticed, Apple rarely discount products, ever. Their products aren't cheap to begin with, and often cost much more than their rivals products, but they still don't discount, because they have faith in the quality of their product.

If the customer wants your product, then price will not be the barrier.

Never forget Steve Jobs also came up with the $10,000 folly that was the Apple Lisa

Transparent Pricing

In a recent Fit Pro business (fitness trade magazine) article a company that does mystery phone calls said that the number of calls being answered in 5 rings or less was down to 60% and worst of all, most operators were committing the cardinal sin of telling the enquiry the price over the phone. In the same magazine, the open comment article says that the fitness industry's market penetration is still only 10%. And in the Editors commentary we find out that management expert Nic Jarvis believes a customer-centric approach will be the next big thing (hang on, no one thought we should be customer-centric before-hand?!)

Anyone, see the disconnect here? We treat our product like a secret organisation, putting up barriers. Oh, you actually want to know how much our gym costs? Oh, we couldn't possibly do that, we have to get one of special Sales Advisor guides to show you the secret room first, the secret room full of machines.

Obscure film reference: on the way to the room in the zone in Stalker, when they get there the room is a cardio theatre

You can go online now and buy just about everything, whether it be Amazon, or booking a holiday or hotel, the price of the product is there and plain to see. But for some reason, the fitness industry is still appallingly bad at this. (It also still thinks phone call mystery shops are valid, when most customers go to the internet first or come into the club, in fact, the only people who really enquire by phone anymore are mystery shoppers!).It was only a few years ago that some of the budget clubs changed the game, by giving customers the opportunity to join online and by actually stating what the price was. Despite this, very few health clubs or gyms actually show you what their prices are on their website, and even fewer allow you to actually part with your cash and join online.

In his book Winning, Jack Welch outlines the key behaviours of a company called Bank One (who lets face it are probably owned by the tax payer now, but the statement still holds true)

"Always look for ways to make it easier to do business with us"
 If you think about the fitness sector, we actually make it very hard to do business with us. In most cases, you can't join online, no one will tell you the price unless you book a secret tour of the special room of machines. And even if you do turn up to have a look at the gym , there's no guarantee that anyone will actually let you look at it. For example, me and my colleague tried to mystery shop a Virgin Active in the city of London, except we weren't actually allowed to see the club. We were told by the receptionist, that the sales advisor was in a meeting (no doubt discussing with his area manager how he was smashing targets but still needed to do a no joining fee offer that weekend) and couldn't show us around. Could anyone else show us around? No. that was a negative, no one else had the magical powers to say 'look. here's a treadmill'. Could we just go and have a look ourselves, again, that was a negative, there was no way we could be let into the secret citadel without a sales guide, what the hell were we thinking?! Now, if I was a real customer I would have probably gone and joined Bannatynes down the road, because at least they gave us a tour. However, at Bannatynes, the sales advisor had taken the museum tour concept to a whole new level, at one point he said 'here is a water fountain'. Thanks buddy, good to know that my £60 a month entitles me to some tap water. It might be owned by a dragon, but it doesn't mean they are any better than the usual suspects.

Most of the public don't consume our product and don't want our product, and yet, when they do, we actually make it hard for them to do business with us.

We must put ourselves in the mindset of potential customers. I find it very hard to imagine what it would be like to walk into a gym for the very first time, because I do it all the time. So I have to think of a scenario where I wasn't comfortable. I have been to Selfridges on Oxford St in London but once, if you've never had the misfortunes to go into Selfridges or Primark on Oxford St its like a cross between a shopping mall, Bladerunner and the Tokyo subway, in short I wanted to get the hell out of there, stat. And that's exactly how most of the public feel when they enter a gym.

You don't have to be a Six Sigma black belt like Jack Donaghy to figure this stuff out

Most high end health clubs are rubbish, in fact, 99% are.

Most high end gyms are crap. You pay £80-100 for one crappy program written by a guy making minimum wage, and despite the fact you are already paying £100 a month, they try and sell you personal training immediately, and if you're not interested you are persona non grata, just waiting for your 12 month contract to end, so you can leave, join somewhere else and get treated exactly the same all over again.

Don't be fooled into thinking higher price means better service, the fitness industry doesn't work this way. In the same way that the most exclusive clubs don't necessarily have trainers any better qualified than the guy working with his clients in the local park.

But don't worry, at least you get to have Molton Brown when you use the showers.

And nearly all health clubs have followed the big room full of machines model...

All watched over by machines of loving grace

Okay, Adam Curtis didn't have treadmills in mind, but you get the idea
This paradigm was set in the 1990's, and for the commercial fitness industry it hasn't changed that much. Get a room and fill it with cardio machines, and some resistance machines, and minimal free weights. Hopefully this will attract the 'right type' of clientele. This is also a minimal coaching model, because you don't need much coaching ability to show someone how to press quick start on a bike, therefore the company then saves money by paying staff minimal amounts because you don't need a strength and conditioning coach to be in the gym making sure people do something that might actually work.

I've been to a few brand new facilities, and they still get the model the wrong way round. Rather than thinking what does the customer need, and then choosing the equipment and then designing the appropriate space for this need; they still get a big room and see how many bits of kit they can fit in it. These facilities have had impressive swimming pools, and tennis courts and studios but the gym space was poorly designed; still almost an afterthought in terms of layout, size and flow. Just the usual depressing regimented rows of machines.

What would Steve Jobs do then?

In another article entitled Think Different in the Apr/May/Jun 2012 Fit Pro business magazine a guy called Derek Barton rightly states

"The health club industry has not figured out how to deal with the fact most people don't want its memberships. Even when people do join, many don't come back after 30 days."

But then in saying what he thinks Apple would do I think he misses the point. Barton thinks that Apple would build fantastic, cool, easy to use gym equipment that would attract people. He confuses the equipment with the product. Yes, Apple do control all aspects of their product from the machines, to the software to the Apple stores they are sold in. But, they don't control the music of the musicians that go on the ipod, and the computers used at Pixar were just a tool so a creative vision of film making could be realised. In the fitness industry, the machines and the equipment are just the tools.

If we followed this idea, then why don't Life Fitness and Technogym open their own gyms?

They already build the machines. And to be honest, if walking along on a treadmill while playing sudoku is your thing then they have done a pretty good job. (And don't get me wrong, some people want to come to the gym and plug in and watch TV while doing 40 minutes of cardio). Current cardio machines have touch screens, and TVs, and games, and ipod docking stations and internet connection. They've ticked all the boxes.

Probably, the main reason that Technogym and Life Fitness don't open their own gyms is that they are not stupid. Operating a health club is low margin business. The current Technogym top of the range treadmill costs over £11,000 off the shelf without discount, even with a 50% discount, that's a £5000 piece of hardware. A large chain gym can have 20-40 treadmills, so spending over £100,000 on treadmills alone is not uncommon. Set up costs are high, and margins are low in this business model.

Room full of treadmills: That's a 100 grands worth of treadmills right there
 And for a while everyone was happy

When the health club expansion first happened everyone happy, the equipment companies were selling warehouses full of machines, the clubs got to fill their big rooms with a cornucopia of machines to dazzle the public with, and the public got to do their 20-30 minutess of steady state aerobic exercise that everyone had told them to do. The clubs got to control the flow of people in their big rooms,, if someone is on a cardio machine for 20 minutes and the another one for 10 minutess and then another, there is a perceived value to the experience because of the length of time in the gym. Whereas no club was ever going to buy 20 latpulldowns or 15 chest press machines, that would be ridiculous. If members only did the weights circuit workout they were recommended they would be in and out in less than 20 minutess, no perceived value; also too much queuing for the resistance machines if that was emphasised. As resistance machines were built along the lines of one machine for one body part. Unless you were a serious weight trainer then it was all about the body part splits.

Cardio machine, fat loss machine, ab machine & conditioning machine for less than £50

But then, the health clubs became unsure of themselves. They weren't get anymore members and some of the big ones closed down or got taken over. And the companies didn't know oif they were giving the public what they wanted or what they needed, but they couldn't change. And the members of the public who had grown up in the health club boom and had always been told that they needed to do cardio, and lots of it, and you needed machines, and resistance machines too. And the disconnect happened, the public wanted health clubs with machines because it had always been so, and the health clubs kept building them. 

Because the health clubs had become confused, they had turned into showrooms for Technogym, Life Fitness, Cybex, Precor and all the others. The instructors were merely custodians, pointing the public to the best machines for their aerobic workout or their chest day.

Strength machine. Unlike a resistance machines that costs £3000, this one can do multiple things, but it takes up a lot less space in the big room, so the room may look a bit bare, but hey, maybe people could run up and down in the room

The machines weren't inherently bad, they were after all just machines, they more or less did what they said they would do, but the cult was over.

The members, in general, weren't getting results. And like many things in the 21st Century the industry started to fragment, and smaller PT gyms opened, and some people were getting results and they didn't have any equipment and some of them didn't even have a room. The old paradigm was starting to falter.

However, in recent years a couple of examples have shown that another paradigm is possible. British Military Fitness and other bootcamps have shown that people are willing to pay to train when in fact you have no equipment and you don't even have a gym space. (see my thoughts on bootcamps here). Zumba, has done the same, the instructors and the public realised that they didn't need to work in a gym or join a gym, all you needed was a big village hall and some music. Overheads are basically zero, and you target a specific market.

Don't try and be all things to all people

Health clubs have tried to be all things to all people, and in essence have failed to do this. Yes, there is a wide price spectrum, but you can write the mission statement for all of them by re-arranging the following words 'fitness, fun, family, service, customer focused, flexible, personal, blah blah', its all generic and doesn't mean anything in reality. In trying to attract everyone, they weren't really sure who they were attracting.

They have to attract as many people as possible, because they've got a problem,  the set up cost is high, running a facility with swimming pools and saunas and steams rooms costs a fortune, and people keep leaving.

I think it was Mark Rippetoe who said this industry doesn't make money. If you open a power-lifting, olympic weight lifting, hard core lifting facility, even in a relatively large town there won't be enough people to support the business. And in a small town it will be you and 10 of your friends lifting weights, while your business leaks money. Rippetoe says, you need that person who comes in and pays there dues every month, may be you don't like the fact that they just sit on a bike or stroll away on a treadmill, but at least they are doing something unlike most people, and they are paying for the business. Large commerical facilities rely on this idea to a much greater extent.

Both LA Fitness and Fitness First have garnered a lot of bad publicity recently in the UK via twitter, print media (see here) and TV because they make it hard for people to break contracts. This moment has been a long time coming, the sales and contract procedures in the fitness industry are so amateurish and poorly thought out I'm surprised it took this long. But the companies need these contracts, because they know most people are going to drop out, they need to compel you to keep paying.

And other sectors don't get the same level of bad publicity for a simple reason, because people perceive they need the product, that 2 year mobile phone contract, it's open to fat and lazy as well as fit and motivated people. Mobile phones, and ipads attract all types of people, and even when people lose their job they still perceive their phone and internet connection as essential.

But there are lots of other products that have to position themselves in the market place. This is why using Apple as a model is mistaken, because in many ways it is an anomaly. All types of social groups, demographics, and income groups are willing to part money for an iphone or ipad. But not all business work like this.

Positioning - Commit to a proposition 100%

All sorts of business have a specific focus, newspapers for example, all aim at specific markets, and newspapers that try to be all things to all people generally fail. Supermarkets, whether it be Asda or Waitrose have specific customers in mind, as do car manufacturers (this doesn't mean that all these business are successful or that they have a quality product).

But the fitness industry, as stated earlier is a bit more generic, a bit less sure of itself. You're just as likely to find a business man in the budget club as you are in David Lloyd.

Much is made of customer service in fitness, but little is done about it. Ritz Calton is always used as an example, because I guess they do have exceptional customer service, which you pay for. But what if your gym is the equivalent of Travel Lodge or Premier Inn, stop trying to be Ritz- Calton when you obviously aren't.

Budget Clubs brought this model to the table. If all you do is go to a room and get on some machines, why pay £80 a month, why not pay £10 month to walk on a treadmill. Or, to take it to its logical conclusions, why not just go for a walk for free outside.

A statistic I recently heard was that 40% of all budget gym users have never used a gym before. Spending £10 a month is a low risk option. As my colleague, Nick, pointed out though, this means 60% of all budget gym users have been to a gym before. For whatever reason the rest of the industry failed them. It wasn't good enough.

'Churn' is common industry term. With few new customers buying the product, most customers are churning between clubs, dropping out, re-joining, dropping out, re-joining.

Health Club Management magazine in a recent issue stated that the most common complaint in the industry was to do with cleanliness. There are two schools of thought on this, either 1) Health clubs really are a health hazard, and people fearing for their lives leave or 2) The member didn't get the results they wanted, needed to get out of a contract, needed to justify why they were leaving and cited cleaning as the reason.

At a recent workshop I was at, the presenter did say something that struck me that most of the industry doesn't do, and that is, have a proposition and then commit to it 100%

Crossfit & budget clubs

Budget clubs have committed to their proposition. And another example is crossfit. Regardless of what you may think about their training methods, they have stuck to their guns and their model. They have thrived on the hardcore image, they have recently garnered features in the British national press. Even things that would be considered to be bad publicity, like the mythical 'Rhabdomyolysis', have been used to create an aura around crossfit and attract people. They haven't tried to be all things to all people.

They found a niche, and now Reebok have jumped on board as well, because crossfit has differentiated itself.

The golden fleece of weight loss

Quite a few people in the industry have been talking about weight loss and how we need to tap into that market. Most people join a health club for weight loss, which the health club normally fails to help them with (normally because as the research shows, for people with a lot of weight to lose, exercise doesn't make much difference, its about what they eat and non exercise energy expenditure in everyday life).

The fitness industry wants to tap into the weight loss market of weight watchers, slimmers world and their ilk, but it still hasn't done it convincingly. The reasons are cultural, as much as they are about the product. I'm sure weight watchers have the same level of churn as health clubs, they just haven't spent £500,000 on a room full of equipment as well. Continuous government campaigns like Change 4 Life, don't seem to have made much of a dent on peoples activity levels or nutritional habits.

The weight loss market is the golden ticket, but the hardest to attract it seems. Could it be that most people are just lazy? Are we wasting our time with it?

GP/ Exercise Referral - a case study

You would think that people who had been referred to exercise by their GP would stick with it, but their drop out rates are the same as everyone else, despite the fact that they are more closely monitored than most other gym members and pay less (Orrow et al, BMJ, 2012).

So even though these people might have high blood pressure, or diabetes or heart disease and they will literally die if they don't start exercising and change their lifestyle, most of them fail to do so. If you can't motivate this group, what chance do you have with the average weight loss client. Now, a lot of these GP referral clients say they can't afford the gym, and as much as I want to believe they are hula-hooping in the back garden with their kids or going for a country hike like a Change 4 Life advert, lets face it, they're probably sitting on their arse eating a pizza.

So could it be time to focus on segments of the population who you can actually affect change with, rather than spending a lot of time and money trying to attract people who will drop out almost as soon as they started. After all, this is a business that has to make money, its not a public service.

Steve Jobs was right- but this is health & fitness - so think different

The fitness industry has been scrambling around trying to please customers. Steve Jobs, didn't believe in market research - 'because customers don't know what they want until we've shown them'. (Of course, Steve Jobs never went to a gym either, he went for a walk instead).

No customer ever asked for an iphone or a kettlebell or a TRX.

We must break the current paradigm, smash it and find a new one that works.

An integrated gym model, where the customer experience flows effortlessly from purchasing the product, to booking their first appointment, to their first entry into the club, their first encounter at reception and their first meeting with a fitness coach. And it should flow spatially once they enter the facility, they should never feel lost or intimidated. The product should make sense to them immediately both in its spatial layout and their experience and the results they will get from it.

The idea of an integrated product is an Apple stalwart. And one that can be applied to the fitness industry. Yes, in computing it does have its drawbacks (and for the record, I don't own any Apple products, but man-alive I want an ipad, damn, that marketing really does work!), but in the fitness business it makes perfect sense. And the final quote from Jobs

"Simplicity is the ultimate sophistication."

In Summary

If you made it this far, well done. This was a lot longer than I expected. If you just skipped from the beginning, these are the key take home points

Integrated gym model

  • product driven, not sales driven
  • build a results based gym
  • transparent pricing
  • make it easier to do business with us
  • commit to a proposition and stick to 100%
  • don't try and be all things to all people
  • customers want experts to do things for them, so they can focus on other things, offer three levels of product 1) program writing 2)small group training 3) personal training
  • have faith in your price and your product
  • stop discounting
  • yes, customers want someone to talk to but they all also want someone who knows what they are talking about
  • its not about the machines
  • its about behaviour change
  • its about coaching
  • use space wisely
  • break the current paradigm
So that's that,  and if anyone from Fit Pro Business or Health Club Management magazine is reading, you can have this for free.

Do I have all the answers? No. But it's a start.

Sarah Lund: You don't need to be a detective to figure this out, so why hasn't any big fitness company?

Steve Jobs by Walter Issacson
Winning by Jack Welch
Fit Pro Business Magazine Apr/May.Jun 2012, Various articles & editorials,
Orrow et al, Effectiveness of physical activity promotion based in primary care, BMJ 2012:344:e1389
Health Club Management Magazine
30 Rock Season 5

No comments:

Post a Comment