Friday, 15 July 2011

Lessons from Budget Clubs - Part 1 – Ripping Up the Business Model

Budget clubs, or low-cost gyms as some prefer, are creating a paradigm shift in the leisure industry. Love them or loathe them, there are valuable lessons to be learnt. We’re going to summarise our insights in this series of short articles. Every day is a school day!

For starters, budget clubs didn’t so much re-write the business model as rip it up and start again. Most focus heavily on no contract terms which is a bold move, but proving very successful in some instances. To know that many of your members could leave tomorrow with no tie-in means you need a very solid business plan, huge confidence in your product, and the ability to quickly adapt.

There is interesting debate around previous member experience; whether the model is suited to people who have worked out before, or that no-contract terms are attractive to brand new gym-goers.
Of the budget clubs we work with:
  • 20% of members are NEW to gyms, 
  • 35% are CURRENT or RECENT members at another club and 
  • 45% have been a member of a gym in the PAST*

The next game changer that many budget clubs have made is to reduce the cost of sale. Doing away with the sharp-suited sales guy is one of the most refreshing moves in years. The website does the selling, and sign-up is online – exclusively for some clubs. This has the added benefit of maximising data capture (more of which in part 2). The budget gym product is generally very simple, making it easy for the member to choose. Pay as you go options are rare, but sites like payasyougym are linking up with some budget clubs now to fill this gap and bring more prospects into clubs.

The other difference in the business model is the service offering. Low cost equals low service, right? Not necessarily, but service expectations are clearly set-out as members join. And if expectations are low, they are easy to exceed. This is a better starting position than premium brand gyms with high expectations and broken promises. It is possible to make a difference with only a few staff, especially when you use technology to identify members in need of attention or additional motivation.

Budget clubs have changed the rules on contracts, online joining, and service, and many ‘regular’ clubs are following-suit / catching-up. Others are trying to compete by simply discounting, and probably won’t be around for long. Next time we’ll look at collecting and using member data.

*taken from a sample of more than 20,000 members

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