Budget Club Seminar Summary Notes

Dave Stalker, Executive Director, FIA, opened the seminars and gave context to the day, describing the importance of

budget club as ‘They certainly have their place in the market. We must understand and support budget clubs in our

industry wide mission to get more people, more active, more often’.

A representative from Precor, the sponsor, gave an overview of their positioning in terms of quality, service and

technology and how they are adapting their business in response to the budget club model.

The following presentations were made:

"Objective perspective on the low-cost gym sector"- Ray Algar, Oxygen Consulting

• Low cost means selling membership at £20 per month or less

• The 1980s and 1990s saw a shift towards the ‘inconspicuous consumer’ – now an increase of the compassionate

consumer – no frills, value, less indulgent. Consumers want a more efficient way to work, increase of savvy

shopper and ‘it’s cool to be thrifty’

• The ‘low cost’ concept has been around for 10 - 15 years; EasyJet, Ryanair, Primark, Aldi

o Easyjet: “fly for the price of a pair of jeans”

o Aldi: “spend a little, live a lot”

• FitSpace, Bournemouth – UK’s first budget gym, launched in 2006

• Consumer is more connected because of the web. Level of broadband is now high with technology and

infrastructure ready for this new model – consumer can join online, manage bookings and queries online

• Consumers are more networked and can share insights quicker than ever before – proving both an opportunity

and a threat for brands.

• Consumer wants value but not to compromise on service – it’s about managing the supply chain, not

compromising on service

• Once consumers have experienced low cost, they tend not to return

• Biometrics introduced in Holland – scanning fingers and palms = time effective

• Some budget clubs have contracts, other no contracts. If no contracts, no debt collection service needed –

impact on sales staff. No contracts mean consumer can try for a few months then move on

• Budget gym have the ‘affordability factor’ – important in the economic climate. £9.99 or £20.00 a month – Cost

equates to a coffee a muffin for you and a friend!

• Consumer insights:

o “it is almost free!”

o “I have never been to a gym that costs £15 before. I thought all the equipment would be broken”

• McFit – successful budget club. From 2005 to 2009 – 800,000 members and 111 clubs. Target is to break 1

million members by end 2010

“What kind of club are you?” - Mike Hills, The Retention People

• The secret to competing with budget clubs without lowering your fees lie in your retention strategy

• Retention is ‘the proportion of members that stay a given length of time’ – it is a test of CUSTOMER VALUE

• We have poor retention as an industry because of poor value – in recent studies, only 30% of members are still

attending at 3 months. What members tell us when they cancel (e.g. no time, no money) may be very different

to what they actually think (e.g. the gym is dull, the workout you gave me was boring).

• Service clubs have a clear focus on doing something differently to improve retention – how appealing you are to

the members you want to attract and keep. They resource their business to offer EXCEPTIONAL SERVICE

• Service clubs need accurate measurement of service and retention. They need to know:

o Retention rate

o Lifetime value

o Risk rate

• They can then build a retention strategy around this as they:

o Define the problem

o Consider the solutions

o Implement the strategy

o Monitor KPIs

• Increasing the level of interaction with customers consistently drives improved retention.

• Target resource where you need it most –sell and market to high yield customers and identify high risk members

for appropriate intervention.

• Tips:

o Measure retention accurately

o Create a strategy

o Create a real focus on retention

o Market and sell in a way that improves retention.

o Offer contracts that reward commitment

o Never hide behind contracts

o Ensure members receive effective, appropriate inductions

o Identify members at risk of quitting and interact with them regularly.

o Measure success

o Refine, refine, refine

Key points from the panel discussion

Service:

• By providing a contract free gym experience, it allows consumers to “dip in and out” to suit their lifestyles. This

change in product has come about to match the needs of gym goers by changing the product to match the

disposable attitudes consumers now take to buying products.

• The accessibility of budget clubs targets a wider socioeconomic market, spreading across the population.

However, the poorer demographic groups typically are not gym goers and therefore don’t have the experience

of using a gym. This creates the need for some form of service to retain members.

• There is the potential for consumers to have the perception of lower expectations due to a lower cost- they are

aware of what they are buying into although others stated there is no need to compromise and the customer

service element can come from technology based aspects.

• This ‘service’ could come in the form of outsources PT’s/gym instructors, in turn creating career progression

within the industry. Because of the lower cost of membership, it could see consumers choosing to spend a little

more on added extra’s such as personal training.

• However, the lack of staff could potentially affect the membership ‘experience’ and there appears to be a need

for an intervention for retention by expanding on service/add on’s.

• Budget clubs are still in the “honeymoon period” and their success cannot yet be measured due to a lack of

longevity.

Contracts:

• Half the price, double the membership- general consensus.

• There is the desire to have 7000 members but only 1000 users by having a price that goes unnoticed on a direct

debit.

o Need to be flexible in this aspect i.e. does one offer dip in/out with no contract but slightly higher cost

or provide longer commitment for cheaper price.

• Contracts have typically acted as a safety net in the past but there is no greater flexibility- different product,

different perceptions, and different outlook.

Safety

• Health & Safety was a hotly debated topic - there were questions about if the low-cost clubs were 24hr but

didn’t always have staff what would happen if there was an accident?

• PureGym mentioned in the Leeds seminar that they have red help points throughout the club which are

connected to their security company who call 999 no matter how small the emergency, they also have staff who

live within 1 mile of the club and would go to the club in any emergency.

• The safety of free weights were discussed - some gyms have a full set of free weights but they have more

traditional hours of operating so there is always staff on duty. Other low cost gyms who run 24 hours tend to

only have weights that went up to 25 kilos.

Concerns:

• The risk is more within the location of a budget club in regards to rent fee’s, however it was stated that “rent is

not a particularly problematic factor”.

• Currently very hard to find any ‘extracted value’ (negative or positive) about budget clubs on the internet

Conclusions:

• From a peoples perspective the budget club plays on the ‘self determination theory’ whereby providing people

with more control in regards to choice (ie flexibility in contracts, add on PT’s, no pushy sales people) in turn

creates greater intrinsic motivation.

• This form of motivation is more likely to have a greater impact long term, assisting in making budget clubs more

sustainable because of how they are used and leading to more people being more active.

• From a business perspective budget gyms create greater competition, with leading health clubs having to ‘up

their game’ by using clever marketing to promote their facilities in comparison to what the budget clubs are

lacking i.e. group exercise, swimming etc.

• It could also provide scope for clubs to branch out and create their own form of budget club - possibly through

franchising.

• However, the question will be what happens when all of these low cost facilities go head to head- what

differentiates them from one another if price is their main appeal…?

Download presentations at:

http://oxygen-blog.blogspot.com/

http://www.fia.org.uk/diary_dates/events1/event-2.html