|Originally Posted 01/08/10
This question appeared as an email I received around Christmas. The short answer, followed by the long answer later in this blog, is why didn't you react to this about a year or two before they opened in your market. It's a little late to take boxing lessons after somebody in the bar took your girlfriend, kicked your ass and called your mama a bad name:
What do you do when Planet Fitness moves next to you?
They have sold over 6,000 memberships at $10 per month with upgrades of $19 per month.
They killed everyone……. Mike T.
The following is a Seth Godin blog, which partially answers this question. Seth Godin is the guy who wrote Purple Cow, and about a dozen other books. I highly recommend you sign up for his blog and make it part of your business education each week.
In this blog, he talks about what happens when a generalist business gets hurt in the market, by someone delivering the same service, but now doing it cheaper and disrupting the market. This is the same situation that many mainstream fitness centers that are dated and using business plans from the 1990's find themselves in when a low price club, such as Planet Fitness, comes to town. The important thing to learn here is that this blog only applies to generic box clubs and not niche specialists.
What every mass marketer needs to learn from Groucho Marx
Perhaps the most plaintive complaint I hear from organizations goes something like this, "We worked really hard to get very good at xyz. We're well regarded, we're talented and now, all the market cares about is price. How can we get large groups of people to value our craft and buy from us again?"
Apparently, the bulk of your market no longer wants to buy your top of the line furniture, lawn care services, accounting services, tailoring services, consulting... all they want is the cheapest. The masses don't want a better PC laptop. They just want the one with the right specs at the right price. It's not because people are selfish (though they are) or shortsighted (though they are). It's because in this market, right now, they're not listening. They've been seduced into believing that all options are the same, and they're only seeing price. In terms of educating the masses to differentiate yourself, the market is broken.
Fixing this is almost always a losing battle. Just because you're good at something doesn't mean the market cares any longer.
The Marx Brothers were great at vaudeville. Live comedy in a theatre. And then the market for vaudeville was killed by the movies. Groucho didn't complain about this or argue that people should respect the hard work he and his brothers had put in. No, they went into the movies.
Then the market for movies like the Marx Brothers were making dried up. Groucho didn't start trying to fix the market. Instead, he saw a new medium and went there. His TV work was among his best (and certainly most lucrative).
It's extremely difficult to repair the market.
It's a lot easier to find a market that will respect and pay for the work you can do. Technology companies have been running this race for years. Now, all of us must.
If Wal-Mart or some cultural shift has turned what you do into a commodity, don't argue. Find a new place before the competition does. It's not easy or fair, but it's true. You bet your life.
[Please note that nothing I wrote above applies to niche businesses. In fact, exactly the opposite does. You can make a good living selling bespoke PC laptops or doing vaudeville today, even though the mass of the market couldn't care a bit. How he got in my pajamas, I'll never know...]
The market has changed, have you?
If you have been following my blogs for the last year, or if you have ever been in one of our workshops, you know that I have been screaming for years that you have to find a niche in the market and own that niche. Without a clearly defined niche, you are at the mercy of the next low price guy providing the same service at a substantially lower rate.
Planet Fitness (PF) has been around for a while and has appeared in a lot of markets. Some clubs survive nicely against them and often even thrive, while others get pounded into submission is less than a year and then are gone.
PF was created by Mike Grondahl. He has two talented partners, but Mike is the creative force behind the organization. He took an old idea, which was to drop the price, and repackaged it into something new and exciting. He then wrapped a solid marketing concept, the Judgment Free Zone™, around the $10 model.
In other words, he created a niche for his company that competes on price, but is seen by the public as a place where everyone fits in and you can avoid the traditional meatheads and other less desirables that haunt the typical clubs. These bodybuilders and "so into myself” people are the ones, that in many consumers minds, are the people who use mainstream fitness and who intimidate so many regular people who want to work out, but are afraid of hanging out with idiots.
One of Mike's classic quotes, brought out by a vodka or two, is that PF is a niche player and that many different types of clubs could all coexist in the same market, if those club owners weren't so damn stupid. I actually think this quote is rather brilliant and sums up many of the problems we have in mainstream fitness today.
For example, if I run an old style box club, meaning I try to be everything to everyone, have a large workout floor, mediocre locker rooms, about 60 pieces of four-year-old cardio, and the traditional white walled group room with the eight foot mirrors turned sideways and the baskets of crap up against the wall, I deserve to get my ass kicked.
This type of club charges about $39-49 per month, gives the consumer three workouts with a trainer that is totally disinterested, sets the member up on a failure track of doing a circuit with a big stupid workout card and then the club forgets the person even exists. All this club does is rent equipment. The owner puts just enough money into the club to keep it open, is years behind in programming and training, and has a physical plant that is decades out of date.
A fresh PF comes into town and this same guy bitches that the competition is unfair, but in reality, he doesn't really give a crap about his members or he would have been more up-to-date and would have specialized in a very specific niche in his business, such as family or upscale. The ear of the generic box is gone and you either change or you get ran over by someone that is fresh and exciting
The new player with fresh equipment and a clean club, and who is renting newer models of the same treads that the old guy owns, offers a price of $10. The existing owner has to deal with the issue that he is not in the member retention business, has no niche to protect his business and all he really does is sell memberships. Now, however, there is a new club that does everything he does for about a fourth of the cost.
No matter how long you have been in business, or how much money you have invested in your business, you are not entitled to success. If you can't compete as a generalist (see Godin above), then you have to move on, because someone took your market and is doing a better job of it than you are.
Many good clubs compete well against a PF. The ones that are fresh, priced appropriately and are full service do well and can share the market. Where PF gets you is the Darwin thing; only the strongest, and in this case most prepared for battle, survive. If you run a good business based upon seeking a specific niche in the market, you will have a chance. Run a dated box concept from the 90's and kiss your club goodbye.
It is also relevant here to mention the two management styles I mentioned in an earlier blog. About 90% of the owners in this industry are maintenance people, meaning all they do is try to maintain the flow. These owners are happy to hit last year's numbers, hang on to equipment a year too long because it still works, won't reinvest in the club except to keep it open and in essence makes every decision based upon the idea of protecting what they have. These are also the first guys that get destroyed by a new, fresh competitor doing the same thing in the market.
The other 10% are the growth guys. Their mission in life is to take a little risk and just keep pushing. Their clubs are current, they reinvest heavily about every 4-5 years in building a fresh physical plant, their equipment and training is relative to what is happening in the training world, and most importantly, they hire talent instead of settling for young dumb asses who work cheap and just fill slots at the front desk. If they get competition, they seldom hurt, because they have a niche membership and they are the source in that market for that type of club.
There will always be a new, fresh player coming in the market. Before PF and Mike Grondahl, there was the fear of LA Fitness, the fear of 24-Hour, the fear of Gold's, the fear of Bally's and dozens of others. There is always a new hot player, and there will always be a new hot player, in the market. If you want to know how it all turns out, read Darwin, because only the strongest and fittest for survival will survive.