How to Compete Against Discount Clubs

You’ve worked long and hard to get your fitness facility off the ground, and while you’re doing okay in your community, you’ve noticed some of your membership base trickling away. Upon further investigation, you realize that while you’ve had your nose to the grindstone, managing your facility and planning for growth, a discount club has opened up not far from you. Not only that, but a handful of specialty boutique studios have carved out some market share. Where do you fit in, and what can you do to keep your place?

As a mid-sized club (priced between $45 and $65 per month and serving 1,000—2,000 members) or a smaller full-service studio, you have a niche. So do the other options. High-end facilities target fitness enthusiasts who are searching for a lifestyle change in an upscale, unique and remarkable environment with a lot of personalized amenities. In contrast, low-cost fitness clubs target people who simply want access to a place where they can work out on their own time, with no fuss, minimal amenities and a limited overall experience.

Although budget clubs have not had a significant impact on high-end facilities, they have been taking market share away from competitors in the middle. Before budget gyms became popular, mid-sized clubs experienced substantial success because they offered fitness services in a clean and motivating environment (similar to their competitors) at a much lower price than the high-end facilities. Although the amenities did not match up with those offered by high-end competitors, members were willing to forgo such services in order to pay a lower rate.

In reality, however, mid-sized facilities struggled to provide an experience that justified the average monthly rate of $50–$60. Although members were offered an initial fitness evaluation and orientation, it was generic and didn’t address their specific needs, and it came with little or no follow-up. This applied not only to the personal experience but also to group classes. The service was overvalued. Coupled with the lack of investment in new equipment, and possibly a lack of clean facilities and operational excellence, this amounted to basic service at a premium rate.
This created an opportunity for discount clubs, which saw that mid-sized fitness facilities were failing to offer their members a fitness experience that matched the membership fee. Discount clubs offered a comparable experience at a much lower price. Finding no difference in value, people fled to the cheaper options.

If you run or own a mid-sized fitness facility, or an even smaller one, you need to stay viable and regain market share from budget clubs and boutiques. The following strategies may help.

Create an Effective Brand Identity

Many general managers, owners and operators respond to competition with a knee-jerk reaction: They lower their prices. This is destined to fail. It only communicates that the product offerings and services were overpriced all along. Members will resent this, and it will equate their fitness experience to the one available at a discount club (a club that—adding insult to injury—features newer equipment and facilities). Do not lower your prices! Instead, create an effective brand strategy that will differentiate your business.

Determine your target market. Who makes up your core clientele? Include people who are interested in a fitness center that provides a highly personalized experience in a clean, welcoming, motivating and friendly environment. Although it seems simple, many facilities skip this step.

Establish a mission statement. You need to reinforce your facility’s values. The mission statement is your identity, and it defines your product, setting you apart. An effective mission statement focuses on your strengths over the competition’s weaknesses. For example, “ABC Fitness provides a highly personalized and remarkable experience in a fun, welcoming and motivational environment. In your quest to achieve goals, ABC offers an alternative to large, impersonal clubs!” Everything—your logo, your interaction with members, your day-to-day operations and your offerings—stems from your mission statement.

Differentiate your facility. Most budget clubs provide their members hardly any service. I once visited a health club where the tour was self-guided. Once I finished the tour, I was instructed to sit down in front of a computer, review the various membership options and join if I felt so inclined. At some budget facilities, members pay to access the showers! At others, the classes are virtual because the business model cannot sustain a full fitness staff. This means there’s no one there on-site to guide members through a safe and effective class.

Instead of the above, capitalize on this bare-bones mentality by offering more personalization. For example, always greet members by their names. Train staff to interact with clients on the floor to ensure they’re making progress, and to bond with them. Extend this to the class setting by encouraging instructors to inspire participants and be invested in each individual’s success.

Develop standard operation procedures. It is critical that all staff members know the brand inside and out. Toward that goal, it’s imperative that you write down and systematize standard operating procedures—and that each team member reads and executes them on a consistent basis. This will ensure that the brand and the mission statement are preserved.

Invest in marketing. The best way to communicate to your members and leads is to use various marketing mediums effectively. Direct marketing and social media are still viable tools for reaching a larger market. A strong referral campaign is also a valuable tool that many clubs have abandoned, so incentivize your members to bring in a friend or family member! This will not only increase your membership base; it will also boost retention efforts because you’re building a community of like-minded people.

The Boutique Factor

It’s not just discount fitness facilities that threaten to put you out of business. Independent fitness boutiques that specialize in a particular format are also a threat. Across North America, many fitness professionals have abandoned the general facility environment and have opened studios that concentrate on one fitness area. It is quite evident that yoga, indoor cycling, Pilates and CrossFit® boutiques have increased significantly in the past 5–10 years. These facilities are popular because people are drawn to a business that caters to their pet workout rather than offering a full menu of classes. This model appeals to consumers who are tired of paying full price when they want to take only yoga or cycling classes.

These facilities also provide a one-on-one experience. Even in a class environment, members get personal attention because the class sizes are usually more manageable. This may mean it’s time for you to revisit your membership model. Creating multiple mutually exclusive experiences under the same umbrella is key in today’s evolving fitness industry. It’s as if you’re running multiple businesses under one roof.

Here’s an example of how this model might work in a more general fitness facility. Change to a base membership that gives access to the strength and cardio equipment, but charge an extra fee for classes, small-group training, workshops and seasonal challenges.

Create a Strong Community

Member loyalty depends on creating an environment that emphasizes a sense of belonging and community. In 2008, I became the general manager of a 6,000-square-foot fitness facility that was losing a substantial amount of money. Competition in the area was fierce. I was competing against high-end fitness clubs, as well as facilities that were charging as little as $1 per day. But rather than decreasing my monthly dues, I increased them to $90. I created a brand that offered a highly personalized fitness experience in a fun, motivating and welcoming environment. I hired people who were personable and outgoing, and I emphasized the importance of greeting all members by name. This was a key factor in turning things around—toward profitability—within the first 12 months. Members stayed because we had successfully created a genuine bond with them—something the discount clubs couldn’t offer.

Meet the challenge of discount fitness facilities with integrity and professional grit instead of copying their cut-rate route. Focus on your members’ needs, and package your services in a way that no discount can touch.