Posted July 12, 2017

Perceived Value and the Fitness Industry

A few days ago, a well-known celebrity trainer, whose methods I’ve discussed HERE, opened a new facility on the Upper East Side in New York City, with monthly memberships around the $900 a month mark. This alone caused a lot of uproar from people on social media, ranging from stating it’s a waste of money to how other trainers are just jealous she’s able to charge that much and have people pay that on a regular basis. [Note: I won’t link to the article here because I don’t want to donate the views and help bump their rankings, but I’m sure you can find info on it if you wanted to look long enough]

Today I wanted to take a bit of a different spin and talk about the perception of value and how something so pricy as a $900 a month membership, to the right person, is a significant deal worth investing in. Part of that comes down to who it is that would use the facility, what they value, and what experiences they would be willing to pay top dollar for to invest that much recurring revenue in a gym membership.

When looking at perceived value, one of the best concepts to understand is what economists call complements versus commodities. Complements are goods or services  with a “negative cross-elasticity of demand,” meaning that as other goods prices decrease, theirs goes up. Commodities are things like the price of a bottle of Diet Coke.  It’s the same product no matter where you go, so the lowest price will usually win. I first came across this concept in the book The Content Trap by Bharat Anad, who discusses things like how some newspaper publishers exploited connections to their content and services to survive the advent of digital media, whereas others did not.

This idea of complements to commodities is never more apparent than in real estate. The commodities of single family, 3 bed 3 bath houses can be significant, but the individual valuable considerations of each house could significantly change the asking price, from the neighborhood they’re in to the type of roofing shingle to what colour the walls are, and even small and almost inconceivable elements like what kind of light bulbs or fixtures. In the automotive industry, a $100,000 Mercedes Benz will get you from point A to point B the same as a $10,000 Mazda, but the difference is not just in the type of leather on the seats, in the values placed on each brand by the consumer.

In the fitness industry, we can see the same disparity of value, from the $10 a month Planet Fitness memberships where you get access to the gym and that’s pretty much it, to full-service medical fitness and nutrition centres that can range in the thousands of dollars each month. Crossfit boxes, which could be considered to have roughly the same offerings of equipment and classes, can vary significantly in monthly membership rates from one facility to another, even within the same area. The same could go for equally experienced and educated trainers, with some struggling to charge clients $30 a session and others pre-booking months worth of time at $500 an hour and being booked solid.

We can see this in somewhat innocuous goods like handbags as well. There are purses that can cost tens of thousands of dollars, and really only serve a couple of purposes: hold a few things, and show the world you have the social status to spend that kind of money on a relatively useless good. These bags are usually made in the same factories and from the same materials as ones that sell for a couple hundred dollars, or even less.

Even the much loved iPhone understands the concepts of complements versus commodities. A phone that only costs about $225 to produce can sell for over $649, a profit margin of 288%, for a device that many tech insiders call inferior to many Android devices, because they can exploit the complements of their apps, music, podcasts, and interconnectivity with other devices. There’s also the social status of pulling those bad boys out of your pocket.

So coming back to the fitness industry, why can there be such a big discrepancy in pricing and how does this effect your workouts, or if you’re a business owner in the fitness industry or a personal trainer (Re: you’re still a business owner), how can you use similar concepts to make your clients or customers happy, all while charging a realistic amount to live a comfortable life?

Step 1: Understand Your Market

Let’s look at Planet Fitness. They’ve gone to great lengths in their marketing and advertising to ensure people understand who they’re looking to attract, but more importantly, point out who they’re NOT looking to attract. Their use of the Lunk Alarm, negatively characterizing bodybuilders, and using wording like “Judgement Free Zone” are all designed to appeal to the individuals who are scared to go to a regular gym for fear of looking silly, being intimidated by larger weightlifters or bodybuilders, and wanting to feel open and accepting to everyone else.

Bodybuilders and people who like deadlifts may not like it, but with revenues exceeding $330 million in 2015, a 22.5% commission income growth, the addition of over 1 million new members and over 200 new locations opened that year alone, I doubt they care.

On a smaller scale, let’s look at a couple of independent facilities with whom I’m good friends with the owners, both very successful, but in very different ways.

Mark Fisher Fitness is a facility in the Hell’s Kitchen neighborhood of Manhattan, and caters to the theatre and broadway performers market. These are people who historically felt comfortable on stage with the bright lights, but who may not have ever felt comfortable in front of a squat rack.

Because the members they’re targeting are possibly hesitant to step into a gym setting for fear of looking silly, the staff at MFF have taken it on themselves to be the ones who look ridiculous, and encourage the members (who they refer to as unicorns and ninjas) to participate with them. It’s not uncommon for a group class instructor to teach the class wearing a man-thong, rock a feather boa, or use very sexually graphic cues to instruct how to perform specific exercises, all in an attempt to disarm the threat of the gym in the eyes of their ninjas. Their tagline “Ridiculous Humans, Serious Fitness” gives an idea of what you’re getting into.



Now while they go above and beyond to be as outlandish and fun as possible for those they’re working with, the team at MFF also overdo it on the continuing education, consistently look for better ways to deliver a higher service, get faster and easier results for their members, and produce the best experience possible.

They’ve focused incredibly well on who their audience actually consists of, and tailor everything they do to helping attract and retain those members.

Another facility is Cressey Sports Performance in Hudson Massachusetts  and now Jupiter Florida. They cater primarily to baseball players, who make up the vast majority of their clientele, and specifically pitchers, who have very unique demands on them due to their sport.

They’ve gone so far as to outfit their facility with a bullpen, pitching performance coach, and dozens of specialty bars to accommodate the throwing arms of their athletes. They also wanted to recreate the clubhouse feel of a baseball diamond by including a lounge area on the gym floor complete with ping pong table, front lounge area, and treatment tables to use for stretching or manual therapy from baseball specialist physical therapists and manual therapists.

In either of these two cases, you won’t find them trying to appeal to everyone, but significantly honing in on the demands and competing interests of their members, all while exploiting all possible complements they can. For instance, at CSP, they have a lot of pro players doing their off season training in there. What better place for a starry eyed high school player to train than next to their idol in the big leagues? At MFF, their proximity to Broadway means they can have easy access to actors and actresses who can get in their training before stepping on stage, in an atmosphere that resembles their other cast events and social gatherings. In both instances, the social elements of the members connecting with each other far outweighs the benefits of the workouts themselves.

If any of these three very different businesses looked to market themselves in terms of the total pounds of free weights they’d purchased, how many feet of turf they had, or what their hours of operation were, they would each go bankrupt trying to sell those concepts, because every single gym has the same things, and when it comes to competing against commodities such as these, the lowest cost will win. Think of that bottle of Diet Coke. It’s the exact same bottle whether I buy it at a drug store, corner store, or big supermarket. If they’re all equal distance from me, the cheaper one wins. That’s a competitive game you don’t want to get sucked into because you will lose.

Step 2: Provide Connections Throughout Your Services

Once you understand who your target market is, how they talk, what’s important to them, and what they’re looking for from you, provide connections between what you offer and what they’re looking for. This could come directly within your services or by finding connections that can help accentuate what you’re actually doing.

It’s not uncommon for fitness facilities to also include nutritional coaching or work with a dietician, or possible supplement sales and meal plan development. It’s also common to have access to physical therapists, massage therapists, or chiropractors in-house as well, or have a referral process in place to help them access these services easily. Some facilities offer child care for parents who would otherwise not be able to access the gym without having a sitter or a family member watch their young children.

Some other beneficial connections would be having a tailor or dry-cleaner available for your clients to get their clothes altered as they lose weight or gain muscle, group forums for members to connect for team workouts or to find people to go on a run with, or high end branded merchandise (gym bags, yoga mats, shoes, jackets, whatever) to help provide some social status for those who carry the items around, while also acting as advertising.

So let’s look at the high end Upper East Side facility and why people would want to pay for that. They likely offer classes catered towards the population in the neighborhood, act as a networking site, provide a social status boost for members who say they train there, and deliver an experience in line with the kind of things those members would respond favourably to (spa-like, high end fixtures, spotlessly clean, etc).

They also get to work with a fitness celebrity, which carries it’s own cachet and social status boost. Don’t knock the concept of people wanting to be next to a celebrity if you don’t realize people will willingly stand in line to pay someone to scribble their name on a piece of paper because they know their name and have seen them do something they liked.

They likely don’t have heavy metal playing, bars clanging, and chalk dust flying everywhere, and that’s by design. While I would fit right in with a place like that, their target market would walk the other way.

The cost is also a big deterrent from many people in the population, making the facility somewhat exclusive, and in New York, having a space that’s somewhat private can be a massive benefit.

Notice we’ve said nothing about the actual workouts performed in any of these environments. Those are entirely commodities in the eyes of the consumer.

The experiences being provided, down to the smallest details and the intangible connections between members, are what can be the biggest selling features in the fitness industry, and one of the largest areas that many don’t realize they’re missing out on at all. Determining those complements and connections and understanding how to exploit them can allow the fitness industry to capture more of the publics’ interest, get more people involved in some type of fitness, and expand their bottom lines. There are plenty of ways to make a meaningful difference in the lives of our clients and members, and it all starts with discovering the connections and complements to help them get the best experience possible.