DIVERSITY: Good Or Bad for Our Industry?

As I look back at the past 30 years of the health club industry, I realize that in the early years of the modern era, there wasn't much diversity. Clubs originally were either racquet-based operations that later added the components of fitness and aerobics or were strict “pumping iron” gyms. But they weren't really diverse. Whichever discipline they drew from, they both practiced much of the same. Later incarnations of fitness facilities may have fluctuated slightly from the norm, but not enough to say that they practiced diversity. It was still more of the same, even if it was a better version of the same.

The Encyclopedia Britannica describes diverse as meaning “differing from one another, unlike, composed of distinct or unlike elements or qualities.” It describes diversity as “the condition of being diverse.” People have asked me if I mean “diversification” rather than “diversity” when I talk about this subject. No, I specifically mean diversity.

In my mind, the first real diversity came with the introduction of the Curves model in 1992. It was the first practice of divergence I had seen since the mid-1970s. Divergence as a marketing model basically means doing less (or in our terms, niching out), as opposed to convergence, which essentially adds elements in an attempt to be something for everybody. More than 90 percent of health clubs today practice some form of convergence, which is essentially a mistake for most.

Following the success of Curves, our industry has seen a rapid movement towards diversity, as evidenced by the arrival of personal training studios, group exercise studios, low-price fitness-only franchising and a host of other models that have developed in the past five years. These are the true niche players, who in reality are practicing diversity. The rest, some 25,000 or more clubs in the United States alone, are really not diverse at all. They have not described themselves through their marketing, systems or practices. It is no wonder that those who have come up with a diverse form of business are prospering greatly while most of the rest are floundering with outdated concepts of fitness delivery and product/services merchandising.

Which brings us to the theme of this column: is diversity good or bad for our industry? Well, it's probably both. Let's consider first the possible negatives:

  • Diversity may lead to price destabilization in sectors of the marketplace, particularly for mid-priced clubs.

  • Diversity may segment market share so dramatically that clubs have a hard time drawing enough members to sustain business at the elemental operational level.

  • Diversity could signal a shift in the way clubs do business, meaning potential elimination of unprofitable departments or programs, leading to unemployment.

On the plus side:

  • Diversity will eventuate the offering of a wider variety of products, services and facilities to the potential fitness customer.

  • Diversity allows operators to concentrate on their core businesses and not dilute their management efforts.

  • Diversity creates a more-recognizable marketed product, in that it generally narrows that which is offered into a real, palatable and identifiable entity to the consumer. (Mike Grondahl, the leader of value-priced Planet Fitness, calls this “addition by subtraction.”)

The most successful diversity we have seen so far are the efforts (and results) of Curves and Planet Fitness. The former has sold more than 8,000 franchises in less than 10 years and furnished our industry with more than 4 million members that we did not previously enjoy. The latter supplies on average more than 6,000 first-year members with a lower operational cost to a franchisee, a model which creates profitability and stability of operation at a much earlier stage than the conventional club model.

The practices of diversity and divergence will take some time to develop to maturity; they usually do in any industry. It is also likely that the majority of clubs will continue to attempt to implement convergence as the method to attract and retain members. Except for the large athletic club types, the not-for-profits and the emerging big-box mid-pricers, I do not think that this strategy will work much longer for thousands of clubs in our business. It dissipates management efforts, it confuses the consumer and it is hard to market, especially in today's highly competitive environments.

Diversity. Good or bad? You decide.

Michael Scott Scudder, owns and operates MSS FitBiz Connection, an online-based club consulting and training service. He can be reached at 505-690-5974 or mss@michaelscottscudder.com.

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