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Health Clubs Are Definitely Not Shopping Marts

I read with interest my friend John Agoglia's June article, “What's in Your Cart?,” which was a summary of the magazine's Purchasing Power Survey. I must say that the article alternatively amused me, confused me and left me with the persistent thought: “What were they thinking?”

John wrote about small clubs' shopping lists for 2005 and 2006. While plenty of clubs plan to buy equipment and accessories, what interested me was that out of 21 major purchase categories, only one — computer software — even remotely related to investment in management expertise (of course, I don't know if the survey offered choices such as consulting services, sales systems or retention programs).

Here's what amused me: in the 30th year of “modern fitness facilities,” owners are still placing emphasis on equipment and amenities. That's like saying that if you purchase a new refrigeration unit, it will increase sales in your restaurant.

Here's what confused me: why are owners (especially small, independent owners — the most competitive segment of the fitness industry today) busy making sure they are just like everybody else? If that's the case, why not get together once a year, buy all the same stuff, divvy it up and get volume discounts?

My persistent thought is: “What are they (you) thinking?” Are you thinking? Or are you just reacting? Why would you build and re-build the identical model that no longer works like it used to (evidenced by our retention statistics) in a national marketplace that is seeing massive entry of new clubs every month? Why offer the same old-same old in an environment crying out for difference? It just doesn't make sense unless you are trying to drive people to the low-priced end of the market or the high-priced specialized segment. And I don't think that's what you are trying to do — are you?

Let's approach this from some common perspectives:

  • People don't come to clubs for the equipment alone. Granted, a tired, ill-equipped facility won't last long, but equipment is just a means to an end — healthier people — and not the end itself.

  • A dollar invested in training and education will repay itself three, four, five or 10 times over. (When's the last time a treadmill taught you anything you could use to increase your revenues?)

  • If equipment and amenities are so important, why has our national-attrition ratio hovered at 40 percent for the last 15 years? Most people don't cancel memberships because of lack of equipment or poor facilities; they quit because of lack of personal attention.

  • In the “middle of the market,” which makes up 75 percent of facilities, clubs pretty much look alike, are equipped alike, offer similar classes and on and on. Often, just the location differs. Why not just advertise: “We're just like the club around the corner. Our paint job and location are different , but otherwise, we're about the same. Come feel unspecial with us rather than with our competitors.”

Fitness, which started out many years ago as an experiential business, has unquestionably become a commoditized business. Joseph Pine and James Gilmore wrote a must-read book titled, The Experience Economy (Harvard Business School Press, Boston, MA 1999). One of their sub-chapters, “You Are What You Charge For,” read: “If a fitness center were truly in the transformation business…it wouldn't charge (solely) via membership fees or by the amount of time the members spend on machines. Rather, it would charge for meeting the health and well-being aspirations of its members. If the aspirations weren't met within a fixed period of time, the fitness center…would be paid less, on some sliding scale commensurate with the progress achieved.”

They went on to describe the “echelons of customer value.” If you charge for stuff (equipment and classes), then you are in the commodity business. (I assert that more than 90 percent of all health clubs charge for stuff, thus we are a commoditized industry.) If you charge for the activities you execute, then you are in the service business. (I believe that 5 percent of clubs today are in the service business.) If you charge for the time customers spend with you, then you are in the experience business. (I can count on one hand the number of clubs in the experience business.) If you charge for the demonstrated outcome the customer achieves, then and only then are you in the transformation business. (A couple hundred personal trainers nationally may qualify as transformers.)

So how do we address this? Stay tuned for answers in my future columns.

Michael Scott Scudder is a 30-year veteran of the fitness industry. He is a personal business trainer operating Fitness Focus, a consulting company that offers private workshops on pertinent fitness business matters. Questions and comments are welcomed by Michael at 505-690-5974 or

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