In 1993, Continental Airlines launched an awfully expensive $140 million mistake.
Continental Lite was developed to counter the rise of smaller, low-cost start-up carriers. Management ditched the meals and first-class service, increased departure frequency, lowered fares and shortened turnaround time at the gate.
But Continental had a bigger dogfight than it had planned for. Continental remained a full-service airline on other routes, used travel agents, had a mixed fleet of planes, offered baggage check-in and had seat assignments. On the other hand, another low-cost carrier, Southwest Airlines, was built around fast turnarounds, no assigned seats or premium classes of service, short-haul flights, simple locations to get in and out, and a small-town family feel within its team.
Southwest Airlines was selling one brand, but Continental was selling three brands:
- Lite
- Premium international service
- Traditional long-haul domestic flights
The result was confusion for Continental, as it tried to be all things to all people.
Continental's experience applies to the fitness industry in that trying to do one thing well is difficult enough. Trying to do three things well is nearly impossible.
Small studios have a unique position within the communities they serve. Studios are so valued that they have attracted imitation by larger big box club owners, just like Southwest Airlines inspired imitation. However, big box club operators, like management at Continental, often are blinded by profits over actual people.
Too often, large club operators think that they have an efficient model down within their larger club and all they have to do is redo a 5,000- to 15,000-square-foot space into a studio, offer all the bells-and-whistles, and they will be successful. And since big clubs are successful at attracting large groups of members to sign up, their operators often think success is as simple as repeating this for the small studio market.
But are large clubs truly successful in helping members achieve their goals? It’s easy to lock clients into long-term contracts that are hard to get out of, but it takes a different business model to truly create and care for a community of individuals looking to live a fit and healthy life.
When big box club operators create studios within their walls or open separate studio brands, they begin competing in two vastly different markets. If they did not get their big box brand right in the first place, how will they get the studio brand right?
Sound strategy is often undermined by misguided views of competition and the desire to increase profits rather than meeting the needs of people. Adding the physical space for small group training within a big club is not enough to compete with studios. The mentality of the management and staff at big box clubs needs to change, too. The focus needs to be less on profits and more on meeting the needs of each member.
Big box club operators would be smart to define their competitive advantage and focus on that rather than trying to piece together a collection of parts from different gym models in the hope that it will make their brand fit into smaller markets.
Not everyone wants to belong to a studio, so room exists for bigger club operators who are more focused on helping members become healthier and live longer lives rather than just on profits. Profits will then follow.
What do you think? Can large clubs be successful with a studio model?