Happy 2019 fitness colleagues and friends. I am sure you are geared up for a big January this year and wish you the best in executing your 2019 strategies. Since this is the new year you might have been wondering, as you prepared for 2019 and with 2020 only 12 months away, how you can become more competitive in your business. Like many industries, fitness has become more competitive, and to participate successfully in this increasingly competitive landscape fitness business owners must truly understand their business model.
Peter Drucker defined the term “business model” as “assumptions about what a company gets paid for”, that seems simple and part of Drucker’s “theory of the business.” Drucker’s theory was a set of assumptions about what a business will and won’t do, not unlike Michael Porter’s definition of strategy. In addition to what a company is paid for, “these assumptions are about markets. They are about identifying customers and competitors, their values and behavior. They are about technology and its dynamics, about a company’s strengths and weaknesses.” In other words, successful business models are about making money by being competitive with an array of things to consider as underlined above. But are they more than that?
In “Why Business Models Matter” Joan Magretta defines business models, during the dot.com bust in 2002, as “at heart, stories — stories that explain how enterprises work. A good business model answers Peter Drucker’s age-old questions, ‘Who is the customer? And what does the customer value?’ It also answers the fundamental questions every manager and owner must ask: How do we make money in this business? What is the underlying economic logic that explains how we can deliver value to customers at an appropriate cost?”
With so many fitness alternatives available for consumers today, the customer should be the focus as Paul Schaller shared in his recent post Why The Customer Always Matters Most. A lot of wisdom is shared here by Drucker, Porter, and Magretta as well. To break it down every business should i) understand who their customer is first (customer), ii) how they make money (data), and iii) what value they deliver (experience). Today more than ever these three dynamics, customer insights, data, and experiences, interconnect and are key to the success of the most competitive business models today in any industry, let alone in health clubs, fitness studios, and gyms. In the end, the most important thing about great business models is exactly what Paul shared (learn more about Osterwalder and his business model canvas here):
“Customers comprise the heart of any business model. Without customers, no company can survive for long” Alexander Osterwalder
As with a number of industries the health club, fitness studio and gym industry has seen a lot of growth in the past decade. IHRSA reports that from 2008 until 2017 the number of health club consumers has increased 31.50%. That’s a lot of new members out there.
At the same time, studio fitness concepts and budget club concepts have represented the largest share of unit location growth by far with digital solutions surging as well. Now the number of consumers having fitness experiences via digital-only platforms surpasses users of all bricks and mortar locations in the US, exceeding 76 million users in the US alone in 2018, and the same is true in most developed countries. As with retail, we are seeing a greater variety of consumer options that are valuable based on things like convenience, personalization, and ease of commerce. Ask yourself this: how many gifts did you purchase from the Amazon platform this Christmas?
So how do you compete more effectively in 2019 and going forward given these dynamics? Understanding your business model and designing it around the intersection of true insights into your targeted customer members, using data to understand your member customers even better and to hyper-personalize offers, services, and engagement, and creating great services and product experiences relevant to those members is key.
I’ll be writing more about more each of these areas in the coming months and in the interim, you might want to dig into details by referring to these resources and prior articles :