I read an interesting article on Zite last week from Business Insider that highlighted Amazon CEO Jeff Bezos’ advice for anyone running a business. The advice was simple yet profound, even brilliant.
Zite is an Internet news aggregation site that allows you to set your topics and have a daily news magazine on your device based on your preferences. The Mobile App allows you to read more content in a shorter amount of time than would ever be possible through single source media. And, the content is relevant to your interests.
Jeff Bezos’ comments centered on how often we hear the question, “What will be different in ten years?” We spend a lot of time on this crystal ball trend hypothesizing. It caught my attention because I spend a lot of time thinking about trends and predictive analytics. He asserts that a more important question should be, “What will be the same?” In relation to the health club industry, it got me thinking about what might remain the same for health club consumers. It led me to: What won’t change?
His recommendation, once you have identified what you think will still be true, is to focus on those areas.
“When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it,” Bezos says. Read more at http://read.bi/1AHmHxA.
For Amazon, he believes customers will demand lower prices and faster shipments. So, the company spends a lot of time and money on their purchasing power, distribution centers and distribution network. His assertion is that Amazon customers won’t be asking for higher prices and slower delivery (I acknowledge over-simplification here)… I also acknowledge we aren’t in traditional shipping and distribution, but we have our truths that we can make assumptions around versus waning from core strategy to opportunistic operating plans to follow the flavor of the month of what we think may happen. In many cases, we have an argument that some, if not many, consumers will spend more to get exactly what they want and need.
So, what will be the same in our industry? In ten years, what do you think will be the same about your current and future customers?
Things I think may be the same (open for your own definition and debate) are:
1. Behavioral Change will always be hard for people (bad habits, exercise and weight loss), but the desire for positive change will stay steadfast.
2. Members will still require cleanliness, nice facilities and equipment condition to be top notch. They will also want to see the continuation of technological support, including access to their health, fitness, wellness and preventative lifestyle. Medical becoming even more prominent as the continuum of care expands to activity, wellness, prevention and disease management. While this comment may seem predictive, it seems extremely likely to be true based on all that is currently going on.
3. Many consumers will continue to be somewhat “fickle” about wanting new programs and ways to make fitness tolerable if not enjoyable. Others will continue to want stability, routine and the habit patterns they currently enjoy. There are several ways to look at fitness offerings:
A. Lifestyle Product – Upscale, family friendly, third place, community hub, country club without golf, expansive, food and beverage, social, amenity rich; typically with aquatic offering, many with tennis, racquet sports and children’s programming.
B. Convenience Product – Access to equipment and fitness offerings; quick and inexpensive. There may be a bit higher substitution threat with residential, corporate, medical and public space access as this segment has relatively low barriers to entry.
C. Specialty Product – These vary from fitness, to practice, to sport/recreation (examples only to stimulate thoughts). All tend to have higher payroll with fitness expert providers. Provider expertise is paramount in this segment:
- Fitness – High Intensity Interval Training (HIIT) / functional training, boot camps, Barre (Barre is debatable if fitness or practice as this is a crossover activity), indoor cycle, multiple class formats and traditional equipment (cardiovacular and strength).
- Practice – People practice yoga, martial arts, traditional boxing, Pilates, ballet, dance, ballroom, etc. There is a goal of mastery, and while these may be viewed as niche, they have lasted the test of time.
- Sport/Lifestyle – Cycling, marathon training, triathlon training, youth performance training, elite athlete training, etc.
While mastery of fitness and lifestyle in general may be a goal for all, I am simply trying to offer some possible ways to look at what will have longevity versus trend value. More importantly, what sandbox do you want to play in and commit to? You have to align your business model to timeless market needs. Of course, evolution and progression for your business model must be constantly tweaked:
- Many people will pay higher amounts for convenience, maximizing or saving personal time, high caliber programming and engaging experiences. Of course, there is a supply/demand consideration on these models and unpredictability on competitive new offerings. So, if you go to market with a new concept, will it be a 1-3 year play or a permanent evolving offering?
- There will continue to be price and expense pressure for clubs to increase or maintain margin. This will require continuous reinvention. Think full service gas stations with attendants that washed your windows, checked your engine/battery and tires while also pumping your gas. This space was reinvented to reduce consumer costs through expense reduction while creating more locations to serve convenience and repair specialization.
- The threat of substitution (other things people can do to solve their health and fitness challenges beyond health clubs, gyms and studios) will remain high and continue to grow exponentially. We know this to be true and is happening daily now.
- Knowing your consumers (current and future) will be critical. People before, now and in the future want to have an identity to the brands they associate themselves with. How will you be “in relationship” with them and serve them the way they want and need to be served?
- People exercising together creates energy, especially in a high tech world. Human interaction is not going away as we are all social creatures in one way or another. A person cannot completely virtualize himself without unmet needs, but technology and virtualization may be able to augment our future personal delivery.
- The purpose of business will still be to make a profit, and this cannot be underestimated in your analysis and modeling.
- Authenticity, Community, Team Work, Innovation, Versatility and Excellence are timeless.
I can’t help but think about some of the past high-highs and low-lows of other businesses inside and outside of our industry. Those recent and further back:
- Blockbuster. Consumer truths didn’t change. Truths: (1) Desire for movies, (2) Convenience, (3) Speed in getting movies, (4) Lower prices;
- NetFlix, Hulu, Comcast, etc. are still serving these timeless realities.
- High prices and high costs. Long, direct flights. High expense models.
- Southwest used enduring principles and created a new model. Regional Hub and Spoke model, price reductions, expense reductions in delivery with a higher level of perceived service and became one of the most profitable airlines ever. Their case study is worth exploring: Singular plane (early on), etc. Their truth was: (1) People will want to travel conveniently, (2) They will want friendly experiences, and (3) They will want to pay less. They created a new model to deliver on these three items with cost reductions/reinvention.
- Viewed themselves as passenger trains NOT transportation. They required government subsidies, and with the train industry on the brink of collapse, had to re-invent based on permanent truths: Rail cargo, profitable transportation lines, price/cost structure competitive with substitution solutions.
- US Postal service requires government subsidies;
- FedEx knows: (1) Customers will want packages quickly, (2) Old model of calling FedEx for package tracking was inefficient and expensive, and (3) Distribution Network is paramount. They revolutionized package tracking utilizing technology to eliminate call centers and empower customers to track their own packages online. The company saved billions, and customers were happy with their control over tracking. Similar to Southwest, reinvention to reduce costs and enhance customer experience simultaneously.
There are creative ways to reduce costs, decrease/increase pricing and maximize profitability with increased customer service/experience. Those that are revolutionary are thinking outside of the traditional box.
- Body Building Gyms – Rise and Fall – Niche;
- Women’s Only – Rise and Fall – Niche;
- Curves – Rise and Fall – Current Re-creation;
- Accidently “middling” clubs – Rise and Fall – I still believe there is a strategic “middle” market, but it has to be by design in price/labor/expense modeling;
- Bally Total Fitness – Rise and Fall – 5 clubs remain;
- 24 Hour Fitness – Rise and Fall – Current Re-Creation (Sale / New Focus);
- Big Box (“all things to all people”) left underserved market for specialization to emerge (studios, boxing, HIIT, singular/dual offerings). Real estate vacancy rates and provider entrepreneurship also played a significant role;
- Truth of convenient, low-price access led to “High Volume, Low Price” model emergence;
- Weight Loss industry significantly surpasses health club industry with food and supplement sales.
I’m not suggesting there is one successful model that all should emulate. What I am suggesting is to look at what will always be true and consider that lens in how you want to serve consumers while remaining authentic to your beliefs, vision, mission, values and strategy. This leads to the importance of strategic planning, because without that, you will be tempted to waffle, embark upon the next big thing and lose focus on your core competencies based on timeless truths.