jcc 2012 biennial - how the fitness industry is changing and what to do about it

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Key Consumer & Business TrendsHow The Fitness Industry Is Changing And

What JCC’s Can And Should Do About It JCC Bienial 2012 - New Orleans, LA

Bryan K. O’Rourkebryankorourke.com

JCC Biennial 2012

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change across all industries JCC’s Are No Exception To The Change

the change is not cyclical its fundamental

How is the World Changing ?

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Trends = Change

1462nd Business Models =

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What To Do ?

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trends = change1st

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technology

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changing consumers

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globalization

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revolution

134revolution

European Crisis

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technology

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ray kurzweil

16ray kurzweil

17 ray kurzweil

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Kurzweillaw of accelerating

returns

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number of transistors on a chip will double

every two years. “Moore’s Law”

Gordon Moore

1,2,3,4,5,6,7,8,9,10.......

2,4, 8,16, 32, 64 ...........

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technology is progressing much faster than you realize

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fastest adoption everipad $9 billion4th biggest consumer electronic catagory

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5technology trends to watch

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CLOUD COMPUTING

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MOBILITY

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15 billion devices - 201527

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AugmentedReality

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SOCIALIZATION OF THE WEB

4Project Glass Will Revolutionize Virtual Reality

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SOCIALIZATION OF THE WEB

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Gamification

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“Nearly 62 million US internet users, or 27% of the online audience, will play at least one game on a social

network monthly this year, up from 53 million in 2010. Their numbers

will continue to grow”

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digitization of all experiences

not always replacesoften enhances

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including fitness

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consumer trends

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CONSUMER TRENDShttp://www.slideshare.net/Bryankorourke/

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generosity, caring, authenticity2. Human

http://www.slideshare.net/Bryankorourke/

CONSUMER TRENDS

2. Human

Generation G - Insights

“83% of US consumers want

products, services and retailers to support more

causes.”

CONSUMER TRENDS


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3. City Lights


CONSUMER TRENDS

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500 Million Using Health Apps By 2015

73% Consumers7. Know

CONSUMER TRENDS


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Point - Know - Buy7. Know CONSUMER TRENDS


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Largest Generational GroupMillennials CONSUMER TRENDS

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Historical RelevanceMillennials CONSUMER TRENDS

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Largest Generational GroupMillennials CONSUMER TRENDS

brand = self expression | information = thirstyaction = core value | reverberation

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Key Driver Of TrendsMillennials CONSUMER TRENDS


494revolution

what does it mean ?

Globalismnot just in the US

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demographyglobalism & technology

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embrace don’t fear

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we can make a bigger impact

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http://www.abundancethebook.com/

about-the-book/

The Key Is Changing How WE Think

Peter Diamandis

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“A Maasai warrior can now use a cell phone more powerful than anything Ronald Reagan had.”

Peter Diamandis

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we are living in anincreasingly digital culture

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2. Changing Business Models

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Emerging Consumer Factors - Michael SilversteinTreasure Hunt - Inside the Mind of the New Consumer

Companies wil l thrive , S i l vers te in a rgues , by cater ing to the penny-p i n c h i n g i m p u l s e s o f consumers, or by "spanning the poles" and appealing to both the high and low ends while avoiding anything else-there's only "death in the middle."

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Emerging Consumer FactorsHealth club consumer & PRIZM profiles

IHRSA’s completes a nationwide survey of U.S. households. A total of 15,013 individual and 26,487 household surveys were completed to create reliable profiles of members including PRIZM segmentation.

Health Club Consumer Report

PRIZM means “Potential Rating Index for Zip

Marketers”

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Report Includes:

•Trends in Club Membership•Attendance•Activity Participation•Member Profiles•Typical Consumers•Profiles By Club•Profiles By Activity•Club Fees•Cluster Analysis•PRIZM Profiles

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•PRIZM is a geodemographic profiling system developed by Claritas. Each PRIZM divides the U.S. consumer into 14 different groups and 66 different segments. As the classification is household based, we can compare different areas according to the likelihood of joining a health club. For example, the highest indexed PRIZM segment is “Blue Blood Estates,” so we can target “Blue Blood Estates” households within the health club’s immediate vicinity to recruit likely members.

•PRIZM analysis is more valuable than generic demographic data and provides more meaningful insights into membership profiles.

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Emerging Consumer FactorsHealth club consumer PRIZM profiles

2010 Health Club Consumer Report

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Emerging Consumer FactorsShare of Current US Health Club Market

11%

13%

10%

14%11%

7%

33%

Urban Uptown Elite SuburbsAffluentials Landed GentryCountry Comfort MiddleburbsAll Eight Others

6 of 14 SegmentsRepresent 67% of the Market


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Emerging Consumer FactorsShare of current US health club market


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0.1250

0.2500

0.3750

0.5000

Urban Uptown Elite Suburbs Affluentials Landed Gentry Country Comfort Middleburbs All Eight Others

11%

21%

16%

25%23%

42%

25%

Penetration Rates = 17% Overall

Combined 6 of 14 SegmentsRepresent 67% of the Market

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Too expensive

Exercise elsewhere

Feel out of place

No available club

Don't exercise

Too crowded

Don’t know anybody

0 18 35 53 70

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Emerging Consumer Factors“Price” is main objection or “perception of value”


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Emerging Consumer Factors - Existing CustomersReport ID’s 5 key clusters

Predominantly Male:Focus on strength & resistance - 84% Male

Mixed Low Use:59% use club less than 1 time a week - Less affluent25% non-members - Even male female mix

Predominantly 50+:Slightly more female - most affluent - 60% over 50 years of age

Super Avid Hi Spend User:67% female - Highest participation especially group exercise

Female Low Spend:80% female - 67% participate in group exercise

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Emerging Economic FactorsMixed low usage largest share of members

18%

42%

22%

7%

11%

Male StrengthMixed Low Usage50+ GroupSuper Avid High SpendFemale Low Spend

largest group of existing consumersleast affluent and least participative

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Emerging Consumer Factors - Markets MaturingAcquisition focus alone - avoid this space

40% quitin 30 days

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-25000

-12500

0

12500

25000

37500

50000

Total 2007 New 2008 Left 2008 Total 2008

45,570

-11,386

10,268

46,668

24% Left the Industry

Emerging Economic FactorsWhat are customers telling us ?

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Emerging Economic FactorsNational growth has stalled for several years now

Profiles of Success

Stagnant

2009 $19.9 Billion2009 45.3 Million Members

2008 $19.1 Billion2008 45.5 Million Members

Related to economic factorsLimited supply increaseRestricted financial environment

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Emerging Consumer Factors - Michael SilversteinTreasure Hunt - Inside the Mind of the New Consumer

The “New Consumer” Seen in All Industries. Important to Understand “Value”

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Our Digital CultureAlternative fitness options - digital technologies

Consumers are getting accustomed to the“long tail” affect - anytime, anyplace, anywhere.

Estimate 2 million in US utilize some type.

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Emerging Consumer FactorsPrevention - monetizing wellness

The emerging health care mess is creating new customer needsto reduce costs of traditional care via prevention

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Emerging Consumer FactorsConsumer’s don’t trust advertising

The Days of Traditional “Sales” and “Marketing” in Health Clubs is Coming to An End

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Michael SilversteinTreasure Hunt - Market “Bifurcation”

“ I h a v e s e e n t h a t consumers will always trade down and buy the cheapest product in a category if suppliers fail to deliver a stream of innovation and build loyalty based on product superiority.”

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Business Models & Trends - Core EconomicsAverage membership dues flat since 1980

Today = $49.95 1980 = About $40.00

2009 Profiles of Success

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Business Models & Trends - Core EconomicsAverage membership dues fairly flat since 1980

Car Today = $28,400 | Car 1980 = $7,210

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Business Models & Trends - Core EconomicsDevelopment & operating costs nearly quadrupled since 1980

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Business Models & Trends - Core EconomicsROI in the “average” model under pressure

The “average” is feeling most pressurethis is driving “bifurcation trend”

What drives growth in any industry are ROI’sthat sustain growth and attract capital

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Business Models & Trends - Core EconomicsEconomics has driven discounting for certain brands

capacity strategy = asset turnover focus

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Business Models and Trends - Competitive LandscapeBifurcation of the market - Ray Algar Model

http://www.oxygen-consulting.co.uk/

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Prevalent Business Models & Trends - EmergingRay Algar - UK Budget Market


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Business Models and Trends - Competitive LandscapeBifurcation of the market - Ray Algar Model


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Prevalent Business Models & Trends - EmergingBudget competitors

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Prevalent Business Models & Trends - EmergingNew niche trends - engaging personal experience

unlimited $89 - $140 month

“drop-in” fees$17 - $40

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Prevalent Business Models & Trends - EmergingHospitality brands reflect market bifurcation

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Prevalent Business Models & Trends - Emerginghttp://futureoffitnesswhitepaper.ning.com/

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Prevalent Business Models & Trends - EmergingOn line retail continues surge - fitness models follow

"People are just shifting their dollars to the Web," said Sucharita Mulpuru, vice president and principal analyst for Forrester Research Inc. Online retail sales will grow 10% a year for the next five years, accounting for 53% of all U.S. retail sales by 2014, according to Forrester Research.

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Prevalent Business Models & TrendsWellness Model - potential to dwarf extant fitness

•Huge $2.7 Trillion Opportunity

•Health care spending is unsustainable.

•Prevention as a strategic position for employers and ultimately governments is inevitable.

•Key is outcomes and integration.

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Prevalent Business Models & TrendsGrowth - new emerging niches and models

requiring new ways of doing things....

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#3 Evaluate Your Competitive Position

Think Strategically

What are you going to do about it ?

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What are you going to do about it ?

http://www.slideshare.net/Bryankorourke

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Evaluating Your Competitive Position

•SWOT

•Internal - capabilities and resources

•External - market opportunities and threats

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Evaluating Your Competitive PositionConduct a SWOT analysis of your club business

Internal Review:

•Current position

•KPI’S - member execution

•What is your niche?

•What is your technology platform ?

•How are you marketing ?

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Evaluating Your Competitive Position - Internal SWOT What is your niche ? How do you differentiate ?

•Price

•Features

•Competitive abilities

•Wellness Option

94Profiles of Success

Evaluating Your Competitive Position - Internal SWOTCompare numbers to industry figures - benchmark

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Evaluating Your Competitive Position - Internal SWOT What is your technology platform ?

Technology Platform:

•CRM or just billing ?

•Cloud based ?

•Web site integrated ?

•Mobility ?

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Evaluating Your Competitive Position - Internal SWOTTechnology Platform & Customer Experience

A big opportunity is leveraging the strength of tradition into the future

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Evaluating Your Competitive Position - Internal SWOT How do you market ? Social media !

The “NEW” Marketing:

•Social media strategy ?

•What is your spend ?

•Campaign effectiveness ?

•Google Grants !!!!!

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Evaluating Your Competitive PositionConduct a SWOT analysis of your club business

External Review:

•Calculate Demand•Calculate Supply•Evaluate Pricing•Review Existing Members

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Evaluating Your Competitive Position - External SWOTDetermine Demand - www.sitereports.com

Eliminate your “gut” - quantify !

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Evaluating Your Competitive Position - External SWOTMarket assessment drive time - www.sitereports.com

Drive Times

Run 10 minutesMight want to adjust

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Evaluating Your Competitive Position - External SWOTBy utilizing PRIZM you can better estimate demand

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Evaluating Your Competitive Position - External SWOTEstimate Market Demand - Use IHRSA research !

Fictional Trade AreaHouseholds

EstimatedUrban % of HH National % IHRSA % 2009 Households HH DemandU1 - Urban Uptown 6.81% 8.30% 25.10% 7,000 1,757U2 - Midtown Mix 21.37% 4.33% 16.90% 5,000 845U3 - Urban Cores 25.46% 4.96% 7.10% 3,000 213Total Urbans 53.64% 4.96% 17.40% 15,000 2,610

2nd CityC1 - 2nd City Society 6.24% 4.63% 30.10% 15,000 4,515C2 - 2nd City Centers 7.04% 7.85% 11.70% 7,000 819C3 - Micro City Blues 4.16% 6.64% 9.00% 3,000 270Total Second City 17.44% 19.12% 15.59% 25,000 3,898

SuburbsS1 - Elites 2.60% 5.21% 41.70% 8,000 3,336S2 - Affluentials 6.86% 7.71% 23.20% 7,000 1,624S3 - Middleburbs 7.23% 6.15% 20.70% 4,000 828S4 - Inner Suburbs 12.21% 4.53% 8.50% 2,000 170Total Suburbs 28.90% 23.60% 32.76% 21,000 6,880

Total Estimated Market 13,387

Use the IHRSA Consumer Report to calculate estimated demand

This provides you a good estimate for your market potential

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Evaluating Your Competitive Position - External SWOTEstimate Market Supply - Under-serviced ? Change ?

Brand Location Estimated HH Percentage of Trade

Adjusted Trade Estimated Share

24 Hour ABC Drive 2,645 50.00% 1,323 26.06%Anytime Sierra Lane 820 75.00% 615 12.12%Anytime Veterans Blvd 735 50.00% 368 7.24%Snap Fitness Jone Road 640 50.00% 320 6.31%Bally’s Laredo Ave 1,300 50.00% 650 12.81%Jane’s PT Studio MPT 300 100.00% 300 5.91%Your Club Your Club 1,500 100.00% 1,500 29.56%Total Total 5,075

Shop the CompetitionWeb Research

Estimate MembershipsEvaluate Offering

Demand = 13,387Supply = 5,075

GROWTH POTENTIAL !

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Evaluating Your Competitive Position - Internal SWOT Who are your existing members ? PRIZM

U! Urban Uptown

U2 Midtown Mix

U3 Urban Cores

S! Elite Suburbs

S2 Affluentials

S3 Middleburbs

S4 Inner Suburbs

C1 Second City

C2 City Centers

C3 Micro-City Blues

T1 Landed Gentry

T2 Country Comfort

T3 Middle America

T4 Rustic Living

0 125 250 375 500

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Membership Mix by Psychographic Segmentsby uploading household addresses

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#4 Plan & Take Action

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Plan Your Course of Action

•Develop Your Plan

•Resource & Execute

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Plan Your Course of ActionSWOT gives many answers

SWOT Delivers This

If you decide to reposition doing it and executing it is

hardest

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Plan Your Course of Action - Where do you want to be ?What must you add or take away ? Analyze ROI

•Proforma

•Capital

•Realignment

•Expertise

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Plan Your Course of Action R=G - PrahaladOrchestration = Franchise Model

“Executives are constrained not by resources, but by their imagination.”

-CK Prahalad, Ph.D.

There are a large number of experts, products, services and solutions from vendors able to

support and advise you on your fitness business.

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Plan Your Course of Action Seek guidance from experienced professionals

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Recap - What to Do About Change

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Evaluate Your Competitive Position:•Use SWOT approach•Use JCC, RMA, FDD, SEC and other resources to benchmark•Evaluate your current market offering including pricing, features, service•Assess your technology platform - customer facing & integrated•Assess marketing practices - spend, return and the “new” methods•Calculate market demand in trade area using PRIZM•Calculate market supply in trade area•Evaluate current base of membership and changes•Think strategically

Plan & Act:•SWOT generates road map•Conduct in-depth proforma analysis•Prioritize actions - do nothing or reposition•SEEK HELP - JCC, global vendor pool, expertise•Implement and execute

JCC’s Hold Great Promise

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