Marketing startegies
jka
MAR.docx
OUTLINE
I. Introduction
According to the Bureau of Economic Analysis, Planet Fitness ranks number 6 in revenue in the club industry as of 2018. Unfortunately, the Covid-19 has hit hard on the industry as well as Planet Fitness. Going through the pandemic, the company has to face a threat of reduced market share due to changes in behavior of a significant proportion of its customers. Even though Planet Fitness is still one of market leaders, it is essential for the firm’s long term growth to reposition.
II. The pandemic impact on PF
Planet Fitness witnessed the overwhelming impact of the pandemic right in its next quarter of operation. Its revenue plummeted from $181 million for the same period in 2019 down to approximately $40 million. (source) Even though the company had some recovery, at the end of 2020 it still suffered from revenue 40 percent and operating income 74 percent lower than 2019. (source)
In addition to loss in revenue, Planet Fitness’s fund for national advertisement contributed by franchise is also severely damaged by a large-scale of store closures. The closures themselves also significantly hurt the company’s strategic advantage of accessibility. In order to attract casual gym goers that make up the majority of the market, Planet Fitness has been expanding its competitive advantage to 2000 stores across the country (source), making it extremely accessible for their customers in the inner city. Such accessibility is critical for recovery.
Unfortunately, Planet Fitness’ business model relies too much on franchisees. As of 2018, Planet Fitness has 1666 franchised stores and only 76 corporate-owned stores. The franchise stores with less resources are more prone to closure, which is the most vulnerable point for the corporate’s accessibility. Planet Fitness does not publish a report of its permanent closures, but 24 Hour Fitness, a competitor whose 2019 revenue is twice higher than Planet Fitness’s, has permanently closed 100 stores before filing bankruptcy. Based on that, one can tell the company’s scale of closure is significant, given the industry’s high fixed costs.
However, reduced accessibility is only an element contributing to the real threat for Planet Fitness, market loss. A survey by TD Ameritrade found that 59 percent of American say they have no plan of getting back to the gym, and 56 percent of them have found a “more affordable” way to live a healthier lifestyle with exercise thanks to the pandemic. The switch in customer behavior occurs not only in choice of location but also in perception of fitness. More and more people enjoy home workout and mental fitness with yoga classes, which favors companies like MindBody but hurt those like Planet Fitness whose target casual gymers. Such a segment is more likely to switch to other options, making the company even more vulnerable.
III. How Planet Fitness should be repositioned (in general)
The very first thing for Planet Fitness to do is joining the digital market. The industry might be back to normal or a huge part of it might permanently shift to online, but the company has to maintain a strong customer base for both scenarios. For the time to come, Planet Fitness needs to reposition to be highly recognizable for virtual workout with a decent growth in users and memberships. At the same time, the company must come up with strategies to convert home gymers back to physical stores for higher profit margin.
IV. Product
1. Online products description
In order to maintain and extend the customer base, Planet Fitness needs a set of digital services. A must-have is online workout lessons. The company should launch its own app offering those lessons for current members as well as non-member users. The content should be easy as the company’s philosophy is judgement-free. If lessons are undoable for users, they will suffer from tough feelings similar to those caused by dedicated gymers.
Another value of Planet Fitness that needs to be included in online lessons in the sense of community. Physical stores are built as fun and enjoyable places where connections among customers are encouraged. Therefore, virtual workout sessions should have show attendants live, allowing them to communicate. This not only boosts motivation but also serves as a channel of customer feedback.
The online lessons should be delivered in a variety of options, including pre-recorded and live streaming at certain time frames. However, the challenge is the mix of different levels in a class. Many customers find certain lessons too simple and unnecessary to rely on instructors, which negatively impacts their commitment, while it is impossible for the company to serve streaming for all levels, not to mention cost driving. Therefore, Planet Fitness should focus live lessons on the majority of its members. The rest of the customer base can be served by pre-recorded content.
Virtual lessons should not create a bumpy experience for users. During the delivery of more complex exercises, it can be hard for users to do what is in the instructions and look at the device at the same time, thus having to replay over and over. Such minor inconveniences when accumulated can discourage trial users from joining memberships.
The system of brick-and-mortar stores brings Planet Fitness a wide range of advantages of locations, equipment and atmosphere, which are lost when it comes to the boundless virtual market. It is highly challenging for the company to differentiate its digital services among a great number of alternatives.
Pros
2. Cons
3. Suggestions:
a. No extra facilities
b. Multi-level exercises but focus on simple lessons
c. Create a community atmosphere
d.
V. Pricing - gabby
1. Remain low
2. Membership for equipment discounts
3. Free trial for non membership users with limited services
4.
VI. Promotion
1. New image:
2. Advertisement
3. Discounts:
a. Bringing guests
b. Pizza vouchers
4.
VII. Place - gabby
Inner cities
VIII. Recovery evaluation
1. Pandemic control
2. Customer characteristics
3. Competitors
IX. Conclusion
REFERENCES
Everything about PF
2000th store
https://www.planetfitness.com/newsroom/press-release/planet-fitness-reaches-2000th-store-milestone
PF ranking in the club industry
https://www.clubindustry.com/awards-rankings/club-industry-s-top-100-health-clubs-2019
PF’s statement of operation
https://finance.yahoo.com/quote/PLNT/financials/
PF marketing plan
https://amberbemis.files.wordpress.com/2011/04/business371-marketingplan.pdf
Pandemic changing fitness industry + PF online solutions
https://www.arkansasonline.com/news/2021/jan/24/pandemic-changing-fitness-industry/
PF response to the pandemic
How PF and other companies responded
PF online class experience
1. Name of company and product you will be presenting
Company: Planet Fitness
Service: Fitness
2. Your reasoning as to why this product/service needs to be repositioned
Fitness is one of the industries that has been severely impacted by the pandemic. Planet Fitness’ business model and target market has turned its strengths into weaknesses under the influence of the environmental change caused by the pandemic. Store closures greatly impact the company’s strategy of ubiquity and growth based on franchises. Planet Fitness is also prone to losing customers due to its targeting of those who focus on health and wellness, thus are more concerned about going to the gym. They also are mostly casual gym goers, whose workout routines are not complex and thus easy to be done by home equipment. The company’s necessary responses to Covid-19 also undermines the value of Black Card membership that many services are limited, such as bringing guests, availability of equipment, etc. All of these factors significantly contribute to membership cancellation as well as Planet Fitness’s deep drop in revenue.
Recently the company’s revenue has been recovering. However, they might suffer from a huge loss in market share in the long run due to changes in customer behavior. Surveys show a significant number of customers that do not have the intention to go back to the gym. Many of them have become extra defensive against health risks while others completely switching to at-home options. Unfortunately, such a cash cow market hits Planet Fitness hard at the company’s dependence on franchises to gain market share. As of 2018, Planet Fitness has 1666 franchised stores, while only 76 corporate-owned stores, which are more prone to closure. The store structure gives them a slower rate of recovery and boosts their competitors, especially businesses offering at-home workout services.
Planet Fitness’s marketing strategy covers a wide range of customers, fueling its growth but also fully exposing it to the current industry crisis. It is, therefore, necessary for the company to reposition with 3 options: extending to another segment or focusing on a sub-segment to make up for a loss due to changes in customer behavior, repositioning the whole brand in a way that minimize the impact of the pandemic on customer behavior, and repositioning the whole brand in accordance with emerging trends.
3. What questions need to be answered to validate your reasoning?
- How much has the company been losing in revenue?
- How does the pandemic change customers’ workout preferences in the long run?
- How will Planet Fitness’s market share be impacted if no repositioning is brought about?
4. What topics you plan to research in order to validate your reasoning
- Planet’s fitness operation history (changes in market share, revenue, income and prediction for the future)
- Planet Fitness current marketing strategy
- 3 closest competitors to the company in terms of market share and recovery plans
- Customers’ behavior influenced by what is happening and expectations regarding the pandemic
5. What types of sources do you plan to use to conduct your research
- Planet Fitness and its competitors’ reports
- Industry reports
- Review sites
- Business articles and analysis
6. Your hypothesis for the type of repositioning that needs to happen (If X happens, then Y will happen)
In order for Planet Fitness to survive the pandemic and regain customer support, they should focus on the competition in the at-home section, which mainly contributes to the company’s loss in market share. The goal is to create a perception that Planet Fitness is a knowledgeable friend that helps customers bring the gym to anywhere they want. In addition to providing key values that customers would benefit from a store, the company also needs to play an important role in creating an excellent at-home workout experience. If successful, Planet Fitness can not only minimize market share loss but also clear their path to a potential market niche of $5 billion worth.
7. How you will validate this hypothesis
The hypothesis is based on multiple assumptions. First, at-home workout is the segment with the most potential growth. Second, the new target customers if too different from the traditional ones will undermine Planet Fitness’s philosophy and strengths. For example, the presence of well fit and avid gym goers might be a threat to the Judgement Free Zone. Finally, service development should utilize health value. Accordingly, extra facilities such as bars will not be a strong value contributor but cost driver. More facilities mean more space needed, which will be likely to drive the company locations to the outer city where people are more likely to have at-home workout.
QUICK NOTES
Equinox vs PF
Sharing the digital-only membership revenue with franchisees
24 hour fitness and Town Sports International have filed bankruptcy
