Executive Summary:
The Gym Group is a fast growing, leading provider of high-quality low-cost gyms, with 165 gyms open nationwide holding over 796,000 members (The Gym, 2019). They aim to provide affordable access to exercise facilities and expert help to everyone wanting to improve their wellbeing, whatever their starting point, whatever their destination (The Gym, 2019). The following market plan showcases a detailed strategy that the business should implement to increase their consumer retention which is seen as a key issue for gym membership services. High consumer retention rates would contribute to the businesses growth through increased revenue and brand loyalty.
A suitable strategy to increase consumer retention is to introduce a competition scheme that runs within the current membership, focusing on keeping members on the right track to achieve their set fitness goals. In this scheme, members make an appointment with a member of staff and set realistic targets to achieve at the end of a 3-month period; if goals are met, they will be put in for a prize draw to win a basket of fitness-related goods. Every month members will receive a free ticket to use the FitQuest machine already placed in all gyms. This is a ‘fitness measurement’ machine which provides a full body composition analysis so allows members to track their progress (Gatenby, 2018). Individuals can use these results alongside the incentive to win the prizes to motivate themselves to visit the gym more often, turning it into a habit and ultimately allowing the brand to transition from a service to a lifestyle change that consumers will want to implement into their daily lives.
The use of prize draws in this manner is further supported by recent discussions on their effectiveness in enhancing consumer engagement and loyalty (Prize-Draw.com, 2024).
Introduction:
This marketing plan will analyse and develop a marketing strategy that The Gym could use to increase their consumer retention. It will include an analysis of the current situation of the company in the market and amongst key competitors, the objectives the company wants to achieve and the possible strategies that can be implemented to achieve the company goals. Finally, discussing the implementation of the marketing activity and how the company can ensure goal progress and identify any possible threats or opportunities in the external market.
Situational Analysis:
Company Analysis:
The Gym operates in the health and fitness industry, more specifically amongst the low-cost health club market where it is the second largest budget gym in the UK (Goldsmith, 2017) with an estimated market share of 24% within just 10 years of starting up (The Gym, 2019). They plan to open 15 to 20 gyms per year to fill the gap in the market for budget gyms, a sector that is expected to grow 20% by 2020 (Goldsmith, 2017) and since the UK gym market value is currently at £5 billion, there is significant headroom for growth (The Gym, 2019). Their half year report, at the end of June 2019, shows that in 2019 they saw an increase of 26.9% in their revenues to £74.0 million from £58.3 million in 2018. They also opened 8 new gyms in 2019 and membership numbers increased by 10.6% to 796,000 in 2019 from 720,000 in 2018 (The Gym, 2019). The Gym were able to progress well in their revenues and customer reach as they focused on catering to those with busier lifestyles and those with little gym experience. Therefore, their target market was individuals that would be unwilling to pay large sums for membership: 34% of their members had never been to a gym and 25% of their gyms are located in the most inactive parts of the UK (Gordon, 2017). They targeted these people by opening budget gyms mainly within catchment sizes of greater than 60,000 population (The Gym, 2019) by situating them in ex-retail sites focusing on areas where there was a larger immobile workforce, such as around offices, and high consumer traffic, like shopping centres, to further increase their consumer reach and make the gym a more easily accessible option (Denton, 2019). The Gym focuses on providing customers with what they use most and not extras that are not seen as necessary (Gordon, 2017), this is how they keep their costs low and are able to pass this onto consumers. Low prices appeal to students, individuals on low incomes, new gym-goers and those with busier lifestyles who know they may not be able to visit as often so it allows them to penetrate the fitness market through this gap.
Market Analysis
The Gym operates in a highly competitive industry surrounded by other businesses that work to attract a similar customer base. There has been a growing demand for budget gyms which is why there are so many competitors. Reports show the number of low-cost gyms could doubly by 2026 (Terry, 2019); this allows for a continued strong growth in the industry therefore growth in our business.
PESTLE:
The business environment can be assessed by looking at the PESTLE marketing analysis tool.
SWOT:
The strategic analysis can be done by conducting a SWOT analysis. This allows us to assess internal strengths and weaknesses and external opportunities and threats.
Competitor Analysis
Porters 5 Forces:
1. Threat of entry:
This market is already so saturated so if another company decides to enter it may become difficult for businesses to operate as they did and for The Gym to reach their target market effectively and to retain members by keeping them engaged in their business. More companies joining the low-cost gym market may cause current businesses in this industry to implement competitive pricing on their services to attract and retain members.
2. Bargaining power of suppliers:
The Gym have had one supplier for their gym equipment since 2008, Matrix, (Phillips, 2014) so there could be an aspect of customer-supplier loyalty. However, Matrix is a powerful supplier and also supplies to other competitors in the market so can use their bargaining power to decrease the margins The Gym can earn in the market.
3. Bargaining power of buyers:
There are many similar businesses in this market selling a similar service at similar prices so it is harder to attract customers, especially those who are already loyal to a competing business. Switching costs are low and substitutes are available so customers have the upper hand as they can shift from one service to another. The Gym is running on a price sensitive market so has to compete constantly on basis of price to attract and retain existing customers.
4. Threat of substitutes:
Switching costs are low and competitors are offering a similar service so certain competing factors could influence customers to switch gyms. This may affect consumer retention as they may like the service The Gym provides but enjoy the incentives of another business. Indirect competition from ‘at-home gym equipment’ could also be a threat; a one-off payment for equipment such as resistance bands, dumbbells could mean the target market (individuals with busier lifestyles) may prefer to workout at home instead of paying a monthly fee as it may be cheaper and more convenient.
5. Rivalry amongst existing competitors:
As shown in figure 1, two of The Gyms biggest competitors are PureGym and énergie Fitness. They provide an identical service at similar prices, however, PureGym and The Gym are open 24 hours 7 days a week whereas, énergie Fitness are not. PureGym and The Gym also have a ‘ladies only’ section incorporated into most of their gyms (100+ sites) whereas, énergie Fitness have opened up a very limited number ‘women only gyms’ across the UK meaning in comparison to their competitors they have less of a consumer reach towards the female demographic as not all their sites cater to women (EFFW, 2019). Taking all this into consideration we can conclude that PureGym is a direct competitor and the biggest potential threat. As figure 2 shows, PureGym is the current market leader in this
industry, followed closely by The Gym causing them to have some rivalry which is based on the pricing of their services which drives down prices and this competition does take toll on overall long term profitability of the businesses. They target the same demographic of customers: those looking for cheap membership due to less disposable income, inexperience or a busier lifestyle.
Objectives:
- Increase consumer retention as on average nearly 50% of gym members cancel their membership each year (Fricker, 2017). Introducing a quarterly competition scheme to track progress may incentivise members to stay.
- Promote this new scheme through the app, website and social media. Can collaborate with fitness influencers to promote the scheme to an audience that values their opinions. This will increase consumer reach therefore potential customers.
Strategy:
Segmentation:
The Gyms target market consists of a range of demographics with different lifestyles and of various ages as shown in figure 3. The graph shows men and women spend equivalent time at the gym so they are both in the target market. The age group found to spend most time at the gym are millennials who work out on average an hour more than both 31-40 year old and 41-51 year olds. These individuals may go in groups with friends to socialize or may see health and fitness as a priority at this position in life. The potential customers can be aged from 13-75 years old and follow the lifestyle of a student, a full-time employee or just someone with less disposable income who is looking for a cheaper gym service without extra facilities such as saunas and pools
Targeting:
The scheme should be available for everyone but mainly targeted at those aged between 18-32 years old; they have the time and energy to be active gym members. This segment consists of those in education or starting new careers, they may not be completely stable in life yet so have less disposable income which is why a low-cost gym would be attractive to them and they are more likely to retain their membership if affordable. This age group is quite tech savvy so through the usage and growth of social media, where a certain body type may be portrayed as desirable, they will want to work out to get their dream body.
Positioning:
Positioning The Gym in this market and promoting this scheme to their current members and potential consumers will allow for a unique stance in the market as most competitors may have ran a competition scheme short term (around a month) but none have implemented it within a long term marketing strategy to increase retention rates over time. Consumers will associate The Gym brand with running an ongoing competition which will provide an incentive to either join or stay.
Branding:
The objective is to increase consumer retention and consumer reach by promoting the new competition scheme. Using social media fitness influencers to promote the scheme can build strong brand awareness as it is a form of advertising to an audience who values their opinions and share similar interests. The Gym could announce a hashtag for every gym site (e.g. #TheGymChallengeSlough) which can be used across social media platforms for members to share progress stories/pictures/prizes throughout the scheme which further contributes to the excitement and intrigues potential customers to wanting to find out more. These strategies will hopefully drive traffic to The Gyms social media pages where they can find workout videos made by personal trainers at The Gym to educate the public. In these videos the personal trainers will be wearing The Gym branded t-shirts and exercising at The Gym so when shared The Gym brand will gain more exposure and associated with connecting to members through helpful videos and making exercise fun through competitions.
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