The Fitness industry – the genius idea of getting people to pay for pain
I have long been fascinated by the economics of fitness clubs not least because a study of their business is infinitely less demanding than the daunting prospect of actually getting on a treadmill or worse handing over folding notes to someone standing next to the treadmill so they can yell at you and demand that you go faster, use your upper body more or whatever it is that these people, apparently called trainers, like to yell.
Clearly I am not alone in this fascination because a group of investors recently shelled out US$4 billion to buy the US-based Lifetime Fitness gym chain. This sum makes it America’s biggest leveraged transaction so far this year.
In some ways this business seems to be a license to print money because relatively little investment is required and because the fitness business works on an upfront subscription model, it gives these companies lots of cash in hand.
And it gets better because a high percentage of those supplying this cash subsequently drop out of gym usage for reasons that are not hard to fathom; primarily revolving around the familiar idea that physical exercise can always be deferred for another day.
Yet there are few things more likely to increase a person’s self esteem, and possibly increase their esteem in the eyes of others, than the declaration of a determination to lead a healthier lifestyle and get fit.
It is no coincidence that gyms and fitness centres experience a surge of new business following the Christmas and New Year festivities when substantial amounts of food are consumed and less than healthy amounts of alcohol are glugged down. A quick look at a bulging waistline suggests that SOMETHING MUST BE DONE.
However that determination has a habit of fading even though it may produce a spell of cleaner living and sweat-inducing exercise. At this point the gym owners may worry about subscription renewals but can philosophically sit back safe in the knowledge that a new season of over indulgence will be followed by another surge of membership applications.
This business, in other words, is one that relies on good intentions and moments when customers are persuaded that they have to do something they really do not like doing.
Other businesses experience something of the kind but seldom to this extent. I notice, for example in my business, that after a big eating season, such as Chinese New Year, there is a period when healthier and vegetarian dishes sell better than usual, however old eating habits quickly resume.
What also does not change is the gap between what people say they want and what they end up doing. Most people understand this but not the denizens of the bureaucracy who routinely spend their time bothering citizens with questions related to healthy living.
To this end they devise questionnaires asking whether people are interested in, say, a low fat, cholesterol reduced diet and get the dutiful reply that they think this is a very good thing and worth a try.
These answers are given because few people are brave enough to boldly announce that they don’t give a dam what they eat and could not care less how many calories surge through a Big Mac.
The bureaucrats then beaver off and produce reports showing that there is a public yearning for healthy eating. They are not wholly wrong because overtime people do acquire a better of appreciation of a healthier diet but meanwhile they detach that knowledge from their patterns of consumption.
It is one thing to modify your diet and quite another to sign up for a gym that charges good money for you to do what you would prefer not to do. The genius of the fitness industry is its success in getting people to pay for pain. And it goes further because this industry markets itself as a leisure industry that offers the prospect of enjoyment.
I am scratching my head trying to think of another business that does this. Having recently paid a lot for a mildly unpleasant health check-up, I suppose this could come into the paying-for-something-unpleasant category but health checks are unlikely to be undertaken on a daily or weekly basis and there is no pretence of enjoyment, it is purely a precautionary measure.
Given the genius of the fitness club business model it might be imagined that they are all profitable but, especially in Hong Kong, these clubs suffer a high rate of failure so maybe, after all, the market for fitness is not that vast and it has to cope with fickle customers, constantly moving their patronage to the newest kid on the block.
Or maybe some people have actually got smart and discovered that it doesn’t cost a cent to go jogging or do some press-ups.