How can your fitness business recover from a post-pandemic world?
Updated: Feb 8, 2022
The source of inspiration for this post is this remarkable episode of Masters of Scale, in which Reid Hoffman shares “5 essential moves for post pandemic recovery,” based on the lessons learned by some of the guests that have visited the podcast. These 5 moves are:
Change your mindset from "survive" to "thrive."
Focus on your mission
Double down on key strengths
Prepare your team for the change
Map out the future
Over the past several years, we have been working for one of the leading fitness operators in the Spanish market and, in addition, over the last year or so we have been advising a small personal training boutique (for the sake of this post, we will name the business “HL”) on how to adapt their strategy as well as the tactics that would help them keep the business afloat. This, we believe, gives us a unique perspective on how those essential moves can be applied to the fitness industry, which is the goal of this article.
Defining the business context of fitness brands
Very early in the pandemic, gyms pretty much all across the world had to close their doors to comply with the measures that looked to fight against the COVID 19 pandemic. At that point, under the uncertainty of the situation, fitness business owners looked to react and activated “survival mode.”
In the particular cases we worked with, both businesses reacted in similar fashion:
All customer memberships were frozen immediately.
Employees were temporarily laid-off, under the umbrella of a form of unemployment that the Spanish government enabled to protect businesses from having to incur in layoff expenses that would have driven to (potential) bankruptcy.
Both brands pivoted to offering virtual fitness solutions. The large operator started to offer classes through YouTube. There was a deliberate decision to do so free of charge based on the idea that it was the best way to contribute to the population´s overall well being during the lock downs. Meanwhile, HL adopted Trainerize as its app of choice in order to organize weekly personal training sessions for customers and also started to give them via Zoom. In their case, they did not offer free content but they did make sure they would accommodate demand to anybody looking to hire their services.
Transitioning from a “survive” to “thrive” mindset
There were quite significant differences in the way which HL and the large operator reacted after the lock downs were lifted.
HL quickly embraced a “thrive” mindset. They brought back all employees, personally got in touch with all customers, combined the traditional with the digital business model and opened the brick and mortar facility in compliance with the capacity limits imposed by the authorities. This enabled a “referral effect;” many people were eager to start a new workout routine and once they saw the environment in HL, they did not hesitate to tell others about them.
The result? Today the business has more customers and more employees than when the pandemic started.
The large operator on the other hand, adopted a more “survive” mindset, focused on maintaining cash. It only brought back a very limited number of employees, dropped the digital model once gyms reopened and focused on the short term P&L. This also meant that some areas of their facilities were kept closed as well as some gyms in certain locations (they have several across the country) as there were no guarantees it would be able to cover short term costs in them.
Today the brand is still far from reaching the number of customers it had before the pandemic and the majority of employees have not yet returned.
Now, this is not a critic whatsoever to this large operator. It is simply a description of the state of the business (in that particular moment in time) and one must recognize that it is much more complex to lead a large business than a smaller practice.
Their bet is that controlling expenses to the smallest detail will pay off in the future.
But for us, the lesson is clear:
The road to recovery requires pro-activity and agility.
HL has been able to get up and running much sooner than the large operator. It is a clear example of the advantages small and agile businesses have over “whales” but it all started with facing uncertainty and “moving” towards overcoming the situation rather than “waiting for the storm” to pass.
Focus on the mission of your fitness brand
HL´s mission is to help clients with their rehabilitation & fitness objectives. The relationship is therefore not based on price or convenience. It is based on the trust that they will help customers meet their goals and as such, they do not compromise on “brand.” No promotions were needed to bring customers back, no extra investment in advertising, etc.
What we really appreciated is that when they reached out to all customers, they gave them the option of working out in the gym or keep doing so from home at their own pace. What they did not do is personal training sessions at people's homes, despite having several requests from users to do so. This would have taken resources away from servicing other clients with the level of quality they expected to deliver. As a result, they even lost clients along the way but essentially, they made sure they matched customer needs with their own brand mission.
The large operator faced a bit more complex situation given that there were several segments of customers who purchased their memberships (Families, young people, senior citizens, etc.).
In addition, all those groups had different dynamics. For instance, younger people were eager to return to the gym while older folks had, understandably, more reservations.
This made it more difficult to manage customer expectations but perhaps, looking back and applying the lessons learned in the episode, the brand should have focused on the most profitable segment and pushed relentlessly to maintain it engaged with the business. The reality is that it tried to go after all those different segments simultaneously and as a result, all those efforts ended up being insufficient.
Moreover, having a wider spectrum of consumers makes it more difficult to deliver a good customer experience. If we add that, due to their focus on cutting costs, no customer management campaigns were launched (across any channel), reacquiring those users became much more difficult.
Finally, it is worth noting that during this complex era, it seems that “innovation” has been one of the “buzzwords” of the moment and has distracted brands from their mission. Some fitness business owners have been looking for “the next big thing” but without really knowing if it was something that their customers would value. Matthew Januszek, founder of Escape Fitness Equipment, in this conversation in the Fitness Founders Podcast shares his belief that innovation should be based on the customer. For instance, don´t go "digital" for the sake of it is something that your customer does not want.
This was one of the reasons why several projects we were developing for the large fitness operator were discarded; they did not meet the needs of the customers.
Double down on the key strengths of your business
HL´s key strengths are, essentially, a deep knowledge of the fitness space (in terms of overall fitness knowledge) and customer relationship management. The owner does not describe himself as an ambitious entrepreneur looking to scale his brand or an expert in the industry.
As such, his focus was to keep his brick and mortar gym alive; being able to open it again, make it profitable and deliver value to his customers. Nothing more, nothing less.
This is the same train of thought that Luka Hocevar, founder of Vigor Fitness in Seattle (USA), shared in this fantastic episode of the Business for Unicorns podcast. Despite having thousands of followers on YouTube & social media platforms, his belief is that he can be the best coach he can be in his “brick and mortar” gym, thus the reason why he did not build an online training practice. Similarly, he has not looked for opportunities to create a global brand despite his reputation; his focus is to make his gym the best it can possibly be.
On the other side of the coin, the large operator focused on cash management and EBITDA and all strategic decisions were taken from that lens. This meant pausing launching new services, cutting costs related to customer data software maintenance or delaying the opening of new facilities. Again, their bet was to outlast competition in the long run from a financial perspective and it was simply a strategic decision by the executive team and in fact, it was the same decision other brands of similar size made.
Looking back now, an element that in our opinion could have been handled differently, was the approach towards bringing employees back from temporary unemployment.
One of the main things we have learned during this time is that, at the end of the day, regardless of the size of your business, you need to understand that a gym is perceived by your customers as a “local” brand. People go to their nearby gym, interact with the employees there and share an important piece of their personal lives with them. In our case, we even had reports that a high number of users did not even know the name of the brand, but they new the name of several trainers.
Many customers missed their instructors or personal trainers and it was one of the reasons some either left after an initial return or did not even come back at all.
In a fitness organization, your employees create the brand experience and are the ones keeping customers satisfied, so they may be the most worthwhile investment your business should make.
Preparing teams for change
As we said, HL has been able to grow the team of personal trainers and are actually empowering them to take more control of the business. The owner is delegating some of his more trusted customers to them, he teaches them new skills and workout drills, which improves their technical skills (the product) and even lets them make some business decisions on their own.
In addition, and related to a key point that is made in the Masters of Scale episode, he is fully transparent with them about the state of the business. He was during the lock down and he is now about where he plans to take the brand, who the most profitable customers are, the ones “at risk,” etc.
If the team is to “row” in the same boat as the owner, he must make them aware of where the boat is heading.
In similar fashion, the large operator holds weekly meetings with executives, directors & managers to share information about the state of the business and where it is heading. Obviously, one cannot involve all employees from a large organization in these conversations but it must ensure that relevant information is cascaded down to them.
What are the KPIs of the business at any given moment?
What projects have been put on hold?
What business opportunities are there going forward?
What “employee- related” decisions have to be made?
These were all topics covered during these regular meetings.
Understand that “change” has become a fixed element of any business model. It is not a “variable” anymore. As a leader, you must be transparent on how you plan on facing change, the skills the team needs to face it and lead with example towards new horizons.
Map out the future of your organization
With all these elements in place, HL believes that the personal training business model going forward will be a combination of people working out at home and at the facility so the level of personalization needs to improve. This is also a train of thought that is shared by Simon Belsham, Equinox´s Media President. In this episode of the “Business of Sports” podcast, he comments that given that customers´life are going to change and become more flexible (in terms of working from home or the office), operators need to be ready to meet them whenever and wherever they want to take some time out for fitness, which is why they are fully embracing the omnichannel model.
Along those lines, eMarketer projects that 35% of people in the US will prefer to keep working out at home vs 30% who would rather do it in person. McKinsey seems to agree with this research since they believe that outdoor sports and at home exercise will see an increase in participation even after the pandemic is “over.”
Finally, recognizing that customers are demanding more overall “health & wellness” solutions other than “fitness,” HL is closing partnerships with nutrition and physiotherapy professionals in an effort to provide an enhanced brand experience. In this sense, McKinsey also posted an article describing how brand ecosystems will be the future enabler of successful loyalty programs and provides a basic framework for carrying them out.
On the other hand, the large operator is focusing on international expansion for future growth. As such, they are starting to establish a network of local contacts, we helped them project the potential of a certain number of cities, carried out market research, etc. For them, growth does not come from “innovation,” it does so from “volume” but the key learning is:
Your business decisions must be consistent with whatever you believe the future will look like.
Embracing uncertainty in the future
We are still very early in the road towards stability and as we mentioned before, “uncertainty is the new normal.”.
What should not vary though, is your attitude towards uncertain times as we are confident there is still a huge opportunity for fitness businesses. Mr. Januszek also shared that there is an estimated 80% of the TAM (Total Addressable Market) that is composed of customers who have never set foot in a gym.
As we move towards a new reality and fitness businesses around the world embrace it, our aim is to keep you posted on best practices from fitness brands all over (based on our own experience and examples we learn about). Hopefully, the fitness industry will thrive and recover the path to helping people become healthier and a better version of themselves.