Understanding Your Competitive Marketplace and Why It Matters

Whether you’re planning a new fitness center, repositioning an existing facility or trying to increase membership volume and retention, one question should help guide your organization’s strategic decisions: Do you understand your competitive marketplace?

Many organizations believe they know their facility’s competitive environment because they know the names and locations of nearby competitors, their published monthly dues and perhaps some of their core services. Unfortunately, that level of knowledge rarely provides the insight necessary to make sound, meaningful business decisions.

Successful fitness centers have deep, sustained understandings of their marketplace through competitive intelligence. Much more than simply knowing who else is in the market, competitive intelligence includes:

• Your Marketplace—An understanding of how your market area is configured—who your customers are and where they live and work.
• Your Competition—A definition of who your real competitors are and how the market is changing.

Your Marketplace: More Than Just Geography

Every business operates within a defined marketplace—the area where supply, demand and customer expectations intersect. For fitness facilities, the marketplace extends well beyond its physical boundaries and includes:

• Consumer demographics and lifestyle preferences
• Relevant behaviors and purchase patterns
• Transportation patterns
• The constant shifting of member expectations

Defining Your Primary Market Area

Without a clear definition of your primary market area, meaningful competitive comparisons can become difficult. Many organizations assume they know where their members originate, but the data often tells a different story. Mapping your current members’ zip codes, household locations and drive times helps define your primary market area and provides valuable insight into where demand actually exists for your facility’s business model. Understanding where members originate to reach your physical location provides several strategic benefits:

• Improves site selection decisions
• Identifies underserved neighborhoods
• Drives targeting of marketing communications
• Helps better identify competitive overlap
• Anticipates the entry of future competition
• Enhances the insights delivered in demographic analyses

If you are planning a new fitness facility, the primary market area is traditionally an 8-12 minute drive time from the facility location. While market areas can be somewhat circular, they are most often shaped like a polygon to accommodate local drive conditions and natural barriers.

Research and operational experience consistently demonstrate most fitness center members prefer facilities within a relatively short distance from home, more so than work. So, be careful not to overestimate membership potential by relying too much on attracting employees working in nearby office parks and businesses.

Demographic and Psychographic Picture

Once you identify your primary market area, you can investigate and define the composition of its residents. If your fitness facility is established, compare the characteristics of your current members with those of residents in the area to target surrounding neighborhoods more precisely. Important attributes to analyze include:

• Demographic characteristics
  • Composition: population and number of households, annual growth rate, household composition
  • Profile: gender, age, ethnicity, household income, education, employment
• Psychographic profile: beliefs, opinions, interests, lifestyles, social status, purchase behavior

Third-party resources (for example, chamber of commerce, city and county reports, state and national census data, data acquisition and analysis companies) are available to help provide this detailed information.

Your Competition: Information that Informs Strategic Decisions

A thorough competitive analysis is much more than collecting membership rates and reviewing websites. It becomes a roadmap for strategic planning, rather than a simple comparison exercise. Its purpose is to:

• Reveal opportunities for differentiation
• Better understand customer expectations
• Identify potential saturation or cannibalization of the market area
• Challenge assumptions about your business model

A comprehensive evaluation of potential competitors examines:

• Market coverage/presence
• Facility locations
• Products, programs and services
• Targeted audience demographics
• Customer psychographics
• Brand awareness
• Reputation
• Value to price

Not Every Competitor Looks Like You

One of the biggest mistakes fitness centers make regarding their competition is focusing too much on facilities that resemble their own. In reality, every fitness center competes on two levels:

• Direct competitors provide identical services to the same audience. For example, low-price, 24-hour, primarily self-serve fitness facilities compete directly because their business model satisfies the same consumer need with very similar or identical offerings.
• Indirect competitors offer business models that provide varied services or experiences while competing for the same customer’s time, attention and discretionary spending. For example, a multipurpose health club, boutique fitness studio, public recreation center, HOA fitness center—or even other leisure activities—may all compete for the same individual. Organizations that ignore indirect competition often underestimate the true competitive landscape.

Experience Your Competitors Like a Prospective Member

One of the most revealing exercises in the competitive analysis process is to experience competing facilities as a prospective member. These “mystery shopper” interactions often reveal strengths and weaknesses that pricing sheets and marketing communications alone cannot uncover.

There are two components of this competitor assessment: digital and in-person experiences. The digital experience is especially important because, for many prospective members, it creates the first impression that influences their decision to visit the facility.

The digital experience includes:

• Evaluating their website
• Submitting online inquiries
• Observing how quickly and effectively they communicate
• Reviewing their social media
• Calling with questions—and setting an appointment for an in-person visit

The in-person experience as a prospective member helps define:

• Facility size, amenities, condition and cleanliness
• Staff professionalism, personalities and coverage
• Equipment variety and condition
• Program and services offerings
• Profiles of current members
• Sales approach and philosophy (for example, high-pressure vs. meeting needs)
• Value to price

From Information to Strategy

Market and competitive analyses should never become reports that are reviewed a few times when published and then filed away, never to be referenced again. Instead, they should guide ongoing strategic decision-making. Successful organizations continuously:

• Study the marketplace periodically
• Gather customer feedback
• Conduct mystery shopping of new and existing competitors
• Perform SWOT analyses (Strengths, Weaknesses, Opportunities and Threats)
• Refine the facility’s value proposition
• Invest in improving the customer experience
• Strengthen their digital presence
• Monitor key business performance metrics

Markets evolve. Customer expectations change. And, competitors innovate. So, organizations that continuously evaluate their marketplace are better positioned to adapt and remain competitive.

Final Thoughts

Understanding your competitive marketplace is not a one-time exercise performed before opening a facility. It is an ongoing strategic discipline that informs every major business decision—from facility development to programming, staffing, pricing, marketing and long-term investment.

Organizations that consistently outperform their competition are not necessarily those with the newest buildings or the largest budgets. They understand their market better than anyone else—who their customers and competitors are—and use that knowledge to create innovative and engaging services built on a superior customer experience.

To learn more about Cooper Wellness Strategies, contact David Evans, Vice President of Cooper Wellness Strategies at devans@cooperwellness.com.