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How the fitness industry are moving away from hoping you never show up

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January, with all its New Year’s resolutions, is easily the most important month for gyms.

But faced with increasing competition in the fitness industry, many gyms are moving away from a longstanding but sometimes controversial business practice.

Historically, many fitness clubs would rely on a portion of customers rarely using their memberships while still paying for them.

It’s in the interest of the organization to sell as many subscriptions as possible. You hope that they set it, and forget it.– Robbie Kellman Baxter, author of The Membership Economy

“If you think about the traditional gym model, they have limited stuff, limited equipment, limited space and people are paying whether they use it or not,” said Robbie Kellman Baxter, marketing consultant and author of The Membership Economy.

“So it’s in the interest of the organization to sell as many subscriptions as possible. You hope that they set it, and forget it.”

The gym and the buffet aren’t so different

In other words, running a gym is a lot like holding a buffet. Pasta and bread eaters — those who consume less, or the cheaper items, and cost the business less money — end up subsidizing the folks who hover over the more expensive oyster table.

And just like restaurants, gyms are notoriously expensive to operate. They require a lot of space, a lot of equipment, a lot of staff, and a lot of towels!

 

Add in that gyms are typically open 18 to 24 hours a day and you have a very expensive business model that becomes difficult to sustain if everyone is taking advantage to the maximum extent.

That means if you only use your facility membership a few times a year (or never!), you’re effectively subsidizing the hardcore gym rats, like the people who wear down the rowing machines and use up all the lemongrass-scented shampoo.

Sounds like a plan built on fitness failures, but according to Kellman Baxter this kind of business model is starting to go away.

Disruption hits the gym

Like many other industries, the fitness world is being disrupted.

“There are new entrants that take different approaches,” said Kellman Baxter.

“I talk a lot about Crossfit, which is a kind of fitness franchise. They believe that if people aren’t coming, they don’t get the benefit, and if they don’t get the benefit, they’re going to cancel.”

 

Marketing consultant and author Robbie Kellman Baxter says when services are limited, like at a gym or country club, there’s an incentive for organizations to sign people up — and hope they don’t show up. (Submitted by Robbie Kellman Baxter)

 

Kellman Baxter describes Crossfit clubs as actively encouraging and almost requiring members to come to the gym regularly.

Boutique gyms, including Crossfit, spin, yoga and bootcamp studios have more than doubled in numbers globally from 2013 to 2017.

They’re now the fastest growing category among brick-and-mortar fitness establishments, according to the International Health, Racquet and Sportsclub Association.

“People actually get results which makes them more loyal and it turns them into evangelists who recruit other members,” said Kellman Baxter.

Gyms welcome ‘retain and refer’ model

Some gyms, including Calgary’s Big Sky Fitness and Alberta’s former World Health chain, are welcoming the changing emphasis on building customer loyalty.

That means these gyms actually encourage their members to show up, and will do things like arrange check-in phone calls, organize events, and assign staff to accompany people’s workouts.

A lot of gyms are under pressure as a result of outdated practices.– David Brodmann, GYMVMT

“It’s no longer necessarily just about what’s the closest and cheapest,” said David Brodmann, president of International Fitness Holdings, which re-branded all Spa Lady and World Health gyms under the name GYMVMT.

“A lot of gyms are under pressure as a result of outdated practices,” he said. “We to a large extent welcome this wave of consumer choice and knowledge.”

As part of its recent makeover, GYMVMT “de-bundled” all the various services offered by its 19 locations in Calgary and Edmonton to give customers more flexibility in access and pricing.

Brodmann said the decision to move away from the one-plan-fit-all scheme was a “difficult but necessary” one.

“We took a real, fresh look at how we’re serving the modern consumer and concluded that not everybody needed everything that we were offering,” said Brodmann.

Spending more to sweat more

Similarly, Big Sky president and former Calgary Stampeder Brian Strong says he’s been able to grow his gyms’ membership yearly by doing things competitors might deem counterintuitive which increased costs.

“We arrange things like a snowshoe adventure,” said Strong. “We lead it and we bring all of our members for just the cost of the snowshoes. That’s part of the community part of the club.”

 

Brian Strong is the president and CEO of Big Sky Fitness, a chain of three gyms in Calgary, and says a high membership turnover rate is unsustainable. (Falice Chin/CBC)

 

Unlike most gyms, Big Sky also imposes a limit on membership numbers to ensure they don’t sell more than they can accommodate if more members access the facilities.

“Honestly the people who are here that use our club a lot — the highly active — they are also some of the highest referring because they’re happy,” said Strong.

“And honestly, they are the best ambassadors we have for our business.”


Written and produced by Falice Chin.
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Tesla stock surges as Hertz orders 100,000 electric cars – Aljazeera.com

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  1. Tesla stock surges as Hertz orders 100,000 electric cars  Aljazeera.com
  2. Hertz to buy 100,000 Teslas for its rental fleet by next year  CBC.ca
  3. Tesla soars on Hertz deal  CNBC Television
  4. The Hertz-Tesla Deal Will Help Normalize Electric Cars  Bloomberg
  5. Elon Musk Makes Tesla, Hertz and Bitcoin Memes Go Up  Bloomberg
  6. View Full coverage on Google News



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UBS logs surprise 9% rise in Q3 net profit

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UBS posted a 9% rise in third-quarter net profit on Tuesday, as continued trading helped the world’s largest wealth manager to its best quarterly profit since 2015.

Its third-quarter net profit of $2.279 billion far outpaced a median estimate of $1.596 billion from a poll of 23 analysts compiled by Switzerland’s largest bank.

“Our business momentum, our focus on fueling growth, on disciplined execution and on delivering our full ecosystem to clients – all of this led to another strong quarter across all of our business divisions and regions,” Chief Executive Ralph Hamers said in a statement.

In each of the last four quarters, UBS saw double-digit percent gains in net profit as buoyant markets helped it generate higher earnings off of managing money for the rich.

From July through September, favourable market conditions, and higher lending and trading amongst its wealthy clientele, unexpectedly helped raise earnings over the bumper levels reported in the third quarter of last year.

 

(Reporting by Oliver Hirt and Brenna Hughes Neghaiwi; Editing by Michael Shields and Edwina Gibbs)

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Analysis: Capitol Hill drug pricing reform opponents among the biggest beneficiaries of pharma funds

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Democratic Party lawmakers holding up proposed drug pricing reforms are among the largest beneficiaries of the pharmaceutical industry’s push to stave off price cuts, a Reuters analysis of public lobbying and campaign data shows.

The industry, which traditionally gives more to Republicans, channeled around 60% of donated campaign funds to Democrats this year. It has spent over $177 million on lobbying and campaign donations in 2021.

Nonprofit political action committees (PACs) run by Pfizer Inc and Amgen Inc and the Pharmaceutical Research and Manufacturers of America (PhRMA) were among the biggest donors, according to political spending data from OpenSecrets, formerly the Center for Responsive Politics.

Drugmakers are seeking to block laws that would give the U.S. government authority to negotiate prices for prescription medicines. Current U.S. law bars the government’s Medicare health insurance program from negotiating drug prices directly.

Many of the Democrats opposing an ambitious drug reduction bill proposed in the House of Representatives are among some of the biggest recipients of drug manufacturer lobbying funds.

They include Senators Kyrsten Sinema of Arizona, Robert Menendez of New Jersey, and Representative Scott Peters of California, OpenSecrets data covering industry donations through September of 2021 shows. In all, they have received around $1 million in pharmaceutical and health product industry donations this year.

A spokesperson for Sinema did not respond to a request for comment on the funds she has received but said the Senator supports making drugs as cheap as possible for patients.

Menendez and Peters said the donations did not influence their views. All three said they are opposed to The Lower Drug Costs Now Act, which is sponsored by Democrats in the House of Representatives and also known as H.R.3.

Menendez and Peters have advocated for alternative scaled-back drug pricing reforms that would still allow Medicare to negotiate drug prices but would lead to significantly smaller savings.

Congressman Frank Pallone of New Jersey, who is also one of the top recipients of drugmaker donations, voted in favor of H.R.3.

Sinema, who campaigned in 2018 on cutting drug prices, told the White House she opposes allowing Medicare to negotiate them. She received about $466,000 from the industry in 2021, according to OpenSecrets data.

Peters was the top recipient of pharmaceutical industry funds in the House this year at nearly $99,550, according to OpenSecrets data. A spokesperson said Peters was not influenced by lobbying money and opposed the proposed law to protect pharmaceutical industry jobs and innovation.

Drugmakers say the Democrats’ proposed drug price overhaul would undermine their ability to develop new medicines, an argument they have used whenever price cuts are discussed by politicians regardless of political party.

“Patients face a future with less hope under Congress’ current drug pricing plan,” PhRMA Chief Executive Steve Ubl said in an August statement in reference to the proposed law. PhRMA declined to comment on donating to key Democratic opponents of the bill.

The United States is an outlier as most other developed nations do negotiate drug prices with manufacturers.

Amgen did not immediately respond to requests for comment on its donations and Pfizer declined to comment.

PROSPECTS FOR REFORM

President Joe Biden has vowed to cut medicine costs, in part by allowing the federal government to negotiate drug payments by Medicare, which covers Americans aged 65 and older.

But prospects for major drug pricing reforms have stalled in recent weeks amid opposition from centrist Democrats including Sinema and Peters. Negotiations are ongoing, eight Democratic staffers said.

The lawmakers’ resistance comes as 83% of Americans support allowing Medicare to negotiate medicine costs, according to a Kaiser Family Foundation poll. The United States spends more than twice as much per person on drugs as other wealthy economies, about $1,500, for a total of around $350 billion in 2019.

“Members of Congress don’t always mirror the views of the public and the pharmaceutical industry is a powerful lobbying force,” said Larry Levitt, a health economist at Kaiser.

The healthcare industry is the second largest industry lobbying group in the United States behind the finance sector. It donated more than $600 million to politicians ahead of the 2020 elections.

The pharmaceutical industry has spent hundreds of millions of dollars per year to sway federal and state policy. But current Democratic leadership has the industry concerned major reforms could actually be enacted and is working harder to offer alternatives such as reducing insurance co-pays, one industry source said. “It’s been sort of a mad scramble.”

Corporations in the United States are not permitted to make direct contributions to candidates but can give money through PACs. Most corporate PACs, including Pfizer’s and Amgen’s, are run by company managers and employees.

Democrats and some drug price experts say the Lower Drug Costs Now Act could save U.S. taxpayers and consumers billions annually with relatively minor impact on innovation.

A House Oversight and Reform Committee report showed that top drugmakers have spent around $50 billion more on share buybacks and dividends than research and development between 2016 and 2020.

Lovisa Gustafsson, a healthcare policy analyst at the Commonwealth Fund, a non-profit healthcare advocacy group, said, “There are other ways that we can incentivize innovation, aside from just paying huge margins for pharmaceutical companies.”

 

(Reporting by Ahmed Aboulenein in Washington and Carl O’Donnell in New York; Editing by Caroline Humer and Bill Berkrot)

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