Marketing Plan for Fernwood Fitness Centre - Case Study Example

Marketing Plan Part A for Fernwood Fitness Centre Student: Professor: Course: Date of Submission: 1 Introduction This marketing plan aims to asses the current market situation in the Australian fitness industry in relation to Fernwood Fitness Centre positioning in the market. The Australian fitness industry is highly fragmented with very many players offering less differentiated products. To understand the external environment facing Fernwood, the plan will critically analyse the immediate environment impacting on Fernwood fitness centre as a business. Additionally, the plan will analyse the level of competition facing Fernwood. Fernwood’s SWOT analysis will reveal the competitive advantage Fernwood has over its major competitors. Finally the plan will identify the target market for Fernwood’s with a view of developing an appropriate marketing mix strategy to satisfy the target market and deal effectively with competition. 2 Objectives of the Marketing Plan This marketing plan is designed to help Fernwood fitness centre achieve the following objectives as part of its strategic orientation to. Register 5,000 more members by the end of the year 2015 through aggressive membership drive. Increase the number of fitness classes from 3068 classes per week to 4200 by the end of the year 2015. Increase uptake of Fernwood’s health retreats by 25% by the end of the year 2015. 3 Major Marketing issues Due to unpredictable environmental factors, a marketing plan will not always encounter marketing challenges in implementation. The following marketing issues should be addressed for successful implementation of Fernwood’s marketing plan. Positioning the health retreat as a wellness product and not an expensive weekend outing package Due to high cost of advertising in the mainstream media, Fernwood may not effectively communicate its wide array of product offering to the target market. Successful integration of marketing communication in different media may be a challenge to marketers if an effective team is not put in place by Fernwood. Coordination of marketing efforts ensures greater overall success. 4 Current Industry situation According to an industry report, aerobics, fitness and workout are the second most popular physical recreational activity after walking (Fitness Australia, 2012). More than four million Australians regularly participate in fitness industry activities. Participation is set to increase rapidly to more than 7 million Australians by the year 2020 (Market Line, 2014). There have been some notable trends in the market including expansion of small private businesses. Niche marketing is also emerging as a popular trend in the market. Women’s circuit training is a new and growing trend in the fitness industry (Fitness Australia, 2012). In the year 2013, gyms, health and fitness clubs in Australia grew by 2.1%. The Australian fitness industry is valued at $1.2 billion (Fitness Australia, 2012). 83% of income to the industry is derived from membership fees (Market Line, 2014). The market is highly fragmented with an increasing number of small businesses which are offering stiff competition to big players. Leading fitness players such as Jetts have only 178 centres in the whole of Australia (Fitness Australia, 2012). This is a relatively small market share considering there are more than 2,560 fitness centres in Australia (Fitness Australia, 2012). As a result, buyer power is greatly enhanced. However, established players such as Jetts fitness, Pink fitness and Fernwood have the advantage of strong brand salience. The performance of the market is expected to decelerate with a compounded aggregate of 2% for the five year period leading to 2018 (Market Line, 2014). Due to presence of many players and low entry barriers in the industry, buyer power is very high. This lowers the attractiveness of the industry in the long-run. Players in the industry offer fairly similar facilities at the fitness centres. Differentiation can only be achieved through product bundling and augmentation. Women-only is also an emerging differentiating factor in the market. Fernwood has established itself as a leading women-only fitness centre (Market Line, 2014). Fernwood has been established its niche market in women’s fitness since 1989 (Fernwood, 2014). Fitness services providers may need to focus on long-term club membership to reduce buyer power in the market. 5 Fernwood background Fernwood was established in 1989 to provide health and fitness solutions to women in Australia. Since then, Fernwood has become a leading brand in the Australian fitness industry. In 2008 Fernwood was named joint winner of BRW's Most Successful Private Business with a turnover of more than $100 million. As of 2013, Fernwood was the largest women-only fitness organization in Australia with 89 per cent unprompted recalls of its brand name. Fernwood has more than 68,000 members under its fitness and health programmes (Fernwood, 2014). Fernwood has employed the franchise model since 1994 to help it expand operations all over Australia. Fernwood has a nationwide presence in Australia with most of the Fernwood centres being franchised outfits (Fernwood, 2014). Franchising as a business model helps an organization to expand exponentially as franchise holders contribute the initial capital and take care of local problems effectively (Mellahi, Demirbag, & Danis, 2010). Fernwood offers personal training services, functional fit training program and food coaching. Apart from the core product offering, Fernwood has introduced a range of products to differentiate its positioning in the market. The non-core products include childcare services and health retreats. Fernwood has recently introduced Zumba dancing classes to attract and retain members to its fitness programs (Fernwood, 2014). 6 Environmental Factors 6.1 Technology Fitness and health industries are rapidly adopting technological advancement in areas such as computing and Smartphone applications to improve the quality of service delivery and customer experience in their facilities (Strohrmann, Gravenhorst, Latkovic & Tröster, 2012). According to Fritz, Huang, Murphy & Zimmermann (2014), Wearable technology is a fairly new trend in the fitness industry. However, this technology is set to revolutionize the level of interaction between humans and technology devices in relation to health and fitness. Major technology players such as Samsung and Google are leading the rest in developing high-tech devices including wrist watches and glasses. Apple’s iWatch and Samsung’s Gear are examples of wearable watches that exercisers can use to track their activity levels, calorie intake and provide more fitness data (Apple Inc., 2014). Wearable technology can be synchronized with Smartphone devices and internet applications (Strohmann et al, 2012).  Fernwood fitness centre will have to consider different ways of integrating wearable technology use as a strategic tool. Fitness and health monitoring technology continues to improve. Fitness centres will in the near future have integrated monitoring machines that can issue comprehensive body reports on weight, Body-Mass Index, muscle and fat in seconds (Fritz et al, 2014). This and more advancements will definitely change service delivery and customer experience in the industry. Early adopters of technology always have an advantage over laggards and late adopters. Fernwood should adopt emerging technology early to reap the benefits of early adopters such as high initial profitability. 6.2 Political The commonwealth of Australia is a relatively peaceful territory. The commonwealth government and respective regional governments are functional democracies focused on promoting capitalism and job creation (Deloitte, 2013). Fernwood and any other player in the fitness industry can be guaranteed of a stable political environment and political goodwill from the government. The Australian government has given positive indication of its changing focus to preventive health. The Australian government established the National Preventative Health Taskforce in 2008 as part of its plans to lower lifestyle diseases burden on the health system. Increasing physical activity among Australians is a key strategy by the government in establishing the National Preventative Health Taskforce (Preventative Health Taskforce, 2014). It is very likely that the health care system and the fitness industry in Australia will cooperate at the highest level and receive crucial government support to further their objectives. The fitness industry will indeed continue to grow due the positive involvement of the Australian government (Market Line, 2014). 6.3 Legal The World Bank ranks Australia at position 11 in its ease-of-doing-business list out of 189 other countries. It means that the regulatory framework in Australia is strongly anchored on supporting growth and development of businesses (World Bank, 2014). Apart from this positive macro level factor, fitness players in Australia have their own association which represents the interests of the fitness players (Fitness Australia, 2012). As fitness centres and gyms continue expanding, there will be need for a strong regulatory framework to protect consumer interests. The Australian population is aging fast meaning the fitness industry will in the next 20 years be very much connected to the health and nutrition sectors. This will help aging Australians cope with old age fitness problems better. However, the fitness industry will experience strict regulation and facility audits to maintain high standards of service delivery (Fitness Australia, 2012). Fernwood has adopted the franchising model to expand it business in Australia (Fernwood, 2014). While this might be a good expansion strategy, it is important to note that franchises can present challenges and legal issues in relation to contract terms. The fast-food industry in Australia has been particularly affected by contract breaches prompting the Australian government to introduce amendments to the franchising law in 2014 (Smart Company, 2014). The new legislation improves transparency and fairness in franchising contracts. Fernwood must familiarize itself with the changes that take effect from January 2015 to avoid costly fines in case of unintended contract breach. Insurance of employees and clients is emerging as a major issue in Australia’s fitness industry. Gyms and fitness centres will be required to guarantee safety to client s and employees in their premises. Additionally, fitness players must plan for appropriate compensation in case of injuries to clients and employees (Market Line, 2014). Fernwood management should be ready to comply with the regulatory requirements in future to avoid loss of legal battles and consumer indifference. 6.4 Social Australian fitness industry experienced an increased membership of Australians between the ages of 45 and 54. This trend is set to continue due to an aging Australian population. Fitness and exercise have been widely recommended as inhibitors of early onset of diseases associated with old age such as diabetes (Fitness Australia, 2012). Fitness centres must develop appropriate strategies to cater for the growing market that is Australia’s aging population. Females in Canberra lead the demand for fitness programs at 55% as compared to men’s 45% (Fitness Australia, 2012). This presents a positive outlook for Fernwood which focuses on women as its niche market. Increasingly, Australians are becoming aware of the positive contribution of health and fitness programs to their wellness. This is partly due to the government’s promotional campaigns geared towards convincing Australians to take up healthy living programs. In addition, there is increased public awareness that exercise can reduce susceptibility to lifestyle diseases such obesity and heart problems (Liese, Ma, Maahs & Trilk, 2013). These positive social trends will make the fitness and health industry in Australia more attractive to new entrants (Fitness Australia, 2012). Going forward, players such as Fernwood should be prepared to face stiff competition from new entrants in the industry. 6.5 Economic Australia’s economy is relatively stable with a GDP of $US 1,508 billion according to the World Bank data of the year 2013 (World Bank, 2014). The economy is set to grow at a compounded rate of 4.2% until the year 2016 (Market Line, 2014). This means Australians will have more disposable income to spend in health and fitness programs. Areas with higher average income have proved viable fitness and health target markets as there was an 80% participation rate in such areas. Areas with low-income households recorded a minimal rate of participation at 45% (Fitness Australia, 2012). Fernwood may consider renewed efforts in expanding to high income households’ areas. Alternatively, affordable membership packages may be an effective strategy to take advantage of the low income quintile of the population. 7 Competitor analysis The fitness industry in Australia is highly fragmented with more than 2550 players offering slightly differentiated services (Fitness Australia, 2012). Some of the major competitors for Fernwood are: Club pink, Jetts fitness and Contour Express. Jetts caters for both men and women. Jetts operates low-cost gyms and fitness centres that are open for 24 hours every day. Jetts does not offer lock-in contracts to clients as a way of enticing clients that prefer having control over their contracts (Market Line, 2014). Jetts is also in the franchising business. Jetts has two centres in Canberra (Jetts Manuka, Jetts Tuggeranong) (Jetts Fitness, 2014). Contour express is a women-only fitness centre chain that operates through a franchise model. Contour offers a variety of facilities at its centres. Contours fitness has a range of workout programs including cardiovascular and weight training (Contours Express Fitness, 2014). Contour is a direct competitor to Fernwood as both companies target the same market segment. Club pink is a dedicated women-only health and fitness club. It operates two pink clubs in Canberra (Pink Club Belconnen and Pink Club Tuggeranong) (Club Pink, 2014). 8 Competitive advantage of Fernwood Fernwood has managed to grow its market share and revenue from more than 68,000 registered members despite the presence of stiff competition in the market (Fernwood, 2014). This success can be attributed to the competitiveness of Fernwood in the Australian fitness industry. 8.1 Fernwood strengths Fernwood has been offering health and fitness programs to women since the year 1989. Fernwood is a pioneer in the women-only fitness segment. This makes Fernwood brand salience to be higher as compared to new players in the market. As of 2013, Fernwood was the largest women-only fitness organization in Australia with 89 per cent unprompted recalls of its brand name (Fernwood, 2014). A strong brand ensures Fernwood continues to attract new members to its programs and at the same time enjoy stable revenue flow from existing loyal clients. Fernwood has considerable experience in the fitness industry particularly in franchising centres all over Australia. This franchising experience means Fernwood is in a better position to understand the critical details of franchising agreements and strategy. Such experience enables Fernwood to expand its operations into high-value markets. Fernwood has also diversified into offering health retreat and Zumba programs that are becoming popular with its clients (Fernwood, 2014). This diversified portfolio absorbs income shocks from the fitness industry which is experiencing influx of global players and new domestic start-ups. 8.2 Fernwood’s weaknesses Fernwood’s main strategic orientation is offering women-only fitness services. This may become a weakness as more players focus on women-only segment as a niche market. Eventually the niche market will become flooded with competitors becoming unattractive. Fernwood may need to consider diversifying into offering mixed-gender programs separately to avoid losses due to competition. 8.3 Opportunities Fernwood may take advantage of the youthful population of Australia between the ages of 24-35. Young Australians have become increasingly concerned with their health and fitness due to government healthy-living promotions. However, to attract this group into health and fitness centres, Fernwood will have to integrate digital media as part of its promotional and marketing campaigns. Additionally, Fernwood may consider entertainment technology such as wearable technology and virtual training classes. 8.4 Threats There is stiff competition in the market particularly from strong players such as pink club and Jetts. Jetts is offering low-cost programs without lock-in contract terms (Market Line, 2014). Fernwood will need to evaluate and review its positioning in the market in relation to this threat. 9 Target market The target market for this plan can be segmented as follows: 9.1 Demographically Gender Fernwood will continue focusing on women as its primary target market. 63% of Australians who attend fitness programs are women (Fitness Australia, 2012). Age Women between the ages of 20 to 54 years, this is a financially stable group with health and fitness needs that can be met by Fernwood. Socio-economic Fernwood will mainly target Australians in high-income metropolitan areas. This market segment has more disposable income and participation rates in fitness programs. The segment will ensure a stable revenue stream for Fernwood. 9.2 Geographically Australia and New Zealand comprise the main source of clients for Fernwood fitness and health programs. Metropolitan areas provide 91% of fitness and health clients for the fitness industry in Australia (Fitness Australia, 2012). References Apple Inc., 2014. Apple - Apple Watch. Retrieved October 8, 2014, from Apple : https://www.apple.com/watch/ Club Pink., 2014. Welcome to Club Pink® - the boutique women's health club. Available at: http://www.clubpink.com.au/, 2014, from Club Pink.[Accessed October 8 2014] Contours Express Fitness., 2014. Contours Women's Only Fitness gyms and studios. available at: Contours: http://contours.net.au/go/forwomen [Accessed October 8, 2014] Deloitte., 2013. Deloitte Motor Industry Report: Australian Industry Overview. Deloitte. Fernwood., 2014. About Us - Fernwood Women’s Gyms Australia. Available at: http://www.fernwoodfitness.com.au/about-us/ [Accessed October 8, 2014] Fitness Australia., 2012. The Australian Fitness Industry Report. Canberra: Fitness Australia. Fritz, T., Huang, E. M., Murphy, G. C., & Zimmermann, T., 2014. Persuasive technology in the real world: a study of long-term use of activity sensing devices for fitness. In Proceedings of the 32nd annual ACM conference on Human factors in computing systems (pp. 487-496). ACM. Jetts Fitness., 2014. Jetts Fitness Australia | Jetts 24 Hour Fitness Gyms, Fitness Clubs. Availavble at: http://www.jetts.com.au/ [Accessed October 8, 2014] Liese, A. D., Ma, X., Maahs, D. M., & Trilk, J. L., 2013. Physical activity, sedentary behaviors, physical fitness, and their relation to health outcomes in youth with type 1 and type 2 diabetes: A review of the epidemiologic literature. Journal of Sport and Health Science, 2(1), pp.21-38. Market Line., 2014. Gyms, Health & Fitness Clubs in Australia. Canberra: Market Line. Mellahi, K., Demirbag, M., & Danis, W., 2010. Marketing strategies of MNCs from emerging markets: internationalisation and market entry mode. International Marketing Review , 27 (3). Preventative Health Taskforce., 2014. Preventative Health Taskforce - National Preventative Health Strategy. Available at: Pereventative Health Taskforce: http://www.preventativehealth.org.au/internet/preventativehealth/publishing.nsf/Content/national-preventative-health-strategy-1lp [Accessed October 8, 2014] Smart Company. 2014 SmartCompany - Government unveils sweeping changes to franchising law: Your guide to the changes. July 16. Available at: http://www.smartcompany.com.au/legal/41357-government-unveils-sweeping-changes-to-franchising-law-your-guide-to-the-changes.html# [Accessed October 8, 2014] Strohrmann, C., Gravenhorst, F., Latkovic, S., & Tröster, G., 2012. Development of an Android application to estimate a runner’s mechanical work in real time using wearable technology. Sportinformatik 2012, p.148. World Bank., 2014. Doing Business in Australia - World Bank Group. Available at:http://www.doingbusiness.org/data/exploreeconomies/australia/ [Accessed October 8, 2014] Read More