The Drivers for Customer Loyalty among Health and Fitness Clubs - Case Study Example

 The Drivers for Customer Loyalty among Health and Fitness Clubs Introduction Lee (2009) offers that many health and fitness clubs are experiencing situations where customers are unpredictable regarding their level of loyalty for this service industry and many who currently hold memberships are planning to cancel them. In certain markets, there is intensive competition and health clubs are having a difficult time differentiating their business model to gain growth in retention of current members. Because of this, it is necessary for this industry to understand the key predictors of loyalty so that alterations to the brand, market strategy, or internal organizational design can be constructed for this retention effort. This paper identifies the key theoretical drivers for health and fitness by examining key literature on the subject. Music, empathy and instructor competence In South of England, a series of qualitative interviews were conducted with 18 different health and fitness club members in an attempt to identify the key predictors of customer loyalty. This study focused on music and its representation in the health club environment. The study identified that music is a significant loyalty driver depending on the nature by which music is incorporated into the business model. The study suggests that the incorporation of different music genres in classes at the clubs, such as those led by instructors, “acts as a point of consumer differentiation between service providers, therefore resulting in higher levels of customer loyalty” (Oliver, 2007, p.65). This particular study did not identify that music as a constant presence in the generic exercise environment had any correlation with increased member loyalty. This study provides new opportunities for health and fitness club ownership to reassess the diversity of its music selections and incorporate different styles for very diverse membership. However, it should also be taken into consideration that the sample group consisted of only 16 to 24 year-old members and might not necessarily reflect the views of older segments with different values pertaining to music and musical genre. A more in-depth study identified a direct correlation between empathy and customer loyalty. Empathy can best be described as identifying with another’s feelings or motives at the emotional or social level. Empathy, for the purpose of this study, involved the direct level of empathy between various staff members and a diverse client base. Specific values held by a diverse sampling of health and fitness club members identified the most widely-held values as achieving a sense of accomplishment, having an active lifestyle, self-respect, and a sense of belonging within the club (Marandi, Little & Sekhon, 2006). All of these personal values were directly linked with the level of empathy they experienced with different instructors or staff members and could be considered as key drivers for loyalty creation. The notion that certain segments carry completely different value ideologies creates opportunities for health and fitness clubs to examine their segmentation strategies, as the values identified in Marandi et al. represent significantly diverse client needs and predictors of what might drive personalised satisfaction. Value-based segmentation could be accomplished through psychographic profiling, rather than demographic segmentation, through the use of qualitative interviews with random samples of the local population or through direct mail surveys looking for opinion about values pertaining to health and fitness club membership. The idea of empathy as a correlate for increased member loyalty is also reflected in the results of a field study involving 132 clients of five different fitness clubs. This study identified that client-perceived instructor legitimacy was directly linked with higher levels of loyalty for not only the brand of fitness club, but to the instructors themselves (Collishaw, Dyer & Boies, 2008). When clients perceived that instructor enthusiasm was genuine, it directly increased their attitudinal loyalty and built positive perceptions of customer satisfaction. Results of studies such as that offered by Collishaw et al. reinforce that socialisation and the legitimization of instructor empathy and competence can be significant predictors for loyalty creation or development. In this service-oriented industry, the use of different class or exercise consultants is common practice and many brands allow them considerable autonomy when representing the brand. This opens opportunities for many different health and fitness clubs to examine their training programmes or recruitment efforts to locate instructors that can best fit the profile of motivator and provide empathy with a legitimate focus on achieving customer success and satisfaction. It suggests a need for such clubs to examine their human resources model and identify whether instructor interaction should be better developed to stay competitive and build client loyalty. The marketing angle In marketing, activities surrounding differentiation amongst competitors or differentiating through different branding strategies is common practice in many industries, not just the health and fitness industry. Brand associations, generically defined as the consumer ability to recall a brand through visual representation of logos or other promotional materials or find identity through brand recognition, can be considered as an important marketing concept for improved membership ratios. A study delivering questionnaires to 165 random members of fitness clubs identified five brand associations that contributed to loyalty creation. They included, in ranking order, popularity of the brand, management, logo design, escape, and vicarious achievement (Alexandris, Douka, Papadopoulos & Kaltsatou, 2008). Popularity is measured at the social level in terms of finding group affiliation or commonality with others that frequent the specific health club. Management is representative of the internal capabilities or competence of the management team entrusted with representing the brand. Logo design can be categorised as the creative ability of a logo to instil instant brand association. Escape refers to the consumer need to temporarily exit their regular lifestyle in favour of a more rewarding or socially-relevant environment. Vicarious achievement is the satisfaction, at the member level, for meeting their fitness goals through the use of the brand’s facilities. These five brand associations were ranked highest at improving personal loyalty among many different diverse club members. This gives opportunity for many health clubs to examine the potential impact of their logo design and presentation, assess their management capability to act as coaches or administrative representatives of the company (human relations) or use marketing tools to appeal to the psychological needs of members in areas of escapism or personal fitness achievement. The study suggests that using brand associations as a key marketing tool can greatly predict increases in member loyalty. At the consumer behavioural level, one study identified that increases in customer satisfaction tended to lead to decreases in loyalty. It was extrapolated that “repetitive usage of the same brand (loyalty) may lead to lower levels of satisfaction through boredom or that euphoria over a brand (satisfaction) tends to decrease through time and loyalty is affected” (Pleshko & Baqer, 2008, p.112). This is an interesting characteristic of consumer behaviour that suggests that extended use of a brand, if the health club does not change its service delivery concept, can cause customers to seek out other memberships with more diverse or flexible business models. The idea of loyalty is to pursue repetitive use of the brand, however the evidence from this study would offer opportunities for businesses to consider how to create a more flexible business model with launches of new service concepts on a regular basis. Though the study did not identify the specific factors that could potentially lead to consumer boredom with the brand, it does provide meaningful insight into what drives consumer sentiment about the health club to help them diversify their service concept and delivery of these innovations. Club size and market share holdings Pleshko & Baqer (2008) offer results of a further study that indicated a direct positive relationship between market share (usually in terms of size) and customer satisfaction. In most cases, member satisfaction is a predictor of ongoing brand loyalty. The typical view is that smaller, more focused organisations in this industry have better means to provide personalised service and can improve customer service through this one-one-one support. However, this study found no direct link between satisfaction and loyalty, rather that social factors tended to predict ongoing levels of loyalty based on market size characteristics of the club. Market share as a predictor for loyalty is something many clubs can consider as it refers to the social impact with aspects of consumer behaviour such as the reference group concept. In generic social discussion, when the topic of conversation involves the health club membership experience, social status, in some groups, can be theoretically built on how the organisation is discussed. Larger, more established brands typically have more customers than smaller clubs and would therefore expose a consumer to more discussion about the larger brand. If there is a phenomenon occurring in market segments that strongly considers the opinion of social groups based on health club size and market proportion, this could be a risk to smaller organisations looking to improve their loyalty ratios. It could open the door for smaller health clubs to seek diversification of their service concepts or using more concentrated marketing to reach mass groups rather than serving segmented groups based on personal lifestyle or psychographic profile. This is an interesting predictor of loyalty and one that should be considered by smaller organisations losing market share to larger health and fitness clubs. The above assessment is supported by research offered by Pleshko (2006) who describes the consumer-related concept known as double jeopardy, where smaller-sized health and fitness clubs seem to attract fewer loyal customers while larger-share brands achieve loyalty bases because of their ability to purchase larger quantities of service or exercise machinery. In this service environment, customer attitudes and behaviours are directly involved with loyalty and if market share is a significant driver of sustaining or improving loyalty, smaller health and fitness clubs will have a difficult time capturing consumer loyalty without concentrated promotional efforts or the consideration of corporate mergers to remain competitive. Creating member value In business and in marketing, there are considerable models and concepts that involve creating a unique sense of value in customer segments. This is often conducted, especially in service industries where most services are intangible, through differentiation strategies. “To differentiate means to create a benefit that customers perceive as being of greater value to them than what they can get elsewhere” (Zwierzynski, 2009, p.1). In the management planning process, this usually begins with creating a unique value proposition, a statement of uniqueness about the brand, that clearly states what the customer can expect in relation to competition or those services that are completely innovative and customer-focused. Value creation, especially in service industries, is identifying what services are intangible and which are more transparent to consumers and then isolating how to create brand associations through these internalised efforts. Cronin, Brady & Hult (2000) identify first that customer satisfaction is associated with value perception, linked with certain marketing functions such as the chosen pricing schedule for health and fitness clubs. In this article, “customer satisfaction is the result of a customer’s perception of the value received…where value equals perceived service quality relative to price” (Cronin et al., 2000, p.195). Pricing is an extension of value as a major consideration for any health and fitness club, especially based on budgetary constraints, the need to recapture costs of ongoing promotion, or simply supporting the entire service concept and delivery. When determining an appropriate pricing policy, most service industries perform macro-level analyses to uncover what is driving competitor pricing and then reviewing their own service model based on capacity issues, human resources capabilities, or simple procurement of necessary equipment to sustain the service model. Pricing is one of the most transparent elements of the health and fitness club and is often a significant driver in whether or not the price-conscious consumer selects one organisation over another. In the health and fitness club, if customer satisfaction is directly correlated to pricing changes, it should be given more attention as a driver for improving loyalty. Some organisations use different loyalty schemes, such as offering incentives discounts for current members or different promotional coupons that invite customers to become members by offering motivation to make their consumer selection. The knowledge regarding pricing offered by Cronin et al. reinforces the importance of considering pricing as a competitive tool and then carrying elements of price promotions throughout the entire duration of the current service delivery concept. Pricing transparency and its link to customer-perceived value should also give attention to small- and mid-sized health and fitness clubs to examine the macro environment and assess the different pricing strategies being developed or currently in use by competing clubs. Service quality is often difficult to measure until membership has been established and then utilising different quantitative research techniques, such as the interview or survey, to identify customer perceptions of failings or successes in delivering their service model. Because of this difficulty, in an environment where customers are not receiving the levels of satisfaction necessary to boost loyalty, by the time assessments of service quality are conducted the damage may already be done at the reputational level or through word-of-mouth that can be devastating especially in smaller communities. The idea of value creation through pricing should be given more emphasis as a predictor of improving membership loyalty to the brand. Social networks and emotional reactions to the service encounter “In some leisure contexts, personal relationships exert a strong influence on an individual’s thoughts, feelings, and behaviours related to specific activities” (Kyle, Absher, Norman, Hammitt & Jodice, 2007, p.404). In the health and fitness club, the service dimensions include multiple interactions with a variety of different services or staff members that either enhance or detract from customer perceptions of value. In this type of environment, it is likely that consumers will base their overall perception of value on the social dimensions of the service encounter, such as managerial competency or successful staff delivery of different classes relating to exercise and fitness. When multiple service interactions are present, establishing some form of quality control or measurement becomes a difficult task. In this type of service environment, the idea of social worlds is offered by Kyle et al. (2007) that include shared meanings between different members or between staff and client, where certain cultural aspects or activities are present, or certain conventions that are only made meaningful by social interaction. It was identified through the research of Collishaw et al. the importance of interaction with instructors and their ability to provide perceptions of legitimacy for their job role at the social level in order to improve or sustain loyalty ratios. Those who value escapism as a primary value for continuing membership, as offered by Alexandris et al., would be representative of the psychographic lifestyle segment that would most likely be affected by the social dimensions of the organisation. Individuals seeking membership in health and fitness clubs as a social outlet in order to improve their social relationships or escape a tiresome personal lifestyle should then, theoretically, be given more focus since this is a significant predictor in areas of service delivery for loyalty creation. In areas of human resources, through concentrated staff development in areas of psychology regarding this target market or through better ongoing promotions that are designed to meet the lifestyle needs of this group, might serve as a better method for improving loyalty and gaining membership support from escape-minded clients. For the smaller organisation having difficulty achieving loyalty due to market share, which was identified as a predictor for loyalty, using psychographic targeting strategies in areas of promotion might give them the differentiation/competitive edge they need in order to boast higher loyalty levels with existing members or create this perception of loyalty by appealing to social needs. It is rather generic knowledge that many consumers require a sense of belonging in order to progress to higher levels of self-esteem development, and the nature of the health and fitness service model tends to, by nature, appeal to these emotional desires. Conclusion and recommendation All of the literature provided identified many key drivers for what improves or builds loyalty in multiple market segments. They included music diversity and incorporation into health and fitness classes, a significant amount of social factors relating to the social dimensions of the service encounter, market share and size, and even pricing. Creating the consumer perception of value, both through pricing strategies and through improvement of the service encounter in multiple areas of service, would seem to involve blending all of these concepts into a workable business model that allows for innovation and ongoing adaptation to how service is delivered to avoid customers becoming bored with the brand or finding limited personal value in the long-run. Most of the concepts provided that contribute to loyalty sustainment or creation dealt with staff competency and how they are perceived, at the behavioural level, by the client who measures their satisfaction level based on total service satisfaction. There are so many mitigating factors that drive loyalty in this business which creates the recommendation for health and fitness clubs, of virtually any size in the market, to examine their organisational structure to identify deficiencies in how tangible services are delivered and how to make intangible services (such an instructor emotional legitimacy) more transparent to customers. After reviewing all of the appropriate data on the subject, recommendations include decentralizing business decision-making to allow for more generation of innovative service concepts and maintaining an ongoing analysis focus that looks to competing firms and their service activities to create a unique sense of value through service diversification. It does not seem that customer perceptions of value can be created by focusing on just one aspect of the service concept, rather it requires have a multi-disciplined approach to adjusting and measuring service quality and then applying it in a way that appeals to social needs, emotional needs, and improving competence in employees who are integral in delivering a successful service model. References Alexandris, K., Douka, S., Papadopoulos, P. & Kaltsatou, A. (2008). Testing the role of service quality on the development of brand associations and brand loyalty, Managing Service Quality, Bedford. 18(3), p.239. Collishaw, M., Dyer, L. & Boies, K. (2008). The authenticity of positive emotional displays: Client responses to leisure service employees, Journal of Leisure Research, Arlington. 40(1), pp.23-47. Cronin, J., Brady, M. & Hult, G. (2000). Customer satisfaction on consumer behavioural intentions in service environments, Journal of Retailing, 76(2), pp.193-218. 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