I love what I do! I have been fortunate to spend my whole career being in an industry I love. I have been in the fitness industry for over 20 years and have had the privilege to work on four different continents in executive roles for some of the biggest brands in the world.
I would like to share with you my personal story of how fitness went from a boom industry with the world at its feet, to being known for dubious sales practices, ripping off customers and treating its people poorly.
Thankfully things have now gone full circle and there are many great fitness companies here today leading the industry into a stable and sustainable future. It is however, important that we learn the lessons of those turbulent years as I am sure they apply to every growth industry that is in a race to obtain market share and deliver investor returns.
The early years of the fitness industry
The health and fitness industry has always been a precarious one. From the boom time of the nineties to the industry falling on tough times in the late 2000’s. Some of this was part of a naturally maturing industry but I believe it was also due to an industry that truly lost its way and took its customer for granted.
Through all the fast growth and land grabbing for locations, many simply forgot about what the purpose of the business actually was. Even some of the big brand players grew their businesses despite providing their members with poor service and sub-quality facilities. They just happened to place themselves in convenient locations and the customer had no real alternative.
That has now changed; the customer is spoilt for choice when it comes to getting in shape. From boutique studios to wearable tech, the customer truly has fitness on their terms. We are now facing a very different fitness market and unless more gyms and health clubs wake up and smell the coffee on how to look after their members, we will continue to see more and more club closures.
So how did an industry with so much growth and opportunity end up here?
Well, you have to look at where the industry has come from to understand where it is today. I have been fortunate enough to have been brought up in the industry; I started out in a small ladies only gym in my hometown back in the early nineties, when the big health club chains didn’t exist and we all worked in gyms because we just loved fitness.
There were no Membership Consultants or Member Service Managers, we all just did everything; from cleaning the club, working reception, taking members through inductions, through to signing new members up.
Our facilities were basic; cardio was a few upright bikes and the occasional treadmill. Our studio floors were concrete and the instructor with the least painful shin splints took the aerobics classes that day. But we all loved it, and we loved our members.
We knew them all, and I don’t just mean we knew their name, we knew them like friends. We often socialised together, knew the names of their kids and as is the case with any friendship they often shared intimate details about their lives. We were their confidants and they felt comfortable sharing some pretty intimate stuff with us.
I fell in love with the process of joining new members; I didn’t know it as ‘sales’ at the time. I would be on reception, which had a glass front onto the high street. I would observe women walking past the front everyday on their way to work or the shops and then back again later that day. Sometimes they would stop and pause outside the gym door, almost looking like they were going to walk in, to then spin on their heels and quickly walk away.
I would try and imagine what was going through their minds, what were their fears that stopped them coming in? Then suddenly one day they would pluck up the courage to walk in and I would wonder ‘why today’? What happened to get you to take action? I knew that I had a small window of opportunity to get them to open up and start chatting. I would smile and welcome them in, they would relax and by asking them the right questions I could then get them to share their story with me. Often they would ask something like ‘do you have a price list I can take away’? If I had given them the price list and just let them walk out the club, they wouldn’t have come back; not for some time anyway – it’s just the way us humans work.
When we have a need to do something, the minute we take a positive step towards it we feel immediately better about ourselves and the urgency to act disappears. I learnt this first hand observing many women from that reception counter. So I decided to find a way to open up a conversation and help them make a proper decision to get on a healthier path.
You can judge a company’s culture by their Sales Department
The thing is that back in those early days there was a realness to the sales process, we genuinely believed in what we were offering and were passionate about helping others experience the benefits of fitness. We got to know our members and directly helped them achieve their goals. We shared the journey with them from start to finish.
This is so in contrast to what happens in clubs these days. So often the people selling the memberships have little, if no, product knowledge about what they are selling, sometimes they don’t even have a personal interest in fitness. How can they possibly sell with integrity if they don’t even like what they sell, this seems insane to me. I wonder how many car sales people can’t drive??
Now don’t get me wrong, there is nothing wrong with having a sales process. It can give discipline and structure, allowing the potential member to be taken through all the information they need to make a decision. The challenge is when it becomes ALL about the sales process and ‘closing a sale’ that is goes wrong. We now live in a world of sales targets and high commission rewards, which has eroded the integrity of the whole joining process.
We have Sales Managers with Sales Teams tucked away in their offices ‘high fiving’ each other when they close a sale and get to mark up another strike on the office whiteboard. In most cases, teams are targeted on their productivity to make contacts and appointments, forcing them to cold call and harangue people that were unfortunate enough to have their personal details traded by one of their friends in exchange for a free gift!
So how do I know what happens behind the scenes? Because I was part of it for many years, under pressure to achieve more and more sales to make up for the ever-growing number of members leaving out the back door. We became experts in sales generation. We managed the Sales Departments like big efficient machines with slick teams and highly honed skills. The prospects stood no chance against the sales mega machines in these global fitness companies.
Over time the Club Managers who were from fitness backgrounds were replaced by ones from sales backgrounds. The focus of the whole industry turned to sales in a bid to retain the high values being paid by venture capital companies, all hungry to get their multiple returned.
The madness ensued and it all became about the bottom dollar, value eroded, service was non-existent and the member forgotten
Managements fear of failure can drive bad profit decisions
I worked for a decade for one of the largest gym chains in the world, I had front row seats to witness the boom and bust. So what did I learn over this time? I learnt that people ignore what is right in front of them even when they know it is wrong and that without good leadership, businesses go for the short-term wins even if they sacrifice the much greater longer term gains.
I learnt that following a track record of success, management become afraid to drop the ball and make decisions that give the illusion of success even if it’s at the sacrifice of the customer. When a company is used to experiencing rapid growth and success, no executive wants to be the one left without a chair when the music stops and growth halts. I learnt that this cycle is a vicious one built on bad profit decision, which ultimately cost the company highly.
Bad profit signifies the beginning of the end!
Any profit that is made at the expense of the customer experience or by charging more without adding value is bad profit. It may not show up as such in the P&L but there is a price that companies pay for these profits and that is the disdain of the customer who will eventually leave when they have the chance.
I can remember when there was the introduction of an administration fee by this company. This allowed them to advertise no joining fee to attract unsuspecting customers, who were then hit with a mandatory administration fee as part of their membership. The company then realised that they could ratchet up this administration fee and the customer still paid it, probably because there was very little other options for them back in those days.
It wasn’t long before the trading standards authority caught up with this misleading advertising and enforced rules on their marketing. It is always a sign of a bad profit industry when governing bodies need to control their behaviours through tight legislation, just look at the regulations surrounding banking! The fitness industry has experience excessive amounts of attention from these types of organisations over the years.
The original concept of low fees and high value facilities was a good one; people flocked to join these dry clubs that didn’t have the frills but still provided great facilities and some other nifty benefits, such as free juice bar, free DVD hire, cheap childcare, spa pools and massage chairs. But as the pressure to achieve investor returns mounted these benefits slowly fell away. Spa pools were removed, childcare facilities closed and DVD hire became irrelevant in the new world of digital downloads. The cheap membership didn’t look like such great value any more. Also the fees had been steadily rising at the same rate as the facilities were declining.
These big players of the nineties had over played their hand, they expanded too fast and taken on some poor property deals. They were owned by faceless financial institutions and run by frazzled sales people. The market became wide open for a new concept as the customer was unhappy and fed up. Some customers were so disgruntled they took to setting up hate websites and one even made a music video to express their contempt for these big box gym chains (see video link above).
A great brand doesn’t equal a great culture
Of all the business leaders out there I have to say that I believe Richard Branson is the most remarkable. He has proven without a shadow of doubt that by putting the customer first, listening to them and giving them what they want you can build successful, sustainable businesses. Virgin businesses are not always the cheapest, in fact they rarely are but people will pay for a quality product and consistently good service. Virgin businesses always commit to providing their customers with value for money.
I was raised in the era of Richard Branson, I had a Virgin credit card, listened to Virgin radio, had all his business books and watched in admiration when he launched his airline and went into battle with the big boys of British Airways.
You have to admire his approach to risk and unwavering vision. I was excited when I heard that Richard Branson was to launch his first health club in the UK, back in 2002. At last, someone was going to challenge this industry and teach it how to treat its customers.
By 2006 I was worn out by the fitness industry, no longer could I work for a company that was so completely disengaged with what its purpose was and the importance of its customer. Everyday I felt I was living a lie. I didn’t want to be associated with what was happening in the industry in the UK; it was time for a change.
When the chance came up to go and work for Virgin Active South Africa I jumped at the chance. At last I was going to be a part of something that aligned with my own values. I would experience the inner workings of the Virgin machine and it was like I was at last going to get to see behind the curtain of the Wizard of Oz.
When I arrived in South Africa unfortunately all was not how it seemed, Virgin Active had acquired a chain of bankrupt gyms from a liquidator. They had been put into administration following the arrest of the company bosses for extensive fraudulent activity. The executives ended up in Jail and the company was put into the hands of the liquidators. Off the back of a cultural history where their people lived in fear for their jobs and the executive ruled with iron fists, this was never going to be a straight forward acquisition.
There is a famous story of how they became owned by Virgin. The receivers had been trying to find an investor to purchase these clubs but due to international investors being afraid of operating a business in such a volatile country, investors had become thin on the ground.
There were over 4,000 people working in the 130+ clubs, most of which were low income earners living in townships and often the sole breadwinners supporting their whole family. It wasn’t long before Nelson Mandela heard about the plight of this gym chain and decided to intervene. He contacted Richard Branson to discuss the possible acquisition knowing how much Richard liked leisure businesses. On calling Richard his wife, Joan, answered the phone. You can imagine her surprise when Nelson Mandela announced himself and requested a conversation with the Virgin boss. I guess in a bit of a panic Joan took the phone to him even though he was in the middle of enjoying a relaxing bath. A little startled, Richard took the phone and discussed the opportunity with Nelson. He agreed to the purchase the clubs on the call and the Virgin Active gym chain went from 3 clubs to 133 clubs over night.
I learnt an invaluable lesson at Virgin Active once I had spent some time in the company – a brand alone does not make a great company. The clubs had all gone through a re-brand, the staff had new uniforms and the sign above the door said it belonged to Virgin.
The acquisition had happened several years before I arrived but very little progress had been made on changing the culture. Where were all the values you would expect from a Virgin business? Where was the excellent customer service and the innovation? And what was worst was that these gyms were no fun; they didn’t challenge the norm at all. They all operated in a robotic, controlled and fearful culture. These clubs were living like ghosts of their corporate culture past, which was based on fear and control.
This was very far from the Virgin I signed up for. It wasn’t long before I started to understand that my appointment wasn’t going to be filled with learning about Virgin, it was going to be about turning this gym chain into a true Virgin business. The new executive team had been appointed and we were tasked to turnaround this culture and install the essence of Virgin into the business.
What happened over the next four years became legendary; we took a culturally bankrupt company and turned it into one of the highest loyalty score (NPS) achieving companies in the world. Virgin Active South Africa was awarded Deloitte’s best company to work for and profits soared through having happier customers who stayed longer and referred their friends. In some later blogs I will go through the strategy that achieved these amazing results.
It is my belief that any company can achieve similar results if they have a leadership team who has the desire to build something great.
Lessons I learnt in summary…
- Leadership is key to creating a great culture company
- A great brand doesn’t guarantee a great culture company
- Avoid bad profit! Short-term decisions that don’t add value to your customer will catch up with you eventually!
- Stay passionate about how you can help your customer
- Maintain integrity in your sales division by training product knowledge and recruiting people who are passionate about what they sell