Competing in a Price-Driven Market

In 1965, an average three-bedroom ranch house cost about $7,500. A loaf of bread cost 20 cents. Take a date out to the movies and it'd set you back a single shiny quarter - soda and popcorn included.

Membership in a New York health club in 1965? Nineteen dollars a month.

Wait a second - was that a typo?

No. Thirty-five years ago, in a world where an entire home priced less than one of today's cars, a membership in a health club cost $19 a month. Yet in just about any newspaper today, you'll find a membership for a similar price or some club bragging about getting fit for less than a dollar a day. Something's wrong with the math here. Why do today's health clubs constantly insist on competing on price alone?

The answer lies at the core of the fitness industry. In 1965, there simply weren't the vast number of health clubs in existence as we see today. Thirty-five years ago, a modern fitness facility was still unique enough to price on that basis alone - the differentiation factor. It was different from the resort spas or dingy boxing clubs of the time and possessed the qualities that allowed it to charge $19 a month, the equivalent today of well over $200.

We must realize the essential fact that our product, our services - everything we can offer - are now on the verge of being turned into a commodity in the strictest definition. (Every-thing being equal in regards to the product; the only differentiation is price.)

As we know, there are clubs everywhere. In the minds of consumers, they perceive that all clubs are alike. Of course, minor differences exist, but when you get right down to it, "fitness" is the core, common offering.

There's no surprise that potential members shop for price. Anybody old enough to pass a dollar has been hypnotized and trained over the years to value the "cheaper" price. Why would you buy the dollar apple when a perfectly good 50-cent apple is right next to it?

So how can clubs break out of this pricing deadlock? One word: differentiation. Why buy the dollar apple over the 50-center? The dollar apple looks cleaner and shinier. It's fresher. Juicier. An OK apple for 50 cents, the best for a dollar. Don't you deserve the best?

The key to price differentiation is product differentiation. To get more money, you have to give a different and better product.

You cannot control the fact that consumers shop by price for a commodity. What you can control is whether your product will be perceived as a commodity or a premium product. Forget the competition's price-driven song and dance. Differentiate yourself with a higher quality and higher service, then change price upwards. Even as consumers respond to the reflexive buying behaviors wrought by years of a variety of offers, discounts and specials, consumers can also respond positively to a higher price for a higher-quality product. Carefully evaluate and upgrade your facility to be the first $50 or higher club in your area. Outpriced by all the other clubs by 40 percent? Yes. But just on price alone, you're also outclassing all the other clubs by 40 percent!

Your challenge is two-fold: Become different, then get that message out. Remember that your marketplace is strictly defined by the demographics within a 6-to-8-minute drive time from your club. Target to the wants, needs and desires of the people within your marketplace. Then advertise the service benefits you offer that are different from your competition.

Remember - people, most of all, want value, which is defined as quality at the right price. It's your job to deliver value, then let the consumer decide: Quality or price?

Mike "the Club Doc" Chaet, Ph.D., is founder and president of Club Marketing Management Services Inc. (CMS), a consulting firm for the fitness industry. You can contact him at 406-449-5559 or at www.cms-clubweb.com.