MARKETING STRATEGY

MARKETING PLAN OF A LOW COST GYM IN

THE NETHERLANDS

Ozan Can Koseley

Ralph Gesterkamp Josquin Datudey

TABLE OF CONTENTS

Preface ......................................................... Error! Bookmark not defined.

Table of Contents......................................................................................... 2

Explanations of terms and/or abbreviations ................................................... 4

Introduction................................................................................................. 5

Project Aim .................................................................................................. 6

External Analysis .......................................................................................... 6

Internal Analysis .......................................................................................... 9

SWOT Analysis........................................................................................... 12

Marketing Goals and Objectives .................................................................. 14

Marketing Strategies .................................................................................. 15

Marketing Mix ............................................................................................ 17

Cost Analysis ............................................................................................. 19

Controlling ................................................................................................. 22

Conclusion ................................................................................................. 23

Bibliography .............................................................................................. 24

Appendices ................................................................................................ 25

EXECUTIVE SUMMARY

Based on our survey outcome, we find out that price is the most influential factor for people to go to the gym or fitness club. Although there have been many fitness clubs exist in the Netherlands, they in fact charge their members with variation of reasonably expensive prices (between €20 to €40 per month). Seeing this opportunity in gym market triggers us to establish a new concept of low-cost gym in the Netherlands. The low-cost concept is realized by focusing only on fitness core activities without offering any additional services, for instance showers, sauna, group training, sun bed, etc. As an attempt to set our marketing plan up, we start to analyze the external environment. From the external environment analysis, we recognize that:

Fitness center is not in a direct competition with other sport clubs, since it is a complementary place for those team sport facilities, that enables the one doing team sports increase his condition, heal from injuries etc.

Besides price, the fitness center users also look for other most important things such as location, facilities, training programs, bar/cafeteria and equipments.

Our competitors competitive advantages contain services that we do not offer, like group training, sauna, showers, babysitting, sun bed, etc.

Afterwards, the internal environment analysis follows with the details of our competitive advantages, which comprise of:

Competitive price Equipment quality Professional training programs Efficiency in the employment Expansion plan to the areas, where there is a large population to target and there is no

a lot of competition. To sum up both the external and internal environment analysis, we further continue evaluating the SWOT analysis. Our SWOT analysis are:

Strengths: service; price; place; social insurance guarantee Weaknesses: sanitary; no lesson group; no bar; lack of experience within the team Opportunities: growing market in the area we focus on; high awareness of fitness

benefits Threats: competitors; being considered as unreliable fitness center because of the low

price; reluctance of people to change or move to another new fitness center Furthermore, through the marketing goals and objectives that are made accordingly, we plan our marketing strategies. Our marketing strategies basically define the segmentation, targeting, differentiation, and positioning of our low-cost gym concept. Marketing mix for the target market is also identified to complete our marketing strategies. With the use of pricing strategies matrix, we enable to determine our best pricing strategy, which are penetration pricing strategy. Before finalizing our marketing plan, we also try to plan and budget our costs. From our profit estimation, we estimate that our breakeven point will be reached in the third semester of the second operating year. In the end, the marketing control is created to assure our implemented plan. As we would like to determine the extent to which marketing efforts over the year have been successful, annual plan control seems to be the best type of marketing control to apply.

EXPLANATIONS OF TERMS AND/OR ABBREVIATIONS

4 P’s - Price, Product, Promotion, Place B2C - Business to Customers HBO - Hoger Beroepsonderwijs MA - Multiple Answer MBO - Middelbaar Beroepsonderwijs SA - Single Answer SWOT - Strengths, Weaknesses, Opportunities and Threats

INTRODUCTION

Physical fitness and exercise are essential for good physical and mental health, including weight control. Exercising helps a person develop and keep a strong self-image and a sense of emotional balance. As people get older, exercise becomes more and more important. However,

as reflected in the result of survey conducted by the authors, many people (46.2%)1 think that

price issue becomes the most important factor when joining the gym or fitness club. Bearing those issues in mind, the authors are fascinated to provide a prospective marketing plans for new concept of a low-cost gym in the Netherlands. For the initial plan, the establishment of the low-cost gym concept is only focusing on two cities in the Netherlands, which are Hoofddorp and Hilversum. This report begins with the analyses which cover the company’s external analysis, internal analysis, and SWOT analysis, then it continues to set up the marketing goals and objectives. Some marketing strategies afterwards appear to identify appropriate target market and segmentation for the low cost-gym. This report finally ends with marketing mix, cost analysis, and action planning that are prepared to implement and evaluate the marketing strategies.

1 For detailed information, see the Appendix II

PROJECT AIM

The project aim is to give an explicit marketing plan for a new concept of a low-cost gym in the Netherlands, and to upgrade the amount of low-cost gyms from two to four in the next two years.

EXTERNAL ANALYSIS

Customer Environment Customer Decision making According to the survey conducted, customers do look for different points before choosing to go to a sports center. Initially, customers have different reasons to do sports. Below you can see two graphs showing the reasons of people doing sports and fitness respectively. The answers for the question were.

Figure 1 Answers question 6 Even though the division of answers are close to each other, the main difference is that people chose team sports also for socializing. Fitness centers which are said to be a perfect place to meet new people are chosen for their sport and health benefits rather than their personal/social impact.1

Figure 2 Results question 8

1 Figure 2 Results question 8

37.4

25.3

24.2

13.2

Socializing

Staying fit and healthy

Personal satisfaction

Other

27.1

58.3

10.4

4.2socializing

Staying fit and healthy

Personal satisfaction

Other

Together with these, if we look at the answers derived from questions 5 and 14, which asks the respondents whether they are going to any sport club and whether they would go to a sports club even though they are a member of a fitness center, respectively. The answers we get show us that a fitness center is not in a direct competition with other sport clubs. (For the answers/charts you can look in the appendix.) Herewith, we can conclude that fitness centers are initially chosen for their benefit on health and sports side, and that people doing team sports do also chose to go for fitness. Fitness centers can be described also as a complementary place for those team sports as it enables the one doing team sports increase his condition, reveal from injuries etc. Yet, this does not mean that it is not a competitor at all.

Our customer group exists of people who are doing any kind of sports and who want to have a fit body and good condition. With our price range, we will be able to attract different groups of

people, namely; - Non-“sporters” looking for a cheap option - Team “sporters” using/looking for extra options for their

condition at an affordable range - Fitness users who are looking for a less budgeted option

The outcomes of our research shows us that many fitness centers have a high monthly fee,

where customers are not very happy with it. Many of our respondents would be eager to chose for a low-budget fitness centre, and the membership fee is considered the most important thing when choosing for a fitness center. Customer Perception about fitness center After price, the most important things that fitness center users look for are; location, facilities, training programs, bar/cafeteria and equipments. Our aim for our company Fitness Only, is to have a location outside the city center but with adequate public transport and free parking space which will allow us to be reachable for our customers. Our building will be big enough to have comfortable fitness areas, changing rooms and relaxation areas. Our trainers will supply each customer with a personal training program which is constantly measured and according to the needs of that person so that no one will show any dissatisfaction about the training programs and assistance. In this sense, we will have provided the main points that customers are after on their choice for a fitness center and we will have eliminated the important points that cause dissatisfaction at the customers. The sanitary services that we won’t provide do come up in our results about customer decision making process. We know that this is our weakness, however this option is not mentioned as an important point at decision making by the respondents.1

1 Results question 13, appendix 1

Competitor analysis and intelligence Hoofddorp In Hoofddorp, apart from the indirect competitors in the market, the sport schools and team sport clubs, there are 8 big fitness providers, who we will be competing. The amount of fitness centers in Hoofddorp is subject to increase as the population increases and there is demand for such sport facilities. The average price varies from €21,- to €35,- among these competitors. The pricing is however very varied as they have optional pricing for year members or quarter year members. The sport schools do have an average of 600 members per year/per location. This average is

excluding the fluctuations of short period members. Our penetration is expected to have around 900-1500 members after a year. Our price advantage will attract the short term fitness users, non-users and hopefully fitness users at our competitors. Our competitors do have significant advantages against us. They offering different types of attractive options. A list of these can be found below.

Dynamic Family Sport Meersquash Healthclub

Group training Group training Group training

Sauna Reduction on Squash Sauna

Sunbed/Solarium

Babysitting

Our competitors competitive advantages are all in areas of extra services, like the items on the table above. We will try to compete with our advantage on price and personal care/assistance. Hilversum The major competitors in Hilversum are;

- Goois Fit - Van Hellemond Sport and Fitness - Sportcentrum Marjon Sjollema - Van Haren Sport - Dudok Arena

The situation on competition is similar to the competition in Hoofddorp. Here again we can mention 5-6 fitness providers as main competitors. Their price level, most important point to us as it is our competitive advantage, varies within the range of 30 – 40 euro’s a month. However, a member at our competitors does have advantages like reduction on the use of sun beds, sauna’s and even swimming at one location(van Hellemond Sport en Fitness). The extra options are also a threat but our price range, the quality of the equipments and service will be able to survive from this competition. We see Dudok Arena as the most challenging competitor in this area as it is huge, has a good reputation, a good location and the price seems also lower than someone could expect, 35,- euro’s a month.

Fitness Only’s penetration in the market with a low cost price, even though excluding extra services, will draw the attention of many sport and fitness related people. If we could have a good startup, the recognition of our brand/company name will easily be shifted upwards in the regions where we are settled. That will then later on help us to expand our coverage, and open new facilities in other areas.

INTERNAL ANALYSIS

Identification of the firm’s core competences Our company named Fitness Only is a low-budget fitness center offering everything on fitness and nothing else at a very affordable price. We strive to offer our customers the best price-quality proportion available in the Dutch fitness industry. The main points Fitness Only focuses on are:

- A very good price-quality proportion - Good quality equipment - Personal treatment to members

Development of the firm’s competitive advantage To alter the competencies into advantages, Fitness Only will do the following Competitive price: We are able to offer this low price because our company focuses on “fitness only”, we don’t offer a spa center, showers, group lessons, etc. but we offer good quality fitness facilities. By not offering all these extra options we are able to save money on fixed and variable costs. Electricity, water and gas are huge expenditure posts and also the establishment of a spa center asks for a huge investment. Another way we plan to keep the costs low is by renting a building outside of the centers of the

locations where we are setting up fitness centers, for instance in industrial areas. By renting a building outside of the city center we will have a much lower rent expenditure then competitors located in the city center. Thirdly we aim to save money by hiring trainees following sport educations and part-time employees instead of having a crew of fixed (expensive) employees. Also making good long term business deals with our suppliers can save us a lot of money. If we are able to keep our costs low we can simultaneously offer our customers low

membership prices and guarantee a very good price-quality proportion. Quality equipment: Fitness Only will look for the company that supplies the best quality fitness equipment available and try to create a good long term business deal with this company. If we provide the company with our expansion plans and convincing them that the concept of setting up low budget gyms will be a success we are confident that we able to setup such a deal. We want to provide all our customers with the best equipment available as this is what they come for when they join Fitness Only. Our customers come to work out, not to relax, go to a spa or socialize so therefore we want to provide them with good equipment. Personal approach: However many fitness facilities do ask for huge sums of membership fee, customers are often not satisfied with the personal training from professionals. Fitness Only aims to have good contact with the customers and offer each of them a professional training program. Computer aided systems will help the trainers to keep track of each customer so that they can always coach and assist them with their trainings and get the customer a program which will suit their needs. For new members to orientate we offer them a first week free training coupon and a introductory tour so that we can convince them of our formula and help them in their choice. Employees:

For the first year we expect to need a crew of about 6 employees. One general manager, three full time interns/trainees and two part time fitness advisors. General manager: We need a general manager with experience in the fitness industry and good know how of all management activities involved. The general manager will be responsible for all human recourse tasks like hiring and firing, training and motivating personnel, team building etc. He/she will also be responsible for, marketing, planning, administrative tasks, problem solving tasks and public relations. General manager will be responsible for any activities in both fitness centers (Hoofddorp and Hilversum). Trainees: The trainees we intend to hire come from the best sport and management educations in the area. They will need to have a heart for sports and fitness in particular and

good knowledge of fitness. They will need to have good communication skills and a professional attitude though remain friendly and give customers personal attention. It would be great if we can find trainees who already have a degree for fitness instructor, if they do not have such a degree we will train them internally to become a fitness advisor. Part-time employees: The part time employees we are looking for will have experience in working in the fitness/sports industry. For the part time employees counts as well that we will

try to attract fitness instructors but if that isn’t possible to train them internally. The part time employees will need to be flexible, have good communication/coaching skills and they will need to be able to assist the general manager with his tasks. Membership fees: We will provide our customers with a very good and competitive price for their membership

contracts. The price that we are going to charge for customers above 16 will be 3,50 Euros per week which will add up to 16,75 Euros per month on a yearly basis, also we are going to charge a 25 euro inscription fee. Our members can choose to pay in monthly installments or everything at once, when they pay the whole amount at one we will not charge them with the inscription fee. We are also going to offer contracts for children for 12 to 16 these children will have access to all cardio fitness equipment but they aren’t allowed to use the weights and power fitness machines. By offering this service we want attract a whole new target market and simultaneously to help the society to tackle this problem.

To attract large groups we aim to offer companies good business deals so that they can provide their employees with a contract with a fitness club. In the fitness industry it happens a lot that companies make business deals with gyms in order to offer their employees free fitness so that they stay healthy. We can offer these companies a contract for 14,25 Euros per month per employee excluding tax. This is a price that not many fitness clubs can match and therefore we are confident to attract companies. Also the location that we choose to set up our fitness clubs will make it easier for us to attract companies as there are a lot of companies in industrial areas. Another way to attract large groups is to make arrangements with sport clubs (football, hockey, athletic games etc.). If we can attract their members with the use special training programs so that they can improve with their sports there lies a huge potential. Another very new trend that we want to pick up on is to make arrangements with health insurance companies, in order for their customers to fitness free of charge or at a reduced cost at our fitness clubs. The idea is kind of similar as the arrangements we intend to make with ordinary companies, that their customers remain, stay or become healthy by going to the gym regularly. If they have healthy customers it will save them a lot of costs as their customers won’t need to go as often to health institutions for which they declare a lot of money.

Target market: We try to attract specific target groups with our marketing strategies, for example we could execute a marketing campaign on all secondary schools in the area in order to attract young students from the age of 12 till 18. Another group we are thinking of targeting in a marketing campaign all the older students studying on all MBO, HBO and Universities in the surrounding area. Equipment/facilitation: We offer our customers a large spacious building so that they have enough space to work out and there aren’t long rows of people waiting for particular exercises. The building will be easy

reachable as we will search for a location in an industrial area close to a main road. Another advantage of setting up our facility in an industrial area is that there is often a lot of free parking space. In the building there will be a changing room with lockers in which they can store their belongings. There will be a small lounge area where people can socialize and take a break from their trainings. Also there are a couple of services that we are going to outsource, there will be a sun tanning

machine for which people have to pay a small amount of money and there will be a vending machine with many soft drinks in it. We are planning to rent out a small area of the building for a physiotherapists office to set up in our building with whom we make arrangements for them to make use of our facilities. As mentioned before we will provide our customers with the best equipment available. Of all the equipment we will have at our facilities we want to have 30% power fitness machines and 70% cardio equipment. We use this formula based on the demand of the market, for our

research we saw that there is a larger amount of demand for cardio then for power fitness. All the equipment will be cleaned twice a day by the employees of Fitness Only, our members can also clean the equipment themselves before they use it and after they have used it. The building will be cleaned by an external company. Expansion plan First we want to start by setting up two fitness centers, one in Hoofddorp and one in Hilversum. We chose these area’s because of the fact that there is a large population to target and we don’t have a lot of competition. There are quite a few exclusive fitness club established in these cities but we don’t see exclusive fitness clubs who offer spa’s etc. as competition as they attract a very different customer group demanding very different services then the customers we attract. If everything goes according plan and the first two gyms become a success we want to expand further, the plan is to open 4 fitness clubs in 5 years. For all fitness clubs we have set a target to attract around 5000 members within 2,5 years, research showed us that the biggest growth will come after the first year. If we reach this target in Hoofddorp and Hilversum it is time for us to expand and search for good locations for our new gyms.

SWOT ANALYSIS

Strengths

Service : Fitness Only will offer quality equipment, all week long for the customers.

Besides the equipment, personal training advises will be continuous and customers would be able to contact supervisors always.

Price : The price offered by Fitness Only is very competitive and low according to the

market average.

Place : Fitness Only will chose a location which is easy to reach by any means of transport. Public transport or by own car customers should easily reach the facilities. Free parking will be a big advantage. Details on place and establishment will follow.

Social Insurance Guarantee (100%) : At this moment Aviva insurance refunds all cost made at a fitness center. This refunding is based on an idea that people doing sports do live a healthier life. We will approach them to be sure on this refunding for our customers. Also Agis insurance, which has just started a new campaign for youngster above 18 and students, is one of the insurance companies that we want to approach to get a full or partial refunding on the costs a customer makes. This will encourage many who don’t want to spend much for their condition.

Weaknesses

Sanitary: Fitness Only will not offer any sanitary facilities and extra options like a sauna. People will not have the chance to take a shower after their training. For customers with a hygiene thought this will be a big disadvantage.

No group lessons: To keep the costs low, Fitness Only will not offer lessons provided

by trainers. Trainers will keep track of personal improvement and condition but will not provide lessons except instructions on how to use equipment.

No bar: A place to rest, meet with fellow trainees, and have a drink will of course be

available but in here there will be no servants. Vending machines will provide food and drinks for customers and their visitors.

Lack of experience within the team: Since the members of the team did not work

together before, the team will not have a team synergy. And of course, we don’t have experience on running a fitness centre who has to expect a harsh competition.

Opportunities

The growing market in the area. It affects the population and affordability of the residents.

Recent news and advertisement focus on benefits of fitness. It has increased the awareness about life with sport.

Threats

People may think that there is offered lower quality with the lower price.

People could continue with their current fitness centers. Competitors: Competitors might lower prices. Many fitness centers’ are awaiting for

their opening.

MARKETING GOALS AND OBJECTIVES

Defining marketing goals and objectives is indeed the key to the whole marketing process. It should clearly state where the company intends to be; at some specific time in the future.

Marketing Goal “To establish the amount of low-cost gym four in the next five years” After establishing our aim and main reason of writing this business plan we have outlined our main marketing goals and objectives. As you have noticed we want to start a low-cost gym and to upgrade the amount of low-cost gyms from two to four in the next five years in the Netherlands. We as a group have notices that more and more people are joining sport schools for health and personal reasons. Especially after Christmas and new year more people are attending gyms and using sport to reduce wait. The most important element of participating gyms and other sport activities are because

people want to give themselves a good feeling of doing something to keep fit and in shape. Our marketing goals is to satisfy and to assist people in satisfying their needs to keep fit and in shape. Most gyms are pretty expensive, as the prices vary between €40,- to sometimes €80,-. We provide a gym membership of not more than 20 Euros a month, for at least 12 months. This membership includes using all the new equipment of a famous sports merchandise brand, and

classes at the gym. The reason why the prices of a membership are this low, are because there are no sanitary supplies, for example no showers, sauna etc. This can reduce cost what we can change in a reduction of our membership fee.

Marketing Objectives

Introducing new concept of low-cost gym to the Netherlands’ market with special focus in cities of Hoofddorp and Hilversum.

Developing a strong brand within the gym business environment in the Netherlands Capturing:

o 50% - 60% of the market by value within one year in Hoofddorp o 35% - 40% of the market by value within one year in Hilversum

Attracting:

o Those who left fitness or drop their intention to go to fitness because of the price issue

o People who are doing other sports to do fitness o Students who are living in:

Hoofddorp and its neighborhoods Hilversum and its neighborhoods

MARKETING STRATEGIES

Segmentation Fitness Only categorizes its low-cost gym concept as an act of business to customers (B2C) approaching. The segmentation is likely to be based on the Socio-demographic as well as Psychographic variables. Variables like gender, age, occupation and cities are used in socio-demographic segmentation. Socio-demographic are very useful in categorizing different tastes and preferences. An added value is that it is reasonably easy to measure and project the composition and size of demographic segments for the next 5, 10, or even 15 years. Motive is categorized as Psychographic Segmentation and from such information; it is possible to infer what type of service appeal to particular group1. Segmentation criteria of Fitness Only’s business consist of as follows:

Socio-demographic Segmentation

Age 12 – 50 years old

Gender Male and Female

Occupation Mainly student

Cities Hoofddorp and Hilversum

Psychographic Segmentation

Motives Doing fitness only

Targeting Single Segment Targeting2 Single segment target is used when a company’s capabilities are essentially tied to the needs of a specific market segment. We will be using this strategy since we are only offering one service to specific market segment. However, it will be slightly changed if the situation of the market force/suggest us to do so.

Differentiation

Feature Advantages Benefits

Continuous updated/ renewed fitness equipments

Experience cutting-edge fitness equipments

Catch up with new technology on fitness equipments

Lowest price offer in the market

No extra charge for those who do not need service other than using or exercising with fitness equipments

Spend less money

1 Hollensen, Svend. Marketing Management : A Relationship Approach. Essex : Pearson Education Limited, 2003. 2 Ferrel, O.C & Michael D. Hartline. Marketing Strategy. Minnesota: Thomson South-Western, 2005.

Positioning We would like to position ourselves as :

Low-cost, high-quality brand We decided to do so because we enter an existing market with current service. According to Ansoff’s Product-Market Growth Matrix, our strategy is known as MARKET PENETRATION1. It is the best way to gain competitors’ customers and is the least risky way for our company to grow.

Source: http://upload.wikimedia.org/wikipedia/en/5/53/AnsoffMatrix.jpg

Furthermore, we would constantly monitor what our target customers want and the extent to which they perceived our service as satisfying those wants in order to strengthening our current position.

1 "Product-Market Growth Matrix." Wikipedia, The Free Encyclopedia. 21 Jan 2008, 12:25 UTC. Wikimedia Foundation, Inc. 24 Jan 2008 <http://en.wikipedia.org/w/index.php?title=Product-Market_Growth_Matrix&oldid=185854667>.

MARKETING MIX

Marketing mix or also known as 4 P’s are the essential and strategic components of a marketing plan.1 Its elements comprise of:

Price The price is the amount a customer pays for a product. Among other ways to

determine the price, pricing strategies matrix is most likely suitable to the Fitness Only

situation.

According to the above pricing strategies matrix, Fitness Only falls into category of

Penetration Pricing. By implementing the penetration pricing strategy, the price

charged for Fitness Only services is set artificially low in order to gain market share

from the competitors, such as Healthclub and Dynamic Family Sport.

Additionally, the exact price charged for membership cost in Fitness Only is €16.75

per month, which makes us quite possibly the most competitive fitness center in the

Netherlands. The detailed calculation of how we came up with the monthly

membership cost can be found later in the cost analysis part of the report.

Place Another element of Neil H. Borden's Marketing Mix is Place (or distribution). This

element is about getting the products to the customers.2 Some examples of distribution

include distribution channels, market coverage, specific channel members, inventory

1 “Marketing Mix.” Marketing Teacher. Marketing Teacher Ltd. 10 Dec 2007

<http://www.marketingteacher.com/Lessons/lesson_marketing_mix.htm>. 2 “The Marketing Mix.” Net MBA, Business Knowledge Center. Internet Center for Management and Business

Administration, Inc. 12 Dec 2007 <http://www.netmba.com/marketing/mix/>.

management, warehousing, etc. As Fitness Only provides services instead of products,

this marketing mix element seems to be the least relevant element to be considered.

Product (in this case: service) Wikipedia has stated that product defines an object or a service that is mass produced

or manufactured on a large scale with a specific volume of units. Considering the three

levels of a product, Fitness Only could also identify its services through the levels.1

Core product The core product is strongly related to benefits that customers get out of the

product or service. Some benefit that Fitness Only offers to its customers

mainly focuses on staying fit, healthy and in the good shape.

Actual product The actual product is tangible and physical product, in which advantages can

be directly attained out of it. In Fitness Only case, this type of product refers

to customers experience on the new and more advanced fitness equipments.

Augmented product The augmented product deals with lots of added value, for which you may or

may not pay a premium. Being a member of Fitness Only makes the

customers enjoy companion from our professional fitness instructors or

trainers personally.

Promotion Promotion represents the various aspects of marketing communication about the

product with the goal of generating positive response from the customers. The

promotion can be done in several ways, like personal selling, advertising, public

relations, word of the mouth, direct mail, trade fairs and exhibitions, etc.

Prior to opening the fitness centers in Hilversum and Hoofddorp, Fitness Only will

aggressively promote its low-cost gym concept by using advertising. The advertising

mediums that are used include newspapers, magazines, and some outdoor advertising

(e.g. flyers, posters, bus sides). Yet, all the advertising should be visibly put or

executed in schools, universities, or places where most students exist.

Furthermore, the use of word of mouth can also be another promotion activity to inform the potential customers about what Fitness Only can offer. This way of promotion is done by informing each member to bring anyone to join the membership, as they will get prize or reward for it.

With the help of recent technology, the word of mouth can be also applied via online forum, social group, and blogs.

1 “Three Levels of Product.” Marketing Teacher. Marketing Teacher Ltd. 10 Dec 2007 <http://www.marketingteacher.com/Lessons/lesson_three_levels_of_a_product.htm>.

COST ANALYSIS

We as a new low-budget fitness club “FITNESS ONLY“ are starting clubs at two locations in the Netherlands. The areas we have chosen, are linked with the opportunities for expanding. Further aspects that we need to consider are the following.

- Rent of the building - Utilities (water, electricity etc.) - Wages and income personal - Gym equipment - Inventory (furniture etc.) - Marketing Promotion & Advertisement - Incidental expenditures

We need 1500 / m2 space to operate. We have established the rent of the buildings in those areas and we came to the following figures. After we have conducted research on both cities we are confident that it will be successful, therefore we will start both gyms at the same time.

Rent Hilversum EURO 120,- / m2 / per year . 1.500 = EURO 180.000,- Hoofddorp

EURO 100,- / m2 / per year . 1.500 = EURO 150.000,- The following information is the cost analysis of one gym.

Utilities

Utilities are the so called water and electricity costs that come back every month. We have done some research of these utility costs and came to the conclusion that we have no high water costs, as we have no showers and extra spa facilities such as sauna’s and steam bath etc. So the costs of water are a average of a small office building. The electricity bill will be the highest as we need good lighting the entire time and especially during the summer when an air-condition is fundamental. We only need air-condition for 3 months a year, the rest of the year the average electricity are monthly payments. Water EURO 1.000,- / per month (average) Electricity EURO 1.500,- / per month (average) Cleaning of gym EURO 1.500,- / per month

Wages and income We as low-cost gym want to keep all the cost low, so we need personal that is not too expensive. In total we need 6 personal including, included one general manager. We have decided to offer 3 internships / placements to students that study sport management and exercise. These students are learning a lot during their education and we can give them the opportunity to improve their skills and abilities. We pay these students EUR 200,- per month for their work to keep them motivated. Furthermore we have 2 part time personal that work 16 hours a week for EURO 800,- per month. These 5 personal are advisors at the gym and are in control of the daily routine. We have no accountant but are outsourcing this aspect to a specialized payroll services company. The costs are the following;

General Manager 1 EURO 40.000,- / per year* Intern / trainee 3 EURO 7.200,- / per year Part-time 2 EURO 4.800 / per year Payroll Services Outsourcing - EURO 8.000,- / per year *The general manager will be responsible for two gyms.

Gym equipment We have done research of the gym equipment and have discovered that Precor an American company what is specialized in gym equipment is one of the best equipment manufacturer and what is of very good quality. We have chosen for 70% Cardio and 30% Power training

equipment. The total amount of equipment is an average price of all gyms in the Netherlands, but because Precor is very enthusiastic about our concept they are willing to be soft on the annual amount of financial payback. The depreciation of the equipment is approx. 75.000,- a year. After five years we need to replace our equipment for new equipment. Every year we pay an amount of EURO 100.000,- to pay the lease. Gym equipment EURO 500.000,-

Depreciation per year EURO 75.000,- Remaining value (5 years) EURO 125.000,-

Inventory Our inventory part of the organization consists of the following aspects what are very important to run our core business and to satisfy towards the needs of the customer. For instance three

computers including all software, for administration of members and for the general manager to do his managerial work in his office, and for any other extra work that needs to be done daily. Furthermore we need bar code utilities (printers, readers and a barcode machine) for printing membership cards. Finally we need lockers for both male and female changing rooms. After five years we sell the inventory in total for an amount of 20% of the total new value. And we invest in a new inventory.

Bar code utilities EURO 1.000,- Computers (including software) EURO 2.500,- Furniture (couches etc.) EURO 5.000,- Lockers (300) EURO 10.000,-

Marketing promotion & advertisements To keep a flow of members each month we need to consider advertisement acts. Therefore we have chosen for special actions, such as for every person that is applying for a member in the first month receives 20% discount. Furthermore each member has the opportunity to earn a prize for each member they assist in applying for a membership. We also have flyer hand-outs, and have discussed to work with some famous shopping malls to create a sport activity day at location. Promotions & Advertisements EURO 1.000,- / per month Flyers EURO 800,- / per month Prizes EURO 400,- / per month

Incidental expenditures

Our incidental expenditures of the gym are costs that are sudden and need attention straight away. For instance gym equipment what needs repair, because they broke down. They need to be fixed a.s.a.p. For that we have taken the following average amount. Incidental costs EURO 2.000,- per month

Yearly Expense

Expenses Hoofddorp Hilversum

Rent €150.000 €180.000

Utilities €48.000 €48.000

Wages €38.750 €38.750

Gym equipment (lease of 5 years)

€100.000 €100.000

Inventory (5 years) €3.700 €3.700

Marketing €26.400 €26.400

Incidental costs €24.000 €24.000

TOTAL €390.850 €420.850

Profit Estimation

The number mentioned below does not include members from companies that have

made a contract with us.

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue

Number of members (Hoofddorp)

1500 2500 3400 4200 4800

Number of members (Hilversum)

1600 2600 3500 4300 5000

Submission fee gyms €25 €25 €25 €25 €25

Membership Fee €16,75 €16,75 €16,75 €16,75 €16,75

Revenue (Hoofddorp) €301.500 €502.500 €683.400 €844.200 €964.800

Revenue on submissions (Hoofddorp)

€37.500 €25.000 €22.500 €20.000 €15.000

Revenue (Hilversum) €321.600 €522.600 €703.500 €864.300 €1.005.000

Revenue on submissions (Hilversum

€40.000 €25.000 €22.500 €20.000 €17.500

Expense

Yearly Expense (Hoofddorp) €390.850 €390.850 €390.850 €390.850 €390.850

Yearly Expense (Hilversum) €420.850 €420.850 €420.850 €420.850 €420.850

Net Income

Hoofddorp -€51850 €136650 €315050 €473350 €588950

Hilversum -€59250 €126750 €305150 €463450 €601650

From our profit estimation, we estimate that we will reach our breakeven point in the third semester in the second year of operating.

CONTROLLING

After we have implemented our plan, we would run marketing control. According to Svend Hollensen1, there are 4 types of marketing control and they are:

1. Strategic Control 2. Efficiency Control 3. Annual plan control 4. Profit Control

We would try to use the third option, which is Annual plan control. The purpose of using this type of marketing control is to determine the extent to which marketing efforts over the year have been successful. According to Britannica.com2, there are 5 activities involved in Annual plan control and those activities will be briefly explained below.

1. Sales Analysis We would compare our sales goals with actual sales and explain the difference.

2. Market-share Analysis We would compare our sales with those of our competitors.

3. Marketing expense-to-sales analysis We would measure how much we spent to achieve our sales goals.

4. Financial Analysis

We would compare profits to our sales (profit margin), our sales to our assets (asset turnover), our profits to our assets (return on assets), our assets to our worth (financial leverage) and our profits to our worth (return on net worth).

5. Customer Satisfaction Analysis We would measure our customer satisfaction quantitatively. In addition, we would not only measure their satisfaction, but also their loyalty to our company.

1 Hollensen, Svend. Marketing Management : A Relationship Approach. Essex : Pearson Education Limited, 2003. 2 “Market Controlling.” Encyclopædia Britannica, the Online Encyclopedia. Encyclopædia Britannica,Inc. 17 Dec 2007

<http://www.britannica.com/bps/topic/365730/marketing#tab=active~checked%2Citems~checkea%3E%2Fbps%2Ftopic%2F365730%2Fmarketing&title=marketing%20--%20Britannica%20Online%20Encyclopedia>.

CONCLUSION

The reason for this marketing strategy report and research was to find out whether an opening of a low-budget fitness center would be successful. Our aim by opening our fitness center Fitness Only is offering low price and quality equipment to customers and expand our locations within the next 5 years. After the research we made, we realized that price issue was the most important point at the decision making stage with the customers of fitness centers. This result gives us an indication that our concept has a great potential. Apart from this, the survey results showed us that service issues like sauna, shower, and etc. were items that customers favored but as an second or third item during the decision making. As we won’t be providing these services, they were set as our weaknesses but our price advantage seems to be eliminating those items. If Fitness Only provides the following items as they are described in the report, the chance of succeeding will be very high.

- Price level of €16,75 - A location of around 1500m2 with a relative cheap rent - A location that can be reached easily by means of public transport - A location that has free parking space - Good quality equipment provided by Precor - Sufficient personal care to each customer.

Of course, not only these items are important for reaching the targets set and mentioned in

this report. Advertising and promotion is an area that needs a lot of attention. Though, these items will not bring huge cost effects as our starting locations are mid-sized cities; Hoofddorp and Hilversum with respectively 70.000 and 83.000 inhabitants. With sufficient advertising Fitness Only could introduce itself to all inhabitants and draw the attraction of customers. The threat of having an unrecognized brand name and the fear of low quality that the customer might feel due to low pricing can be easily eliminated by Fitness Only’s introductory trainings for free. After all, we can conclude that our concept of a low-cost gym has a high potential to succeed and reach its targets within the mentioned time frame.

BIBLIOGRAPHY

Primary Source: 1. An interview with Mr. Sebastian Reeker, on Tuesday, January 8, 2008 at 14:00 –

15:00.

Secondary Source:

Books: 1. Hollensen, Svend. Marketing Management : A Relationship Approach. Essex : Pearson

Education Limited, 2003. 2. Ferrel, O.C & Michael D. Hartline. Marketing Strategy. Minnesota: Thomson South-

Western, 2005. 3. Cravens, David W. and Piercy, Nigel F. Strategic Marketing. Boston: Mc Graw Hill-

Custom Publishing, 2002.

Websites:

1. “Market Controlling.” Encyclopædia Britannica, the Online Encyclopedia. Encyclopædia Britannica,Inc. 17 Dec 2007 <http://www.britannica.com/bps/topic/365730/marketing#tab=active~checked%2Citems~checkea%3E%2Fbps%2Ftopic%2F365730%2Fmarketing&title=marketing%20--%20Britannica%20Online%20Encyclopedia>.

2. “Marketing Mix.” Marketing Teacher. Marketing Teacher Ltd. 10 Dec 2007 <http://www.marketingteacher.com/Lessons/lesson_marketing_mix.htm>.

3. “The Marketing Mix.” Net MBA, Business Knowledge Center. Internet Center for

Management and Business Administration, Inc. 12 Dec 2007 <http://www.netmba.com/marketing/mix/>.

4. “Three Levels of Product.” Marketing Teacher. Marketing Teacher Ltd. 10 Dec 2007 <http://www.marketingteacher.com/Lessons/lesson_three_levels_of_a_product.htm>.

5. "Product-Market Growth Matrix." Wikipedia, The Free Encyclopedia. 21 Jan 2008, 12:25 UTC. Wikimedia Foundation, Inc. 28 Jan 2008 <http://en.wikipedia.org/w/index.php?title=Product-

Market_Growth_Matrix&oldid=185854667>. 6. "Product-Market Growth Matrix." Wikipedia, The Free Encyclopedia. 21 Jan 2008, 12:25

UTC. Wikimedia Foundation, Inc. 28 Jan 2008 <http://en.wikipedia.org/w/index.php?title=Product-Market_Growth_Matrix&oldid=185854667>.

APPENDICES

Appendices I – Health Awareness Survey Appendices II – Survey Output

Appendices I – Health Awareness Survey

Q1. In which of the following age groups do you fall into? (SA)

o Under 18 (screened out)

o 18-20

o 21-25

o 26-30

o 31-35

o 36-40

o 41-44

o 45 or above

Q2. Please indicate your gender (SA)

o Male

o Female

Q3. Are you a student? (SA)

o Yes

o No

Q4. Which of the following best describes your annual income before taxes?

(SA)

o Under €10,000

o €10,000 - €19,999

o €20,000 - €29,999

o €30,000 - €39,999

o €40,000 - €49,999

o €50,000 - €74,999

o €75,000 or above

o I prefer not to answer

Q5. Which of the following clubs do you visit regularly to exercise the respective

activity? (MA + SA)

□ Football Club

□ Basketball Club

□ Swimming Club

□ Tennis/Badminton/Squash/Table Tennis Club

□ Korfball Club

□ Bowling Club

□ Hockey Club

□ Aerobics Club

□ Power lifting Club

□ Sailing Club

□ Any water sport Club

o None of the above (go to Q7)

Q6. Why did you choose to exercise your sport? (MA)

□ Socializing

□ Staying fit and healthy

□ Personal satisfaction

□ Other

Q7. Do you go to a Fitness Club? (SA)

o Yes

o No (go to Q14)

Q8. Why did you choose to go do fitness ? (MA)

□ Socializing

□ Staying fit and healthy

□ Personal satisfaction

□ Other

Q9. What is your monthly membership fee? (SA)

o < € 20

o € 20 – € 25

o € 25 – € 30

o € 30 – € 35

o € 35 +

Q10. How satisfied are you with your current fitness club? (SA)

o Very Satisfied

o Somewhat Satisfied

o Not satisfied nor dissatisfied

o Somewhat not satisfied

o Not satisfied at all

Q11. What is the reason of your (dis)satisfaction with your current fitness

club? (MA)

□ Price

□ Location

□ Training Programs

□ Personal assistant

□ Free parking

□ Facility (location, space)

□ Bar/cafeteria (food, drinks)

□ Sauna

□ Sanitary facilities

□ Equipments

□ Other

Q12. What did you consider before deciding to join your current fitness club?

(MA)

□ Price

□ Location

□ Services

□ Training Programs

□ Personal assistant

□ Free parking

□ Facility (location, space)

□ Bar/cafeteria (food, drinks)

□ Sauna

□ Sanitary facilities

□ Equipments

□ Other

Q13. Among the items you chose, which one is the most important for you?

(SA)

o Price

o Location

o Training Programs

o Personal assistant

o Free parking

o Facility (location, space)

o Bar/cafeteria (food, drinks)

o Sauna

o Sanitary facilities

o Equipments

o Other

[GO TO END]

Q14. Would you consider to visit the following clubs to exercise the respective

activity? (MA + SA)

□ Fitness Club

□ Football Club

□ Basketball Club

□ Swimming Club

□ Tennis/Badminton/Squash/Table Tennis Club

□ Korfball Club

□ Bowling Club

□ Hockey Club

□ Aerobics Club

□ Power lifting Club

□ Sailing Club

□ Any water sport Club

o No, I would not consider visiting any sport club.

Q15. If you would be choosing to go to fitness centre, what would you consider

important? (MA)

□ Price

□ Location

□ Training Programs

□ Personal assistant

□ Free parking

□ Facility (location, space)

□ Bar/cafeteria (food, drinks)

□ Sauna

□ Sanitary facilities

□ Equipments

□ Other

Q16. What is the maximum monthly price you would pay for a membership of a

fitness club? (SA)

o < € 15

o € 15 – € 25

o € 25 – € 35

o € 35 – € 45

o € 45 +

[GO TO END]

END. Thank you for your participation!!

Appendices II – Survey Output

Q1. In which of the following age groups do you fall into? (SA)

Q2. Please indicate your gender (SA)

Q3. Are you a student? (SA)

4%

32%

42%

18%

4%

Under 18 18-20 21-25 26-30 31-35

64%

36%

Male Female

90%

10%

Yes

No

Q4. Which of the following best describes your annual income before taxes?

(SA)

Q5. Which of the following clubs do you visit regularly to exercise the respective

activity? (MA + SA)

58%34%

8%

Under €10,000 €10,000 - €19,999

€20,000 - €29,999

35%

10%

16%

12%

0%

2%

1%4%

1%

10%

1%8%

Football Club

Basketball Club

Swimming Club

Tennis/Badminton/Squash/Table Tennis ClubKorfball Club

Bowling Club

Hockey Club

Aerobics Club

Power lifting Club

Sailing Club

Any water sport Club

None of the above

Q6. Why did you choose to exercise your sport? (MA)

Q7. Do you go to a Fitness Club? (SA)

Q8. Why did you choose to go do fitness ? (MA)

Q9. What is your monthly membership fee? (SA)

Q10. How satisfied are you with your current fitness club? (SA)

38%

25%

24%

13%

Socializing

Staying fit and healthy

Personal satisfaction

Other

78%

22%

yes

no

27%

58%

11%

4%socializing

Staying fit and healthy

Personal satisfaction

Other

3%

18%

33%

31%

15% < € 20

€ 20 – € 25

€ 25 – € 30

€ 30 – € 35

€ 35 +

Q11. What is the reason of your (dis)satisfaction with your current fitness

club? (MA)

28%

21%23%

15%

13%

Very Satisfied

Somewhat Satisfied

Not satisfied nor dissatisfied

16%

18%

14%

4%6%

14%

11%

2% 7%

7%

1% Price

Location

Training Programs

Personal assistant

Free parking

Facility (location, space)

Bar/cafeteria (food, drinks)

Sauna

Sanitary facilities

Equipments

Other

Q12. What did you consider before deciding to join your current fitness club?

(MA)

Q13. Among the items you chose, which one is the most important for you?

(SA)

16%

18%

14%

5%6%

13%

12%

1% 5%

8%

2%

Price

Location

Training Programs

Personal assistant

Free parking

Facility (location, space)

Bar/cafeteria (food, drinks)

Sauna

Sanitary facilities

Equipments

Other

46%

18%

10%

10%

3% 5%

5%

0%0%

3%

0% Price

Location

Training Programs

Personal assistant

Free parking

Facility (location, space)

Bar/cafeteria (food, drinks)

Sauna

Sanitary facilities

Equipments

Other

Q14. Would you consider to visit the following clubs to exercise the respective

activity? (MA + SA)

Q15. If you would be choosing to go to fitness centre, what would you consider

important? (MA)

31%

27%3%

15%

9%

0% 6%0%

0%0%

6%

0%

3%

Fitness Club

Football Club

Basketball Club

Swimming Club

Tennis/Badminton/Squash/Table Tennis Club

Korfball Club

Bowling Club

Hockey Club

Aerobics Club

Power lifting Club

Sailing Club

Any water sport Club

No, I would not consider visiting any sport club

27%

13%

7%10%

3%3%

7%

3%

7%

17%

3%

Price

Location

Training Programs

Personal assistant

Free parking

Facility (location, space)

Bar/cafeteria (food, drinks)

Sauna

Sanitary facilities

Equipments

Other

Q16. What is the maximum monthly price you would pay for a membership of a

fitness club? (SA)

64%

27%

9%

0% 0%

< € 15

€ 15 – € 25

€ 25 – € 35

€ 35 – € 45

€ 45 +