SWOT Analysis for Virgin Active - Essay Example

?Contents Situation Analysis 2 Market Size and Value 2 Market Trends 2 Obesity 2 Public and Private Health Clubs 2 Distribution 3 Virgin Active’s Competitors 3 SWOT Analysis for Virgin Active 3 Strengths 3 Weaknesses 4 Opportunities 4 Threats 5 Segmentation: 6 Profile Criteria 6 Geo-Demographic 6 Psychological Criteria: 7 Behavioral Criteria 7 Positioning 8 Situation Analysis Market Size and Value The health and fitness club market has experienced a rise between 2006 and 2011, with a 17.3% increase in value to ?2.66bn. The market is expected to continue increasing in the years to come; especially during the Olympics, which will inspire people to live a healthier lifestyle. Virgin Active should therefore take advantage of this opportunity. Although market revenue increased, the number of subscriptions to private health and fitness clubs did not increase accordingly, showing a difference between the rise in revenue and the rise in subscriptions. The reason for this could have been due to the rise in membership fees, which account for 75% to 85% of health club earnings. An alternative cause could be that health clubs are spending less than before, which accounts for a decrease in company expenditure. According to a report by Mintel (2011), the health and fitness club market has 5.33 million users, and as previously mentioned, this figure is predicted to increase with the upcoming Olympics. Market Trends The health club market has had some positive turns due to increasing awareness of obesity problems, and negative turns due to the economic crisis. Obesity In the UK, the high rate of obesity is a very serious problem that requires action to be taken. The following statistics by Keynote (2011) are obesity predictions for 2050: 60% of men, 50% of women, and 25% of children. This is a very large percentage of the population. In 2010 (confirm year), the government created a scheme in England called ‘Change4Life,’ which aimed to change the lives of the population of England by altering diet and exercise habits. This public encouragement of exercise could have influenced the rise we now see in health club use. Public and Private Health Clubs However, due to the current economic crisis, it is becoming difficult for health club members to pay the annual fees. In addition, as people are looking to decrease spending, health clubs are likely to be considered unnecessary during hard times, despite member loyalty. With an increase in government spending on health and welfare, public health clubs have seen improvements and increases in available resources. However, this does not benefit private health clubs like Virgin, which rely on membership numbers to generate profit. Distribution Health clubs provide a service in exchange for payment of membership fees. Some clubs also charge a joining fee. Once fees are paid, members can utilise the facilities as they please within the timeframe they have purchased. Health clubs often have an additional system where consumers can pay less for access to fewer facilities. At health clubs, members can also purchase items like water bottles or food, and often health-related products such as protein shakes and powder. Virgin Active is a chain of health clubs with 194 locations throughout South Africa, Italy, Spain, Portugal, Australia, and the United Kingdom. As of April 2011, Virgin Active had 69 health clubs in the UK, with a total of 265,000 members; this averages at 3,841 members per club. The fee to join a Virgin Active health club ranges from a monthly fee of ?50 to ?90. Virgin Active’s Competitors According to Mintel (2011), the leading fitness and health clubs in the industry in 2011 were: David Lloyd with 450,000 adult members, Virgin Active with 419,000 adult members, Fitness First with 400,000 adult members, DW Sports Fitness with 250,000 adult members, LA Fitness with 215,000 adult members, Bannatyne Fitness 180,000 adult members, and Nuffield with 150,000 adult members. After Virgin Active’s purchase of the Esporta business, the company moved into second place; however, Virgin Active was unable to strip David Lloyd of its label as market leader with the highest number of members. Although Fitness First has the greatest number of clubs, Virgin Active also exceeded one hundred clubs with its purchase of Esporta. SWOT Analysis for Virgin Active Strengths • Virgin Active is part of Virgin Group, which has made a name for itself in the media industry, increasing brand awareness. • Obesity concerns and the media’s encouragement to live a better lifestyle are influences persuading consumers to join health clubs. • Better technology is available, i.e. better and more divers exercise machines. Health clubs can also provide entertainment via media such as television and music. • As health club activities occur indoors, weather conditions are not a concern; therefore, health clubs are year-round rather than seasonal. • The variety of facilities and activities available at health clubs increase the chances that there will be something for everyone. Weaknesses • Obesity concerns have led the government to invest in public health clubs, which may hinder private health clubs. • Government cuts and the recession have led to decreases in spending. • Membership fees are very expensive and have risen with inflation. • Alternative free activities such as cycling and jogging may draw consumers. • Health clubs may still be associated with old-style bodybuilding gyms. • Redundancies and outsourcing by Virgin Active have damaged staff loyalty. Opportunities • Obesity will increase unless people start to follow healthier lifestyles. • Obesity is increasing in children, therefore Virgin Active can target this demographic. • Companies can utilize New Year’s resolutions to join health clubs by organizing promotional activities during Christmas and New Years to attract potential consumers (Mintel 2011). • As health clubs are becoming socialising venues, Virgin Active can make the environment more sociable and friendly. • Children’s participation in health clubs has grown in 2011, with 266,000 children participating each month, producing an annual revenue of ?3.2 million. • The 2012 Olympics will be an inspiration for many viewers, motivating them to live a healthier lifestyle. • The increasing pressure to get fit and achieve a certain body shape is increasing the number of people taking the time and effort to join a gym. Threats • As the cost of living rises, people will cut back on unnecessary spending such as membership to health clubs. The increasing expenses of day-to-day living may leave customers unable to afford going to gyms, resulting in a decline in membership. • Unemployment is also damaging business, as unemployed people cannot afford membership fees. • The rise in unemployment may prevent people from joining health clubs. • VAT rises have driven prices up, and Virgin Active membership fees taxed; therefore, as Virgin Active makes less money, it is forced to increase fees to maintain profitability. Segmentation: The criteria for segmenting health clubs market will be on the basis of behavioral, psychological and profile categories as explained by Baines (20XX). Profile Criteria Geo-Demographic People demand different product at different stages of their life. However, for some people other factors such as income level as well as position in the family determines what services will be consumed by them. Heath clubs attract a range of customers ranging from children (5-12), teenagers (13-19), early adults (18-25), mid adults (26-35), adults (36-45), and elders (45+). This is often done by offering family services, children playground, student discounts as well as personal trainers for private sessions. Since, Parents/Guardians are the key decision makers for children and teenagers, health clubs mainly focus shaping the decisions of the last four groups. Mintel (2011) states that improving health and fitness was one of the most prominent New Year’s resolutions taken by the British public. The health clubs market focuses on providing consistent services to both male and female. Whereas, some target females such as Gymophobics and males such as males such as Spartan health club, majority tend to provide services for both the genders. Health and fitness clubs tend to attract people from different social classes. The local gyms tend to provide services for most people at a reasonable price, the major players in the market tend to charge premium membership fees by offering access to more services and outlets. Having multiple outlets across the country can significantly shape customers’ preference when deciding which clubs to join. The financial advantage of multinational corporations over local clubs has helped as retains well as acquire customers from the competitors by building multiple sites throughout UK. This is used when there are clear location differences in consumption and preference. Virgin Active targets various segments of the market. However, since their prices are high, compared to lower priced gyms, their mainly target people who have a sound and stable income and are able to commit themselves to the membership fees. The price charged can be justified by the wide ranges of services offered which includes gyms, racquets, dance classes, pools and various other services. The members of Virgin Active can access more than 100 sites across UK. Virgin Active’s product revolves around people from all genders and belonging to ABC1 category. Psychological Criteria: Baines (20XX pg.232) states that these include “using attitudes and perception (e.g. negative feeling about fast food); psychographics or the lifestyle (extrovert, fashion conscious, high achiever) and the types of benefits sought by consumers from products and brands and their consumption choices.” Health and Fitness clubs generally focus on acquiring customers who are health conscious and image of the body. They also appeal to people who are seeking a new lifestyle with regards to friendship and wellbeing. Health and Fitness clubs helps bring people with similar attitude towards health together where they can be both physically as well as socially active. People also seek various benefits such as spas when joining this industry. The major competitors try and fulfill this benefit by building large sites where they offer a wide range of services to all its members. Then, people want to work in a safe environment which these clubs are required to provide as people from different background come here. Other benefits sought may include customer service, entertainment, shower facilities, first aid, vending machine and safe. Virgin Active targets people who are health conscious and actively take part in physical activities. Their products are designed to help people lose weight, become both physically and socially active by giving them a chance to meet new people and feel comfortable with their appearance. Virgin Active provides people access to multiple clubs by getting memberships from one. An example is a member from Kingston branch is able to use Virgin clubs in Manchester or even abroad if they have any equity there. Virgin Active tries to provide all the relevant services sought by its customers. Behavioral Criteria Traditionally, Health clubs were viewed as a place dedicated completely towards building health. But now the recent changes in the health club sector where different types of entertainment opportunities are available along with various facilities and services is constantly shaping the views of its potential customers. To better understand the market, bases such as product usage, purchase and ownership will be used for segmentation. People may be segmented into light users, medium users and heavy users. Where some health clubs target light users, many target the medium and heavy users. They can also be broken down into the time of the day used. For example, young mothers and retired people may use the facilities during daytime whereas employed people may use it at the evening. Many health clubs charge a different price based on peak and off-peak times. Many health club offer memberships for a day, a month, 6 months, and even for a whole year; with many health clubs, the longer period membership purchased, and the more cost effective it will be in the long-term. Memberships can be purchased either by cash, by credit card; online, some even cheaper membership on direct debits. Virgin Active aims to attract customers regardless of whether they are light or heavy users. They offer a wide range of membership options for different types of users discounted no monthly contracts for 16 and 17 year olds. However, it restricts to only their home club. They also provide areas where children can play whilst their parents workout in the gym. Virgin targets families, by providing different facilities for various members of the family they hope to retain them for longer. Positioning Positioning Atmosphere: This depends on how fun the environment of the club is. Members perceptions of a fun atmosphere is the key factor. Based on the number of members / survey Accessibility: Accessibility is measured by how close the club is to members, and the range of facilities provided in the health club. As a company website is a direct form of marketing, exploring websites is a great way to see what values the brand represents and what message it is communicating to consumers. Company websites showed: Virgin Active: Focus on family/friends, features a cafe to encourage socialising and create a fun atmosphere David Lloyd: Direct completion, concentrates on the best quality personal workout and offers a wide variety of services The gym: Direct competition, aims to make services affordable by lowering costs and offering a more ‘do it yourself’ type of membership. UK based with 18 locations so far Nuffield: Direct competition, concentrates on a healthy way of life through using the gym. Offers features such as health MOT and private doctors Fitness First: Direct competition, offers many facilities including lounge areas to hang out before and after workouts and a creche for children Leisure Connection Ltd: Indirect competition, provides management for leisure centres, works with many companies Bannatynes Health Clubs: Direct completion, over 60 clubs across many locations, designs programmes for consumers as part of induction DE VERE VILLAGE: Not direct competition, extension of village hotels, offers personal trainers and cardio classes, values include “fitness at your own pace,” trying to meet a middle ground in the market by offering a fully equipped gym to consumers looking to relax DC Leisure Entertainment: Offers fitness instructors and basic equipment, focus is exercise and fun on a one-to-one basis LA Fitness: Direct competition, intensive workouts and personal trainers, large chain, emphasis on personal training, offers free three-day membership + no joining fee for one month DW Sports Fitness: “Buy 1 years membership, get 2 months free.” Direct competition, offers best equipment and personal trainers, focuses on improving image, first website to acknowledge that people get bored after joining the gym and leave. Has a shop and a direct link to “special offers” Recommendation Virgin Active has a strong customer base covering many areas of the market. Recommendations are made to strengthen customer relationships and re-position the product to a more ------------ and -------------. These recommendations are: Product Theme days- An intangible service that emotionally and psychologically appeals to customers. Certain days during the year will feature a special theme that will help create a better atmosphere within the health club. When cultural or religious events occur, such as Easter, Eid, Chinese New Year, etc., Virgin Active will decorate the health club in celebration. This will make a wide range of customers feel more at home, and will give Virgin Active a unique advantage through an exciting atmosphere. The aim is to make give a unique feel to the gym every month or so using themes that will highlight special events in the lives of consumers. These events will be publicised using leaflets given out to customers, which will also highlight competition dates. This information will also be available through the website. If there are clashes between two events, there will be a policy of dividing the different sites to hold particular events. We will also make amendments to the cafe menu and make special food available for theme days. Moreover, the main idea is to give customers a good impression when they enter the clubs as theme days will change the appearance of the environment and be accompanied by competitions. Competitions- Competitions will take place every month in each outlet to stimulate customer interaction. These competitions will be optional; members will not be required to participate. As it is unlikely that all members will attend events, there should be enough space to run these competitions. Teams of four to six people– any new members who arrive late and want to join will be assigned to a group– will compete every month for the ultimate prize given at the end of the year. The prize will be a week’s holiday to any country of their choice with all expenses paid and ?500 worth of spending money each. This prize is a way to give back and thank loyal customers who have attended competitions with Virgin Active. Competition activities will differ each month, but will be based on services offered at the gym. For example, in January it could be a competition related to weight-lifting, and in February it could be a swimming competition. This is so that every member can participate without facing consistent disadvantages. It will also allow customers who typically stick to a single activity such as swimming to try a wide variety of activities. On competition days, the gym will close early in the afternoon, and then re-open in the evening. Another interactive feature will be available on the website when customers give Virgin their details and receive a username, which will allow them to access a league table. This will allow them to see which team is leading the competition. This will also allow Virgin Active to update members on special offers using direct marketing, and encourage customers to use the website, which may attract them to other areas of the gym. When customers login, there will be a forum where users can leave comments and interact with each other, or discuss the competitions. This idea is likely to enhance customer loyalty and help retain customers, as it is unique to Virgin Active. Participation in competitions will be completely free of charge to show gratitude to loyal customers. Alongside the grand prize, this will attract members to participate in the competition. No extra staff will be required to help run these competitions, as current Virgin Active staff are capable overseeing the implementation, and this will strengthen the relationships between employees and customers. The hope is that each team will appoint a leader who will organise cooperation among team members and increase motivation. Marketing Communications Sales Promotion - Week’s Free Trial Many competitors offer free trials, often with a one-day duration. In order to keep up with the competition, Virgin Active should offer a week’s free trial, because one day is not long enough for a potential customer to get a feel for a health club. This one week trial will be free of charge and is purely designed to attract the attention of potential customers. By using a week’s free trial, people will be able to adjust to the environment and develop a routine within the health club; this is not possible with a one-day trial. During this free trial week, potential customers may even make new friends, which will benefit the health club as social attachments are just another reason to stay at a health club and purchase membership. The one-week free trial will be available at every Virgin Active health club. To qualify, customers simply come into a Virgin Active health club, state that they would like a one-week free trial, provide their details, and then begin using the health club services. After providing their details, people will immediately have access to the club for one week without paying for membership. On the first day of their trial, they will get a tour of the facilities. After their week-long trial has ended, if they wish to join the club full time, they will be required to pay normal membership fees. If they would not like to pay for membership, they can no longer continue using the club services. This trial is only available once per person. These details will be disclosed at the time of signing up for the free trial. Digital and PR – Facebook and Twitter A Facebook page and a Twitter account will be set up under Virgin Active’s name to enable customers to leave feedback about the activities held at Virgin Active clubs. This will also allow customers to recommend and vote for theme days that they would prefer. This can help increase customer interaction with the company and also allow Virgin to update them on the news and products offered by them. Additionally, if a customer likes or comments on an activity, other potential customers can be reached effectively. This can help create “word of mouth advertising”. However, Virgin Active should continuously monitor the activities and respond to customer comments and suggestions in order to avoid any negative image being developed. Read More