Goodlife Fitness Case Study

Situation Analysis

Goodlife was established as a sole proprietorship in March of 1979, by David Patchell-Evans. The company's goals are to provide the best in equipment, facilities, and services with a well trained staff. The goals are based on high-quality service with proper education and training, superior cleanliness, and various programs. The head office is located in London, Ontario, numbering roughly forty employee personnel. The sole purpose of the head office is to provide leadership and support for the franchises and company-owned clubs. Goodlife fitness has reopened its Kitchener Fitness Club location with a larger facility which includes improved equipment. With Goodlife allocating these funds to the Kitchener location, management hopes to improve its customer retention rate to see a return on their investment. The Kitchener-Waterloo area has around 15 fitness and exercise clubs serving a population of about 450,000 people. The four main competitors for this customer base are two YMCAs in both cities, an International Family Fitness Center located in downtown Kitchener and Popeye's Gym which is also in Kitchener. All four competitors offer similar programs, have equivalent facilities, and comparable membership rates.

SWOT Analysis - Internal

Strengths

* Goodlife has a strong corporate culture and philosophy. David Patchell-Evans, who is the founder of Goodlife, started the fitness club business based on his rehabilitation experience. His philosophy is that health and fitness provide a satisfying life and fostered a lifelong to people. He started Goodlife University and by teaching the company's philosophies, training skills, and computer program skills, all of Goodlife's staff learns the company culture.

* Goodlife provides various compensations and opens new career paths to all employees. If each employee gets eight new customers a week, he or she will receive a bonus. At Goodlife they encourage and motivate their employees.

* Their revenue is increasing. In particular, the growth of their revenue from June 1999 to March 2000 is sharp, it increased approximately 10 times from the beginning to the end of that period. Therefore, they can expend advertisements to acquire new customers or to hire new employees and prepare various programs and price lists.

Weaknesses

* The biggest problem Goodlife has is the turnover rate of their customers. Although the number of members at the end of each month is increasing, retention rate per year is decreasing monthly.

* The number is shifting from 63.5 percent to 56.4 percent in the year from March 1999 to March 2000. In particular, the turnover rate of part-time employees is higher than that of full-time employees.

* At the same time, a ratio of membership revenue shifted from 89.9 percent to 83.3 percent. In the past, Goodlife mainly hired people who were studying Physical Education and Kinesiology in school. However, most of these employees transferred to different jobs after the economy rose in the late 1990s. After that, even though Goodlife changed their hire policy, they can't keep employee relation.

SWOT Analysis - External

Opportunities

* The Canadian fitness market is growing at approximately 6 percent a year because of demographic factors such baby boomers.

* Canadians are aware of the importance of exercising. Canadian Fitness and Research Institute's report reveals that 63 percent of adult Canadians, over 18 years old, believe that physical activity is effective in preventing heart disease or other chronic conditions.

* Fitness industries estimate that about 10 percent of Canadians belong to a health club. Therefore, Canadian fitness market is expected to grow.

Threats

* The first crucial issue is Customer churn. Although many Canadians recognize the importance of exercise, most of them do not exercise. According to the study, other physical recreation activities such as walking are more popular than fitness clubs and 86 percent of Canadians at least walked as physical activity once a year.

* Recruitment to make up for losing employees is quite hard. Even though they put an ad for new hires in the local paper, the economy is improving and the local unemployment rate is low in Kitchener. They had difficulty receiving applications from high-quality candidates.

* Competition is intense. There are 15 fitness and exercise clubs in Kitchener. Four in particular are Goodlife's major competitors, which are two YMCA clubs, The International Family Fitness Center, and Popeye's Gym.

Problem

The main problem in this case is that Goodlife does not know what its customers want due to an insufficient relationship focus. This is directly related to Provider Gap 1 of the Gaps model. A symptom of this problem is the lack of customer retention that the Kitchener Goodlife Fitness Club has. Sixty percent of the members of the Kitchener Goodlife Club are irregular and only go to the club every once in a while, leading these customers to not renew their membership or to cancel it before it has expired.

Sub-Problems

The employee turnover rate is high at this club because the staff is mainly part-time students that leave the club when they have completed school. Also, due to the economy, it is difficult to attract high-quality full-time applicants as staff.

Another sub-problem is that if members are not satisfied they will tell their friends and family negative comments about Goodlife which results in them joining a different gym; this is negative word-of-mouth and can be quite unfavourable to a company.

Alternatives

1. As the manager, Krista Swain, had suggested, using the swipe card to collect information about their members is a great solution. As a club, they will learn their member's different fitness habits and how often they go to the gym.

a. Advantages:

i. The club will be able to organize their customer data and learn from it how to better please their customers.

ii. Goodlife will be able to analyze their customer's fitness behaviours and tendencies.

iii. The information will be on the computer for the employees