The first Northeastern location of a LifeTime Fitness facility opened this weekend in Northern New Jersey only a few miles from where I reside. Watching the progress of the company as it built the fitness club and its customer base has been a lesson in superb retail marketing.
Beginning earlier this year, in the summer, the advance party of LifeTime employees began to launch direct mail shots and fulfill them from a storefront office located a mile or so from the eventual facility site.
Word began to spread among members of the fitness club to which I have belonged for some 25 years.
Lifetime facilities come in four levels of quality, but all are geared to family fitness and offer a desirable mix of activities, including several swimming pools, racquet sports, and large exercise spaces with an equally large quantity of machines.
Dwarfing even the local YMCA's in size and range of services, the Lifetime facilities do for the communities into which they enter, and to the existing, small-scale fitness clubs, what Home Depot did for these communities in hardware. And, of course, to the small, old-line hardware store.
You might think the Lifetime fitness clubs are impersonal, being as large as they are. Certainly, the owners and manager of my longtime fitness club, and others, hope so. And warn their members of the lack of friendly, familiar staff at the large new facility.
But this isn't so. In fact, far from being cold and impersonal, the staff of the newly-opened Lifetime Fitness facility has clearly been thoroughly and well-trained in cheerful, courteous, friendly service.
The things that the firm has done right are easily enumerated. They have chosen two sensible locations in the area, which is one of the more densely-populated, higher-income sections of the state, but underserved in terms of fitness facilities. Their price points and service offerings provide a compelling value propositions for middle-income and higher families.
No doubt the firm's national scale, use of standardized club designs and their own construction company serves to put them in a position of having significantly lower costs than a smaller, local club would have for the same physical facility.
The staff are all customer-focused, fit-looking and efficient. Far from being overwhelmed by the size of their membership base, they seem to connect well with their customers. The woman responsible for the metabolic analysis and services remembered me, though we had met only once, for an assessment several weeks ago.
As part of the opening process of the first location, the management held a 'get acquainted' cocktail party a few weeks ago, followed by an opening night in the facility two days prior to it opening for business.
Both events served to expose the staff to their customers, answer questions, and prospect for more members through the people who had already taken advantage of early-membership deals.
Lifetime's new facility opened for business yesterday morning in flawless style. They obviously had all of their staff on duty for the opening weekend, and it resulted in a very positive experience.
The place was packed, yet without a sense of chaos.
The building is designed so that the two highest-margin services- a cafe and a spa/massage service- open onto the front lobby. It's no secret that Lifetime aims to make fitness a business. Their employees are all trained to offer, in a polite, non-pressuring manner, additional, fee-generating services. But they also are trained in a general sense to solve problems, answer questions and generally provide a very positive customer experience.
For example, when I asked a cafe staffer about using my member card to charge items, she instantly explained how that was done, where to sign for the service, and, if one's card was not handy, what information they use to allow charging to one's account.
Current economic conditions notwithstanding, the spa and cafe were doing land office business this weekend. Between the people I saw from my longtime fitness club, and the stories of other customers in the locker room coming from other fitness clubs, it's clear that Lifetime has successfully taken significant market share from existing fitness competitors.
It's difficult to see how any local, general fitness businesses, except for the YMCA's, will be capable of prospering, let alone surviving this new competitor's entry into the fitness market.
I checked Lifetime's last five year price chart, as depicted nearby. While roughly even with the S&P500 Index for the period, the company's price soared well above the index for the early part of the term.I don't follow individual companies for investment purposes, and I don't own any positions in Lifetime Fitness. Looking at the chart, I can't say definitively why the company's stock price began to plummet late last year.
Perhaps it is viewed as a discretionary service which will be hard hit by the likely recession.
If so, the experience of the past few months in New Jersey suggests that they are far better managed than that. Nearly everyone with whom I've spoken at the new facility feels the services are much less expensively priced than what is comparably available. The staff performs in a manner that makes you feel you are watching a well-oiled retail machine at work. It doesn't take much thought to understand that Lifetime's size and growth potential allow its employees to consider career development options which are simply nonexistent in your local, smaller-scale fitness business.
I've always liked the people who own and operate the fitness club to which I have belonged for nearly a quarter of a century. Were it not for Lifetime, I would have had no reason to sample another competitor, nor plan not to renew my membership when it expires early next year.
However, there's no realistic way in which that business can compete for my fitness dollar now. Due to a mistake made locating on a wetlands parcel, the owners cannot add more fitness services, such as swimming or tennis. The relatively high fixed cost nature of fitness clubs means that just a small loss of customers will have a severe impact on my current club's profitability.
Faced with, by March, two Lifetime fitness facilities bracketing it within a few miles on each side, my old club won't be able to raise prices and retain members. They obviously can't lower prices to retain members and still maintain profitability.
On both financial and service offering bases, it would appear that the club has a relatively short future. Schumpeterian dynamics, in the nature of a large, lower-cost, more service-rich chain of fitness clubs, has irrevocably altered the local competitive landscape for fitness facilities.
And, true to form, it has resulted in more and better fitness services for the customer's dollar.
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