How to Handle a Low Cost Competitor

It’s every gym owner’s worst nightmare: You wake up one day to find that giant health club is coming to town and offering memberships at a fraction of what your rates are.

Matching the lower price would devastate your profit margins, but ignoring the threat may cause your members to leave. Don’t panic. Taking on a low price competitor requires a careful rethinking of how your business operates.

The knee jerk reaction of many fitness business owners is to immediately drop your prices below the competition, and buyers will beat a path to your door. On the other hand, this strategy will land you in a price war. No one wins in a price war. rather the participants merely survive. Even if you win and put your competitor out of business, chances are you may not have much of a business left when the battle is over.

Fortunately there are some things you can do to compete without crippling your profits. That’s the good news. The bad news is that you’ll need to make major operational changes, and you’ll need to rethink how you communicate with members and clients. The changes required may not be for the faint of heart, but they’re better than the alternative.

Provide More Value

When customers prefer the lower priced of two options, it’s usually because they believe the cheaper item is a better value. To compete, you need to get the customer to value your product more than the competition’s, regardless of the price.

Customers will pay more if they’re convinced that what you have to offer is demonstrably better than the competition. Determine what it is that sets you apart from the competition and make sure you tell the world about it. If you don’t have a niche and are trying to be all things to all people, that should be your first order of business. Prospects and even current members need to understand why they should be willing to spend more on a membership at your facility.

Focus on Relationships

Now, more than ever, you need to develop a personal relationship with your members. Gone are the days of an unenthusiastic front desk staff. Gone are the days of a room full of equipment and devoid of personality. Gone are the days of an owner or manager hiding in the back office. Members and clients need to be WOWed, and more importantly, they need to feel that their monthly payment buys them more than just the ability to work out. They want to be appreciated, they want you to care, and they want to feel good about their experience at your facility.

Take Ownership of the Member’s Results

Customers will always pay extra if you take responsibility for ensuring that they achieve the results they seek. There will always be people who simply want the best price; those people will join your competitor’s business. Alternatively there will be people who are willing to pay more to achieve results; those people will choose you.
Here are a few specific ideas you can implement:

• Survey your members to find out what they feel is most important and implement accordingly
• Perform a SWOT analysis to understand the strengths, weaknesses, opportunities, and threats of your new competitor
• Evaluate your own prices. Make sure your price matches the value you offer. You might even consider increasing prices to present a higher end option
• Leverage your current resources by rallying your staff to take a stand against the new competitor. If you staff is not the team you want to take into this battle, get a new team.
• Sign members onto new term agreements (perhaps offer a $100 gift card to incentivize them)
• Change the look and feel of your facility. Clean, repaint, and even consider changing your outdated brand image

Remember, it’s never too late to become friends with your members and clients!

Whether it is the experience, the staff, the results, the programs, the atmosphere, the attention to detail, or the relationships forged, there are many unique qualities that can set your fitness business apart from your low cost competitor. Plan early, work hard, and make your members and prospects understand that your facility offers the most value per dollar spent.

Do you currently compete with a low cost competitor?  What have you done to overcome the challenge?