Virgin Active Strategy
Virgin Active is one of the largest health club businesses in the world, with over 170 clubs and more than 900,000 members spread across the UK, Italy, Spain, Portugal and South Africa. Virgin Active is currently developing sites across Australia. The Virgin Active club located at 138 Bourke St, Melbourne officially opened in May 2009. Virgin Active opened its first Australian club in French’s Forest, Sydney in December 2008. Virgin Active offers convenient class times as well as fast classes for busy CBD workers.
It boasts a range of unique facilities including a 25 meter swimming pool, relaxation spa and sauna, dedicated mind/body studio, internet cafe, a rock climbing wall and even sleep pods for a quick daytime power nap.
Current Business Strategies In an article from the Virgin Active Australia’s website that was also published in The Daily Telegraph the “holistic approach to health and fitness” is mentioned, this is the main strategy used by Virgin Active. From machine waiting times and intimidating environments to high fees and poor customer service, consumer dissatisfaction with the current gym offerings is clear,” said Mark Blackman, Managing Director, Virgin Active Australia. “Virgin Active will redefine the gym experience in Australia with world class facilities, a friendly, welcoming environment and that great value for money and customer service that people have come to expect from Virgin. Matthew Bucknall, global CEO, Virgin Active added, “With a proven formula that has seen rapid growth and expansion overseas over the last nine years, we believe that the Australian market is ripe for the new, holistic approach to health and fitness that Virgin Active offers. ” Virgin Active has made a large effort to emphasis that it is not simply a gym but a health club and that it is not a contract but rather a relationship.
The strategy shown is extremely personal and this makes their members feel important and eager to work out and spend time in the clubs.
The focus has been placed on an overall healthy lifestyle and enjoyment in achieving members personal goals, instead of a bodybuilding mindset where looks are everything. Virgin Active attempts to cater for everyone from 3 month olds in the kids club to over 55s with a ‘young at hearts’ membership. Virgin Active offers unique ‘flexible’ memberships where rather than being locked in for an entire year, new members are locked in for an initial 1 month period and after this period members can cancel whenever they like.
This is a risky strategy where members can leave anytime but has been proven to be successful in the health and fitness industry.
This is because the public are more likely to sign up if they know they can get out if they are not satisfied with the service on offer. This puts pressure on Virgin Active to perform and provide great service for their members in order to retain numbers. Strategies have been implemented to encourage members to consistently workout and enjoy themselves. French’s Forest has 160 classes a week which caters for most. Floor staff are always on hand to help members with any difficulties and to give advice.
Assessments/programs are developed for every member and evaluated every 6 weeks.
Competition Fitness First and all other local sports and health clubs are competition and a threat to Virgin Active. Although at this stage they should just be looking to establish themselves as they only have 2 clubs in the country now which is not nearly on the same scale as Fitness First. Virgin Actives competition does not share the same holistic view of health and fitness. Fitness First for example have no obligation to their members once the sign up process is finalized because members are locked in for a year.
This puts less pressure on other clubs to perform in the short term but in the long term members will leave in order to receive a more personal service such as what is on offer at virgin active. Virgin Active employs all personal trainers on a permanent basis whereas Fitness First personal trainers all work for themselves and pay a percentage to Fitness First.
This is an advantage to Virgin Active because they have used strategies such as the offering of a free personal training session if a member has not been in the club for two months, and free updates of programs every 6 weeks. Pricing policy Exact prices are:
Joining Fee: Standard $125 Club-V (kids club) $25 Weekly Rates: Flexible (18-55) $23. 95 Student starters (16+) $19. 95 Young at hearts (over 55’s) $15. 95 Club-V $8. 00 The pricing policy/model is one that members should receive value for money and should reflect the level of service provided.
These prices are slightly more expensive than other health and fitness clubs/gyms so Virgin Active is taking the responsibility to satisfy their members through providing a different kind of service. Virgin Active is required to continue selling to members through every experience they have within the club as they have the option to leave as they like.
Inputs Initial sites in development include both city and suburban locations. Virgin Active is seeking the very best places to build, focusing on convenience to customers including sites with large spaces and parking facilities in the suburban locations. The design of the clubs will be truly unique with spacious layouts and plenty of natural light to allow members to be fully engaged and motivated by the atmosphere around them. Specific features will include 25m lap pools, distinctive dedicated studios for mind and body classes, and innovative relaxation spa zones.
Other inputs are all the staff employed to work in the club, cafe, people skills and a culture of health and fitness knowledge. The Virgin brand itself and the success of Richard Branson is a major input for this business because it is recognized internationally and renowned for a different kind of service that is more personal where value for money is received. Outputs Outputs that Virgin Active creates are a friendly and positive environment through hiring specific staff that enhances the customer service provided. As is the healthier lifestyle that members receive through being involved in the club.
Whether members come in everyday or just every now and then it will still have a positive impact on the overall health and well being of members.
World class facilities is another output created with the inclusion of swimming pools, air con, industry leading equipment and the latest range of group classes. Great value for money is the output used to lure potential members to the club with similar prices to competitors like Fitness First but offering a much better overall service. Growth Overtime In an article from the Virgin Active Australia’s website that was also ublished in The Daily Telegraph the following was mentioned concerning the international growth of Virgin Active. Already a major player in health and fitness in the UK, Italy, Spain and South Africa, Virgin Active has made a significant impact on the industry since its inception in 1999. It is now one of the largest health club businesses in the world, with over 170 clubs and more than 900,000 members. In 2007, the company enjoyed its eighth continuous year of growth, with reported revenues of $658m (? 313m) and EBITDA (earnings before income tax and depreciation) of $152m (? 73m) during the calendar year.
It is still very early for Virgin Active Australia as its first club at French’s Forest, Sydney was opened less than a year ago on the 15th of December 2008. Although it has been set up with the international formula which has proven to be a success with huge growth since 1999 for Virgin Active internationally. Changes that have occurred in the industry structure The move from regular gyms to health clubs has been the most evident change in the health and fitness industry. Health clubs place a larger emphasis on a healthy lifestyle rather than simply lifting weights and going for a run.
Health clubs can largely be seen now as leisure facilities in terms of swimming pools and sauna’s being included in many health clubs.
Parents can now enjoy a coffee at the cafe while kids are in kids in club V or various other creche facilities. This alternate business model has produced a more intense competition. Select one of the following business strategy theories: o Understanding the value chain. o SWOT Analyses. o Five Forces Analysis.
o The Balanced Scorecard. o Blue Thinking vs Red Thinking. o Product Life Cycles and the Ansoff Matrix. 3.
Apply the principles outlined in the first part to analyse the chosen sports business or industry.
This report will use the 5 forces analysis tool in order to determine the competitive positioning of Virgin Active in the current health and fitness market/industry. This analysis has revealed that there is quite a lot of competitive rivalry among the industry at both a large and small scale. Both the supplier and buyer power lays primarily with the members. The local environment has proven to be a fair substitute, although this may not be the case with new clubs if they are based further inland and not near the beach.
Porters 5 Forces of Competitive Position 4. From your analysis of this sport business, critically evaluate its current business strategies.
Furthermore, suggest future direction/s the business or industry could take justify the reasons. Virgin Active’s current business strategy is one of influencing change within the health and fitness industry by providing a holistic product/service that attracts customers ranging from 3 months old in Club V (creche) to 55+ with specific young at heart classes provided. Staff is trained to interact with all members on a personal level.
Future Directions: Takeover Fitness First: When Virgin Active begun trading in South Africa they thrived by taking over the health and racket chain which had a hold on the market much like the hold Fitness First has on the Australian market. Takeover is a great option because the sites have already been selected and set out by Fitness First.
Saturate where the demographic is correct such as near the beach and high population areas. This makes advertising easier in that local papers are able to reach your target market as well as wider range television advertising.
Acquisition local fitness businesses that have 5 or greater sites because it will increase Virgin Actives market share quite rapidly. The experienced staff of these business should be kept and trained in the Virgin way of great customer service and more personalized experience. There are only two clubs in Australia at the moment therefore more clubs need to be built quite quickly in order to build the business capacity, sites should concentrate on the central business districts.
Loyalty programs should be developed between the different Virgin businesses. For example Virgin Active members receive cheaper flights with Virgin Blue.
A frequent user points system should be developed to encourage members to always attend the clubs regularly. Points may be accumulated every time the club is entered and may be used in the cafe for example. Branded merchandise should be developed such as towels, water bottles and hats to create greater brand awareness throughout the fitness market that is always growing.
The sponsoring of sporting teams has proved to be a great option for businesses looking to gain exposure and reach a broad audience. As Fitness First sponsors the Cronulla Sharks and the NRL has had record crowds this year despite bad behavior by players off the field.