The gym business model – exploiting behavioral economics in all the wrong ways

If you need an example of behavioral economics for one of your classes, you can never go wrong with the gym. Men’s Journal explains the standard gym business model:

Commercial health clubs need about 10 times as many members as their facilities can handle, so designing them for athletes, or even aspiring athletes, makes no sense. Fitness fanatics work out too much, making every potential new member think, Nah, this place looks too crowded for me. The winning marketing strategy, according to Recreation Management Magazine, a health club–industry trade rag, focuses strictly on luring in the “out-of-shape public,” meaning all of those people whose doctors have told them, “About 20 minutes three times a week,” who won’t come often if ever, and who definitely won’t join unless everything looks easy, available, and safe. The entire gym, from soup to nuts, has been designed around getting suckers to sign up, and then getting them mildly, vaguely exercised every once in a long while, and then getting them out the door.

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  • http://twitter.com/JustinCFPCDFA Justin Reckers, CFP®

    This is a great observation about the power of behavior in decisions to spend money. It is an even more powerful sales tool when the people who never use the facility put there monthly dues on direct debit so they never have to see the money they are wasting.

  • Bhuvnesh Nagpal

    The same is true of 25-year annual holiday schemes – people get sucked in with the lure of exotic locales, but do not really holiday every year, and the companies thrive on such “inactive members

  • Omnitechbusiness

    Does anyone know of a site or business for Key expense category percentages in the Fitness Gym industry (i.e. Anytime Fitness)? IE, advertising, facility cost, payroll, etc?