Sometimes it needs a fresh pair of eyes to spot the obvious problem and when Andy Coslett, the former chief executive of InterContinental Hotels, was appointed to the same role at Fitness First in May 2012, he noticed an immediate issue: where was the customer experience?
Britain’s largest, and oldest, fitness chain was on the brink of financial collapse. It was rescued through a combination of a £550 million debt-for-equity swap – which gave American investment fund Oaktree Capital Management a majority stake in the business – and a company voluntary arrangement, that closed almost 70 gyms and reduced its rental bill.
But the gym membership model was broken. Customers were disillusioned. Tempted by special offers and the allure of a healthy lifestyle, they faced a reality of ambivalent staff, tired premises and outdated equipment and contracts that were difficult to cancel.
Coslett, with his background in the hospitality sector, understood their pain. ‘We were not a company with customer service at our core,’ explains Mark Hutcheon, director of communications at Fitness First, who likens the old model to a ‘dictatorship’.
He adds: ‘Nobody thought to ask what the customer wanted. They signed up, and we left them to do it all themselves.’
Fitness First dates back to 1993, when founder Mike Balfour opened the first club in Bournemouth with a vision to make ‘fitness affordable to everybody’. It was the first fitness chain, providing a rival to country clubs and municipal facilities. ‘We created the category,’ says Hutcheon. ‘The embedded model was to lease a building, put in equipment and sell memberships. There was no competition and no expectations.’
Within ten years, Fitness First had expanded into Europe, Asia and Australia and by 2004 had one million customers worldwide. Attracted by the regular income of monthly membership fees, private equity operator BC Partners acquired Fitness First in 2005 for £835 million.
The chain embarked on a major expansion plan, attracting new members with discounted offers that served to upset existing ones. ‘It was all about getting sales,’ concedes Hutcheon.
Ten years after opening in Australia, Fitness First had seen 80 per cent of the adult population through its doors, but customer satisfaction was low, loyalty non-existent and cancellations running high.
Discussion forums were filled with customer complaints, newspaper articles highlighted strong-armed tactics to prevent members cancelling subscriptions and even the BBC’s flagship consumer programme Watchdog investigated Fitness First’s sales technique.
But there was a corner of the Fitness First empire where the chain was booming and customer satisfaction was high – Asia. The gyms were in prime locations, such as shopping malls, and were not cheap to join, but the staff offered a personalised service and customer loyalty was at an all-time high. ‘Members felt truly respected,’ explains Hutcheon. ‘They received high quality customer service.’
When Oaktree Capital Management took over Fitness First two years ago, it provided the opportunity to correct past wrongs and, in doing so, create the first global gym chain.
And by taking the debt off Fitness First’s balance sheet, the transaction allowed the chain to start afresh without the ever-tightening noose of rising interest charges requiring aggressive new membership sales tactics.
Rebuild from the base up
‘We had to rebrand from the base up,’ explains Hutcheon. ‘How do we start to rebuild customer loyalty? How do we start that journey? How do we understand our customers’ needs?’
Fitness First needed to understand customer motivation. Its retention number had reached 50 per cent, so for every two people who signed up, one would leave. ‘We struggled to shift it, but it had almost become the accepted industry maxim,’ says Hutcheon. For the first time, Fitness First asked why. It started to analyse every line of customer data. ‘We went outside the industry sector to understand why.'
Fitness First turned to behavioural psychologist Stuart Biddle, a professor of physical activity and health at Loughborough University. ‘We asked him to analyse why people lose their motivation to exercise,’ explains Hutcheon. Its own research revealed that while 32 per cent of UK adults plan to take up exercise in January, more than 63 per cent have abandoned their resolutions by the end of February. ‘But the really interesting truth emerged that convenience, price and location had no bearing in the long-term on whether members kept up their exercise regimes,’ he adds.
Biddle’s work also revealed that motivation to exercise is not underpinned by willpower, as previously thought, but by a range of external factors.
He found three specific psychological needs that have to be fulfilled before exercise becomes a habit. First, people have to enjoy a sense of personal growth: they need to see signs and be given encouragement that they are making progress. Second, they need autonomy to give them a choice in what they do. And third, they need to experience a sense of belonging.
‘We didn’t deliver any of that,’ states Hutcheon. ‘Once we had cracked the motivation code, we needed to bring that psychology into the way we built and ran our business. We needed to fulfil these needs of our members.
‘Andy Coslett’s view is that we are a hospitality business. People choose to come here. We needed to ask them What do you want?’
What did customers want?
Clean equipment, came the response. Free wifi. Clean showers. Cool down showers. Better hairdryers for women. Members were busy people and sometimes needed unusual help, such as printing documents. Fitness First started to train reception staff in the art of the concierge.
Members also wanted to understand the equipment, without having to ask a member of staff, so iPads featuring 30 second video demonstrations have been introduced.
Having launched an app that allows members to check exercise schedules, book sessions and swipe into clubs, Fitness First is also working on one that will offer exercise programmes for every need. ‘It will have half a million, two-minute, bespoke workouts,’ says Hutcheon. Based on an algorithm that uses the answers to five simple biographical details, the app will provide the ideal workout. It will also provide an up-to-date progress report. ‘Members input details, such as age, and it will measure their progress over time.’
These changes are being introduced against the backdrop of a major investment programme that is updating tired looking equipment and furniture, stripping out stained carpeting and revamping reception areas. Sales managers have been replaced by learning and development managers, who concentrate on skills and training.
Fitness First is even tackling membership contracts after last year’s investigation by the Office of Fair Trading. Members have new rights to cancel contracts, and terms and conditions are carefully explained to those signing up for the first time. Contract terms are also more flexible, offering different ways to join.
‘We want to be seen as the fitness leader,’ says Hutcheon. ‘This means we have to lead the industry in everything we do: setting the agenda, creating innovative products and services and showing everyone else how it should be done. We want to inspire people to get fitness into their lifestyles.’
To ensure it doesn’t slip back into old routines, Fitness First takes the temperature of online chatter on a daily basis. It tracks the number of positive comments against negative ones. From an historic low where there were about 40 negative comments for every positive one, it now has an average of five strong positive comments for every negative one. If the numbers start to slip, immediate action is taken to address the contentious issues. ‘It is a pretty good real-time indicator of how we are delivering on our basic promise,’ adds Hutcheon. ‘It is an insight into our customers’ minds.’
The gym is also creating its own online buzz. Having analysed its data, it emailed the top 15 per cent most active gym goers. ‘People got a real buzz from that sort of recognition. It is a way of sharing our data that connects us to our customers. Giving members a ‘you did it’ moment, even if it is tiny, like a high five after a workout, all helps.
‘We are raising the bar,’ says Hutcheon. ‘We have introduced key performance indicators related to customer service that are built to make our brand stand out.’
Its 8,000 staff, who deliver services to members on a daily basis, are being retrained. From basic issues, such as ensuring equipment is regularly wiped down, to simple greetings when members arrive, they are learning how to deliver the new Fitness First message.
‘We are telling staff that they have an important role to play in transforming our brand,’ explains Hutcheon. A new Fitness First Academy has been launched to train staff on the latest fitness thinking, how to use the equipment and in emotional intelligence techniques to help them connect with members. Some practices from Fitness First in Asia have also been imported across the group, such as competitions for reception staff to recall members’ names. Some achieve 1,000.
Staff are also encouraged to deliver fitness programmes in their local communities as part of Fitness First’s approach to corporate responsibility. ‘The reason we are putting time into that, is because we think it is a much more effective way to the convey purpose and values of our company, rather than above the line advertising,’ adds Hutcheon. ‘And our staff love it. They are naturally very competitive. They like to perform and are always looking for an opportunity to demonstrate their expertise, and if you can do it for a group of people, such as elderly people or inactive children, you can extend the message that getting fitness into your life is fun.’
Under the new regime, staff turnover has fallen and engagement levels have risen. And Fitness First has just completed an overhaul of its identity. ‘We are building the brand from the inside out and our brand identity needed to be refreshed,’ says Hutcheon. ‘But in terms of convincing customers to give us a second chance, we needed to change from the inside. People motivate people.’