Differentiation As Key to Success in Business Strategy
Differentiation is what determines whether a fitness or health facility distinguishes itself and grows to have a loyal customer base or becomes one among the many ones competing for the same customers in the same way. Any operator should strive to distinguish itself from its competition to grow sustainably.
About 9 Min.
Why Differentiation Matters
The legendary business strategist Michael Porter in his seminal work “What is Strategy?” explained the role of differentiation for a robust business strategy (Porter, 1996). According to Porter, there are three main principles to consider in strategy:
- It’s about what you do differently than the competition, only this way can you escape a competition merely based on price
- It involves tradeoffs, deciding what not to do is equally important as deciding what to do; as some activities might be inherently incompatible with one another
- It’s important to create a fit between the different activities that you decide you will do so that they reinforce each other
This of course, also applies to the fitness and health industry: First and foremost, for many, is the realization that they are not alone. A few hours online reveal several other fitness centers with similar programs and applications, better or similar equipment, similar branding, and sometimes to the horror of many, cheaper prices.
The first instinct to kick in, and rightly so, is to make your offering as competitive as possible. This strategy usually revolves around trying to improve the offering or reduce prices as much as possible. But does this approach work out?
Since many fitness and health facilities share a similar vision and dream, a few more hours online reveals that one is also not alone in the dream of making one’s offering more competitive. Your competitors are also likely to improve their offerings and try their best to keep their prices as low as possible. This begs the question, is there another way to compete?
What Does Differentiation Mean in Your Business Strategy?
Maybe the answer to growing your fitness or health facility sustainably neither lies in making it more efficient, chasing the latest trends, or in decreasing costs but in making your fitness app and locations as unique or as different as possible, hence differentiation.
Differentiation is a business strategy that involves distinguishing the product or brand a company offers from other products and brands before the consumers' eyes.
Differentiation has helped establish brands in all other industries, the fitness industry not being an exception.
Why You Should Consider Differentiation For Your Fitness Center
Making your business stand out and establishing your brand should be among your most important goals from now on. This is because including differentiation in your business plan can go a long way in helping you grow. Some of the benefits of differentiation include:
1. Reduces Price Competition
According to Statista, the number of health facilities in the United States increased from 30,022 in 2008 to 41,370 in 2019. That’s a plus of more than one-third in just a decade; this pattern repeats itself all over the world. The definition of a fitness and health facility has widened in these few years and now also includes different kinds of competition, such as yoga, athletic, dance, and group exercise facilities.
The increase in competition only means that for each service you offer, there will always be dozens of competitors offering that service for lower prices and/or compromised quality. That makes it imperative to make your customers look at your facilities and your app in other terms outside of pricing but rather through the lens of differentiation and value.
With differentiation, you can brand your business and craft the public and consumer's perception of your brand, e.g. around quality service, health instead of aesthetics, technology, customer service, and other aspects of your business outside the membership fee. This makes it difficult for competitors that use the low-cost, low-quality approach to compete for your members.
2. Increased Margins
Differentiation, if done correctly, can help increase the margins of your business. The fitness industry is becoming more competitive, making it difficult for businesses to stretch their margins by increasing subscription costs or having more expensive programs.
Differentiation can help you professionalize your gym brand as a high-quality facility hence attracting consumers that are willing to pay for better programs helping you in turn to increase your margins. After differentiating your products, you can convince your consumers or attract consumers who prefer sticking with quality and compromising cost, avoiding detrimental price-based competition.
3. Product Uniqueness
Differentiation in the fitness industry can help you draw a line between your offering and the offering of your competitors.
Without differentiation, you risk the chance of both your existing members and prospective members perceiving your service as something that has many substitutes in the market and one that they can get for way lower prices.
Using a differentiation strategy, your business can focus on what makes your products different or unique from what others offer in the market. This could be a clear focus on individual health goals, service, or even an improved experience thanks to technology.
After pursuing a differentiation strategy consistently, your existing and prospective members may start viewing your products not with their similarity to the competitors but with their differences - which is a great achievement and advantage in the competitive marketplace that is the fitness industry.
4. Creates Brand Loyalty
According to a Harvard Business Review study,
acquiring new customers is five to twenty-five times more expensive than retaining an existing one.
This is true for the fitness industry as it is for any other industry.
The lifeline of any fitness and health facility does not lie in the new, young, motivated, and savvy customers who are trying fitness for the first time but in those older, consistent, and slow customers who have been visiting the fitness center for years. That makes creating brand loyalty a priority for any fitness center that wants to grow.
Differentiation enables your business to separate itself from other fitness facilities, corner an attractive segment of the market, and create brand loyalty from those customers.
Differentiation also enables a fitness center to balance competitive pricing that brings in newer members and quality that keeps loyal ones happy.
5. Narrows Down Your Target Audience
According to IHRSA, more than 71 million Americans visited health clubs in 2018 alone, which set the highest record since they started recording.
As more and more Americans discover the benefits of fitness and staying healthy, fitness centers' target audience has expanded widely these past decades. Any facility today has clients of all ages, genders, health purposes, and motivations.
Differentiation is important for fitness centers as it enables a fitness center to develop its niche, corner a market segment, and narrow its target audience.
Narrowing a target audience enables a gym or fitness center to perform effective targeted marketing and allocate more resources to issues your customers value the most.
Do Your Facilities Stand Out?
Differentiation plays a vital role in the success of any fitness center. It's not only about better or faster; it's about what makes you different. That's why your digital strategy and your app should also focus on letting you differentiate on top of a robust platform. For EGYM clients on our Enterprise platform, we offer advanced customization options supported by our dedicated Professional Services Team that includes developers and project managers to help your digital strategy reflect the differentiation that your business pursues in the real world.