Planet Fitness has adopted an unusual pricing strategy in thefitness market, setting prices well below those of its majorcompetitors.. This activity is important because, according tomarketing managers, pricing is one of the most difficult activitiesto perform well, and it is essential to understand the factors thatmust be considered when choosing a pricing strategy.

The goal of this exercise is to demonstrate a creative use ofpricing to target a market segment that is not well served bycompetitors.

Read the case about Planet Fitness's decision to“go against the grain” to achieve success inthe fitness market and answer the questions that follow.

How does going completely against the grain of a typical fitnessclub strategy lead to success? That's the question that PlanetFitness appears uniquely positioned to answer. Most health clubsprovide members with vast and seemingly valuable extra amenitiessuch as child care, juice bars and protein supplements, on-staffprofessional trainers, and a broad range of fitnessclasses.¹ Others specialize in a particular area offitness, like yoga or Pilates. But many customers find the pricestoo high because they see little value in some of these amenities,or in the types of classes offered at specialty studios. Furtherreducing the value of traditional gym memberships, many consumersregard the social aspects unpleasant and offputting—whether thatmeans observing others with nearly perfect bodies posturing in themirror or listening to grunting exercisers huff with everylift.

While many of its competitors target upscale fitness buffsworking on their six-pack abs, Planet Fitness successfully pursuesan entirely different market: those who do not really enjoy goingto the gym but know they need to do so to stay healthy. Theseexercisers are unlikely to hit the gym five or six times a week,making conventional gym memberships, which demand yearly contractsand fees of $49 to $95 per month, appear more expensive on aper-visit basis. Planet Fitness's formula is different: At $10 amonth, the membership offers good value even if customers get tothe club only a couple of times each week.²

In combination with its low price point, Planet Fitness promisesa clean, friendly, laid-back workout environment featuringbrand-name cardiovascular and strength equipment. Although it doesnot have the high-end amenities its competitors promise (e.g.,pools, juice bars), the clubs maintain the key elements its memberswant: brand-name equipment, unlimited fitness training, flat-screentelevisions, and large locker rooms. Its customers know from itsadvertising that they can expect a nonintimidating workoutenvironment, or, as Planet Fitness promises, “No gymtimidation. Nolunks. Just $10 a month.”³ With its foundation inthe idea that simple is better,⁴ Planet Fitness hasbecome the fastest-growing full-sized fitness club in the UnitedStates.

For those who want a little more, Planet Fitness also offers apremium PF BlackCard membership for $19.99 a month, which promisesaccess to nearly all the clubs in the Planet Fitness chain,unlimited guest privileges, use of tanning and massage chairs, andhalf-priced drinks.⁵

In addition to these in-club benefits, Planet Fitness's growthhas been reinforced by its effective location strategy andmarketing efforts that focus on attracting new customers. Thelow-cost monthly membership makes it easy to draw new members.Because most members come in only a couple of times each week,Planet Fitness also enjoys operating efficiencies and economies ofscale, achieved by welcoming a high volume of members on any oneday.⁶

Planet Fitness treats customers like real people. What kind offitness club offers members pizza on the first Monday of everymonth, bagels on the first Tuesday, and Tootsie Rolls on a regularbasis?⁷ The kind of gym that plans to expand to1,000 locations in 2015, with an eventual goal of more than 2,000,and that attracts more than 5 million members and systemwide salesapproaching $700 million.⁸

^Q1.Which of the pricing orientations discussed in thetext does Planet Fitness most closely pursue?

A. profit-oriented.

B. customer-oriented.

C. sales-oriented.

D. premium-oriented.

E. competitor-oriented.

Q.2 Suppose that a Planet Fitness studio has fixed expenses of$7500 per month and variable expenses of $4.99 per member permonth. How many PF BlackCard members (described in the case) wouldthe studio need each month to break even?

A. 500.

B. 900.

C. None of these

D. 1500

E. 375

Q3. Based on information in the case, what level of competitiondoes the fitness center market represent?

A.oligarchy.

B. Imperfect competition.

C. monopolistic competition.

D. pure competition.

E. monopoly.

Q4. As the case explains, Planet Fitness can keep prices lowerin part because its members make fewer visits per week to the gym,thus reducing?

A.profits.

B. membership capacity.

C. variable costs.

D. fixed costs.

E. the demand curve.

Q5. Suppose that a new fitness company decided to copy thePlanet Fitness strategy as described in the case, includingmatching its prices. This new company would be demonstrating whattype of pricing strategy?

A. competitive parity.

B. breakeven pricing.

C. target profit.

D. premium pricing.

E. target return.

Answer rating: 100% (QA)

1 CSalesoriented It is a pricing method through which the majority of the market share needs to be c... View the full answer