Daniel Nyiri and his wife Nina founded 4UFitness in 2014. Sinking in a red ocean with just a handful of new clients each month, they now have a hard time scheduling the booming number of customers. Daniel tells us how he applied a blue ocean approach to shift from red to blue in the fitness industry, and the huge impact it had on his company.
How competitive is the US fitness industry right now?
The US fitness industry is a very red ocean with over 35,000 health clubs competing for customers. Just in our street, W. Kennedy Boulevard in Tampa, Florida, there are 68 personal training studios. Gyms keep opening every day – they pop up like mom-and-pop shops. And all of them have the same offering, even the big ones like Ali Fitness, Equinox, Gold’s Gym, Anytime Fitness, Snap Fitness, etc. Most of their trainers are 1099 (independent contractor status) and they get a bonus for each new contract signed.
Each gym strives to sign you up to an unbreakable contract of between six months to two years. And once you signed your contract, you rarely get the personal training you hoped for. The trainer is usually different for each session. There’s hardly any follow-up, and therefore, no result. Fifty percent of our clients are still paying some sort of personal training fee every week to another studio because they got caught with a contract.
What inspired you to take a blue ocean approach?
First, the red ocean in the fitness industry. We had two gyms and only about eight leads a month for both studios. And it was the same for all the studios I knew. I needed to do something that nobody else was doing.
Second, I always had a passion: to do things differently. My business coach recommended Blue Ocean Strategy about a year and a half ago. Reading this book gave me the roadmap on how to break away from cutthroat competition in the fitness industry.
Daniel Nyiri and his wife Nina. Their blue ocean shift had a huge impact on the company.
Moving Away From The Competition in the Fitness Industry
How did you create a blue ocean shift?
As we applied the blue ocean approach, we realized how much of what the fitness industry competes on doesn’t make sense from most people’s perspective. We set out to change that, to break away from the competition and create a blue ocean. Consider the differences using Chan Kim and Renee Mauborgne’s four actions framework and its four questions: which factors should be eliminated, reduced, raised and created.
What we eliminated: Long and short-term contracts – almost everyone hates them. So in our studios, there is no contract.
What we reduced: Time. People are increasingly stressed for time. They want to work out but typically find themselves hard-pressed to squeeze time in to stay in shape. So people often don’t end up going. We didn’t want that to happen. We are in business to make people healthy! So, our workouts are only 20 minutes, and only twice a week.
What we raised: The experience. Other gyms use 1099s for their trainers. What that means is that the trainers are not employees, just contractors that often come and go and are not perfectly aligned with creating the best gym experience. In our studios, by contrast, the trainers are employees and we really care about them. Our trainer salaries are almost double compared to a manager salary at other gyms. That’s because we want them to be committed so that they give an amazing experience to our clients every time.
What we created: We created two important factors. First, we give a 100% guarantee. Either you get results, or you get your money back. For clients, that creates tremendous trust and goodwill. They believe in us, which results in a shorter lead time between a person showing interest in our gym and becoming our client. And as our employee trainers are well paid and well treated, they have a strong incentive to give their all, so clients don’t ask for a refund. The result: it is very unusual that a client asks for their money back – I would say around three a year.
Second, we developed a high-tech invention, the full-body electric muscle stimulation suits that allow you to get a three-hour workout in just 20 minutes. And you only need to come twice a week. We are really giving back time to people as we help them get and stay fit.
What are the results of the new strategy?
We now get hundreds of leads a month with an absolute minimum of 200 per studio. We have a receptionist service that can take up to 50 simultaneous calls, but we get paralyzed sometimes because we receive so many phone calls a day we cannot handle it.
That just didn’t happen before we took a blue ocean approach. In the past, I had to attend all the business chambers and networking events, to potentially find one client. Since making a blue ocean shift, I have not been to any of these as we are getting so many leads. We even have a hard time scheduling in new customers!
Our studios are still growing significantly in revenue. The combined growth for all of our studios is already 158% higher this year compared to last year’s total revenue, which means we’re expecting about 350% growth from 2016 to 2017!
We keep hiring more and more people. Before we started the blue ocean approach, we had one employee. Now we have fifteen employees. It’s a huge jump. Blue ocean strategy had a huge effect on the company and the way we do everything within the company.
Thanks to our 20-minute session, our trainers can see two or three times more people than in gyms that offer 45- 60-minute sessions. Therefore, we generate more revenue per employee even though our employees are paid higher than in any other gym. We have a good return on that investment.
Our aim is to have a hundred studios in the next five years. This may sound ambitious, but we are partnering up with different suppliers to make this happen and to keep the costs of building studios down. All our studios are furnished and ready in less than a month and the total cost remains under $40,000. We make them profitable within a month. We manage to keep the cost down because we find the right people and they all come at the same time. Everyone thinks that it takes weeks and hundreds of thousand dollars, but it doesn’t.