Business Strategy

Master of Sales: Leadership in a Price Sensitive Market

Everything that Frank Pucher says is infused with enthusiasm and character.

They show up in his business of twenty-one years, 121 Fitness in Roseland, NJ. He has a client base that is long-lived and he is not cheaply priced. “I ask my clients to invest in themselves and five things: sleep, breath, hydration, nutrition and movement.” He has eight employees who are well paid with benefits like a 401k to which the company contributes. His client base is half men, half women.

Frank’s business is in the health and fitness market. If you’ve been a lifetime gym rat like me, you know that pricing in that sector is a race to the bottom. The first gym I joined in Boston years ago was $75 a month with full amenities: 2 rounds of machines, free weights, exercise classes, towels, lockers, sauna, steam, 8 squash courts, and a bar, a real one. Today you can join a gym for $10 a month (Towel? Nyet!), but please don’t take serious direction from the “trainers”. They may injure you and for sure they won’t be there long; read the release you signed upon joining.

Frank does not pay attention to competitors.

Here’s what 121 Fitness can teach executives in any industry about leadership in a price sensitive market.

  • Standing Out = Connection with Clients

Central to their investment, Frank asks both clients and employees to work with him on movement and soul to achieve a better life. When you walk into his business, it does not look like your typical health club. Employees have conversations with you. There are no steroidally enhanced humans grunting at weight benches or manic exercisers pitching truck tires around. There is a variety of equipment and training modalities being used by clients and trainers in a very focused manner based on the client’s goals. Interestingly, in NY Times, a research study regarding types of exercise routines, suggests that “going hard”, as in aggressive weight lifting, may not be the best option for long term brain health.

Client retention is based on recognition of the health dividend and the reduction of bad choices. For some few clients, that would be enough, but as consumers we both expect value for our money, and as humans we respond to appropriate and singular attention. Connection.

Frank asks himself and his employees to have “conversations” with all clients in the facility, but more pointedly, to text five clients during the week, take 5 clients (with spouses or partners) to dinner a year and send handwritten notes. The communications may be motivational or a discussion, but “they are about the client, not about us. No shop talk.”

In truth, would you fall off your chair if you received a real note from your dentist?

The main digital connection is tracking movement and health with clients through whatever device they use, Fit Bit or other, so that Frank and his team can track metrics and continue improving the clients’ wellbeing.

  • Coached, Not Cloned Employees

The second half of the gross profit equation is built on employee retention. Most business owners manage to the needs of their businesses. As a result, employee and management interaction is structured about what the employee should do to better the business. And, of course, what the employee is not doing (well) for the firm. Usually dreadful, whatever polite language you use and leads to employee turnover, driving up costs: related replacement expenses, such as advertising, interviewing and training time, and possibly the loss of loyal clients and their revenue.

Frank’s approach to coaching is other directed, again. “I don’t want clones and coaching is not about my needs. I want my people to achieve what is significant to their lives, and then they will stay on.” He also asks them to go away for five days for personal development – theirs, not the business’s or his.

Clearly, Frank’s business is positioned for the future. Consumers are far better educated about the benefits of nutrition for themselves and their children, and demographically, the number of people who are contemplating retirement, and want to stay healthy during that time, is rising dramatically. All good omens for Fitness 121.

Thanks for the conversation, Frank! Now do 5 more. Just kidding!

Cross Industry Briefing Points

  1. Differentiation in any market requires specific, noticeable actions of value to both clients and employees that achieve workable share and retention;
  2. Differentiation supports premium pricing even in a market where you have very low priced competitors. Many firms think, but do not outwardly prove, that they are offering valuable differentiation services that support premium prices when their actions do not support real value, hence price. Highly valued, unique actions directed to clients are “value adds”, not product/service benefits. Do not confuse them.
  3. Both client and employee retention are positively linked to better than average profitability. If you want to manage your P&L better on the revenue and gross profit lines, you must hire the right kind of workers and provide clear leadership on their performance. Simultaneously, when a prospective or current client is openly and aggressively interested in ‘getting the best deal (meaning price)’, complains a lot, and never refers any new clients, they should be directed to your low priced competitor. This is called “harvesting” in marketing terms.
  4. A business can compete successfully as the low priced alternative if all costs are reduced and managed aggressively, such as property costs, wages and marketing expenses, among others.

About the Author

Chris Filip is a business development expert improving revenue and gross margin results for B2B and professional services firms. She is an active speaker, published author and media commentator on all aspects of competitive strategy.