How to Increase Profit by Targeting the Right Customers
A Business case study showing that being bad to customers can actually increase profit.
Almost every discussion about the start of a business begins with the same assumption — if you want your project to thrive, you have to locate and position a business towards its target audience. Naturally, every business starts in this position.
In the Forbes How to start a business Guide in 2023, target audience research is considered as crucial element of a business plan. Yet, analyzing and understanding a target audience are two different things. Successful businessman and entrepreneur, Jim Stengel, famously said “If you want to understand how a lion hunts, don’t go to the zoo. Go to the jungle”.
Observation is key to customer understanding. This is a story about a gym that used this logic in a way that might surprise you — being bad towards their customers.
Table of Contents
- What problem Planet Fitness faced?
- How they addressed the issue?
- Treating customers badly
- Final Thoughts
What problem Planet Fitness faced?
Originally established in 1992, Planet Fitness became one of the fastest growing gyms in the United States with their profits skyrocketing to 937 million dollars in 2022. However, the success accomplished wasn’t present at the beginning.
Planet fitness faced the problem of financial difficulties along with the highly competitive gym industry forcing the owners to close an initial gym. However, in 1994, the long-time CEO of company, Chris Rondeau, became the official partner of a business.
Seeking to overcome the financial burden that led to closing of the first gym, owners this time tried to experiment with by analyzing the demographics of their customers.
How Planet Fitness addressed the issue?
Planet fitness owners addressed the issue by dividing their target audience into two categories: bodybuilders and lifters training on a more recreational basis. Then, they analyzed the training habits of these categories.
They figured out that much larger group recreational customers didn’t come to the gym everyday training occasionally while body builders were in the gym every day performing heavy exercises.
To address the issue, Planet fitness removed all the heavy weights from the gym along with equipment body builders used the most while also installing devices in the gym that tracked the amount of noise. In particular, the owners wanted to prevent the noise coming from throwing weights on the ground and heavy grunts body builders make.
Treating Customers Badly
“Planet Fitness is no place for a bodybuilder” says a post on Generation Iron fitness network expressing disbelief on the policies Planet Fitness implemented. Starting from the negative reception by body builders, the effects of the prohibition were numerous.
In the first place, recreational customers spent less time in a gym weekly, yet they’re paying the membership fee. In that manner, gym could accept more customers in their facilities without additionally expenses of expanding their exercising spaces or buying new machines.
Ultimately, by being hostile to some of their clients, Planet Fitness managed to boost their earnings considerably. They observed their clients and found out a way address their preferences directly. However, nobody thought that prohibiting certain group of people would happen.
Final Thoughts
As stated before, observing customers and understanding their preferences is critical for every business since well-being of every business is inevitably connected to their customers. Contrary to popular belief, target market analysis is not used just for finding demographic perfectly fitting the business offers but also removing “the parts that don’t fit”.
Moreover, business can thrive by refusing to provide services to the certain elements of the clientele, as the Planet Fitness example clearly demonstrates.
Having both dimensions in head, offers a better understanding of target market research and analysis.
Learn from other’s experience by reading stories about business, work and communication ✅