Critical Competitive Capabilities and Operational Priorities
L.A. Fitness has been relatively successful since its initial opening in 1984. The brand’s strong competitive position stems from its commitment to comprehensively understanding the unique needs of each community it serves. In its early years, the firm’s competitive focus was on industry-wide differentiation (Grisso 5). The business sought to distinguish itself by offering alternative public services that motivated people to spend more time at the gym. For instance, L.A. Fitness was one of the first gyms to introduce daycare services and swim schools for young children. The strategy was designed to lure recent mothers back to physical exercise. Such distinct services set L.A. Fitness apart from other regional and country health clubs. The brand can replicate this strategy in each of its stores because it does not allow franchising. Therefore, each fitness studio is nearly similar in terms of service quality.
More recently, L.A. Fitness’ operations functions have focused on customer retention instead of customer attraction. The health club has dialled up its social media activities to prioritize campaigns that induce people to engage more with the brand and research health-related matters online (O’Reilly par1). Since the gym operates based on a membership model, social media plays a critical role in making the brand data-rich. The gym uses data analytics to know its customers by name, their motivations, and goals and establish strong relationships with subscribers. The health club has been finding ways to become more content driven to reach and engage prospective and current clientele. It can be argued that the new focus on retention instead of acquisition is another creative and strategic approach to brand differentiation.
Analysis of L.A Fitness Operation Management Tasks
The coronavirus pandemic led to drastic changes in consumer requirements, especially factors influencing customer satisfaction. Contemporary perceptions and expectations of what counts as quality services from gyms transformed with the recent social isolation guidelines. As a result, L.A. Fitness was forced to rethink some of its marketing and business strategies. The brand’s most noticeable operations management functions are evident in its customer service, supply chain management and sustainability.
Customer Focus
L.A. Fitness is highly strategic and committed to its customer service. According to Quismondo et al., a random survey of gym goers revealed that customer service is the most important factor determining the quality of a health club (12). The concern is present regardless of a gym’s business model. Foremost, instructors are considered cornerstones of customer service. Such employees should display the willingness to help people while making them perceive they are acquiring the appropriate assistance (Quismondo et al. 12). A review of L.A. Fitness’s employee selection and recruitment strategy shows that the brand only hires highly educated and experienced trainers. The business has over 10000 employees who, at one point, all work at its headquarters in Irvine, California (Wells and Ellsworth 9). In addition, the health club also outsources independent professionals to motivate and train its staff members. The approach adds to the quality levels that trainers transmit to clientele, improving the chances of consumer retention.
The reception area is also considered a crucial section of customer service since it encompasses the starting point of consumer-business interactions. Customers anticipate being met with conversations that show trust and confidence (Quismondo et al. 12). L.A. Fitness ensures that all its customer service personnel are uniformed and spread evenly within the health studio. The employees are ever present to reduce waiting time and to provide solutions. However, L.A. Fitness has extended its customer services by going digital. The fitness studio’s online wellness application provides users easy access to personalized accounts. Users can employ the app to pay their subscription bill, acquire passes for friends, check and schedule classes and reserve sports courts. The digital innovation separates L.A. Fitness from other health clubs while locking in consumers through efficient customer services. Enhancing the customer experience is one way of ensuring impactful customer retention.
While most health clubs focus on attracting and retaining the youth, L.A. Fitness uses a holistic approach to capture all members of society. The health club’s marketing strategy targets a broad range of consumers, across all life ages. According to a press release by the CFO in 2014, the brand was focusing on targeting women and older members (Wells and Ellsworth 6). For instance, the fitness studio offers a time-restricted membership program for members above 55years. The brand also has a Kids Klub with a reserved section for infants and toddlers. Digitalization of services is another strategy the brand uses to ensure its services are inclusive and readily available. L.A. ensures that all its member’s family-related needs are met regardless of location. However, it is not clear how the business is able to personalize such services, as toddlers and older people have distinct behavioural tendencies and developmental requirements. Customization of services is necessary to ensure customers experience convenience.
A subtle but critical competitive factor in L.A. Fitness is how the studio centers hygiene in all its operations. According to Quismodo et al., cleanliness is an essential customer service component in gym facilities (9). The authors used a semi-structured survey of gym participants to find that hygiene is an aspect that they would not compromise on (Quismodo et al. 9). L.A. Fitness captures this function well compared to other average gyms. Foremost, L.A. Fitness has a professionally developed team to ensure the cleanliness of its equipment and studios. Each studio has its staff for cleaning floors, equipment and locker rooms. Secondly, the fitness center offers its consumers their own locker spaces. The safe and spacious storage spaces improve safety, organization, and hygiene. Locker rooms are one of the most visited areas within a gym, meaning a clean locker impacts consumer perceptions and overall satisfaction. Lastly, good maintenance of the various studios is a must. Renovations help ensure the facilities are free of dust, pebbles, mould and rust.
Flexibility and Supply Chain Management
Since its inception, L.A. Fitness has focused on increasing its accessibility and availability through a strategic selection of locations for opening branches. In its expansion, the health club targeted communities composed of a young professional population, meaning middle-income earners are the primary consumer market (Wells 8). The expansion strategy also targeted low-cost buildings that would otherwise not lease spaces to fitness studios if they were properly running. The strategy means L.A. Fitness searches for rental properties where it is sure it has superior bargaining power to negotiate favourable lease agreements. In addition, the tactic allows the business to renovate and brand its spaces to reflect the surrounding community. In retrospect, the location strategy could have negative implications given L.A. Fitness’ array of all-age-encompassing services. The brand has been targeting communities with highly educated young people, yet it still offers toddlers and elderly services. Communities populated mostly by young adults have fewer children and older adults.
While the location is one of the success factors that people use when determining if to join a gym, the official work hours influence consumer perceptions of convenience. L.A. Fitness’ approach to being a ‘proximity-based’ business entails having 24hrs of open business hours (Quismondo et al. 11) neatly. The studio opens from 7 am to 11 pm, with customers having the option of reserving extra training sessions at an extra price. Moreover, the brand also operates during most days of the year, including national holidays. As opposed to traditional fitness studios, L.A. Fitness does not allow people to adapt to its opening hours. Instead, it is the shop that adapts to people’s schedules. Managers get to satisfy customer time requirements, while the wide schedule does not increase the workers’ workloads. Open schedules, however, come with strict space requirements, such as parking and machinery scheduling. The unstructured coming in and out of users can increase operational costs for the business. For instance, peak hours will require additional staff. Therefore, the business might be forced to recruit both part-time and full-time employees.
A key component in the service offerings of health studios is the nature of the equipment installed. In its early stages, gyms are often advised to lease equipment instead of direct purchases (Carlton et al. 27). The strategy reduces up-front capital costs and provides better financial flexibility for upgrading existing machinery. In 2014, L.A. Fitness had to raise $2 billion in credit due to its rapid expansion, pushing the company into debt. Over 70 studios were temporarily shut down due to huge operational costs. The financial gap highlighted the importance of L.A. Fitness redesigning its supply chain management. The company still does not lease but engages in bulk buying of above-average quality machinery. The business is sustainable in its management of machinery as internal personnel are educated and trained on repair and maintenance. However, the equipment is still subject to annual reviews and repairs from the retailer. Consistency in running machines and support personnel contribute to the larger objective, customer retention.
Sustainability
L.A. Fitness is well ahead of its competitors in terms of integrating green concepts into its operational strategies. The company has been building eco-friendly gyms that prioritize human and environmental health. L. A. Fitness takes numerous technical and policy-related steps to ensure its environmental setting does not contribute to the worsening of the atmosphere (Melfi 16). As seen during its installation of Orange County’s gym, the studio works with professionals from California Ambient Air Quality Standards (CAAQS) to address six common air pollutants; namely ozone, particulate matter, nitrogen dioxide, carbon monoxide, sulfur dioxide and lead (Melfi 16). L.A. Fitness prioritizes the eradication of all regulated air pollutants in its facilities. The goal is to ensure the studios emit pollutants below the regional level, as documented by CAAQS. Air quality is also ensured by managing the number of equipment used in the facility to minimize human over-crowding in small areas. Pieces are placed at a minimum of 4 square meters from each other (Carlton et al. 30). However, the floor plan still requires a significant investment in additional staff resources.
The green concept extends to almost every aspect of L.A. Fitness’ gym studio designs. Another important area of focus was how the building uses water. California is prone to high temperatures, hence the facilities needing water and air cooling systems. An analysis of the studio’s construction plans shows that it employs a rotary screw chiller for refrigerated compression of the cooling tower to disperse heat from the inside while rejecting heat from the outside (Melfi 18). The selected cooling system is the RTHD model, which is known to have nearly 200 tons of cooling power. The alternative is relatively cheap, conventional and energy efficient. It uses minimal amounts of electricity and water to control room temperatures from different sources, including the human body, human movement, machinery and weather. However, the cooling system requires more frequent repairs and professional attention (Melfi 18). Maintenance of the system requires highly-skilled personnel, which raises the average labour expenses incurred by the business. Moreover, L.A. Fitness studios are relatively small buildings to employ complicated cooling systems often used in larger commercial buildings.
In an effort to reduce operational costs and integrate sustainability into its operational functions, L.A. Fitness has been experimenting with devices that act as alternative sources of electrical power. Gyms are often heavily criticized for wasting vast amounts of electrical power through inefficient floor designs and machinery (Quismondo et al. 13). L.A. Fitness has innovative cardio machines and indoor cycles that function by turning human kinetic energy into household-grade electricity. The equipment uses micro-inverters that are capable of producing nearly 160 watt-hours of power per workout. Therefore, there is the potential that gym equipment could power the entire studio, if not the building. However, such devices come with a limitation to the floor arrangement. Devices have to be networked in a particular format to ensure the suitable capture and transfer of electric power. The electrical design thus can impede floor plans, making the gym less accessible or creative in appearance.
L.A Fitness studios are also designed to give maximum lighting at the least power consumption. In the establishment of its West Oak facility, it was recorded that the studio’s lighting was arranged to meet ASHRAE’s 90.1 (2001) standard for power lighting intensity in an exercise facility (Melfi 24). The standards consider stringent power density requirements and seek to reduce consumption through enhanced lighting technology and reduced cooling requirements. For instance, the most widely used bulb is the 32 Watts T8 Fluorescent lamp, which has an average release of 2850 lumens (Melfi 25). The bulb offers good performance even when it hits up to 25 degrees Celsius, improving its durability and impact on overall operational costs. According to the renovation of the West Oka studio, every two lamps were associated with a 5% decrease in lumens, which is equivalent to a 21% decrease in power consumption in the bulbs (Melfi 25). The approach highlights the studio has a comprehensive understanding of how to minimize operational costs by reducing power requirements. Coupled with the power-generating equipment, L.A. Fitness is nearly half-independent in terms of its power needs.
Recommendations
One of the main challenges when it comes to enhancing customer satisfaction in L.A. Fitness revolves around its management and ownership structure. The applied ownership model does not inspire sufficient consumer trust or confidence to guarantee successful customer retention. As of 2005, L.A. Fitness has focused too much on customer attraction and retention (Stevenson 1). The approach is behind the institution’s strategy to move from being a publicly incorporated company to a private business venture. The company has been leaving behind the stock market to differentiate itself from other gyms. However, business research shows that private businesses offer consumers less visibility and transparency compared to public businesses (Wells and Elseworth 9). L.A. Fitness is too private in terms of its operational and functional management to ensure sufficient customer retention. The company needs to find new strategies to enhance its level of transparency in critical operations to avoid speculation from consumers, potential investors and industry stakeholders. While returning to become a publicly traded company is off the table, there are certain operations the company can make more visible to enhance consumer and investor confidence. An example is its employee and trainer selection and recruitment process.
The club also needs to improve its understanding of community needs to effectively deliver holistic gym products. One of the identified gaps in the report is the tendency for L.A. Fitness to focus primarily on teenagers and young adults (Wells and Ellsworth 6). The strategy is counter-intuitive, given the brand differentiates itself from its competitors by offering gym programs for toddlers and the elderly. The lapse shows a fault in how L.A. Fitness interacts with the community and how it generates its understanding of the local populace. In their analysis of Swedish fitness facilities, Rikesh and Johannes found it common for businesses to accept assistance from local law enforcement agencies in understanding community needs (31). Social services and law enforcement were integrated to come up with additional, customized programs for different segments of the community, including team building for companies, cardio classes for the obese, self-defence classes for women etc. Each location where L.A. Fitness opens a branch should include a special fitness program that mirrors the distinct needs of the surrounding community.
Identified L.A. Fitness’ key success factor is its tendency not to franchise. Similar to the fast food industry, large conglomerates in the fitness industry tend to use franchising as their main business model for development and growth (Caster 53). It is highly recommended that L.A. Fitness continue with this expansion strategy as it has allowed it to differentiate itself from major competitors, despite differences in location. However, not franchising is part of the larger standardization strategy. The fitness studio needs to ensure the swift standardization of services across all clubs to improve the control of consumer expectations. Standardization is a documented management tool for influencing consumer expectations of the quality of goods or services (Helberger 70). The strategy is commonly seen in the creation of digital content, as there are defaults for consumer data protection and how content is produced. In the same way, L.A. Fitness has to standardize its operational characteristics to influence consumer expectations and facilitate the replicability of services across all branches. The approach is bound to reduce the number of exits from the clubs.
L.A Fitness has room to improve on its sustainability strategies in a larger effort to improve brand perception and mitigate operational costs. Sustainability in business is a continuous process due to the dynamic nature of technology (Quismondo et al. 12). With each innovation comes a new opportunity to reduce energy consumption and pollution levels. One recommended approach is for the gym to abandon the use of conventional gym gear. The floor designs indicate the use of non-recyclable plastic, such as foam. Management can employ eco-friendlier materials like natural latex and rubber mats. Wall, mat, floor and tile materials should all be recyclable content. L.A. Fitness can also improve its environmental conservation by reducing the number of equipment or objects per square foot. Aforementioned is gym sets are placed 4 square meters apart. Improved gym equipment can help maximize this space. For instance, management can invest in single adjustable dumbbells as opposed to many dumbbells of different weights. Continuous improvement should be a concept deeply embedded in the business culture.
While L.A Fitness already has a firm grasp on the use of digital technology to enhance customer interactions, it can still add several improvements to its online application. At the moment, the business app is tailored to operate as a payment and service scheduling system. However, it is not designed to provide customer feedback or allow consumer complaints. Integrating the two functions into the software is bound to positively impact customer relations and the business’s data analytics capabilities. L.A. Fitness is not maximizing its data collection to enhance the accuracy and effectiveness of its managerial decision-making. The studio should also make an effort to increase consumer awareness of the complaints and suggestion function included in the app. The lapse in data collection might explain why the business has been slow in transitioning from traditional large-group classes to small-group personal training (Quismondo et al. 15). L.A. Fitness needs to come to terms with the importance of data-driven decision-making in business. It is becoming more complicated and necessary each day.
Conclusion
L.A. Fitness does not hold a permanent or large competitive advantage over its competitors in the fitness industry. The enterprise might be the largest gym chain in the United States, but its dominance is under threat due not insufficient or ineffective managerial strategies and decisions. The company differentiates itself by having superior customer services, highlighted by its online application, professional gym support and standardized services. L.A. Fitness is only leading in terms of sustainable practices, as it fuses concepts of green living in its building designs. Nevertheless, there is still significant room for improvement. While the fitness studio is advised to carry on with its business model of not franchising, it is recommended that it enhance its operational transparency. L.A. Fitness is equally recommended to improve its community collaborations. While the studio should standardize services, each branch should also be distinct in how it understands and mirrors the unique needs of its surrounding community. It is important to acknowledge the report is based on several limitations. Firstly, it is based on an analysis of secondary literature and not first-hand data from relevant persons. Secondly, not all resources offering insight on L.A. Fitness are recent. Future reports should focus on managerial practices centred on sustainability and community engagement from a longitudinal approach. Such a direction will ensure elements affected and findings are constant over time.
Works Cited
Carlton, Melissa. Launceston Aquatic Health and Fitness Business Plan Analysis. Launceston City Press, 2012.
Caster, M. Strong-Arm at the Gym. Men’s Health, vol. 28, no. 1, 2013, p. 1-56.
Grisso, Jennifer. Individual Case Study: An In-Depth Look into L.A. Fitness. Digital Commons Creative Project, vol. 23, 2018, pp. 1-19.
Helberger, Natalie. Standardizing Consumers’ Expectations in Digital Content. Emerald Insight Journals, vol. 13, no.6, 2011, 69-79.
Melfi, David. Design and Analysis of L.A. Fitness Mechanical System, West Oaks Location. Pennsylvania State University, 2006. \
O’Reilly, Lara. L.A. Fitness Switches Focus from Acquisition to Retention. Marketing Week, 13 September 2011, https://www.marketingweek.com/la-fitness-switches-focus-from-acquisition-to-retention/, Accessed 22 August 2022.
Quismondo, Jairo, Jorge Unanue and Pablo Burillo. Best Practices for Fitness Center Business Sustainability: A Qualitative Vision. Sustainability Journals, vol. 12, no. 5067, pp. 1-17.
Stevenson, Rachel. Business Analysis. L.A. Fitness Chairman Weighs Up Approach to take Business Private. The Independent, 14 December 2005, https://www.independent.co.uk/news/business/analysis-and-features/business-analysis-la-fitness-chairman-weighs-up-approaches-to-take-business-private-8698958.html, Accessed 25 August 2022.
Wells, John and Ellsworth Gabriel. The Quiet Ascension of L.A Fitness. Harvard Business Education, 2016, pp. 1-27.