Crafting a Pricing Strategy: A Case Study of The SDL Fitness Club

Background and Content

The price is one of the primary elements of the marketing mix and pricing a product or service remains one of the fundamental aspects of the marketing strategy. When choosing a pricing strategy, a company should consider different factors while following its stated goals (Liozu et al. 2014). There are three options: enter the market with a high price and be able to convince the customers the product/service is unique and of superior quality, break the market at a very low price compared to that of competitors and achieve profits based of large sales volume, or value products/services at the same price as competitors but offer products that are very similar to those of the competitors (Vidrova et al. 2019). The aim of this paper is to develop a pricing strategy for The SDL Fitness Club. The paper progresses in the following sections: competitor analysis, target audience, the proposed pricing strategies, and a conclusion. If you need business dissertation help, our team is here to support you through every step of the whole process.

Competitor Analysis

The UK health and fitness industry is among the most attractive and growing markets in the UK. In 2018, the UK fitness industry was worth £5billion, which was a 2.9% increase compared to its worth in 2017 (CIL Management Consultants 2019). This growth has attracted many new entrants and made the fitness industry quite competitive. Among the gyms and fitness clubs in Hull are Tommy Coyle Academy, Xercise4Less, Nuffield Health Fitness and wellbeing, Planet Gym, Fit 24 UK, PureGym, David Lloyd Gym, and AOF Champions Gym and others. The major players by share are Xercise4Less, Tommy Coyle Academy, and Nuffield Health (Hull Live 2020). Xercise4Less charges a membership fee of £9.99pm and the available classes include Zumba, Pilates, Leg Bums and Tums, Body Combat, Body Balance, and 8-week body transformation. Tommy Coyle Academy charges a membership fee of £40pm but its classes are restricted to fat burning sessions. Nuffield Health charges a membership fee of 34pm and the classes offered are body balance, body attack, body combat, pilates, body pump, running club, legs bums and tums, kettlebells, yoga, and swimfit. Other than the gyms and fitness clubs that offer the same products and services as those intended by SDL Fitness Club, the company will face indirect competition from companies that help individuals manage their weight and health with different products and services including those that provide dietary and nutrition advise such as Monkey nutrition and PhD Nutrition among others.

In the health and fitness sector, consumers use affordability, cleanliness, convenience, club status, and clientele as the core factors that influence purchase decisions (Zhang and Li 2014). Of these, price is the most influential factor followed by convenience, and then the facilities within a particular club (García-Fernández et al. 2018). This implies that while SDL Fitness should place great emphasis on price, it should ensure the club, services, and other facilities are convenient to the target audience. Nonetheless, it is advisable that a company competes with two factors (García-Fernández et al. 2018) and as such, it is suggested that SDL competes on price and service line, given that the incumbents do not offer as many services as those SDL intends to offer.

Target Audience

Segmentation

According to Theodorakis et al. (2014), among the reasons that people spend time in exercise are health, enjoyment, appearance, social interaction, challenge, stress relief, skill development, personal satisfaction, and achievement. On the other hand, Hutson 2016) writes that people who are involved in fitness activities are more motivated by physical appearance while Bernal-Garcia et al. (2014) assert that the motives influencing people to engage in fitness activities differ by gender. For example, social factors and release of tension are common motivators for women while health and fitness and the major motivators for men. In light of this information, a combination of demographic variables and behavioural variables would be appropriate in developing the market segments.

Extant research has shown that demographics including age, race, and gender influence the willingness to people to engage in fitness activities. Hutson (2016) writes that while adolescents have sufficient knowledge on the role of exercise in promoting wellbeing; most of them are physically active for the desire to remain physically attractive. Nonetheless, MacIntosh and Law (2015) state that there is a significant percentage of youth adolescents who remain physically inactive due to lack of time, resources, and concern. On the other hand, the adults could be well-informed on the importance of physical activity in promoting health and wellbeing but most of them are not motivated to engage in physical exercise while others lack time.

Income is also an important determinant of whether people engage in fitness activities or not. According to Breesch et al. (2015), people with high levels of income and education are more likely to engage in fitness activities because they can afford it and they also know the benefits of engaging in fitness activities. Analogously, Hutson (2016) writes that high income earners are the educated persons understand and afford quality services, which promotes their health and wellbeing. On the other hand, people with low levels of income could understand the health benefits of fitness activities but have low bargaining power, which deters them to engaging in quality fitness activities.

The target audience

In light of the above information, the most appropriate market segment for SDL is people with moderate levels of income as they understand the health benefits of fitness activities but they have limited access to them based on their income levels. The segment is constituted of males and females as well as adolescents and adults.

The proposed pricing strategies

Competition-based pricing

Competition-based pricing is proposed for SDL Fitness Club. In this type of pricing, prices are decided based on those of competitors (Fisher et al. 2018), which implies that SDL could therefore price its services as those of competitors, price above the prices of competitors, or price below the prices of competitors. Additionally, SDL could set pricing based on the dominant price in the market.

New product pricing strategies

Market penetration is the most appropriate product pricing strategy for SDL given that the target audience is persons with moderate levels of income who are willing to engage in fitness activities but their income levels limit them. In this pricing strategy, SDL will temporarily set prices below the market price or could even give out the services for free for a set period of time after which the prices will be revised (Spann et al. 2015). However, the company has to meet its operational costs and therefore freely offering the services is not recommendable. Therefore, SDL should set prices below those of competitors and below the market price.

Pricing tactics

Product bundle pricing is recommended for SDL Fitness Club. In this pricing tactic, a company sells more than one service or good by package at a more attractive price as compared to selling the products or services separately (Fang et al. 2017). SDL plans to offer different services including cardio, boxing, salsa, kettle bell, HIT, Zumba, Aqua Zumba, Pilates, and health, wellbeing, and nutrition advices and therefore it could sell two or more of these services as a package to consumers at a price that is lower than purchasing the two services separately. Nonetheless, SDL should define the price for each service in order to serve customers that are interested in only one service.

Table of proposed prices

NB: 1. When a customer purchases two or more services, the price of the package will be determined by calculating the average price for the three services and subtract a discount of £10.

2. When customer purchases any service, health, wellbeing and nutrition advice will be given freely.

3. The membership fee will be £30

Conclusion

The aim of the paper was to develop a pricing strategy for SDL Fitness Club. Based on the competitor analysis, the health and fitness industry is attractive thus entering the industry is a viable business idea. The industry is also competitive and therefore SDL will have to compete on basis on price in order to gain and maintain a competitive position. The most ideal target audience is persons with a moderate level of income regardless their demographics. To appeal to these persons, SDL will have to sell its products at a lower price as compared to the market price. The product bundle pricing will also allow SDL to attract more customers, which some promotions such as free information on health, wellbeing and nutrition will be given to customers that purchase any of the services or package.

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References

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Breesch, D., Vos, S. and Scheerder, J., 2015. The financial viability of the fitness industry in Belgium. Sport, Business and Management: An International Journal.

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García-Fernández, J., Gálvez-Ruíz, P., Fernández-Gavira, J., Vélez-Colón, L., Pitts, B. and Bernal-García, A., 2018. The effects of service convenience and perceived quality on perceived value, satisfaction and loyalty in low-cost fitness centers. Sport Management Review, 21(3), pp.250-262.

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MacIntosh, E. and Law, B., 2015. Should I stay or should I go? Exploring the decision to join, maintain, or cancel a fitness membership. Managing Sport and Leisure, 20(3), pp.191-210.

Spann, M., Fischer, M. and Tellis, G.J., 2015. Skimming or penetration? Strategic dynamic pricing for new products. Marketing Science, 34(2), pp.235-249.

Theodorakis, N.D., Howat, G., Ko, Y.J. and Avourdiadou, S., 2014. A comparison of service evaluation models in the context of sport and fitness centres in Greece. Managing Leisure, 19(1), pp.18-35.

Vidrova, Z., Krizanova, A. and Gajanova, L., 2019. ADVANTAGES, LIMITS AND ISSUES OF USING THE COMPETITIVE PRICING STRATEGY. Economic and Social Development: Book of Proceedings, pp.339-348.

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