Reference no: EM133200167 , Length: 2 pages.

Assignment: Planet Fitness- Islam in the United States

Brief note about format and structure: As with the previous assignment, I left the formatting up to you to decide (e.g., single spaced, double spaced, margins, etc.). This is because I would like for you to focus on providing succinct answers rather than fixate on length.

Brief note about content: All of the information required to successfully complete this case is contained in this document as well as in class lectures and slides. You do not need to do additional research or go beyond the scope of this course.

Observe the academic integrity policy. This includes using your own words to express your thoughts and paraphrase the words and ideas of other sources (although you don't need any other sources aside from the case and course lectures).

Planet Fitness Pricing for Success

How does going completely against the grain of a typical fitness club strategy lead to success? That's the question that Planet Fitness appears uniquely positioned to answer. Most health clubs provide members with vast and seemingly valuable extra amenities, such as childcare, juice bars and protein supplements, on-staff professional trainers, and a broad range of fitness classes. But many customers find the prices too high because they see little value in some of these amenities. Further reducing the value of traditional gym memberships, many consumers regard the social aspects unpleasant and off-putting-whether that means observing others with nearly perfect bodies posturing in the mirror or listening to grunting exercisers huff with every lift.

While its competitors target upscale fitness buffs working on their six-pack abs, Planet Fitness successfully pursues an entirely different market: those who do not really enjoy going to the gym but know they need to do so to stay healthy. These exercisers are unlikely to hit the gym five or six times a week, making conventional gym memberships, which demand yearly contracts and fees of $49 to $95 per month, appear more expensive on a per-visit basis. Planet Fitness's formula is different: At $10 a month, the membership offers good value, even if customers get to the club only a couple of times each week.

In combination with its low price point, Planet Fitness promises a clean, friendly, laid-back workout environment featuring brand-name cardiovascular and strength equipment. Although it does not have the high-end amenities its competitors promise (e.g., pools, juice bars), the club maintains the key elements its members want: brand-name equipment, unlimited fitness training, flat-screen televisions, and large locker rooms. Its customers know from its advertising that they can expect a non-intimidating workout environment, or as Planet Fitness promises, "No gymtimidation. Just $10 a month." With its foundation in the idea that simple is better, Planet Fitness has become the fastest-growing full-sized fitness club in the United States.

For those who want a little more, Planet Fitness also offers a premium PF BlackCard membership for $19.99 a month, which promises access to nearly all the clubs in the Planet Fitness chain, unlimited guest privileges, use of tanning and massage chairs, and half-priced drinks.

In addition to these in-club benefits, Planet Fitness's growth has been reinforced by its effective location strategy and marketing efforts that focus on attracting new customers. The low-cost monthly membership makes it easy to draw new members. Because most members come in only a couple of times each week, Planet Fitness also enjoys operating efficiencies and economies of scale, achieved by welcoming a high volume of members on any one day.

Planet Fitness treats customers like real people. What kind of fitness club offers members pizza on the first Monday of every month, bagels on the first Tuesday, and Tootsie Rolls on a regular basis? The kind of gym that had over 1,050 locations in 2015, with an eventual goal of more than 2,000, and that attracts more than 5 million members and has systemwide sales approaching $700 million.

Task

I. According to the case, what is Planet Fitness' pricepoint? Why does it make sense for Planet Fitness to price their membership this way?

II. Given its pricing strategy, why is it essential for Planet Fitness to continually attract new members? Would high-end pricing competitors face the same need? Why or why not?

III. If Planet Fitness wanted to increase its producer surplus without cutting too much into their sales or profits, what are their options? Describe these options and provide examples.