Why Wimpy Gyms are the Best (Economically)

Recently, I was listening to NPR public radio, when I learned about some surprising facts behind the business models for some public gyms. As it’s well known, the average American doesn’t really go to the gym as often as they hope. However, when a NPR reporter checked with Planet Fitness, public gym in Manhattan, the results were extreme to say the least: while the maximum capacity of the gym in question was roughly 300 occupants, the amount of members PF had was around 6000 people! The monthly fee for Planet Fitness was just $10 (This is Manhattan after all). By contrast, another “serious” gym in the area cost 800 dollars a month, but didn’t require any annual contracts - Planet Fitness did.

The key to this lay in the field of behavioral economics. As counterintuitive as it sounds, the key behind Planet Fitness’ income stream lay in the fact the company actively works to discourage customers. Discourage them from the gym, that is. According to McCall Gosselin, the company’s director of public relations, companies like Planet Fitness were designed for the average Americans who “just want to get in, get on the treadmill for 30 minutes, and get out”. And it makes sense. The more customers there are, the higher the costs for upkeep and equipment. So simple logic dictates that the opposite is true. Less usage of the equipment means less money needed for said equipment.

What companies like Planet Fitness do is capitalize on the natural human tendencies to prioritize immediate events over all else. When a customer locks themselves into an annual contract, they are visualizing the end result a year down the road: a much healthier person. When combined in conjunction with the immediate stimulus - just 10 dollars a month - most customers will eagerly sign up. In essence, the consumers end up paying for the dream of being fit. By the time a few months roll by and they realize it’s not working out (the long term stimulus of healthiness is moving closer to being an immediate stimulus) it’s too late, they still have the remainder of the year on their contract no matter what.
But in the end, the results are what matte

r. Planet Fitness has tripled in size over the past half decade, and they now have over 4.5 million members in hundreds of clubs: 917 to be exact. Not bad for a gym that once removed a squat rack because it was “too intimidating”. In fact, Planet Fitness has been one of the fastest growing companies in America since 2008. In my opinion, the growth Planet Fitness has experienced was in a big part attributable to the Recession. After all, why pay hundreds of dollars a month when you could go work out in another gym for 10? It made sense.

And as the annual earnings report continue to show, it continues to do so.