In a recent podcast episode, Wexer CEO, Paul Bowman, interviews Eric Falardeau, a Senior Partner at McKinsey & Company, share a comprehensive examination of the evolving landscape of the fitness and health industry to share how you can maximize growth opportunities with profitable fitness business models.
McKinsey & Company is a global management consulting firm. Eric specializes in the global fitness and health industry. He shares his expert perspective on the current state and future trajectory of the fitness industry. He delves into the critical aspects like the opportunities emerging fitness business models will provide, how fitness business models will need to include digital transformation to expand into emerging markets, the potential impact of weight loss pills, and how the fitness industry has changed after the COVID-19 pandemic.
The Current State of the Fitness Industry
Before delving into emerging fitness business models, it’s essential to understand the current state of the fitness industry. Eric Falardeau provides a macro-view, highlighting a significant issue in the industry. He points out that many fitness models today cost between 10-30 euros or dollars, which, in his opinion, leaves a considerable amount of money on the table. This observation underscores the need for innovation and the exploration of new business models that can extract more value from each customer relationship.
“At a macro-view, I think the sector is leaving a lot of money on the table by having such a high share of humans move through models that cost between 10-30 euros/dollars today.”
~ Eric Falardeau, Partner, McKinsey & Company ~
Fitness Business Model Opportunities
In an era of emerging markets and rapid digital innovation, the fitness and health industry has not remained immune to the winds of transformation. As technology advances and new markets emerge, fitness businesses are presented with both challenges and opportunities. To navigate this shifting landscape effectively, it’s crucial to understand the emerging fitness business models that can maximize growth and profit.
Being aware of emerging opportunities to provide new innovative fitness business models will play a pivotal role in a a fitness business ability to thrive and adapt to changing consumer needs. Critically assessing whether there are unmet needs within the industry and whether a business has found a viable model that sets it apart from competitors is crucial for making informed decisions about where and how to allocate resources.
Consumers are spending more on health, fitness, and wellness than they ever have before. Future of wellness in 2030 shows a $1.5 trillion market globally—and it’s growing at a clip of 5 to 10 percent each year. McKinsey research shows that consumers are most interested in six wellness categories: health, fitness, nutrition, appearance, sleep, and mindfulness.
Eric shared consumers are clearly looking at health and wellness as one of the most important things in their life now. Therefore, the industry needs to realize the possibility of people paying 5, 10, 20, 30 dollars/euros more for something that is helping them move or live as healthy as possible.
The Role of Information and Technology
Eric emphasizes the transformative potential of information and technology in the fitness industry. He believes that this sector is uniquely positioned to benefit from these advancements, as they can have a substantial impact on overall value creation and member solutions. In an era where wearable fitness tech, data analytics, and personalized fitness apps are becoming increasingly prevalent, businesses that harness the power of information and technology stand to thrive.
“This is one of the sectors for which information and technology can have the most impact on overall value creation and overall member solutions.”
~ Eric Falardeau, Partner, McKinsey & Company ~
Embracing New Business Models
One of the key takeaways from the interview is the importance of embracing new business models. Eric Falardeau urges the fitness sector to explore innovative ways of creating more value for customers. He points out that the industry should not be limited by traditional pricing models and that it’s entirely reasonable for individuals to invest more in their health and fitness. This sentiment challenges the notion that the mid-tier pricing model is no longer viable in today’s market.
The fitness and health industry is undergoing a paradigm shift, and one of the most significant shifts involves transitioning from a “push” model to a “pull” model. This means that instead of merely pushing out existing solutions and services, businesses in the industry need to adopt a more customer-centric approach. They must empathize with the end user and focus on understanding their specific needs and preferences. This shift is vital for staying relevant and effective in a rapidly evolving market.
Another crucial paradigm shift revolves around reevaluating and strengthening business models. With increasing competition, fitness companies must stress-test their models to ensure they can withstand tougher market conditions. The shift here is from complacency to a proactive and competitive mindset, where businesses continuously innovate and adapt their models to maintain their position as leaders.
In essence, business model considerations encompass the ability to navigate the complex terrain of digital transformation while ensuring that the chosen approach aligns with the unique needs and expectations of the target audience.
The Importance of Digital Transformation
To thrive in the modern fitness landscape, businesses must adapt to the era of digital transformation. Eric emphasizes the need for fitness business models to incorporate digital elements to expand into emerging markets effectively. This shift involves not only offering digital fitness content but also leveraging technology for customer engagement, data collection, and personalization.
It’s evident that digital transformation is no longer an option, but it’s essential to have a clear digital strategy.
AI-powered marketing tools enable fitness businesses to understand their customers better than ever before. By analyzing user data, preferences, and behavior, AI can help tailor marketing campaigns to individual needs, increasing the likelihood of customer engagement. This personalization is crucial in a competitive market where customer acquisition costs are a significant concern.
Moreover, AI has the potential to enhance customer engagement itself. For example, personalized fitness plans and workout recommendations based on user data can keep members motivated and engaged in their fitness journey. Chatbots and virtual trainers powered by AI can provide instant assistance and guidance, creating a more immersive and responsive fitness experience.
Digital transformation extends beyond marketing and engagement. It involves leveraging data and technology to improve operational efficiency and deliver better services. This includes streamlining processes, optimizing resource allocation, and enhancing the overall customer experience. By embracing digital transformation and AI, fitness operators can stay competitive, evolve their business models, and ultimately provide greater value to their customers.
Emerging Markets: China and India
One of the most exciting aspects of the fitness and health industry’s evolution is the emergence of new markets, particularly in countries like China and India. These populous nations are witnessing a surge in fitness and health consciousness, presenting a goldmine of opportunities for fitness businesses. As per industry reports, the fitness industry in China is projected to reach a staggering $22.8 billion by 2025. McKenzie research has shown the Chinese have an increase in spending, particularly in categories that are focused on health and lifestyle.
In traditional fitness, with a substantial portion of the population yet to be tapped, the scope for growth is immense. However, to seize these opportunities, fitness business models must adapt to the unique characteristics of these markets. This adaptation involves understanding cultural nuances, tailoring fitness offerings, and, of course, embracing digital transformation to reach a broader audience.
Digital and Virtual Fitness Increase Post-COVID
The fitness industry, like many others, underwent a significant transformation in the wake of the COVID-19 pandemic. Lockdowns and social distancing measures prompted a surge in demand for digital fitness solutions, as people sought ways to stay active and healthy from the safety of their homes. This shift accelerated the adoption of online fitness classes, virtual personal training, and connected fitness equipment.
While the pandemic posed immense challenges, it also highlighted the resilience and adaptability of the fitness industry. Businesses that quickly pivoted to offer digital solutions not only survived but thrived during these challenging times. This resulted in a “Leaders Take Most” principle, where the leaders who were quick to adapt, innovate, and maintain their brand presence not only retained their existing members but also attracted new ones. This dynamic has allowed them to capture a larger share of the market, leaving smaller players struggling to keep up.
As the world emerges from the pandemic, the lessons learned from this period are invaluable. Fitness business models that continue to offer digital options are likely to maintain a competitive edge in the post-COVID-19 era.
The Importance of Purpose and Passion
Eric emphasizes the significance of purpose and passion in the fitness industry. He believes that businesses driven by a genuine desire to improve people’s lives are better poised for success. When fitness professionals and entrepreneurs are passionate about their work, they are more likely to innovate, adapt, and create solutions that resonate with customers.
In conclusion, the fitness and health industry is undergoing a profound transformation, driven by emerging markets and digital transformation. Fitness business models that can adapt to these changes, harness the power of information and technology, and offer value to customers are poised for growth and profit. The future of the fitness industry is not only about physical health but also about embracing the digital age, catering to emerging markets, and fostering a sense of purpose and passion for improving lives. As Eric Falardeau suggests, this industry has abundant opportunities for those willing to innovate and create more value from each customer relationship. It’s time for fitness businesses to unlock their growth potential in this dynamic landscape.
The Eric’s insights serve as a valuable resource for industry professionals seeking to navigate the fitness and health sector’s ever-changing landscape. The fitness industry needs to continue to evolve and bring more meaningful value to customers by embracing innovation and technology.
Find out how Wexer’s unparalleled data, technology and extensive library of wellness and fitness content can help you leverage your date to benefit of your business in 2023
More Info:
Contact: info@wexer.com
Paul Bowman, CEO of Wexer
Eric Falardeau, Partner at McKinsey & Company
Podcast 25