I was talking to a new health club owner the other day. Our discussion turned to what plans he had for the business and amongst other things he mentioned that he’d like to capitalize on the ‘baby boomer’ market.
Baby boomers are often seen as cash cows with a substantial asset base, high discretionary income, the motivation to stay fit and healthy into old age and the free time to take advantage of it all. It’s an attractive proposition for sure and I’m not saying it’s the wrong thing to do for my friend but it is absolutely the wrong starting point.
John F Kennedy famously said ‘Ask not what your country can do for you ask what you can do for your country’. If I could borrow from him I would say ‘Ask not what your market(s) can do for you but what you can do for your market(s)’.
Imagine McDonalds saying we want to increase our average customer spend from $10 to $20 per person per meal. Let’s serve a prime rib eye steak meal, with baked potato and sour cream as a side, and charge $29.95. We’ll call it the Mc Steak and Bake and attract more of an up market crowd.
Obviously this strategy is flawed and doomed to failure. The core McDonald’s market is less interested in a dining experience and more interested in convenience, low cost and fast service. The introduction of the Mc Steak and Bake may attract a few interested existing patrons but most steak lovers will already have a favorite steak house and not be willing to trade for the prospect of spending an evening surrounded by screaming kids and pimply faced teenagers.
Of more concern for McDonalds the increased wait times in the restaurant and the drive through (due to increased cooking, serving times and clean up) would alienate the core market who would quickly find other fast food outlets who did meet their needs.
Obviously the Mc Steak and Bake is a poor fit for the McDonalds brand. Not too surprising considering that they could not successfully introduce pizza to their menu.
The right starting point is to take a close and careful examination of your business (not what you may consider to be the most lucrative market) and critically evaluate what you can offer a new market or build on for an existing market.
Then take a close and careful examination of the desired market and critically evaluate what they want, need, fear, aspire to etc. Take everything that you know and create a profile of the market and build on it over a few weeks or months (your first effort will be woefully lacking) get input from your staff, talk to your existing members who fit the profile, listen to what they say but more importantly watch how they behave. If you ask someone directly they will tell you what they think you want to hear. But if you observe their behaviour it will often tell a completely different story.
For example, the number of group fitness participants that say they ‘intend’ to regularly attend a particular class is often much higher then the actual number of attendees who participate week in week out. As those of you who have attempted to cut a class will know after weeks or months of single digit attendances all of a sudden there are scores of objections when a poorly performing class is earmarked to be cut.
Once you have a complete idea of what you can/do offer and a more complete understanding of your desired market you need to realistically evaluate where and to what extent your existing market(s) and desired market overlap. The more overlap the greater the likelihood of successfully being able to profitably service that market.
Here is the example of McDonalds strategy outlined previously. I could not come up with one single shared characteristic of these two markets. This is not to say that some would not try the new offering but it would not be enough to justify the investment in new equipment, training, marketing and significant erosion of the existing market share.
Once you have determined your ability to profitably service a market you then need to evaluate the likely impact of that market on your existing market(s). It could be that, just like in our McDonalds example, the allocation of resources to the new market could have a significant negative impact on existing market(s).
The bottom line is that you need to start with what the market wants and critically evaluate your ability to deliver on it. Not vice versa. Those markets that are most similar to your existing markets will be the easiest to service and often the most profitable.
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