Planet Fitness: Strategic Positioning According to the Porter’s Model

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Table of Contents

Operational Effectiveness
Productivity Frontier
Strategic Positioning Sources
Company Trade-Offs
Fit and Sustainability
The Growth Trap
Summary
References

Operational Effectiveness

Planet Fitness LLC is one of the largest international gym franchises, providing services to a wide range of customers. Planet Fitness has been very successful in the area of operational effectiveness that refers to the ability to design, create, and deliver services and operations better than competitors (Porter, 1996). Specific examples include an anti-bullying policy that promotes respect and acceptance of every athlete, protection from judgment, and affordable exercise services (Planet Fitness, n.d.). The availability of such services revolutionized the second-tier fitness market in the mid-1990s when pools, exercise equipment, and group and private classes were co-located, often as a condition of higher fees. The company introduced a low-cost ($10) monthly subscription, increasing customer financial affordability. Moreover, Planet Fitness worked well with geographic distribution, with many clubs in several countries located in infrastructure-advanced and accessible areas, increasing the potential for audiences to be attracted to Planet Fitness (US SEC, 2021). These operational advantages have positively impacted brand awareness, strengthening the company’s positioning and laying the groundwork for attracting an even larger audience. Finally, regarding internal processes, Planet Fitness has utilized a minimalist business model that avoids excess and redundant services, creating low operating costs and profitability for the low-end consumer (Shine, 2015). Thus, from an operational efficiency standpoint, Planet Fitness has demonstrated success.

At the other end of the organizational continuum is strategic positioning. This term refers to the ability to achieve competitive advantage by creating unique value for customers — not necessarily the company’s daily operations (Porter, 1996). Planet Fitness’ value proposition is to provide customers with an environment that does not discourage or condemn their athletic journey regardless of progress, which is a significant issue for the American population (Goel, 2022). This becomes the key to audience engagement, allowing Planet Fitness to expand potential audiences, retain current customers, and attract new ones, and this positioning sets the company apart from direct competitors. From what has been analyzed, it appears that the company needs clarification about the operational effectiveness and strategic positioning, but rather, given customer growth, financial performance, and brand recognition, Planet Fitness seems to be finding a good balance on this continuum.

Productivity Frontier

Every company should strive to maximize its operational performance to demonstrate high efficiency in using available resources to multiply profits. According to Porter (1996), the difference between a company’s and an industry’s productivity frontier and Planet Fitness’ current productivity frontier should be called the productivity frontier. Locating a company on this frontier is subjective because the only reliable way to determine this level is for the company to publish this data. Nevertheless, based on its operating performance results, the company appears close to the Productivity Frontier (Goel, 2022). This means that it has almost reached the limit of what can be optimized and improved.

Strategic Positioning Sources

Of the three sources of strategic positioning, Planet Fitness most likely uses needs-based one. This addresses most of the needs of specific consumer cohorts, meaning that there are customers with different interests whose needs the franchisor is trying to meet (Porter, 1996). Strategic brand positioning as affordable access to safe and psychologically comfortable fitness services covers the needs of different groups, whether they are interested in a low-cost, minimalist gym with no pretense of elitism, a friendly environment, and a lack of judgment. Nevertheless, the company’s target clientele is people who are afraid of being bullied or ridiculed for being overweight or for their exercise mistakes (Bennett, 2018). The wide geographic distribution in various areas increases access for the average working-class customer who has little awareness of professional sports but is interested in taking care of their bodies (Planet Fitness, n.d.). In addition, the brand offers a $24.99 monthly subscription for the more affluent customer segment that includes more of the services offered by the gym, this, Planet Fitness may also practice access-based positioning (Porter, 1996). Much of the strategic positioning comes from the needs-based paradigm, but the company also uses access-based positioning by offering premium services to a different customer segment.

Company Trade-Offs

The main trade-off, which has become a dogma at Planet Fitness, is to avoid bells and whistles and provide the minimum services necessary to use the gym, lowering the plan’s cost and increasing financial affordability. The main reason for this compromise is apparent: the company’s strategic positioning, given the low price and avoidance of elitism, was initially aimed at this segment of customers who do not have much money but want to work out in gyms without feeling judged (Bennett, 2018). This focus is the first compromise that Planet Fitness made, deliberately moving away from catering to affluent customers with high demands on the gym and the level of service (Porter, 1996). This fundamental compromise has led to its consequences, including the deliberate reduction of fitness features and functionality to lower customer entry prices (Goel, 2022). The same goes for choosing the path of simple but efficient operational performance and abandoning the competitive athletic spirit to achieve inclusiveness and accessibility (Brandwein, 2022). Thus, Planet Fitness makes many trade-offs in its practices, which are thoughtful parts of its strategic positioning.

Fit and Sustainability

Planet Fitness’ success in the industry marketplace depends on the fit between its strategy, structure, and the environment in which it operates. For a franchisor, an excellent fit would mean that all strategic elements are aligned and connected and there is a fit between the two that is effectively translated into practice (Porter, 1996). In sustainability, two conclusions must be drawn that will allow a company to maintain a competitive advantage over time. First, Planet Fitness’ pricing practices and philosophy of nonjudgmental accessibility have proven viable for over thirty years, indicating a high degree of sustainability. Second, Planet Fitness has yet to consistently maintain its competitive advantage, losing out to other players in the market in terms of the quality of products offered, level of customer service, and net promoter score (Comparably, n.d.). This suggests that the sustainability of Planet Fitness seems questionable, and it is unclear whether the chosen paradigm will sustain its competitive advantage for another ten years.

Another feature of the model is fit, which determines how well the various elements of the strategy fit together. Planet Fitness has achieved a high level of fit because there is a direct alignment for the company between the value and resource offerings combined with the expectations and needs of the target audience. This is evidenced by continued geographic expansion and customer growth (Planet Fitness, n.d.). Planet Fitness operates in an environment with an upward trend in health care, which supports the company and contributes to increased demand (Howarth, 2023). The business structure also supports a good fit criteria position, as avoiding excess promotes a focus on the non-demanding customer.

The Growth Trap

The pursuit of growth can be defined as a critical business need, and while the constraints and tradeoffs created may hinder it, reaching a specific limit can place a company in a growth trap (Porter, 1996). Planet Fitness is making strides in expansion, including financial growth, but the brand is yet to fall into this trap. Signals in the form of growth investments, ongoing marketing campaigns to expand the customer base, and performance growth may indicate either that the company is still far from its growth limit or that it senses a limit and is taking steps to get out of the trap (SEC, 2021; Planet Fitness, n.d.; Goel, 2022; Shine, 2015). It is impossible to accurately predict whether a brand will face this trap in the future because, on the one hand, the metrics show trends toward growth, but on the other hand, Planet Fitness has made little progress in public perception (Brandwein, 2022). However, it is essential to understand that if Planet Fitness becomes hostage to the growth trap, it will prove to be a severe problem for the company, associated with a decrease in competitiveness and an inability to keep up with the pace of market change.

Summary

Planet Fitness’ strategic positioning is based on the value proposition of providing affordable, safe exercise services that protect customers from the psychological pressures of this environment. As we have seen, the company’s strategy involves many trade-offs, the most important of which is a voluntary refusal to serve affluent, demanding customers. This allows the company to target a broader segment of customers, and its growing revenue and geographic and customer expansion are evidence of its success in this area. Planet Fitness is successful in fitness because the components of its strategy are interrelated, but not so successful in sustainability because it remains to be seen how long the brand’s competitive advantage will remain relevant. It is unknown whether the company is falling into the growth trap, but it is clear that Planet Fitness is taking preventative steps to grow effectively.

References

Bennett, J. (2018). How to reach and connect with your target market. WFC Entrepreneurship. Web.

Brandwein, S. (2022). Is a Planet Fitness gym membership right for you?SI. Web.

Comparably. (n.d.). Planet Fitness. Comparably: Transparent and Rewarding Work. Web.

Goel, S. (2022). How does Planet Fitness work and make money: Business model. The Strategy Story. Web.

Howarth, J. (2023). 8 massive fitness industry trends (2023-2026). Exploring Trends. Web.

Planet Fitness. (n.d.). About Planet Fitness. Planet Fitness. Web.

Porter, M. E. (1996). What is strategy?HBR. Web.

Shine, D. (2015). Planet Fitness: Fitness for everyone. Digital HBS. Web.

US SEC. (2021). Planet Fitness, Inc. — Form 10-K[PDF document]. Web.

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