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Wednesday
Sep132017

How Xercise4Less Became the Market Force It Is Today

Six years ago, when the Yorkshire Post, based in Leeds, England, reported on the expansion of the U.K. health club chain, Xercise4Less, the story’s headline dubbed it, “The People’s Gym.” That moniker stuck and, in essence, pinpointed the chain’s identity, its ethos, and its mission: to make the club’s extensive exercise facilities accessible and affordable for all.

At that time, Jon Wright, the company’s founder and a former Leeds rugby player who worked in fitness sales after finishing college, had already opened four clubs in the north of England, but spoke of something different—his passion to “make fitness accessible for the many, not the few.” Since then, the company has championed that message, which reads a bit like political manifesto.

“We had a good product, but the newspaper story turned it into a brand,” says Xercise4Less Marketing and E-commerce Director Jon Nasta. “It was more luck than judgment.”

Today, some 300,000 members enjoy a total of 48 Xercise4Less clubs in England, Scotland, and Wales, thanks, in part, to the company’s equity partner Business Growth Fund (BGF). Last year, the firm raised its investment in the chain to a total of $25.7 million, through the latest injection of $9.9 million. Apparently, there’s more to come. 

And, with $52 million in revenues (2016) and a profit of $7 million (EBITDA), Xercise4Less has made The Sunday Times Fast Track 100, a ranking of Britain’s fasting growing private companies in terms of sales.

Richard Taylor of BGF, who sits on the Xercise4Less board of directors, sums up BGF’s interest: “Xercise4Less is an example of how an ambitious company can disrupt an established model. Jon and his team have understood the market and the opportunity available to them, and have used our growth capital to build a business of scale.” 

How and why Xercise4Less became the market force that it is today is a story worth reading—and repeating.

Sharing the Love 

To expand Xercise4Less, the first thing that Wright did was assemble a highly experienced senior management team.

Nasta, for one, had built his own company, Retention Solutions Ltd, which specializes in automated customer communication and feedback software products. In the process, he worked with club operators in all segments, including the budget market, and recognized a unique proposition. 

“The thing that made Xercise4Less different,” he observes, “is that the clubs had, in marketing terms, what we call ‘brand love.’ Some members absolutely loved what the clubs had given them, how they’d changed their lives. People who joined Xercise4Less achieved more than they ever thought possible.”

What’s more, they were eager to talk about their experience. Each week the company posted a success story on social media.

“There’s no better marketing tool than customers who give you glowing reviews,” Nasta says.

As he sees it, his task is to build on the goodwill the club has already engendered, and energize the people who support the business. He’s also made sure that all the management and staff are keenly aware of the value they’re delivering.

A Generous Offer—Technology Included 

It’s no wonder that the members are happy.

The cavernous 30-40,000-square-foot fitness facilities are stocked with some 400 pieces of Matrix equipment, and include a separate women-only area. In the newer sites, that space spans up to 4,000 square feet, as the membership across the group is 52% female.

There are 200 free classes a month, helpful staff on the fitness floor, and in-house personal trainers. Additional features include a sled-pull track, a martial arts cage and a boxing ring.

The price? Monthly dues start at about $13 a month on an annual contract.

“For many years I think health clubs were ripping off their members,” Wright says. “They were over-charging for facilities and under-delivering in terms of service, and the budget guys have come in and have woken everybody up. That’s a good thing.” 

Indeed, Xercise4Less can be said to exceed many high-end clubs in its vision, which includes utilizing the latest technology for member convenience and 24/7 engagement.

When they enter the club, their I.D. is their fingerprint, and the Xercise4Less app allows them to post comments, take part in fitness challenges, talk to personal trainers and other members, make referrals, and to collect loyalty points redeemable for Xercise4Less products.      

The app has nearly a five-star rating and every member is required to download it upon joining a club.

“Our strategy is to take the touch points outside the bricks and mortar of the club so that our members always feel connected,” Nasta notes.

The next stage is a premium version of the app, which will provide a full exercise experience at home. It will be developed with VirtuaGym, the all-in-one solution for client coaching, membership management and billing, and scheduling, which currently has 140,000 unique visits a week.

“The app will mean that you can be a member of Xercise4Less and never have to come to the club,” explains Stuart Perrin, COO. “People will be able to stream live classes or choose from a library of 5,000 prerecorded group exercise and bodyweight classes. That’s the next iteration. We’re far ahead of everybody, including clubs in the U.S.”

What’s more, the company is involved in a research project on the non-gym going market.

“Fifteen per cent of the population are members of health clubs,” says Wright. “But 85% aren’t, yet a high number of them have health and fitness goals. That’s my target market—that’s what we want to get into now.”

Listening to Members and Staff

Software also enables the company to engage its members with surveys that ask for feedback every three months. The staff makes sure to respond to requests or complaints within 24 hours. Currently, 25% of the members share their views.

“By having that flow of feedback, we’ve created a culture where key operational decisions are genuinely driven by what our customers are saying they want,” Nasta says. 

The need for more water fountains in the gym was one request that was easily addressed; however, the fact that women-only area could be accessed only directly from the ladies changing room involved a complete rethinking of the club design going forward.

Reflecting Nasta’s influence perhaps, each morning management views positive and negative comments from members presented via a “dashboard.” Graphs alongside key words give an indication of how a sentiment is increasing or decreasing, and identifies which clubs or regions are performing well. Such data facilitates continuous customer engagement with the business.

The same approach helps to ensure staff satisfaction. In addition to quarterly surveys, there’s a staff council to present ideas and issues.  

“We listen to what they’re saying, and if it’s a good idea, we’ll run with it,” says Perrin. “Anything that makes the boat go faster, we’ll do.” 

There’s also a FastTrack 100 program for the most promising staff to follow a clear career development path and, as the company is growing so quickly, there are many opportunities. What’s more, last year, the clubs were closed for two days to celebrate the staff and the company’s achievements, so all could enjoy an outdoor music festival.

“The process around health club management is very, very simple,” says Perrin. “If you treat people right, if you incentivize them in the correct way, if you give them the correct training, then they’ll be successful. Along as your people are happy, motivated and trained correctly, you’ll only get bigger and better results.”

Perfecting the Model

All of this, while also investing in sites that are double the size of most other budget clubs.

“Our first club was 20,000 square feet and it just became too busy,” says Wright. “It wasn’t a great customer experience.” But the Leeds club, which spans 34,000 square feet and serves more than 10,000 members, never feels full, he says. 

“As time has gone on, we’ve realized that space is our friend,” says Perrin. “We’ll take all the unique selling propositions of other clubs, bang them in a bigger space, and do it cheaper.”

For operators in towns and cities targeted by Xercise4Less, this can be an aggressive and often catastrophic approach. Perrin acknowledges that clubs have closed after Xercise4Less has entered their market. 

“We’ve just gone into Mansfield [in the Midlands], which has a population of more than 107,000. It’s so overpopulated with clubs—every operator is in that town. But we open next week and 4,000 members are ready to go. We’ve upset everybody in the town because there are 4,000 fewer people trading elsewhere. We’ve close down some of the smaller operators quite regularly.”

Xercise4Less is not afraid of going head to head with other similar providers, either. In Milton Keynes, 50 miles north of London, they’ve recently opened as a neighbor to rival low-cost chain PureGym, even sharing a car park.

“Penetration levels have increased in the past few years, and that’s all due to the budget operators,” says Wright. “We’re growing the market. But it’s business, it’s cyclical, it goes round. I’m sure at some point somebody’s going to do something that’ll snap at our heels.” 

What’s the secret to success? “Give your members the right product at the right price, and they’ll stay,” he points out. 

A Bright Future

When you do that, you get results. Currently the company reports that it’s experiencing a 30% attrition rate, and has generated 80,000 to 100,000 new leads.

“We’re a very fast-paced sales business,” says Perrin. “And we have one of the strongest referral offerings within the industry.” 

He explains that, when a new member recommends five people who join within 30 days of that membership, the referring member receives the first year free.

“I’ve converted them into a sales person,” Perrin adds. “And then those five people see me and we do it all over again. It’s been very successful for us.”

For the moment, there’s potential for huge growth. “We’re so far away from saturation,” Wright says. “We keep opening sites and we keep being successful.”

Plans are to reach 200 sites, adding 15 a year, and to expand into Europe, eventually. “But only when we’re really happy with what we’re doing here … so it won’t be any time soon,” Perrin points out. 

In the meantime, the company will continue to invest in its sites, its members, and its staff—and in its local communities, too. National Health Service (NHS) employees enjoy a special membership rate of about $1.30 a month; the company donates to two national charities; and it offers free classes each weekend to young children.

“These are significant initiatives which signal that a business understands how it can drive meaningful social change, while building deeper connections with key stakeholders such as staff, members and the wider community,” says fitness industry analyst and founder of Gymtopia, Ray Algar. “Of course, it also enhances their corporate reputation, which is vital if a business is taking the long view.”

“We see Xercise4Less as one of the most important communities in a town, and as such, we have a responsibility to give something back,” says Wright. “Some of the statistics coming out of primary schools on obesity levels are a disgrace. We’re in a position to do something about it, so we do.”

As a company, Xercise4Less wants to make a positive impact on the lives it touches, he says. “We get a buzz out of that. Whether it’s members or employees, we want people to come to work and feel like they’re having fun. And we want the members to feel that they’re changing their own lives.”

These are the types of things that “the people’s gym” would—and should—do.