When should you launch a second brand?

There is no question that David “Patch” Patchell-Evans, founder and CEO of GoodLife Fitness, is a highly successful businessman. He has built the largest fitness empire in Canada. In 2010 “One in every 43 Canadians… [was] a GoodLife member.” With the recent acquisition of Extreme Fitness he has just added thirteen new locations to his empire.

Main_LogoBy all accounts Patch is a remarkable person:

  • He has earned an enviable and well-deserved reputation for his contributions to the Canadian Health and Fitness Industry
  • He has built a strong and distinctive brand identity for GoodLife through his commitment to a consistent brand experience in all locations, and his adroit use of integrated marketing communications and promotional tactics

I have personal experience with the GoodLife Brand. The equipment is generally new, the locations are clean, the staff is friendly and there is a good range of classes available.

Members that I chat with have told me they think the clubs are well run and they are happy with what they are getting for their membership fee—a middle-of-the-road experience for a middle-of-the-road fee. GoodLife’s reasonable pricing allows its members to forgive some of the less positive attributes of the customer experience that sometimes include overcrowding and high-pressure sales tactics from its employees.

Many industry pundits believe that the acquisition of Extreme Fitness represents yet another one of Patch’s savvy business decisions. One source elaborates:

  • It adds a number of promising new locations from which GoodLife can expand its brand and business
  • It provides a preemptive strike against impending US competition such as the soon-to-launch Equinox chain
  • It prevents Toronto/GTA competitors, Snap Fitness and LA Fitness, from making further inroads in this important Canadian market

These reasons provide sound justification for GoodLife’s acquisition.

As a Branding Specialist, I do wonder if GoodLife’s intention to incorporate all the Extreme Fitness clubs under the existing GoodLife Fitness brand is the optimal decision. It is certainly one way to go, but is it the best way to go? In particular, I wonder if GoodLife may be missing a valuable opportunity to move towards its company vision—to give every Canadian the opportunity to live a fit and healthy good life—and solidify its dominance in the Canadian Health and Fitness Industry. Could the moment be right to launch a second brand?

Should Patch launch a second brand?

A winning marketing strategy requires effective market segmentation. Customers in broad product-markets do not have homogenous needs and do not desire comparable benefits. Customers in broad product-markets are more diverse and complex—consumers happy with a “middle-of-the-road” experience are seeking something different from consumers that desire a more premium “high-quality” experience.

GoodLife Fitness already owns the “middle-quality” submarket. GoodLife’s decision to rebrand all thirteen Extreme Fitness locations means it could be missing opportunities in both the premium and value submarkets. This leaves these submarkets open for other industry players to get a stronger toehold in the market—a starting point from which to more aggressively develop these submarkets. The premium submarket warrants significantly higher membership rates and profits. Could this be a missed opportunity?

The moment could be right for GoodLife to launch a second brand. A second brand could help GoodLife:

  • To stake out a strong position in the premium submarket with assets it already owns
  • To realize a new avenue for future growth in memberships and profits while blunting the efforts of competitors to exploit this submarket
  • To retain the elite personal trainers in the Extreme Fitness locations in more affluent neighborhoods of Toronto and the GTA by recognizing their status in the health and fitness community and their more elite clientele
  • To reap the financial rewards of a loyal clientele who will willingly sign more lucrative membership contracts to enjoy the added benefits that a new premium brand will provide to satisfy their needs.

GoodLife Gold anyone?

About ashleykonson

STRATEGY CONSULTING | EXECUTIVE COACHING | CORPORATE TRAINING | KEYNOTE SPEAKING | Ashley Konson is the Managing Partner of Global Brand Leaders Inc., a new kind of brand consulting company dedicated to making brands and their teams leaders across the globe. He is a Brand Leader, Business Consultant and Award-Winning Educator, and a recognized thought leader and fervent advocate of the premise that strong brands and businesses achieve and sustain their market positions because they are strong Inside out™.
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8 Responses to When should you launch a second brand?

  1. SG says:

    GoodLife actually has another brand, Fit4Less. I believe it is fairly new, and its a discount gym. http://www.fit4less.ca

    Overall I’m not a fan of GoodLife, I had membership there for a year. They offer good deals through corporate accounts, but otherwise it is quite expensive and I strongly believe that I did not get the value I sought at GoodLife. It was too expensive, and it was overcrowded- not to mention the 1 year contract requirement. It was also a hassle cancelling my membership and I kept on getting billed even after. They have one person working at their Customer Support Centre for sure, since there were always 25-30 people waiting on the phone-line ahead of me while I tried to get the issue resolved.

    The worst part about GoodLife? They charged me more than my contract stated, $135 more. When I tried to argue this, they pointed to the little asterisk on my contract that said that they had the right to change prices at any time. Speaks a lot to what kind of a gym GoodLife comes across as to me.

    I’m at LA Fitness now paying half of what I was at GoodLife, without a contract, and am quite satisfied.

    • ashleykonson says:

      Hello Sharry, my thanks for taking the time to read and comment on my post. I have heard similar concerns about GoodLife around contract issues. Thanks for the heads up on Fit4Less as I was unaware of this entity.

  2. Ashley – sound thinking here. Unfortunately, as Sharry’s post references, the entire industry is rife with poor customer service practises, many that skate a very thin line of legality. Its that shoddy reputation that probably disquiets most folks who want an exclusive gym experience. They probably feel that’s possible from a stand-alone dedicated to exclusive gym experiences versus a chain with some dubious practises.

    That aside, I’d be interested in seeing what the financials look like on the 13 new locations acquired. What would it require to make them truly luxury or high-end and what does that experience look like in the fitness world? Can those locations – and the demographics in their respective catchment areas – support an exclusive clientele and what would that require in terms of CAPEX (to enhance the locations) and OPEX (to keep them top-notch offering the very best services).

    I agree that GoodLife needs “flankers” to keep share as the fitness market matures and the middle gets real crowded. What we might be seeing is Patch regrouping and looking across ALL his locations and determining which get upgraded to a new executive set of gyms, which remain middling GoodLife locations and which get downsized to Fit4Less.

    • ashleykonson says:

      Hello Hilton, thanks for taking the time to read and comment on my post and I appreciate your kind words. I hope Patch comes up with his plan very quickly because the word on the street is that a large number of elite fitness instructors at Extreme Fitness clubs in more affluent areas have already made up their minds not to sign employment contracts with GoodLife Fitness. Apparently GoodLife requires exclusivity from its instructors and its pay scale is lower also?

  3. Thank you for an interesting post Ashley. I am with a services firm preparing to launch a product line and we are debating launching the product line under a new brand. We have a premium services brand and have concerns that the product line may erode our market position. What is your opinion regarding services brands launching products and vice versa?

    • ashleykonson says:

      Hello Jeremiah, my thanks for your kind words. I wish I could provide a simple answer to what appears to be a simple question. But it is not. I would need some context to provide you with a more considered viewpoint. Feel free to contact me by email/phone and I’d be happy to chat with you briefly about your intentions.

  4. Mike Harris says:

    All things being equal a small company will strengthen itself by focusing its marketing assets on a single brand. Make acquisitions for distribution and customers only until you have 20% or more of the market under a single brand. Then diversify your brands but be prepared to spend more money than you would if supporting a single brand.

    • ashleykonson says:

      Hello Mike, my thanks for taking the time to read and comment on my post. I agree with your premise in the first sentence, but am wondering about the basis for that in your second. Is there some research that supports this contention? Across all industries? I believe that in this particular context a second brand is not only warranted but provides the potential for real upside in terms of broad product-market dominance and increased profit margins. I don’t believe that the costs associated with a second brand are an significant factor in this case. GoodLife could use the Extreme Fitness name if it chose. It already own the right locations. The signage is in place. The clubs are amore upscale and higher service standards already exist. In my mind this is a great opportunity for GoodLife Fitness.

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