Entrepreneur Doug Levine is looking into implementing significant organizational changes at Crunch in order to grow the company, both in terms of facilities and lines of business.
Paul W. Marshall; Jeremy B. Dann
Harvard Business Review (899233-PDF-ENG)
March 19, 1999
Case questions answered:
- Situation Analysis: Develop a summary of the market conditions that led Levine to come to the conclusions regarding market needs. Considering the 5Cs as a model for describing the situation, highlight those aspects that would have been critical to Levine’s decisions—reacting to the market, conceiving of a solution, and structuring that solution in the context of the perception of the available audience(s).
- The Target Audience: Based on your situation analysis, how would you describe the people that make up the market that Levine concluded would be available for Crunch. Be as descriptive as possible in defining the character, lifestyles, demographics, motivations, personalities, and other traits that would get maximum benefit from Crunch.
- The Structures: Describe Crunch as a brand that embodies attributes, features, and tangible details that reflect the positioning idea that Levine seemed to have regarding the solution that his target audience would want. A brand is an identified entity that is a composite of multiple elements that constitute value. Review the elements of Crunch’s total offering and describe how 2-4 of the specific features of Crunch work to make Crunch “believable” in the minds of your target audience(s).
- SportsLife: This primary focus of this case was originally written to develop a decision process to conclude if a buy or no-buy should be made regarding SportsLife. In this assignment, describe your perception of the alignment of the apparent audiences and markets for Crunch and SportsLife and make a recommendation to Levine to buy/not buy SportsLife. In a couple of sentences, cite the most important reasons/evidence for your recommendation.
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Crunch Case Answers
Situational Analysis – Crunch Fitness
At the time of Crunch Fitness’ conception, most fitness centers advertised how it would make you more attractive. However, Levine took the opportunity to create an inclusive fitness center to change the conception behind fitness and bring in more people.
The public needed a fitness community that focuses on a healthy-living instead of appearances. That led to Crunch taking the opportunity to position themselves as a mid-priced, high-quality fitness facility that stresses a no-judgment zone and atmosphere that targets young, hip, working adults in urban areas who are health-conscious but can’t devote all of their time and energy to fitness.
They needed an outlet for their everyday stress, and Crunch made it possible with their fun programs and facility offerings. They portrayed their devotion to values like health, free of judgment, fun-focused, and small-scaled cozy environment.
Most of their success is contributed by having unique, trendy fitness classes while creating a social experience for members of all fitness levels. This concept differentiates Crunch from their competitors that flooded Manhattan with their aerobics studio.
The Target Audience of Crunch Fitness
Market Segments for fitness centers, in general, are: making friends, losing weight, taking shape, peak performers, health requirements, and sports focus.
The key concept is to cluster consumers with related needs, which is what Crunch did but added the element of fun and no judgment zone.
The people that make up the market are young, working adults in urban areas that are health-conscious but having a hard time managing their time and energy into fitness.
Crunch Fitness offered some sort of refuge for individuals who struggle with average stress to anxieties associated with exercising, especially since the trend was to look good to feel good.
Many people struggled just going to the gym to feel and look good because of the constant fear of not looking the part of being a model in the gym.
The Crunch brand attracted consumers due to its comfortable, relaxing, fun, intimate, and judgment-free zone. It initially attracted more female consumers, who then turned male consumers into aerobics’ fitness craze and eventually joined the crunch fitness club.
Crunch is not a typical traditional fitness center, and that is their main source of success. They operate differently in various ways.
For example, Crunch generates revenue in either month-to-month $75 with an initiation fee of $150, or an annual fee-up front $800 per year.
They offer a structure-less vibe of working out where consumers come in with their stress and anxiety ready to work-it-out with enthusiastic trainers.
It allows members to experience a different fun way of exercising that any other fitness center won’t offer, from trainers and environment to non-traditional classes.
Levine brought in live rap performances in “Hip Hop Aerobics,” “Cycked,” a unique blend of yoga and cycling, and “Co-ed Action Wrestling.”
He also incorporated weights and cardiovascular exercises equipment and made sure he does not exude a lot of emphasis on group exercises for those who are not interested.
Crunch invites everyone of all levels of fitness to join as they are trying to live a healthy lifestyle in a fun way.
Considering that Crunch is interested in acquiring SportsLife, they need to make sure that their positioning and brand go uninterrupted.
Their core is a no-judgment environment. It is quite fitting that they should consider continuing differentiating themselves and allowing consumers to feel welcomed.
One of Crunch’s biggest concern is losing their humorous and quirky atmosphere when expanding. To maintain that atmosphere and attribute, Crunch should incorporate their group classes, especially aerobics at SportsLife.
Keeping in mind that in SportsLife, they were focused on organized sports and traditional exercises, which is completely the opposite of Crunch’s target-audience preferences. Crunch should include their charismatic instructors to maintain the brand identity and no judgment positioning.
They could also incorporate their unusual exercise concepts with traditional sports to gather a larger audience while maintaining their core audience. This way, consumers can choose from three experiences; Crunch, SportsLife, or a combination of both.
The positive aspects of acquiring SportsLife are increasing the size of the company by 60% and targeting Atlanta as the top city Crunch is ready to expand in.
However, the biggest challenge that Crunch is facing is that it does not align with their positioning, target, or cozy experience. SportsLife is located in a suburban area as opposed to Crunch, where it is located in urban areas.
The size and facilities don’t fit Crunch’s standards and position. SportsLife’s target consumer is older than Crunch’s target audience and very different, considering it targets people with families generating at least 70K a year. Lastly, the billing structure may vary.
Keeping in mind that the cost of the possible acquisition will be: $2.5 Million cash payment, $2 Million in debt assumed by Crunch, $3.5 Million through an “earn-out” agreement whereby the current owners will help manage the clubs for an additional 3 year period.
Levine and Harvey both estimated that Crunch would need to spend at least $300K in the short-run on each club to upgrade the facilities and operations.
Taking all the information into consideration, it is only right for Crunch to prioritize their own growth that aligns with its brand.
For example, “Crunch.com” is a good idea for starters since it could use the same quirky advertisements they gained following for while emphasizing the judgment-free zone.
They should not even consider the idea of international expansion, the “crunch-plex,” and retail/restaurant concepts just yet. They need to maintain and enlarge their original target market.
They also need to understand that SportsLife has a completely different brand, segmentation, service that they offer, which is exactly the opposite of Crunch’s.