Les Mills’ products—choreographed fitness moves with accompanying music—are a global fitness phenomenon. Around the world, gym and fitness center customers are jumping, leaping and stretching to classes designed and produced by this Kiwi business.
The company began life as a gym operator when an Olympic athlete of the same name opened his first premises in 1968. The company is still in this market with a modest ten establishments, but its group fitness classes are the real engine of growth and driver of revenue. The company’s website boasts that over 10,000 gyms in over 60 countries now use its products.
At face value, Les Mills has exploited changes in the macro environment (the desire for personal fitness and well-being, the combination of popular music with exercise, the growth of solo exercise). But there is so much more to this story. Not only has Les Mills directly contributed to the growth of the group fitness market, but it has also accessed economies of scale, operated strategically to position itself structurally, and played a very smart game with its customers. Much of this depends upon judicious use of its brand. Not content to be a mere supplier of routines and prerecorded music to gyms and trainers, Les Mills has built a consumer-facing brand. As a result, within a great many gyms today, a tiny but critical part of the gymgoing experience—the classes—are branded Les Mills.
Growing the Market: An Authoritative, Quality Brand
There is little doubt that Les Mills has increased demand for group fitness classes by raising the profile, relevance and acceptability of group training. The Les Mills brand conveys quality and experience in the market. As with most strong brands, this reputation has been built through the quality of its product, not through persuasive communications.
The International Health, Racquet and Sportsclub Association magazine has described Les Mills as “doing for group exercise what McDonald’s did for hamburgers.” And the analogy runs deep. Production costs are (one assumes) very low because of massive economies of scale (designing and recording one “class” for hundreds of thousands of gym patrons). So far, despite low costs, customers have shown they are willing to pay more for a tried-and-trusted brand.
The Les Mills story, however, is not without its risks and challenges. In its formative years, Les Mills moved cleverly. Without attracting too much attention (which may have attracted imitators early on), it built its brand gradually. Prior to Les Mills, no one saw it coming. Now, with its scale widely understood and accelerating, a key challenge is to manage growth. As well as controlling quality over a rapidly growing organization, Les Mills must ensure that vast distribution isn’t interpreted as a lack of quality or attention. Otherwise, being the McDonald’s of its space might become a double-edged sword.
Capturing Value from Customers and Consumers
Clearly the whole fitness industry has seen value created by the growing popularity of group fitness classes. Les Mills has used its brand to capture value across the value chain and make life difficult for potential competitors.
Les Mills’ direct customers are gyms and individual trainers. Gyms are critical, since most sessions happen within a gym under the auspices of its event schedule. Many gyms are only too keen to adopt Les Mills programs, which they reckon will attract more customers and bring them back more often.
Trainers perform a complementary role, since without them the Les Mills programs are worthless. With experience and even qualifications from Les Mills, trainers are often reluctant to jump ship. Like the gyms themselves, trainers know that Les Mills is the brand that consumers demand. (Perhaps there is even a sense of wishing to reward Les Mills for so dramatically increasing the size of the market, which trainers rely on for work.)
When it comes to end consumers, Les Mills has captured more value by tailoring multiple products to different audiences. It has segmented its market through a combination of behavioral and demographic variables. For example, BodyVive is described as a “low impact-35-minute class …targeted to active adult gym members in their 40s, 50s and 60s.” (Source: Fitness Business News, 2006.) A common nomenclature has been deployed to create coherent brand architecture with names like BodyPump, BodyVive, BodyJam and BodyCombat. Thus the classes are self-reinforcing and serve to create the appearance of further critical mass for Les Mills, even if gym operators neglect to mention the formal Les Mills endorsement.
Sustaining Competitive Advantage: The Industry Standard Brand
Les Mills dominates an otherwise heterogeneous industry. There simply is no branded competitor. In gyms that don’t offer Les Mills classes, the only alternative is usually a homemade class dreamt up by a trainer. Such products are difficult to scale up, and are particularly so in the face of the powerful Les Mills brand and its loyal user base.
The Les Mills brand, combined with very wide distribution, has created a de facto standard for group fitness classes. Although the network of relationships and competences held by Les Mills is itself an entry barrier to this market, becoming the industry standard adds an additional line of defense.
Of course it’s never impossible to enter a market, and as its size grows, so does its attractiveness. Despite the power of the Les Mills brand, a player with deep pockets and access to the market (say a global chain like Fitness First or Virgin Active) might try to grab a slice of the action. This wouldn’t be easy. For the breakaway chain, this could mean losing the ability to charge consumers a price premium. The worse case scenario would see consumers leaving in favor of other gyms offering the Les Mills classes.
A similar threat might come from a disruptive innovator, who may attempt to undercut the slick brand and feature bundle provided by Les Mills. Although it is difficult to hypothesise where such an entrant might come from, there may be an opportunity for an entry-level group fitness brand. A back-to-basics firm could differentiate itself through the use of classical or acoustic tracks in place of Les Mills’ high-energy pop music.
Les Mills has taken steps to mitigate these risks. As local gym flyers illustrate, Les Mills is becoming an ingredient brand. Gyms frequently carry the Les Mills logo and advertise when they will have the next Les Mills product available. Once again, a fine balance must be struck. Pushing too hard to capture value (and brand equity) from gyms will alienate them, providing further encouragement to larger players tempted to strike out on their own.
So far Les Mills has the balance about right. It’s built a consumer-facing brand that doesn’t detract from that of its customers, the gyms.
Les Mills has identified, created and captured value where the traditional giants of the industry failed to recognize it. And now these industry giants are helping to promote Les Mills. Some centers have a dedicated Les Mills room, complete with motivational Les Mills–branded posters. They do this willingly because of the appeal of the Les Mills brand. But in lending further support to Les Mills—although they benefit from the patronage the classes bring—they are creating a powerful brand in which they have no stake. With this in mind, one wonders if—instead of McDonalds—a more accurate metaphor for Les Mills is the Intel Inside of the fitness industry.