Peak Gym Case

Study
Submitted to:
Peak Time 2012
International Business School Competition

Presented By:
Rakesh Chaudhary
IIT Gandhinagar
INDIA

Task 1
Calculation of profit from clients

Profit = Sales Cost

Sales
Cost

Sales
For Muscles, for full ticket:
Sales=
$4115000*0.05 = $205750

Full
Ticket

Pool
Only

Gym
Only

Trainin
g Only

Muscle 205750

4660

55720

5370

31840

16110

Youth 823000 76890

Middle 238670
132810 55720 148570
Age
0
Upper
205750 13980
Class
Others 493800

4660

5970

5370

49750

3580

Cost:
Average
price of
each
ticket

No. of
member
s in each
type

No. of
client of
each
type

Part of salary to Total no. of hours Total no. of hours

each type of client
used
allotted to each client

Average Price for full ticket

=

(% of members in type x in
full ticket * Price of type x in full
ticket)
Where type x = full time,
morning, evening, students and
weekends
=
(0.35*192)+(0.14*115)+(0.12*11
5) + (0.25*134)+(0.14*58) = $

No. of membership in each type:

No. of membership in full ticket = total sale of

full ticket/Average price of one full ticket

It also give total no. of monthly membership

of each client
No. of membership of each type of client in

each activity - from membership type

purchase choice
7

Total No. of monthly membership in

year 2011 in :
Full
Pool
Ticket Only
Muscle
1483
s
Youth

90

5933 1483

Gym
Only

Trainin
g only

1071

80

612

240

Middle17205 2562 1071

Age

2216

Upper
Class

1483

270

115

80

Other

3560

90

957

53
8

Number of hours used (from client spending %

table)
Pool

Gym

Training

Total

Muscle

16943

23284

9632

49859

Youth

78218

60584

37938

176739

Middle Age

210665

169453

121193

501311

Upper Class

18615

14807

9632

43053

Others

39495

41572

22095

103162

Pool
($)
Muscle
Youth

Gym Training
($)
($)

8659 38343 40009

39976 99766 157588

Middle Age 10766 27904
503415
6
9
Upper
9514 24383 40009
Class
Others 20185 68459 91780

Variabl
e cost
($)
87011

Fixed
Cost
($)
109160

297330

386948

890130

109755
4

73905

94259

180423

225859

Total Cost
($)
196171
684278
1987685
168165
406283
9

Profit for Clients

Total Sales

Total Cost

Profit

Profit %

Muscle

271500

196171

75329

27.7456

Youth

947840

684278

263562

27.80663

Middle Age

2723800

1987685

736115

27.02531

Upper Class

231070

168165

62905

27.22355

Others

551790

406283

145507

26.37006

Total

4726000

3442580

1283420

27.15658
10

Sales Channels:
Hairdressers
Cost ($)

For 260
people
hours used cost/hour
($)

Pool

186000

363935

0.51108

133

Gym

510000

309699

1.646758

428

Training

832800

200489

4.153837

1080

Cost for 260 people

1641

Hairdressers share = $10*260 = $2600

Total extra cost = $2600+ $1641 = $4241
Members converted = 46

Additional cost per member = $ 4241/46 = $ 92

11

Average profit per member/month =$ 31

Hairdressers:
Average churn rate = 8% (Avg. of full ticket members)
No. of members who left after 1st , 2nd , 3rd , 4th months (of
these 46) are 4, 3, 3 and 3
Member who left after 1 month give loss of = 4*(92-31) = $
244
Who left after 2nd month =3*(92-62)=$90
At the end of 4 month, we have profit of 36*31= $1116
Net profit after 4 months = $821
12

Allpeakers.com
Cost of offer viewed = $0.5*6758 = $3379
Since students (24%) are extremely price

sensitive they will buy only on the discount day

Of remaining 76%, 76/30 = 2.5% are the

usual no. of people who buy, assume double

no. of people buy on discount day.
Hence, 30% of people who buy the service
bought on discount day
13

Voucher sold on non-discount day = 85 (=122*.70)

Fee on voucher = 85* 192*0.03 = $491.9
Voucher sold on non discount day = 37 (=122*0.30)
Fee on voucher = 85*(192*0.8)*0.03= $170.5
Total fee on voucher = $662
Total money spend = $662 + $3379 = $4041
Discounted money = 37*192*(1-0.8)= $1421
Additional cost per member = 5462/122 =

$45
14

Allpeakers.com
After 1 month 108 people left the club
Hence loss after 1 month = (45-31)*108 = $1512
Profit after 2 month = 14*17=$238
Profit after 3 month = 13*31=$403
Profit after 4 month = 12*31=$372
Profit after 5 month = 11*31=$341
Profit after 6 month = 10*31=$310
Total profit after 6 month =$152
15

ompany should use a mix of current and new channel

Current Channels:
Company should discontinue the use of

allpeakers.com, here people come with discount

rate, give less profit.
They dont know about the company and by the

time they came to know most of them leave with

dissatisfaction
Should continue with hairdressers
16

New Channels:
Doctors can be approached, since most of the people

who visit doctors are generally health conscious.

Free services for some hours, preferred over giving

discount
Group purchase sites which allow to sell with money

return guarantee after a certain amount of free trail

should be approached
To promote one time visit it should do advertisement at

tourist places
17

Strategic
advices
Swimming spas in club 2 and 3
Install new non-traditional sports activities
Discount for students, most profitable clients
Change of price grid

concentrate on more amount of profit than %

profit
18

Task 2,

Fit Life promotion

Client wise strategy:

Students

Extremely price sensitive, most profitable

Upper Class

Go to trendy places, Price insensitive

Middle-aged, Middle- Class

Professional advice, Quality services

19

Training only for students in Peak gym = $ 63

Yoga classes in Fit Life = $ 65

hence peak gym is cheaper for students joining

training classes
After 10% discount promo,
Yoga classes in Fit Life = $ 58.5
Splitting peak gym training classes in
aerobics and yoga for students will :
Make price of each section lower than Fit Life
Provide more options to students in Peak Gym
20

Group discount given to students

Since students do sports with friend providing

additional discount lead to more no. of

students to join

2 month and 3 month scheme

Help regular customers to use club at lesser

price
21

In peak Gym
Students Full
Ticket
Sales
Sale %

Pool
Only

823000 76890
87%

8%

Gym
Only

Training
only

31840

16110

3.3%

1.7%

87% of sale is of full ticket, hence prices of full

tickets are most significant
Churn rate was increase by 5 % for all full
ticket when fit life used the promo trial
Reduce price of full ticket by 10% for students
22

Launch a new package with full ticket for upper

class with higher price than current full ticket.

Package includes:
Regular nutrition advice by advisor and doctor
consultancy once in a month
Personal trainer on additional cost
Effects:
More quality product will attract more upper class
It will increase the profit from upper class client
by more than 10% by reducing churn rate
significantly
23

Task 3

Strategy

Expansion of club in nearby

cities of Maywell
GDP per capita of Berryhill is

21 tUSD and population 4

million

24

Year 2011 data

Pool

Gym

Training

Total time spend

(hrs)

363935

309699

200489

% of total time
spend

42

35

23

Club No.

Gym

Aerobics

Pool

Yoga classes

+
+

At present
Club No. 2, 3, 4 dont have pool
Training facilities in every club

25

Club No.

Size, sq. m

1710

950

450

1200

1500

Visitors

1049

551

509

549

901

Utilized space*, %

95

90

98

83

99

Unused Space (sq.

m)

85.5

95

204

15

Modifications
Yoga classes replaced by pool in club 4,
Real estate in cheaper in zone 2, expand club 3
with pool
Buy land for Club 3, save rent paid
26

Effective utilization of available

resources
In zone 1, Real estate

prices are higher,

hence more upper
class people are here
In zone 2 more middle

age-middle class
Low real estate price
Good transportation
facility to city center
27

Club 3, middle-age middle-class centric

Visit of women specialist doctor once in a

month
Hiring nutrition advisor
Big university in the western part of zone 1
Club 1 will be closest to university
Discount offer to students of the university at

club 1
Additional discount for people joining in group.
Offer separate yoga and aerobic services at
28
club 1

Addition of new trend activities :

Zumba, capoeira and active dances in club

2,4, 5

Attract people who choose more trendy

places - upper class

Attract people who are lazy but health

conscious, adding new segment of customers

29

2009
Sale
1 time
113584
visitor
Gym rent
64536
Membership 3260463
3438583
Total

2010

2011

Sale %

Sale

Sale

3.30

138277

3.44

159018

3.21

1.88
94.82

67469
3811651
4017397

1.68
94.88

74216
4726447
4959681

1.50
95.30

One time visitor contribution

Significant in zone 1 clubs main tourist

attraction
Discount coupon distribution - Tourist travel

agencies, special discount on saunas

30

Best option:
Effective utilization of available resources
Club 5, opened in 2011
2009

2010

2011

Sales

3438583

4017396

4959681

Gross Profit

1419131

1626678

1517101

Gross Profit
Margin

41.27%

40.49%

30.59%

Sales increased but profit decreased

Resources in new club is not effectively utilized

Club 5 is not giving profit
31