Posted By Clod on July 20, 2012
With opportunity development, the club owner is saying, “Let’s change and capture even more members” (similar to the ones we have now). You’re taking a high risk by changing your club, but selling to existing target markets.
Here, owners risk more capital by making major adjustments in product and place, and moderate adjustments in promotion, programs and people. For example, an addition of a swimming pool, expansion of the weight room with computerized resistance equipment, combined with additional staff, advertising and water exercise classes, would constitute opportunity development. The addition of new profit centers appealing to the members you already have, such as a juice bar, is also a form of opportunity development.
With diversification, the club owner is saying, “Let’s try all new things and get new members.” You’re taking an extreme risk by creating new products and services and selling them to new markets.
For example, a decision to gut all of the indoor tennis courts and convert the entire club to fitness would constitute diversification and require a complete revamping of promotion, programs, people, product, place and price.
Is there a path that will reduce uncertainty? The most cost-effective route is to concentrate first on market penetration. When that is worn out, move to market development, and then either try another form of market development or move to opportunity development. When you feel opportunity development is exhausted, begin to recycle back to market penetration, market development, opportunity development, etc. Normally, every club can keep a growing membership base with this circular path. Only if you have no alternative should you consider the strategy with the greatest risk: diversification.
You can also reduce your risk within each strategy by using the components in the order shown in Figure 2.
Promotion and programs are the least risk because mistakes are easy to correct. If you hire the wrong people, you can rectify the situation, but usually not as expeditiously as anyone would like. Product and place changes require major capital, and errors are not easily or inexpensively fixed. The reason price is the highest risk is the tendency to lower it. And, once you lower price, it is tough to raise it later. It has been my experience that lowering price is always the first answer the staff has to every marketing problem, when it should be the last. If you focus on the other P variables first, you should find the only adjustment you need to make in price is to raise it.
Real life isn’t black and white. And so it is true for any model. Lines between one strategy and the next are fuzzy.
One person might call what they did market development, while another might call it opportunity development. So what? As long as the decision is made using a logical framework, the nomenclature doesn’t matter.
The names may change, but the ideas are fundamental.
Understand and use these strategies, and you’ll be on your way to a result every owner will welcome: more members at higher prices with the least risk.