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Charter Fitness – a Race to the Bottom

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I received the above promotion in the postal mail.

$0 to join and $10 per month.  Really?

Take a look at the membership agreement

The image above is actual size.  Don’t forget to read this line

I understand that this membership has an Annual Fee of $39 which will be billed annually about 45 days from join date.

So, given that sentence, I see that there is a $39 annual free, that if I don’t read this small print carefully – it’s about a 4 point font in the membership agreement – I will get a surprise in 45 days.  In 45 days, after I have signed up, and starting consuming their service I will find a $39 charge on my credit card.

So, $0 to join and $10 per month – in large font.  $39 annual fee in about 4 point font.

Why not just say… $0 to join $10 per month (min 12 month term) and $39 annual fee – all in large font ?

Obviously, with promotions like this – you have the suggestion that…

  1. The category of fitness centers that Charter Fitness competes in is in a “race to the bottom”. 
  2. Further, if you can’t win the “race to the bottom” on cutting corners then try to obfuscate (using small print) an additional fee of $39 per member per year and hope the valued customer does not take this into account when they make their membership decision.
  3. The attempt to obfuscate the $39 fee is a window of suggestion as to what they think of (value) the potenial customer.  (If it’s not obfuscation then why not bill me immediately, so I can see it at the time I join?  Why the delay of 45 days?  And if I want to cancel after finding out this additional free, then that’s a $60 early termination free.)

Here are some words from a recent posting by Seth Godin

Let’s not race to the bottom.

We know that industrialists seek to squeeze every penny out of every market. We know that competitors want to drive their costs to zero so that they will be the obvious commodity choice. And we know that many that seek to unearth natural resources want all of it, fast and cheap and now.

We can eliminate rules protecting clean water or consumer safety. We can extort workers to show up and work harder for less, in order to underbid a competitor. We can take advantage of less sophisticated consumers and trick them into consuming items for short-term satisfaction and long-term pain. These might be painful outcomes, but they’re an direct path to follow. We know how to do this.

I know we can do that. There’s always the opportunity to cut a corner, sacrifice lifestyle quality and suck it up as we race to grab a little more market share.

But the problem with the race to the bottom is that you might win.

You might make a few more bucks for now, but not for long and not with pride. Someone will always find a way to be cheaper or more brutal than you.

The race to the top makes more sense to me. The race to the top is focused on design and respect and dignity and guts and innovation and sustainability and yes, generosity when it might be easier to be selfish. It’s also risky, filled with difficult technical and emotional hurdles, and requires patience and effort and insight. The race to the top is the long-term path with the desirable outcome.

Sign me up.

The Take

A race to the bottom will reduce the profitability of the industry or category in which this is the chosen strategy.  It will reduce the profitability (and the quality / innovation / experience of the service) to the point that the price approaches the cost of actually delivering the service.

Why not a race to the top?  A premium product at a premium price?

That is, a strategy of differentiation?  That’s the route that made Apple the most valuable company ever.

To win a race to the bottom just might take as much hard work as a race to the top.  But, which race do you want to win?  And when you win the race to the bottom have you really created as much value – to society, to the world, to the future – as if you won the race to the top?

If Charter Fitness wins a race to the bottom – they lose.  And, we all lose.

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Written by frrl

August 22, 2012 at 5:36 pm

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