Target Segment Choice for a Regional Gym
Coastline Fitness runs two gyms in a coastal town. It has 1,850 members. Members aged 35–50 make up 62% of the base and buy more annual contracts and personal training; 18–24s are 18% and 25–34s are 20%. A low-cost 24/7 competitor has opened near the university and is charging students €19 a month, compared with Coastline's €35. Student membership at Coastline has fallen 28% in six months. Coastline cannot match €19 without cutting its margin to unsustainable levels. It has €20,000 for a three-month campaign. The manager proposes a 40% student discount, but the finance director worries this will attract price-sensitive members who leave when the discount ends. The clubs have spare capacity in off-peak hours and a small-group training studio that is underused. Member surveys show that 35–50s value coaching, childcare, and a quiet pool; students value flexibility and low price.
1. Which segment should Coastline target and how should it position the offer? Apply segmentation criteria and recommend a campaign focus.
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Target the 35–50 segment, not students. Segmentation criteria: the 35–50 group is substantial (62% of 1,850 = 1,147 members), measurable (age, contract type, PT usage), accessible (existing database, club communications), differentiable (values coaching, childcare, quiet pool), and actionable (can be served by off-peak studio and staff). Students are a smaller, price-sensitive group facing a 24/7 low-cost entrant; matching €19 would damage contribution and likely fail because Coastline cannot match the competitor's cost structure.
Positioning: 'Coastline is the club for busy adults who want coached, calm, credible fitness-not a cheap keycard.' Campaign focus: retention and upsell of 35–50 members, plus conversion of 25–34s who aspire to that experience. Use €20,000 for small-group training tasters, childcare-friendly off-peak classes, member referral, and testimonials. Metrics: retention rate of 35–50 cohort, PT attachment rate, off-peak utilisation, cost per retained member-not student headcount.
2. Evaluate the manager's 40% student discount proposal using contribution logic and likely behavioural response. What would you do instead with the €20,000?
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40% discount: €35 → €21. That is close to the €19 competitor but still not cheaper, and it signals that the standard price was overpriced. Revenue per student falls by €14/month (40% of €35). If 100 students accept, revenue is €2,100 versus €3,500-a €1,400 monthly giveaway. To recover the lost contribution from one full-price member at €35, the club needs 2.5 discounted students, before extra servicing cost. Students who join mainly on discount are likely to churn when it ends, and the discount may leak to existing members.
Instead: create a separate off-peak student membership at €24 with restricted hours and no long contract; this protects the core price and uses spare capacity. Spend the €20,000 on the 35–50 positioning and a limited student trial, not a blanket discount. Test a six-week off-peak student pilot with 50 places; measure conversion to paid, attendance, and whether existing members downgrade. If pilot cannibalises full-price members or fails to retain, stop.