MBA Assignements : TMA MS -65 Third Assignment Marketing of Services

MBA Assignements : TMA MS -65 Third Assignment Marketing of Services

Course Code : MS-65
Course Title : Marketing of Services
Assignment Code : 65/TMA-3/SEM-II/2004
Coverage : All Blocks

Please study the case given below and answer the questions given at the end.

Re-creation Health Club: Balancing Supply and Demand

The owners of Re-creation Health Club had an unusual marketing problem, their health club was too successful. Some established members using the gym had recently complained about overcrowding, particularly from Monday to Wednesday between 5pm to 8pm. Even mornings between 9am to 10am were getting busy and many of the 63 weekly aerobics classes were usually full. The club operated between 6am to 10pm from Monday to Friday and 7:30am to 7pm on Saturday and Sunday. The problem was compounded when an introductory offer of Rs.1,000/- for a one-month trial was made. Approximately 300 people joined under the trial offer which ran for two months, but it was difficult to estimate how many would continue as full members.

Established in a fashionable metro colony in the 1970s, the club originally operated a squash and tenpin bowling centre. During the fitness boom in the 1990s, a 25 m swimming pool and a sauna/steam room was added, and the bowling alleys was replaced by a gymnasium. Since 2000 the membership has grown by 75% despite the annual membership fee increasing from Rs. 15, 000/- to 20,000/- . Members ranged in age from 16 to 80. The age split was under 18(6%), 18-24 (15%), 25-34(38%), 35-49(31%), and 49+(10%). Mothers were frequent users and child care facilities were available at the club. Members joined the club for a variety of reasons such as to lose weight, gain bulk, tone muscles or to improve general health and fitness, but most enjoyed the social interaction of working out with other people.

From outside , the club looked unobtrusive and fairly uninviting. It was set back about 20 m from the main street with an entrance down a narrow arcade. Upon arriving, however, a member knew that this was no ordinary gym. Reception staff all wore black corporate uniforms consisting of a jacket, skirts or pants and white shirts or blouse that would not look out of place at an airline. Gym instructor wore colour-coordinated Re-Creation T-shirts and tracksuits. Fresh flowers were always on display at reception and in the changing room �a touch appreciated by many members according to feedback surveys. Members submitted their bar-code photo identity member�s card on arrival. This sped up processing and provided useful information on usage patterns which could be used for marketing purposes. For example, members who had not been at the club for one month were sent a reminder card inviting them back.

Next to the reception was a juice bar that sold a range of wholesome food including the popular �banana smoothie� which was a combination of milk, ice-cream and bananas. Tables and chairs were also provided in case members wanted to sit down for more substantial snack. The club was cleaned continuously, in particular the spa and pool areas, and regular tests were taken to ensure that the correct temperature and chemical levels were maintained. Attached to the club was a medical centre with a doctor, private physiotherapist and nutritionist. Re-Creation�s innovative approach to physical fitness and serving member needs could be seen throughout the facilities. The gym had the latest equipment, such as step machines, that simulated the action of climbing stairs. An �Aerobic Express� had been introduced which meant moving from the step machines to walking machines every five minutes to rotate the equipment more effectively during peak times. Members took a number if there was a queue. The aerobic floor had been specially laid to provide spring and cushion so that the members would not strain their muscles and joints when attending classes regularly. Every three months, a full-colour magazine for members was published. It included photographs of members and staff as well as articles on health, nutrition and details of forthcoming events. This, and other initiatives, had won the club numerous industry marketing award. The themes at Re-Creation was fun and friendliness. Recently, a �Big T-Shirts� aerobics class was introduced specially for the larger members. Participants wore oversized T-shirts to make them feel less self-conscious.

All staff were carefully selected and well trained, including receptionists, aerobic instructors and the gym staff. Reception staff referred to members by name and acknowledged them with a smile. This had been relatively easy to maintain as all staff had been hired because of the basic empathy with people. All gym staff worked part-time to avoid service fatigue. Weekly training meetings held by management to ensure up-to-date health and nutrition information was received by staff, who were also trained in customer service and required to attend several sessions on understanding human behaviour and motivation. Staff were continually encouraged to take care of any member situation without the need for management�s involvement or approval. When a customer service opportunity was created and handled, each staff member was rewarded for handling these situations well. Staff were also thoroughly introduced to Re-Creation�s �Power Rules� which, in part, stated that �the customer is always right�. Service standards included answering phones within three rings and not leaving prospective members in reception for more than ten minutes when awaiting a tour of the club. All new members were offered an introduction to the gym equipment and facilities on their first visit by a �personal trainer� staff member.

Market research showed that more than 60% of new members joined through word-of-mouth referrals. Promotional activities included the Yellow Pages, direct mail and newspapers (although, with less success) and publicity events. Re-Creation�s retention rate of members was between 60-80% as compared to the industry average of 20-25%. The main reasons cited for non-renewal of membership were moving out of the area, not enough use to justify the cost, financial problems and moving to another gym because of price or overcrowding. More than 90% of members lived within 5km of the club. In order to expand capacity, the owners were considering a number of alternatives. These includes converting the downstairs squash to a boxing training circuit room or increasing the size of the gym work out area by 50%. This second option requires building above the reception area on a mezzanine floor at an estimated costs of Rs. 20 lacs and would take 18 months to complete. Anita, Marketing Director, suggested extending the opening hours, introducing a lunchtime aerobics class or increasing the price to reduce demand.


1. Why do service organisations lack the capacity to inventory their services? Compare a service organisation with a manufacturing firms in terms of inventory capacity (e.g. car repair and maintenance service with an automobile manufactures/dealer.)

2. What problems exists for Re-Creation in not matching demand and supply?

3. Suggest some ways in which Re-Creation might balance supply and demand.

4. What alternative solutions should management consider?

Comment for MBA Assignements : TMA MS -65 Third Assignment Marketing of Services
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