sition is the Tiffany of was hich compared with most other club5. And he had deliberately crehealth clubs. Now its owner ated high-cost facilities, asking his wants to expand. architect to survey the top health clubs in each Transition city and then to design spaces that were 30% NDTICE: The copyright law of the United States larger than the existing highest stan. (Title 17 U.S. Code) governs the making of dand. Maintaining such plush faciliphotocopies or printouts of copyright malerials. ties in prime locations wasn't what The person using this system is liable for any anyone would call cheap. What's motc, the club's niche sudHow Do You Grow denly seemed precarious. Market share was difficult to track, but Gordon's sense was that the number of a Premium Brand? companies entering the high-end health club and spa scene was erowing fast, even though Transition had stalled. To top it oif. Transition's membership was aging. The average member age was now 46 , ten years ano, it had been 41 . Gordon, a former senior executive at Moira Roint, an cxclusive Califotnia golf club, was in his larze, modern office at Transition's Chicago facility. From his desk, he could sce by Regina Fazio Maruca through a one-way mirror into the weight room. He leaned back in his chair and watched his business working. The Nautilus circuit was It was a great idea. The first of It wasn't just clever marketing. busy but not too crowded, and seven its kind. A series of ultrapremium True, the initial campaign - a tar- of the eight step machines were also health clubs located in major cities geted direct-mail effort featuring in use. Not bad, given that it was althroughout the world. Targeted at an endorsement from four-time Wim- ready 8 pat. on a Thursday night. senior executives too busy to eat. bledon winner julia Sonoma-had He thought about the competition Frequent business travelers. Singles. generated a solid response. And and told himself to calm down. People who just plain liked the extra Transition advertised regularly in Technically, Transition didn't have. attention and pampering and could publications such as the New York competition. It was an clite organiafford to pay for the best. Times, Town and Country, and the zation: the only one of its kind. He And it really had taken off. Since London Times. But word of mouth took a deep breath and picked up his its flagship club had opened at one also had served the company well. copy of the Wall Street lournal, but of New York City's most prestigious Transition was elite-offering top-of- almost immediately, he could feel addresses 15 years ago, Transition's the-line services to a select clien- his blood pressure rise again. There, sales had doubled each year. The tele-and its reputation had spread on page 9, was a full-page ad for the first location, a 25,000-square-foot quickly throughout the ranks of Fitworth healhh club chain. Manhatfacility with 14 full-time staff mem- wealthy jet-setters and business tan-based Fitworth was one of the bers, plus numerous sales associ- travelers. Early on, it had developed successful recent start-ups, and the ates, was almost maxed out at 2,300 a reputation as the Tifiany of health company's new campaign was clearmembers. Within its first two years clubs. And its name became known ly an attack on Transition. of operation, Transition had opened worldwide as the best of the best. "Sure, you can afiord it, but why similarly popular facilities in other Despite the success, however, pay for something you don't usef" major cities: Chicago, Washington, owner and president Gordon John- was the slogan-a direct shot at TranLos Angeles, London, Paris, Milan, ston was feeling unsettled. Transi- sition's all-inclusive, onc-price memSingapore, Hong Kong, and Tokyo. I tion's margins wereshrinking In the bership plan. Transition charged Within five years, it was also operat- past 12 months, sales growth had a $600 initiation fee, plus $2,300 ing through the five-star Printemps flattened, while operating expenses per year for a membership. Food hotels, offering its services to guests. had continued to rise. Gordon had to and beverages were extra-available pay a premium for celebrity chefs at prices comparable to finer casual Regind Fazio Maruca is an associate and former Olympic coaches and restaurants in New York Ciry. Fiteditor at HBR. athletes. His staff-to-member ratio worth charged an $800 initiation but, 3 of 4 afbet that, the reaely meateribip fee depended op which of a lares States. Fitmesth had alse ant af a cimies oriheot a thiatyengs hocei. Conlem lart his uster int inalind ifed sae af facilitiers, wielh as adfi Aale Pacifie ieciem, and wish tio tomal hourly shirpi int anall ahis. clesels Thue Wreth oluhe acocst the the facilitime trainise ataft, and emasape thitapimts. Fat morth the situation. Peailes fitwerth te eacry the feamatien allob it its dyd not peovide in-heue ehefs. But it did atfer a limined disaer mona he was mowed atwot Clarkhoaesio 4 axp-rated hanel shain that hal mo: an deseitaty pronpenct, aitd Ambias. quine aler aene inufur as Frimimes. priche liaciations like Tuanuitiont, it hel tharageil to apen facilitirs wirh 23 How Do You Grow a Premium Brand? Nam Read the case carefully and answer the following questions: 1. What specific strategic action would you recommend for Transition? 2. Justify your recommendation and highlight the potential risks of your strategy
