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Health Fitness Marketing Plan

Corporate Fitness

Executive Summary

Corporate Fitness will serve Seattle-area businesses, helping them to become more productive,while lowering their overall costs with innovative wellness programs and strategies.

Our business is based on two simple facts:

1. Healthy employees are more productive than chronically ill employees.2. It costs less to prevent injuries or illnesses than to treat them after they occur.

At Corporate Fitness (CF), we tie worker productivity directly to the health care issue. Webelieve that traditional approaches to the current health care crisis are misdirected. Thesetraditional efforts are what we call reactive--that is, they wait until after the worker has beenstricken with illness or injury, and then pay for the necessary treatments. Our approach, whichemphasizes prevention and good health promotion, is much more proactive.

By helping employees change their behavior patterns and choose more healthy lifestyles, CF willlower companies' health care expenditures, while raising worker productivity. Health careexpenditures will decrease due to reduced medical insurance premiums, reduced absenteeism,reduced turnover rates, reduced worker's compensation claims, reduced tardiness, shorterhospital stays, etc.

The state of America's health care crisis, coupled with current demographic changes, threaten tonot only exacerbate the crisis, but further erode worker productivity as well. Theseenvironmental factors coupled with the local competitive situation signal a favorable opportunityin this market. We feel the time is right for Corporate Fitness.

Situation Analysis

Corporate Fitness is entering their second year of business. The business model has been wellreceived and marketing is especially important to maintain growth and market penetration. Inaddition to offering fitness facilities for Seattle corporations, Corporate Fitness' main activity isthe creation and implementation of wellness programs. The basic market need is the reduction ofcorporate costs and the increase in employee efficiency that can be achieved through long-termwellness programs.

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y A 35 mile radius is in need of the services.y The total targeted population is 15,800 employees.

Demographic

y51%:49% male: female.

y The individual income range is $38,000-$75,000.y 67% of the customers are single, 33% are married.y For the manufacturing customers, 43% have some undergraduate course work.y For the corporate customers, 83% have some undergraduate coursework, 16% have undertaken

graduate coursework.

Behavior Factors

y Recognize the need to have physical activity in their l ives.y Have incorporated some sort of exercise program in their daily/ weekly routine for the last

several years.

y Are willing to utilize fringe benefits that are offered by their employer as part of theircompensation package.

Market Needs

Corporate Fitness is providing their customers with a health care cost management program foremployees that will increase employee productivity and decrease overall business costs.Corporate Fitness seeks to fulfill the following benefits that are important to their customers:

y Customization- CF will offer a totally customized solution for each company as well as eachemployee within the company.

y Convenience- Customers will not use the service if it is not convenient. CF recognizes this andstrives to make their services as convenient as possible for the targeted customer groups.

y Results-orientated strategy- CF will need to improve a company's bottom line in order to attractand maintain customers. While CF will strive to address all of the their customer's needs, the

reality is that they must indeed provide significant value for the companies themselves in order

to grow their market share.

Market Trends

There have been two significant market trends in the last five years.

y Increased usage of fitness facilities on behalf of individuals. Exercising and "working out" hasbecome a more mainstream activity in American's lives over the last decade. Five to ten years

ago there were widespread reports about an impeding health crisis, obesity. Americans, relative

to their Western European counterparts have higher incidents of obesity. To a large degree, this

is correlated to American's unhealthy diet of fast food, and generally poor food choices,

especially fried foods. The poor diet is not the only factor however. Americans were fairly

inactive, with only 19% of people age 20-40 exercising three times a week. Luckily, that has

changed over the last 10 years. The percentage of active people has increased to 43% as of

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2002. More and more people are going to the gym after work or are incorporating some sort of

outdoor activity into their daily routine.

y The incorporation of fitness memberships within the "basket of benefits," a part of the totalcompensation package. As fitness memberships have become a more common element in the

working American's lives, companies have become to incorporate membership as part of their

benefit package for employees. This has occurred for at least two reasons. One reason is a

flexible method to compensate employees. The second reason is that is has a positive effect on

a company's bottom line. Study after study supports the contention that a physically fit

employee is happier, healthier, and more productive. For no other reason, offering fitness club

memberships to employees is a smart cost-benefit decision.

Market Growth

In 1999, the U.S. medical bill was $738 million, of which businesses paid 30 percent. Recentstudies indicate positive returns on investments for wellness programs of various companiesranging from $1.91:1 to $5.78:1. General Electric's aircraft engines division, for example, saves$1 million per year through its wellness programs. Traveler's Insurance Company reportedsavings of $7.8 million in 2000, attributable to its wellness programs, and a return of $3.41 forevery dollar invested in wellness.

Important demographic changes are taking place in America that point to the importance ofworker productivity in coming decades.

y 16 million new jobs will be created by the year 2005, but there will only be 14 million workers tofill them.

y In 2000, women comprised one-third of the work force, a ratio that will increase to one-half bythe year 2003.

y An estimated 80 percent of jobs to be filled in the immediate future will require more than ahigh-school education. Only 74 percent of Americans, however, finish high school, and only 67

percent graduate with adequate skills.

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y The number of skilled workers available to fil l new jobs is decreasing, meaning that employersare facing more severe competition for labor. Thus, the health and productivity of each

employee becomes crucial to a company's success.

The following quantitative information has supported explosive growth in the health wellness

program industry. The last five years has seen a 9% growth rate and the next five years isexpected to achieve a 7% growth rate.

SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company,and describes the opportunities and threats facing CF.

Strengths

y Results-orientated approach to attracting and maintaining customers.y A well-researched, detailed health wellness program that is long-term in focus.y Intensively trained staff.

Weaknesses

y High costs associated with customized, personal service.y The inability to work on a high volume business model.y The costs of attracting a large corporate client.

Opportunities

y Participation within a growing market.

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y The large increase in clients that follows with the acceptance of CF's program by a singlecompany.

y The ability to leverage future quantitative analysis that supports the contention that long-termwellness programs have a significant, positive impact on a company's bottom line.

Threats

y Lack of immunity to an economic downturn.y Potential competition from larger, well established competitors.y A change in society where the individual begins to take far more responsibility for his/her health

maintenance.

Competition

The three main competitors for Corporate Fitness are:

y YMCA-market is lower-income families and/or students who want accessibility and affordabilityof fitness facilities.

y Gold's Gym-services are targeted toward those motivated and dedicated individuals whoworkout five to seven times per week.

y Better Bodies-aimed at casual fitness-seekers who do not workout with a high intensity but stilldesire the status and recognition.

Service Offering

Corporate Fitness provides wellness strategies/programs to businesses in the downtown Seattlearea. A wellness strategy is a long-term effort, combining both health-promotion and exercise-related activities designed to facilitate positive lifestyle changes in members of a company'swork force.

Corporate Fitness will work with a company's senior management to help it develop a missionstatement for its wellness program. The client company's employees will undergo a health-riskanalysis, following which each employee will be given the opportunity to meet with a healthprofessional to design a personalized health program.

Finally, Corporate Fitness will furnish employee progress reports to senior management withwhich to carry out the incentive program and generally monitor changes in the behavior of itswork force.

Keys to Success

Corporate Fitness' keys to success are:

y Marketing services to companies and individuals.y Recruitment of experienced managerial talent.y Dedication and hard work of the founders.

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y Raising productivity.y Lowering overall costs.

Critical Issues

Corporate Fitness faces several critical issues:

y Sign up a sufficient number of medium-sized companies. It is more cost effective for them toservice a couple medium-sized companies than many small companies.

y Continue to drive down the costs associated with serving a customer.

Marketing Strategy

Corporate Fitness will begin by targeting small- to medium-sized businesses in the downtownSeattle area. The first task is to convince senior executives of the benefits and needs of wellnessprograms. This will be accomplished by aggressively pursuing interaction and relationships withbusiness professionals who would profit from using this service. Once a strong image isestablished, Corporate Fitness will use similar strategies to market its services to largercorporations in Seattle and other areas of expansion.

Mission

Corporate Fitness is a health service that helps businesses and individual workers attain one ofthe greatest gifts of all--that of good health. Personal gains, such as improved self-esteem andself-motivation, combined with measurable benefits will create tremendous advantages for boththe employer and the employee.

Marketing Objectives

1. Generate a 10% yearly increase in sales.2. Increase market penetration every quarter.3. Continue to cultivate CF's image as the premier long-term wellness program provider.

Financial Objectives

1. Decrease customer acquisition costs by 4% every two quarters.2. Lower the cost of service delivery by 1% a quarter.3. Holding spending, as a percentage of sales, at a steady rate.

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Target Markets

The market for corporate fitness is not particularly segmented, as potential customers include alldowntown businesses that offer their employees some type of medical benefits, are experiencingescalating health care costs, and wish to more effectively manage those costs.

Corporate Fitness, however, segments its services for individual organizations. Corporate Fitnessworks with senior management to develop mission statements and provide incentive plans, andwith employees to design personalized health and fitness programs.

The targeted customers are corporate employees and manufacturing employees.

Positioning

Corporate Fitness will position them selves as the most effective wellness strategy and programdeveloper. This positioning will be supported by statistics indicating an increase in worker

productivity and a decrease in business operation expenses from the implementation of corporatewellness programs.

Strategy Pyramids

The single objective is to position CF as the most proficient wellness program provider in theSeattle area. The marketing strategy will seek to develop customer awareness regarding theservices offered, develop the customer base, and work toward building customer loyalty.

The message that CF seeks to announce is that they can have a dramatic effect on the bottomline. This message will be communicate d through various methods. The first method will be

the production and disbursement of printed materials. The printed materials will describe all ofthe services offered and will give prospective customers some insight into CF's past successes.

CF will also rely on presentations to company's HR departments. These presentations will allowCF to personally address any concerns or "pains" that companies have and indicate how awellness program/ strategy can help service their needs.

CF will also rely on advertisements in the Business Journal of Seattle for increasing visibilityand interest in CF's services among Seattle-based companies. Lastly, Corporate Fitness will usea website as a source for disseminating information.

Marketing Mix

Corporate Fitness' marketing mix is comprised of the following approaches to pricing,distribution, advertising and promotion, and customer service.

y Pricing- Prices for using Corporate Fitness' services are comparable to those of higher-endfitness centers. An employee choosing to utilize a Corporate Fitness center will pay a $100

monthly fee. For each employee enrolled in the general wellness program, regardless of

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whether or not they use the fitness facility, the employer will pay $150 annually. The prices

reflect the quality of the equipment and service.

y Distribution- This will occur both at the company's worksite as well as at CF's facilities.y Advertising and Promotion- Printed material, presentations, advertising in industry specific

journals and a comprehensive website will be used.

y Customer Service- Corporate Fitness will operate on the principle that it is imperative to achievetotal customer satisfaction if the business is going to succeed.

Marketing Research

Two types of market research were used when CF was collecting market research. The first typeof research was focus groups. The focus groups were collections of seven to nine people whowere asked a series of predetermined questions with the responses recorded and discussed amongthe group members. In addition to the pre-established questions, there was a free-flowdiscussion format toward the end of the focus group that provided flexibility in allowing theparticipants to share information and insight with CF.

Additionally, questionnaires were used to collect market information from perspectivecustomers. The questionnaires were submitted to a total of 100 HR professionals. The responserate was 43, higher than expected. The validity and usefulness of the questionnaire was ensuredby utilizing a graduate statistics student to develop the questionnaire. Overall, both forms ofprimary market research were insightful for providing This research confirmed many alreadyheld assumptions as well as introduced several valuable perspectives that CF was not yet privyto.

Financials

This section will offer a financial overview of Corporate Fitness as it relates to the marketingactivities. CF will address Break-even Analysis, sales forecasts, expense forecasts, and how theylink to the marketing strategy.

Break-even Analysis

The break-even analysis indicates that $16,667 will be needed to reach the break-even point.

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Break-even Analysis

Monthly Revenue Break-even $10,101

Assumptions:

Average Percent Variable Cost 10%

Estimated Monthly Fixed Cost $10,000

Sales Forecast

Please refer to the following chart and graph to illustrate the sales forecasts.

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Sales Forecast

2003 2004 2005

Sales

Corporate Employees $298,783 $389,776 $455,678

Manufacturing Employees $242,077 $288,739 $333,890

Total Sales $540,860 $678,515 $789,568

Direct Cost of Sales 2003 2004 2005

Corporate Employees $29,878 $38,978 $45,568

Manufacturing Employees $24,208 $28,874 $33,389

Subtotal Direct Cost of Sales $54,086 $67,852 $78,957

Expense Forecast

The expenses forecast will be used as a tool to keep the department on target and provideindicators when modification or corrections are needed for the implementation and maintenanceof the market plan.

The marketing expenses will be high during the first quarter of operation, a quarter when there isincreased usage of fitness facilities. The expenses will settle a bit during the second and thirdquarter. The expenses will rise during the fourth quarter, the quarter whenHR budgets aretypically submitted/reviewed.

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Marketing ExpenseBudget

2003 2004 2005

Pamphlet Production $1,000 $1,200 $1,400

Website Production/Maintenance $9,200 $8,000 $8,000

Other $9,250 $12,000 $14,000

------------ ------------ ------------

Total Sales and Marketing Expenses $19,450 $21,200 $23,400

Percent of Sales 3.60% 3.12% 2.96%

Controls

The purpose of Corporate Fitness' marketing plan is to serve as a guide for the organization. The

following areas will be monitored to gauge performance:

y Revenue- monthly and annual.y Expenses- monthly and annual.y Customer satisfaction.y Wellness program effectiveness within each company.

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Implementation

The following milestones identify the key marketing plan programs. It is important toaccomplish each one on time an on budget.

Milestones

Advertising StartDate EndDate Budget Manager Department

Advertising Campaign #1 1/1/2003 6/30/2003 $3,750 Robert Marketing

Advertising Campaign #2 7/1/2003 12/30/2003 $5,500 Robert Marketing

Other

Total Advertising Budget $9,250

PR Start Date EndDate Budget Manager Department

Pamphlet Completion 1/1/2003 3/1/2003 $1,000 Steve Marketing

Other

Total PR Budget $1,000

Direct Marketing StartDate EndDate Budget Manager Department

Marketing Plan Completion 1/1/2003 2/1/2003 $0 Steve Marketing

Other

Total Direct Marketing Budget $0

Web Development StartDate EndDate Budget Manager Department

Website Completion 1/1/2003 3/15/2003 $9,200 Steve Marketing

Other

Total WebDevelopment Budget $9,200

Other StartDate EndDate Budget Manager Department

Other

Total Other Budget $0

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Totals $19,450

Marketing Organization

Steve Perkins and Robert Gomez will share responsibility for the marketing activities.

Contingency Planning

Difficulties and Risks

y Problems developing a sufficiently large client base.y Significant economic downturns.

Worst Case Risks Include

y Determining that the business can no longer support itself.y Having to liquidate equipment to cover liabilities.