Flevy Management Insights Case Study
Design Thinking Initiative for Boutique Fitness Studios in Urban Markets


Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Design Thinking to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, KPIs, best practices, and other tools developed from past client work. We followed this management consulting approach for this case study.

TLDR A boutique fitness studio chain faced stagnation in membership growth and client engagement due to increasing competition and outdated strategies. By implementing design thinking and digital transformation initiatives, the studio successfully revitalized its offerings, significantly improving customer satisfaction and attracting new members through holistic wellness programs.

Reading time: 11 minutes

Consider this scenario: A boutique fitness studio chain, located in major urban centers, is facing stagnation in membership growth and client engagement despite the booming health and wellness trend.

The organization is grappling with a 20% decline in new memberships and a 15% increase in member churn over the past year, attributed to intensifying competition from both traditional gyms and digital fitness platforms. Additionally, internal challenges include outdated customer experience strategies and a lack of innovation in fitness program development. The primary strategic objective of the organization is to rejuvenate its market position and membership growth by embracing design thinking to enhance customer experience and service innovation.



This strategic plan outlines a comprehensive approach to address the challenges faced by a leading boutique fitness studio chain. The organization has recognized that to reverse the downward trend in membership growth, a fundamental shift in strategy is necessary. By prioritizing customer experience and service innovation through design thinking, the studio aims to differentiate itself in a crowded market. The following sections detail an external assessment, internal capabilities review, and strategic initiatives designed to achieve this goal.

External Assessment

The fitness industry is experiencing significant transformation, driven by technological innovation and changing consumer preferences towards personalized and flexible fitness solutions. The rise of digital fitness platforms has expanded the competitive landscape, challenging traditional gyms and boutique studios to innovate continuously.

Our analysis begins by examining the industry's competitive dynamics:

  • Internal Rivalry: Intense competition exists among boutique studios, traditional gyms, and digital fitness platforms, all vying for the same customer base.
  • Supplier Power: Moderate, with numerous equipment suppliers and fitness program creators, allowing studios some negotiation leverage.
  • Buyer Power: High, as consumers have many options for fitness services, both in-person and online, leading to higher expectations and price sensitivity.
  • Threat of New Entrants: High, due to low barriers to entry for online fitness platforms and the growing trend of at-home fitness.
  • Threat of Substitutes: High, with alternatives ranging from outdoor activities to free online workout content.

Emergent trends include a shift towards holistic health and wellness, increased demand for personalized workout experiences, and the integration of technology in fitness routines. These trends present both opportunities and risks:

  • The rise of holistic wellness offers an opportunity to integrate wellness services beyond physical fitness, potentially opening new revenue streams.
  • The demand for personalized experiences can be met through technology-driven customization, enhancing member retention.
  • Technological integration in fitness routines presents an opportunity for differentiation but requires significant investment in digital capabilities.

A PEST analysis reveals that technological advancements and evolving consumer health consciousness positively impact the industry, while regulatory changes related to health and safety standards post-COVID-19 could pose operational challenges.

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Internal Assessment

The organization's internal capabilities reflect a strong brand reputation and a loyal customer base in urban centers. However, challenges in innovation and customer experience design have led to a decline in competitiveness.

SWOT Analysis

The organization's strengths include established brand recognition and prime location facilities. Opportunities exist in leveraging digital technology to enhance customer experience and in expanding service offerings to include wellness and lifestyle programs. Weaknesses are evident in the lack of innovative fitness programs and outdated customer engagement strategies. Threats include the rapid rise of digital fitness solutions and increasing market saturation.

Value Chain Analysis

Analysis of the value chain highlights inefficiencies in member onboarding, program development, and customer feedback loops. Opportunities for improvement include streamlining operational processes and enhancing digital engagement channels to improve overall service delivery.

Organizational Design Analysis

The current organizational structure, characterized by centralized decision-making and segmented departmental functions, limits agility and innovation. A more flexible, cross-functional team approach could accelerate the development and implementation of new fitness programs and services.

Strategic Initiatives

  • Implement a Design Thinking Program: Initiate a design thinking workshop series to foster innovation in service design and customer experience. The goal is to create more personalized and engaging fitness programs, driving membership growth and reducing churn. This initiative will require resources for training, workshop facilitation, and implementation of new service concepts.
  • Digital Transformation of Customer Experience: Develop a comprehensive digital platform that offers personalized workout plans, virtual classes, and wellness tracking to meet the increasing demand for digital fitness solutions. The intended impact is to enhance member engagement and retention. This initiative will require investment in technology development and digital marketing strategies.
  • Expand Holistic Wellness Offerings: Launch new holistic wellness programs, including nutrition counseling, mental health workshops, and recovery services, to differentiate from competitors and address emerging consumer trends. This will create value by attracting a broader customer base interested in comprehensive wellness solutions. Resource requirements include program development, staff training, and marketing.

Design Thinking Implementation KPIs

KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.


In God we trust. All others must bring data.
     – W. Edwards Deming

  • Member Retention Rate: An increase in retention rate will indicate success in enhancing the customer experience and program value.
  • Customer Satisfaction Scores: Higher scores will demonstrate the effectiveness of new service innovations and digital experiences.
  • New Membership Growth: A key metric to measure the success of market differentiation strategies and the appeal of holistic wellness offerings.

These KPIs provide insights into the effectiveness of strategic initiatives, enabling timely adjustments to strategies and operations to ensure alignment with the strategic goals of enhancing customer experience and driving growth.

For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.

Learn more about Flevy KPI Library KPI Management Performance Management Balanced Scorecard

Stakeholder Management

Successful implementation of strategic initiatives relies on the engagement and support of key stakeholders, including employees, technology partners, and members.

  • Employees: Essential for delivering innovative fitness programs and exceptional customer service.
  • Technology Partners: Vital for the development and implementation of the digital transformation strategy.
  • Members: Their feedback will be crucial for iterating and improving new offerings.
  • Management Team: Responsible for strategic direction and resource allocation.
  • Marketing Team: Key for communicating new offerings and driving member engagement.
Stakeholder GroupsRACI
Employees
Technology Partners
Members
Management Team
Marketing Team

We've only identified the primary stakeholder groups above. There are also participants and groups involved for various activities in each of the strategic initiatives.

Learn more about Stakeholder Management Change Management Focus Interviewing Workshops Supplier Management

Design Thinking Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Design Thinking. These resources below were developed by management consulting firms and Design Thinking subject matter experts.

Design Thinking Deliverables

These are a selection of deliverables across all the strategic initiatives.

  • Design Thinking Workshop Series Plan (PPT)
  • Digital Experience Development Roadmap (PPT)
  • Holistic Wellness Program Framework (PPT)
  • Member Engagement and Retention Strategy (PPT)
  • Technology Implementation Plan (PPT)

Explore more Design Thinking deliverables

Implement a Design Thinking Program

The strategic initiative to implement a Design Thinking program was significantly bolstered by employing the Kano Model and the Jobs to be Done Framework. The Kano Model, a theory of product development and customer satisfaction, was instrumental in identifying and categorizing customer preferences into delighters, satisfiers, and basic needs. This framework was particularly useful for this strategic initiative as it provided a structured approach to innovating fitness services that could exceed customer expectations. The organization embarked on the following steps to apply the Kano Model:

  • Conducted comprehensive customer interviews and surveys to uncover hidden needs and desires related to their fitness journey.
  • Mapped the findings to the Kano categories to prioritize features of the new fitness programs that could act as delighters.
  • Developed prototypes for several high-potential service concepts that aligned with customer-defined delighters and satisfiers.

The Jobs to be Done Framework was another key tool, enabling the organization to focus on the underlying tasks customers were hiring fitness services to accomplish. This perspective shift helped in designing services that were more closely aligned with customer goals and life outcomes. The implementation process involved:

  • Segmenting the customer base according to the specific jobs they were trying to get done through their fitness routines.
  • Designing tailored fitness programs that directly addressed these jobs, ensuring a higher degree of personalization and relevance.
  • Testing these programs with select customer segments and gathering feedback to refine the offerings further.

The results of implementing these frameworks were transformative. The organization successfully launched a series of innovative fitness programs that resonated deeply with the target market. Customer engagement metrics saw a significant uptick, and preliminary feedback indicated a marked improvement in customer satisfaction and retention rates. The Design Thinking program, guided by the insights from the Kano Model and Jobs to be Done Framework, led to the development of services that were not only unique but deeply aligned with customer needs and aspirations.

Digital Transformation of Customer Experience

For the digital transformation of customer experience, the strategic initiative team utilized the Diffusion of Innovation Theory and the Customer Journey Mapping technique. The Diffusion of Innovation Theory, which explains how, why, and at what rate new ideas and technology spread, was pivotal in strategizing the rollout of the new digital platform. This theory helped in identifying key customer segments that would act as early adopters, thereby accelerating the adoption curve. The steps taken included:

  • Identifying characteristics of early adopters within the studio's membership base and targeting them with initial outreach efforts.
  • Implementing a phased rollout plan that allowed for gathering feedback and making adjustments before a wider release.
  • Utilizing social proof and testimonials from early adopters to encourage broader member adoption.

Customer Journey Mapping was employed to ensure that every touchpoint in the digital experience was optimized for engagement, satisfaction, and value delivery. By deeply understanding the members' interactions with the digital platform, the team was able to:

  • Map out the entire customer journey for using the digital platform, identifying key moments of truth that could make or break the user experience.
  • Design and implement targeted improvements at each stage of the journey to enhance usability and satisfaction.
  • Monitor usage data and feedback to continuously refine and enhance the digital customer experience.

The implementation of these frameworks led to a highly successful digital transformation initiative. The new digital platform received widespread acclaim from members for its ease of use, personalized content, and seamless integration into their fitness routines. Adoption rates exceeded initial projections, and the organization saw a significant improvement in member engagement and satisfaction, validating the strategic approach taken.

Expand Holistic Wellness Offerings

In expanding holistic wellness offerings, the team leveraged the Servqual Model and the Blue Ocean Strategy. The Servqual Model, which measures the gap between customer expectations and experience, proved invaluable in identifying areas where the new wellness offerings could exceed market standards. This framework guided the organization through the following actions:

  • Conducting a comprehensive survey to gauge customer expectations for holistic wellness services.
  • Comparing these expectations against current market offerings to identify gaps and opportunities for differentiation.
  • Developing new wellness programs that specifically addressed the identified service quality gaps.

Simultaneously, the Blue Ocean Strategy encouraged the organization to venture beyond the highly competitive fitness market to create a new, uncontested market space in holistic wellness. This strategic move was facilitated by:

  • Conducting a thorough analysis of the fitness and wellness industry to identify overserved and underserved customer needs.
  • Creating value innovation by combining high-demand fitness services with emerging wellness trends that no other competitor offered.
  • Launching a marketing campaign that highlighted the unique benefits of the holistic wellness programs, effectively creating a new niche in the market.

The results from these strategic frameworks were compelling. The organization successfully carved out a new segment in the wellness market, attracting a significant number of new members interested in comprehensive wellness solutions. Feedback from members highlighted the perceived value and uniqueness of the offerings, leading to increased loyalty and advocacy. The strategic initiative to expand holistic wellness offerings, underpinned by the Servqual Model and Blue Ocean Strategy, positioned the organization as a pioneer in integrating fitness with broader wellness services.

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Launched innovative fitness programs leading to a significant increase in customer engagement and satisfaction.
  • Implemented a digital transformation initiative that exceeded adoption projections and improved member engagement and satisfaction.
  • Expanded holistic wellness offerings, successfully attracting a new segment of members interested in comprehensive wellness solutions.
  • Utilized the Kano Model and Jobs to be Done Framework to develop services that align closely with customer needs and aspirations.
  • Employed the Servqual Model and Blue Ocean Strategy to identify service quality gaps and create a new market space in holistic wellness.
  • Identified and targeted early adopters for the digital platform, using social proof to encourage broader member adoption.

The strategic initiatives undertaken by the boutique fitness studio chain have yielded impressive results, demonstrating success in reversing the trend of stagnation in membership growth and client engagement. The implementation of design thinking workshops and the adoption of digital transformation strategies have notably enhanced the customer experience, as evidenced by the significant uptick in customer engagement metrics and satisfaction scores. The expansion into holistic wellness offerings has effectively differentiated the studio in a crowded market, attracting new members and increasing loyalty among existing ones.

However, while these results are commendable, there were areas of challenge and opportunity. The adoption of digital transformation, although successful, faced initial resistance from a segment of the traditional customer base, indicating a potential oversight in managing change and setting expectations. Additionally, the reliance on new market creation through holistic wellness offerings, while innovative, carries risks associated with pioneering untested markets, including higher marketing costs and the challenge of establishing credibility in new service areas.

Alternative strategies that could have enhanced outcomes include a more phased approach to digital adoption, incorporating change management principles to ease the transition for existing members. Additionally, a pilot program for holistic wellness offerings could have provided valuable insights and reduced the risks associated with entering a new market segment. Going forward, it is recommended to continue monitoring the impact of these strategic initiatives closely, particularly the long-term sustainability of the holistic wellness market segment. Further investment in technology to personalize the customer experience and leveraging data analytics for continuous improvement in service offerings will be crucial for maintaining competitive advantage.

Source: Design Thinking Initiative for Boutique Fitness Studios in Urban Markets, Flevy Management Insights, 2024

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