October 20th, 2015
Marketing Communication Department
Global Marketing Communication & Advertising
CASE WRITING: CRUNCH
Crunch is a fitness center founded in 1989 by Doug Levine in New York City. He started with the idea of creating an aerobic studio, as it was a popular activity practiced by that time. However, Manhattan was already flooded with these kind of studios, so due to his acting background, ...view middle of the document...
Moreover, Levine hired experienced trainers in order to develop innovative unique routines and started offering one-year memberships. Crunch Fitness invented classes such
as Hip-Hop Aerobics and Co-Ed Wrestling that fuse fit and fun in unexpected ways. In addition, Crunch started offering shorter group fitness classes (30 or 45 minutes versus the traditional hour-long format) to appeal to time-crunched consumers. These unique classes appeal to about half of consumers.
Crunch managed very well to fulfill consumer’s needs and expectations and created a strong image by using several advertisement methods like printing their logo on apparel or making events as well as TV commercials and fitness programs on TV. By 1999 they owned facilities in 4 cities in the United States and in Tokyo, Japan and were looking forward to a greater expansion.
The same year, Crunch received an offer to acquire SportsLife, an Atlanta-based company that owned six fitness facilities. This company pulled around $17 million worth of revenue each year and if Crunch purchased them, it would represent an immediate 60% increase in the size of the company. So the critical question is: if I had to take the final decision of acquiring SportsLife, knowing about Crunch’s positioning and so far successful development and plans of expansion, would I purchased it?
My first action would be not to acquire SportsLife. To begin with, only two out of the six facilities of SportLife were located in urban areas, and lets remember that Crunch’s target audience is young urban professionals. Having 4 gyms located in the suburban areas wouldn’t make sense. Additionally, the format of SprtsLife’s facilities were completely different from Crunch’s facilities, they were almost double the size of Crunch’s and they featured extra amenities such as Olympic-sized swimming pools and courts for basketball, squash and racquetball. Crunch is positioned as a gym where their users can go after work to
clear their minds, make some exercise maybe some cardio, lift weight or take a class. Not for people that is engage with team sports like basketball, squash or racquetball, that kind of people fit in a completely different audience. And last but not least, having these amenities raise your operation costs,...