Back in the mid-1990s, before email became widely used across corporate America, the executives of Frito-Lay’s northern California region suddenly found their mailboxes full.
“We were getting all of these letters from people asking, ‘What did you do? What’s going on in northern California?,’” explains Tom Fitzgerald, who at the time was finance director for the region, a geography known to be a sales laggard among Pepsico’s 24 business units, within which Frito-Lay itself was a particularly heavy bottom dweller.Read More
Thus, as Fitzgerald relates, there was no shortage of intrigue concerning a sudden and steady sales climb inside Frito-Lay’s northern California business. Looking back, he observes that the explanation of the phenomenon was rather simple and therefore not necessarily pleasing to neighboring regions and business units, known to be on a constant lookout for cunning new sales promotions or incentives.
“Northern California, oddly enough, was the only unionized market for Frito-Lay in the country. Meanwhile, we had a direct store delivery business, which meant that we went to every store at least once a week—and often every day—to merchandise and sell the inventory,” explains Fitzgerald, who notes that the “direct sales” approach afforded the region larger numbers of employees than other locales, which in turn allowed Frito-Lay to at times operate inside the region more like a “military organization.”
Like those of many of his peers, Fitzgerald’s Pepsi career routinely opened new chapters as the packaged goods company rotated its finance executives into new regions and business units. Fitzgerald’s arrival in the northern California region brought a new set of eyes to Frito-Lay’s local challenges and paired the finance executive with a divisional leader who was prepared to listen.
“I told the leader that too often the business had one answer one day and a different answer the following week. I said, ‘Let’s just pick three, and then we’re going to lock in and stay there,’” comments Fitzgerald, who credits a newfound focus and the regional leader’s willingness to collaborate with having propelled the snack maker to the top of the region’s 24 business units within 3 months.
As for the details behind Fitzgerald’s “three answer” prescription, the finance leader reports: “Two were top line–driven, operational metrics that we could measure. The other was related to how our team worked and coached the frontline salespeople.”
For Fitzgerald, the remedy was less about strategy or metrics and more about focus.
“It’s not necessarily about how good your strategy is,” he says. “Frankly, there may have been three better ideas along the way, but because they changed the strategy and moved to the next thing too quickly, they couldn’t get all of their people aligned to execute it well.”
Adds the finance leader: “I became a big believer in the notion that if you have an ‘A’ strategy but a ‘C’ execution, you’re going to miss your numbers every time.” –Jack Sweeney
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CFOTL: Tell us about Planet Fitness and what distinguishes its membership model from those of its fitness rivals?
Fitzgerald: If you look at everything that most fitness brands do in the industry, you’ll see that we do the opposite. It starts with whom we target. Most fitness brands—and I used to belong to Lifetime Fitness before I came to Planet—target people who are already members of a gym. About 20% of the U.S. population belongs to a gym, and this number is pretty similar in other developed countries around the world—about 15% to 20%. The vast majority of people do not belong to a gym. All of the others—Lifetime Fitness, Crunch, Blink, LA Fitness, whoever—really target people who belong to a gym. We target the other 80%. We say that we’re trying to get people off the couch to start their fitness journey. This is why we have had $10 as our opening membership price point for over two decades, a number that accounts for 40% of our members. As a former retailer, I love this. Any retailer would kill to have this stat.Read More
We have two price points, essentially. We have a $10 price point and a $22.99 monthly dues price point that gives you a whole lot of other perks and amenities. We almost always advertise the $10 price point, yet 6 out of 10 people who come in to join for $10 walk out with the $22.99 price point, which is amazing. It’s the old loss leader kind of thing, but it’s not a loss leader for us. More than 60% of the people walk in thinking that they’re going to spend $10 and end up spending more than double this just because of the value that we offer. But in attracting people who were on the couch to start their fitness journey, we also recognize that we need to do another thing that is opposite to standard industry practice: We make it very easy to cancel. We know that your life may get in the way, that kids’ soccer games or whatever may be going on, and that you just aren’t getting to the gym anymore, so you’re going to cancel your membership. This is fine, because typically 20%—and more recently, 30%—of the people joining Planet Fitness have belonged to Planet Fitness at some point in the past.
Planet Fitness | www.planetfitness.com | Hampton, N.H.