Episode 590: The Planet Money Workout : Planet Money Today on the show, the mind games that gyms play with you. From design to pricing to free bagels, gyms want to be a product that everyone buys, but no one actually uses.
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Episode 590: The Planet Money Workout

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Episode 590: The Planet Money Workout

Episode 590: The Planet Money Workout

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STACEY VANEK SMITH, HOST:

I went to the gym the other morning; a Planet Fitness. And if you've never been to a Planet Fitness, it's one of the cheapest gyms around. It's like $10 a month. While I was there, I saw this guy. He was sitting in a massage chair - Planet Fitness has massage chairs - Gequan Boyce. He and his friend had just finished working out. He told me they were working on their arms.

How often do you guys come?

GEQUAN BOYCE: Five days a week actually. Yeah. That's Monday through Friday 'cause I work in the city. So I come straight from work.

SMITH: But to be honest, while I was looking at him, I wasn't totally convinced that Gequan actually comes to the gym five days a week. So I asked him.

Do you mind if we run your card and see how often you've actually been?

BOYCE: Yes, of course. I don't mind.

SMITH: Really? How long do you need? I don't want to take away your massage time?

BOYCE: Two minutes.

SMITH: A couple of minutes later, I caught Gequan actually trying to sneak out of the gym before we could run his card. But I saw him out of the corner of my eye.

Oh, hey, do you mind if we check your card?

BOYCE: Yeah, sure. Why not?

SMITH: OK.

We went up to the front desk and the receptionist checked his membership card, the one he swipes when he comes in. She picked a few different weeks and checked how often Gequan actually goes to the gym. Turns out he's pretty consistent.

BOYCE: The moment of truth.

UNIDENTIFIED WOMAN: Twice in a week.

(LAUGHTER)

BOYCE: Jesus. Oh, man.

SMITH: Two days a week. The receptionist tells me this rude awakening happens all the time.

Do you see people - they think they work out more than they do?

UNIDENTIFIED WOMAN: Oh, yeah, tons of them. They'll come use the massage chair rather than work out. Come in here and they're like, oh, I was here yesterday.

SMITH: Like, no you weren't.

(LAUGHTER)

UNIDENTIFIED WOMAN: You were here like last month.

SMITH: The result of the self-deception is obvious. This Planet Fitness here in Manhattan, one of the most crowded places on Earth, smack in the middle of high gym season, and this gym is pretty much empty. The members of this gym may think they're working out a lot, but they're not. And frankly, this is the way gyms like it - costumers who pay, but don't cost the business a dime. Hello and welcome to PLANET MONEY. I'm Stacey Vanek Smith.

CAITLIN KENNEY, HOST:

And I'm Caitlin Kenney. Most businesses would close if their customers never showed up. An empty restaurant - disaster. An empty store - bankruptcy. But here, among the mirrored walls, rubber mats and elliptical trainers, emptiness equals success. Today on the show, the mind games that gyms play with you. From design to pricing to free bagels, gyms want to be this product that everyone buys but no one actually uses.

(SOUNDBITE OF SONG, "PLAY HARD")

NE-YO: (Singing) ...We work hard, play hard. Keep partying like it's your job.

FRANK PENA: Hey, PLANET MONEY people, today's show is about gyms. My name is Frank Pena (ph), trainer from Planet Fitness. I'm going to be popping into the show to give you exercises to get in shape while you learn some economics. So shake it out and let's get started.

(SOUNDBITE OF SONG, "PLAY HARD")

NE-YO: (Singing) Hey, said a hustler's work is never through...

KENNEY: Let's be honest here, most people don't use their gym memberships. I haven't been in like three weeks.

SMITH: That's not that bad. I haven't been in six months. And you know why, Caitlin? It's this.

PENA: All right everybody, now we're going to go into some push-ups. So hands about shoulder-length apart, feet slightly apart from each other. And down...

SMITH: Well, I'm not alone. Here at Planet Fitness, they tell me that half of their members never set foot inside of this gym - half of their members. And the whole gym system is built around this fact.

How many people can work out in the gym at once?

CHRIS ANTHY: I mean, I'd say a few hundred to be completely honest.

SMITH: This is Chris Anthy. She manages the Planet Fitness on the Upper West Side of Manhattan. The gym can hold 300 people. How many members does it have?

ANTHY: It's about 6,000.

SMITH: Wow.

ANTHY: It's a lot of members.

SMITH: What would happen if they all came?

ANTHY: Oh, my goodness. We'd have a very crowded gym, very crowded gym. Thank goodness they all don't show up at one time.

SMITH: Because if every member came tomorrow, they would need 20 times the space. The treadmills would be drenched in sweat, the barbells would be broken. There would be bread lines at the elliptical trainer. And it would cost a fortune. If people actually came to the gym, Planet Fitness would have to charge a lot more than $10 a month.

KENNEY: Gyms need their members not to come, but they can't just lock the doors. They can't tell people not to show up. So they have to rely on consumer psychology to get you excited enough that you'll sign up for a gym membership but not so excited that you'll get up an hour early to do some crunches before work.

PENA: Great idea PLANET MONEY people. Crunches are next. You want our feet planted on the ground, knees bent. Up one, hold and back down. Up two...

KENNEY: The first gym trick is to attract the right kind of customer. The kind of customer who thinks he's going to work out but who won't. Customers like this guy.

RUDY FABIANO: I personally like the gyms that I can get a shake at. (LAUGHTER)

FABIANO: 'Cause I am Italian and, you know, you have to eat.

SMITH: Rudy is in his early 50s. He lives in New Jersey. He's not especially buff. He doesn't belong to a gym, which is weird because he designs gyms for a living.

FABIANO: We are architects that specialize in fitness center designs in health clubs.

KENNEY: Rudy says architecture and design can basically allow gyms to attract the kind of customer they want. When he started 25 years ago, the kind of customers gyms wanted were bodybuilders. And gyms were designed around sweat.

FABIANO: Most spaces were big warehouses filled with equipment. And you remember the baggy pants that everybody had and a lot of clanging and not a lot of experience beyond the experience of just lifting weights.

KENNEY: Those gyms attracted people who came every day. Memberships were expensive. But Rudy started to think, what if gyms looked less like sweat factories? What if they looked more like a fancy restaurant or hotel lobby? Maybe you could attract someone else - a more casual exerciser. But at first, he says, the gym owners didn't get it.

FABIANO: I used to have these discussions with the gym owners that - and the argument would be, gee, I'm so proud of all of this equipment. I want to show it off. So I'm going to put all of my, you know, 80 pieces of cardio right in front so when you come in, you're impressed. And my argument would be I'm not impressed, I'm scared (laughter). 'Cause I come in on a Monday night, and there's people sweating around me and the noise of all of those treadmills and the experience is not what we're trying to sell.

KENNEY: To show me the experience he is trying to sell, Rudy took me to a gym he just finished designing in Manhattan. OK, Frank, we're going to need something a little more mellow for this part.

PENA: All right listeners, now we're going to jump into some leg lifts. So this time we want our feet together, hands at your sides. So bring them down, one, two, three, then they touch the ground and back up.

KENNEY: So I was saying, Rudy took me to his newest gym, BFX in Chelsea. We stand outside, and it sort of looks like it could be a cocktail lounge or something.

FABIANO: Well, we're looking at clear doors and right across from us is the BFX logo. It's laser cut in wood. You can see people sitting in the lounge downstairs - not sure what they're doing, right? And then you walk in and it look - feels like a store, it doesn't feel like your traditional health club. You really don't see any equipment.

KENNEY: All right, so let's go in.

FABIANO: Yeah, so please. You know, you'll hear obviously the music and the fun and as - you'll start seeing some more components.

KENNEY: And, of course, here is the welcome desk. It's white marble and, as a member of the out-of-shape public, it kind of reminds me of something.

It looks like a - like a bar almost. It's like the same dimensions as a bar.

FABIANO: In fact, it is and that's on purpose.

KENNEY: Out of shape people feel comfortable at bars. We like bars. And this place is designed to make you feel comfortable, you feel like you could hang out here. This kind of design, it's gets you in the door. Suddenly you're imagining yourself sitting in those chairs, chatting with a friend, and before you know it, you're shelling out money for a yearly membership or some classes.

PENA: Come on, Stacey and Caitlin, we're going to start with some jumping jacks. Let's go - one, two, three, four, five.

KENNEY: Here is another subtle signal at BFX. Those intense weightlifter types, the ones who come everyday and sweat everywhere and cost places like this a lot of money, they want to see the weight room, the heavy equipment. And in most casual gyms, that's hidden - the gym part of BFX. Turns out, that's down a set of stairs, through a lounge, behind a wall. And as we approach it, I can start to feel myself get a little nervous and intimidated and Rudy says that's pretty common.

FABIANO: Most people because there's equipment in front of you that you may not know what to do with. All right?

KENNEY: And the barbells just are big - yeah, it just looks like stuff I could never do, right?

FABIANO: Well, don't do those big barbells, that'll hurt you.

KENNEY: I mean, yeah I wouldn't. It seems like you're trying to make a gym that doesn't look like a gym. Is that right?

FABIANO: That's correct.

SMITH: Rudy has designed over 500 gyms that don't look like gyms all over the world.

KENNEY: So once you've attracted the right customer, the nonsweaty, bodybuilder type, it doesn't really matter if your customer never gets on the treadmill. It doesn't matter if they never use the gym. But you have to keep the money flowing. And you know how this works - the dreaded annual contract.

KEVIN VOLPP: Joining a gym is an interesting form of what behavioral economists call pre-commitment.

KENNEY: Kevin Volpp directs the Center for Health Incentives and Behavioral Economics at Wharton. He says normally, we hate things that lock us into doing things for certain period of time like cell phone contracts. But gym memberships, Volpp says, those are different. We actually want to be locked into those.

VOLPP: They're picturing the new me who's actually going to go to the gym three times a week and become a physical fitness machine.

SMITH: We like the idea of locking ourselves in. We think, now that I'm paying money for a year, I will make myself go.

KENNEY: And then we don't.

SMITH: And then we don't. And even if we think about canceling our membership, some of those contracts are notoriously difficult to get out of.

KENNEY: This business model works so well that low-priced gyms are growing like crazy. Turns out, that selling stuff that nobody uses is a great business. But there's one problem - annual contracts end. And when people realize they haven't been using the thing they've been paying for, they haven't been going to the gym, they tend to drop out.

Most gyms lose about half their customers every year. And so they have to rely on one final trick. They have to make sure you got something valuable for your money because, let's be honest, it's not our abs.

SMITH: Gyms do all kinds of things to make themselves seem valuable. Remember the massage chair Gequan was using? Planet Fitness has rows of them along with an aqua massage bed. A lot of gyms have mixers and other social events. Planet Fitness also has pizza nights and free bagels once a month. And those are the gym's busiest times.

Hey, are you guys coming from the bagel breakfast at Planet Fitness? Oh, yeah? Is that why you guys came? 'Cause this is like the most miserable day.

UNIDENTIFIED MAN: Absolutely helped to get us out.

UNIDENTIFIED WOMAN: We don't miss bagel day.

UNIDENTIFIED MAN: But we still try to actually exercise (laughter) definite keeper, bagel day, yeah.

UNIDENTIFIED WOMAN: We haven't been to pizza day yet, but maybe next month.

SMITH: Does it feel a little weird to eat a bagel right after you...

UNIDENTIFIED WOMAN: Yes, absolutely, it feels very weird that you just exercised and now you're carbo-loading

UNIDENTIFIED MAN: Not me, I love bagels. I'll eat them all the time.

KENNEY: The idea is that these folks will look back fondly on their year of bagels and pizza and renew that annual contract once again.

PENA: All right guys, time to work off those bagels. Let's run in place now. Come on guys, pick up the pace.

KENNEY: Now all of this can seem like you're being manipulated because, of course, you are. But remember, every person who signs up and doesn't go to the gym is basically subsidizing your gym membership, making it cheaper for everyone. If you have willpower and everyone else doesn't, you can actually work out for a ridiculously low price.

SMITH: And think about the alternative - if gyms were really about getting fit, if they really wanted you to show up and pay for it, then all gyms would look like this.

ANNIE VO: It's not that nice in here (laughter). Did you notice there's no where to sit? There's no mirrors in here. It's a really kind of bare-bone space.

SMITH: This is Precision Athlete, a tiny gym on the Upper West Side of Manhattan. Annie Vo is one of the owners, and she is super fit. She has amazing leg muscles from doing all these squats. Vo says she has about 150 members here, and they all come. In fact, if you don't come or if you're not hardcore enough, you will get kicked out of this gym.

Do you ever, like, reject people?

VO: Yeah. Yeah. A common thing that you'll hear is I'm too busy, I have this and that. I'm, like, Vladimir Putin works out every day. I would argue that he's pretty busy. Are you busier than he is?

SMITH: No, you are not. This is the kind of place where everyone knows exactly how often they show up. Andrew Atiya has been coming to Precision for a few years.

How often do you come?

ANDREW ATIYA: I come six days a week.

SMITH: Wow.

ATIYA: Yeah.

SMITH: I totally believed him. The whole time we're talking, he keeps looking away to stare longingly at the exercise bike that he's come in to use.

ATIYA: There's no mirrors, there's no disco music playing right now. There is no, like, slogans. There's - this is a really sincere place.

KENNEY: Sincerity means no tricks, no annual membership, no massage chairs. And sincerity also means your membership isn't being subsidized by all the slackers that don't show up. And so we can finally see what a gym that everyone uses would actually cost. Precision Athlete starts at 500 bucks a month.

(SOUNDBITE OF SONG, "PLAY HARD")

NE-YO: (Singing) Hey, said a hustler's work is never through. We making it 'cause we make it move. The only thing we know how to do...

SMITH: As always, if you have any questions or comments, we would love to hear them. Send us an email, planetmoney@npr.org. Or you can find us on Facebook or Twitter, @planetmoney.

KENNEY: And of course, thanks as always to our amazing producer Jess Jiang. If you're looking for more podcasts, NPR recommends you check out Ask Me Another's Holiday Spectacular. You can find it on iTunes and Stitcher or however you listen to podcasts. I'm Caitlin Kenney.

SMITH: I'm Stacey Vanek Smith.

PENA: And I'm Frank Pena. That was just your first set. Now rewind the podcast, and we're going to do it all over again.

(SOUNDBITE OF SONG, "PLAY HARD")

NE-YO: (Singing) We work hard, play hard. Keep partying like it's your job. Work hard, play hard. Work hard, play hard. We work hard, play hard. Keep partying like it's your job.

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