Episode 590: The Planet Money Workout : Planet Money Gyms don't want you to workout. Or at least, not often. It's better for business that way. Economics explains why.
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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:

This episode originally aired in 2014.

(SOUNDBITE OF ARCHIVED BROADCAST)

VANEK SMITH: 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 (ph). 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 to Friday 'cause I work in the city. So I come straight from work.

VANEK 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: Of course. I don't mind.

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

BOYCE: Two minutes.

VANEK SMITH: A couple 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?

VANEK SMITH: If that's - 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 PLANET FITNESS EMPLOYEE: Twice in a week.

(LAUGHTER)

BOYCE: Jesus. Oh, man.

VANEK 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 PLANET FITNESS EMPLOYEE: Oh, yeah, tons of them. They'll come use the massage chair rather than work out (laughter). Come in here - and they're like, oh, I was here yesterday.

(LAUGHTER)

VANEK SMITH: No, you weren't.

UNIDENTIFIED PLANET FITNESS EMPLOYEE: You were here, like, last month.

VANEK SMITH: The result of this 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 - customers who pay but don't cost the business a dime.

(SOUNDBITE OF MUSIC)

VANEK SMITH: 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 MUSIC)

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 MUSIC)

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

VANEK 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...

VANEK 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.

VANEK 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.

VANEK SMITH: Wow.

ANTHY: It's a lot of members.

VANEK SMITH: What would happen if they all came?

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

VANEK 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. We 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: ...Because I am Italian. And you know, you have to eat.

VANEK SMITH: Rudy Fabiano is in his early 50s. He lives in New Jersey. He's not especially buff. He doesn't belong to a gym.

KENNEY: Which is weird because he designs gyms for a living.

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

VANEK SMITH: 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...

VANEK SMITH: (Laughter).

FABIANO: ...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 a 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 - well, gee, I'm so proud of all this equipment; I want to show it off. So I'm going to put all 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) because I come in on a Monday night, and there's people sweating around me and the noise of all those treadmills. And the experiences 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'd 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 side. So bring them down - one, two, three - then they touch the ground, then 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 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 bar almost.

FABIANO: Yeah.

KENNEY: It's, like, the same dimensions as a bar.

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

KENNEY: Out-of-shape people feel comfortable in 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 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 every day 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. And - yeah, it just looks like stuff I could never do. Right?

FABIANO: Well, don't do those big barbells. That'll hurt you (laughter).

KENNEY: I mean, yeah, it would.

(LAUGHTER)

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

FABIANO: That's correct.

VANEK 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 non-sweaty 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 a - 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 a certain period of time, like cellphone 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.

VANEK 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.

VANEK 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. It 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.

VANEK SMITH: After the break, how gyms are scheming to get you to renew your annual membership.

(SOUNDBITE OF MUSIC)

KENNEY: 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.

VANEK SMITH: Gyms do all kinds of things to make themselves seem valuable. Remember the massage chairs 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 PERSON #1: Absolutely helped get us out today.

UNIDENTIFIED PERSON #2: We don't miss bagel day

UNIDENTIFIED PERSON #1: But we still try to actually exercise.

UNIDENTIFIED PERSON #2: (Laughter).

UNIDENTIFIED PERSON #1: Definite keeper, bagel day, yeah.

UNIDENTIFIED PERSON #2: We haven't been to pizza day yet, but maybe next month.

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

UNIDENTIFIED PERSON #2: Yes, absolutely. It feels very weird that you just exercised and now you're carbo-loading.

UNIDENTIFIED PERSON #1: 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.

VANEK 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). If you notice, there's nowhere to sit. There's no mirrors in here. It's a really kind of bare-bones space.

VANEK 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?

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

How often do you come?

ANDREW ATIYA: I come six days a week.

VANEK SMITH: Wow.

ATIYA: Yeah.

VANEK 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's 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 MUSIC)

VANEK SMITH: Stacey here - it is 2019 - Stacy of today. And we checked in with Annie Vo from Precision Athlete. She left that small, exclusive gym in 2016, and she's an independent personal trainer now. In the nearly five years since we talked, Annie says that that kind of intensive gym model has really taken off. And even the big gym chains have gotten on board.

VO: Now all the big gyms have an internal gym. You have this proliferation of CrossFits. You have proliferations of Orangetheory, Fhitting Room, Tone House, everything you can think of. So I think, at this point, you know, everybody has a few boutique gyms that they belong to instead of, you know, 10 years ago when we first started, we were kind of the first one to offer that experience.

VANEK SMITH: Of course, we have also seen the rise of #fitspo. That is fitness inspiration on Instagram. At least it's inspiration if you are inspired by watching people flex in front of a mirror. But all of this together, we asked Annie - does it actually inspire people to go to the gym more?

VO: I don't think they're actually still going to go (laughter).

VANEK SMITH: That is the problem. Right? Like, where is the app that makes going to the gym less painful?

(SOUNDBITE OF MUSIC)

VANEK SMITH: We always love to hear what you think of the show. If you have any questions or comments, send us an email - planetmoney@npr.org. Or you can find us on social media. We are @planetmoney.

Check out the newest video, by the way, in our PLANET MONEY Shorts series. This time, we sink our teeth into government cheese. Head to npr.org/planetmoneyshorts to watch.

If you liked this episode or if you like PLANET MONEY in general, please review us on Apple iTunes or wherever you get your podcasts.

KENNEY: And of course, thanks as always to our amazing producer Jess Jiang.

VANEK SMITH: The rerun was produced by Darian Woods and Cynthia Betubiza.

KENNEY: I'm Caitlin Kenney.

VANEK SMITH: And 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.

VANEK SMITH: This is NPR. Thanks for listening.

(SOUNDBITE OF MUSIC)

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