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Health Fitness Program Marketing PlanCorporate Fitness

Confidentiality Agreement

The undersigned reader acknowledges that the information provided by _________________________ in this marketing plan is confidential; therefore, reader agrees not to disclose it without the express written permission of _________________________.

It is acknowledged by reader that information to be furnished in this marketing plan is in all respects confidential in nature, other than information which is in the public domain through other means and that any disclosure or use of same by reader, may cause serious harm or damage to ________________________.

Upon request, this document is to be immediately returned to _________________________.

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This is a marketing plan. It does not imply an offering of securities.

Table Of Contents

1.0 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Situation Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.1 Market Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

2.1.1 Market Demographics . . . . . . . . . . . . . . . . . . . . 32.1.2 Market Needs . . . . . . . . . . . . . . . . . . . . . . . . 32.1.3 Market Trends . . . . . . . . . . . . . . . . . . . . . . . . 42.1.4 Market Growth . . . . . . . . . . . . . . . . . . . . . . . . 5

2.2 SWOT Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.1 Strengths . . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.2 Weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . 62.2.3 Opportunities . . . . . . . . . . . . . . . . . . . . . . . . 62.2.4 Threats . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.3 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62.4 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.5 Keys to Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.6 Critical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3.0 Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.1 Mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.2 Marketing Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 83.3 Financial Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 83.4 Target Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.5 Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83.6 Strategy Pyramids . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.7 Marketing Mix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.8 Marketing Research . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4.0 Financials 104.1 Break-even Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 104.2 Sales Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114.3 Expense Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

5.0 Controls 125.1 Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . 135.2 Marketing Organization . . . . . . . . . . . . . . . . . . . . . . . . 135.3 Contingency Planning . . . . . . . . . . . . . . . . . . . . . . . . . 14

1.0 Executive Summary

Corporate Fitness will serve Seattle-area businesses, helping them to become more productive, while lowering their overall costs with innovative wellness programs and strategies.

The business is based on two simple facts:

1. Healthy employees are more productive than chronically ill employees. 2. It costs less to prevent injuries or illnesses than to treat them after they occur.

Corporate Fitness (CF) ties worker productivity directly to health care. It believes that traditional approaches to the current health care crisis are misdirected. Traditional efforts are reactive—waiting until after the worker has been stricken with illness or injury to pay for the necessary treatments. Our approach emphasizes prevention and good health promotion, in a proactive manner.

By helping employees change their behavior patterns and choose healthier lifestyles, CF will lower companies' health care expenditures, while raising worker productivity. Health care expenditures will decrease due to reduced medical insurance premiums, reduced absenteeism, reduced turnover rates, reduced worker's compensation claims, reduced tardiness, shorter hospital stays, etc.

The state of America's health care crisis, coupled with current demographic changes, threaten to not only exacerbate the crisis, but further erode worker productivity as well. These environmental factors coupled with the local competitive situation signal a favorable opportunity in this market. We feel the time is right for Corporate Fitness.

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$500,000

$600,000

$700,000

$800,000

2003 2004 2005

Corporate Employees

Manufacturing Employees

Annual Sales Forecast

Corporate Fitness

Page 1

2.0 Situation Analysis

Corporate Fitness is entering its second year of business. The business model has been well received and marketing is especially important to maintain growth and market penetration. In addition to offering fitness facilities for Seattle corporations, Corporate Fitness' main activity is the creation and implementation of wellness programs. The basic market need is the reduction of corporate costs and the increase in employee efficiency that can be achieved through long-term wellness programs.

2.1 Market Summary

Corporate Fitness possesses good information about the market and knows a great deal about the common attributes of the prized and loyal customers. This information will be leveraged to better understand who is served, their specific needs, and how Corporate Fitness can better communicate with them.

Corporate Employees

Manufacturing Employees

Target Markets

Table 2.1: Target Market Forecast

Target Market ForecastPotential Customers Growth 2003 2004 2005 2006 2007 CAGRCorporate Employees 35% 9,876 13,333 18,000 24,300 32,805 35.00%Manufacturing Employees 15% 5,924 6,813 7,835 9,010 10,362 15.00%Total 28.57% 15,800 20,146 25,835 33,310 43,167 28.57%

Corporate Fitness

Page 2

2.1.1 Market Demographics

The profile for Corporate Fitness' customer consists of the following geographic, demographic, and behavior factors:

Geographics

• The immediate geographic target is the city of Seattle. • A 35 mile radius is in need of the services. • The total targeted population is 15,800 employees.

Demographic

• 51% male and 49% female. • The individual income range is $38,000-$75,000. • 67% of the customers are single, 33% are married. • For the manufacturing customers, 43% of individuals have some undergraduate course

work. • For the corporate customers, 83% of individuals have some undergraduate coursework,

16% have undertaken graduate coursework.

Behavior Factors

• Recognize the need to have physical activity in their lives. • Have incorporated some sort of exercise program in their daily/weekly routine for the last

several years. • Are willing to utilize fringe benefits that are offered by their employer as part of their

compensation package.

2.1.2 Market Needs

Corporate Fitness is providing its customers with a health care cost management program for employees that will increase employee productivity and decrease overall business costs. Corporate Fitness seeks to fulfill the following benefits that are important to its customers:

• Customization: CF will offer a totally customized solution for each company as well as each employee within the company.

• Convenience: Customers will not use the service if it is not convenient. CF recognizes this and strives to make their services as convenient as possible for the targeted customer groups.

• Results-orientated strategy: CF will need to improve a company's bottom line in order to attract and maintain customers. While CF will strive to address all of the its customer's needs, the reality is that it must indeed provide significant value for the companies themselves in order to grow market share.

Corporate Fitness

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2.1.3 Market Trends

There have been two significant market trends in the last five years, increased usage and Corporate Fitness as a part of the benefits package.

Increased usage of fitness facilities on behalf of individuals.Exercising and "working out" has become a more mainstream activity in American's lives over the last decade. American's unhealthy diet of fast food, and generally poor food choices, especially fried foods lead to widespread reports of obesity. Along with a poor diet, Americans were fairly inactive, with only 19% of people age 20-40 exercising three times a week. That trend has changed over the last 10 years. The percentage of active people has increased to 43% as of 2002. More and more people are going to the gym after work or are incorporating some sort of outdoor activity into their daily routine.

The incorporation of fitness memberships within the "basket of benefits," a part of the total compensation package.As fitness memberships have become a more common element in working American's lives, companies have incorporated membership as part of their benefit package for employees. This has occurred for at least two reasons. One reason is a flexible method to compensate employees. The second reason is the positive effect on a company's bottom line. Study after study supports that a physically fit employee is happier, healthier, and more productive. For no other reason, offering fitness club memberships to employees is a smart cost-benefit decision.

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Corporate Employees

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Market Forecast

Corporate Fitness

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2.1.4 Market Growth

In 1999, the U.S. medical bill was $738 million, of which businesses paid 30%. Recent studies indicate positive returns on investments for wellness programs of various companies ranging from $1.91:1 to $5.78:1. General Electric's aircraft engines division, for example, saves $1 million per year through its wellness programs. Traveler's Insurance Company reported savings of $7.8 million in 2000, attributable to its wellness programs, and a return of $3.41 for every dollar invested in wellness.

Important demographic changes are taking place in America that point to the importance of worker productivity in coming decades.

• By the year 2005 16 million new jobs will be created but there will only be 14 million workers to fill them.

• In 2000, women comprised one-third of the work force, a ratio that will increase to one-half by the year 2003.

• An estimated 80% of jobs to be filled in the immediate future will require more than a high-school education. Only 74% of Americans finish high school, and only 67% graduate with adequate skills.

• The number of skilled workers available to fill new jobs is decreasing, meaning that employers are facing more severe competition for labor. Thus, the health and productivity of each employee becomes crucial to a company's success.

The following quantitative information has supported explosive growth in the health wellness program industry. The last five years has seen a 9% growth rate and the next five years is expected to achieve a 7% growth rate.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Corporate Employees Manufacturing Employees

Target Market Growth

Corporate Fitness

Page 5

2.2 SWOT Analysis

The following SWOT analysis captures the key strengths and weaknesses within the company, and describes the opportunities and threats facing CF.

2.2.1 Strengths

• Results-orientated approach to attracting and maintaining customers. • A well-researched, detailed health wellness program that is long-term in focus. • Intensively-trained staff.

2.2.2 Weaknesses

• High costs associated with customized, personal service. • The inability to work on a high volume business model. • The costs of attracting a large corporate client.

2.2.3 Opportunities

• Participation within a growing market. • The large increase in clients that follows with the acceptance of CF's program by a single

company. • The ability to leverage future quantitative analysis that supports the contention that long-

term wellness programs have a significant, positive impact on a company's bottom line.

2.2.4 Threats

• Lack of immunity to an economic downturn. • Potential competition from larger, well-established competitors. • A change in society where the individual begins to take far more responsibility for his/her

health maintenance.

2.3 Competition

The three main competitors for Corporate Fitness are:

• YMCA: market is lower-income families and/or students who want accessibility and affordability of fitness facilities.

• Gold's Gym: services are targeted toward those motivated and dedicated individuals who workout five to seven times per week.

• Better Bodies: aimed at casual fitness-seekers who do not workout with a high intensity but still desire the status and recognition.

Corporate Fitness

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2.4 Services

Corporate Fitness provides wellness strategies/programs to businesses in the downtown Seattle area. A wellness strategy is a long-term effort, combining both health-promotion and exercise-related activities designed to facilitate positive lifestyle changes in members of a company's work force.

Corporate Fitness will work with a company's senior management to help it develop a mission statement for its wellness program. The client company's employees will undergo a health-risk analysis, following which each employee will be given the opportunity to meet with a health professional to design a personalized health program.

Finally, Corporate Fitness will furnish employee progress reports to senior management with which to carry out the incentive program and generally monitor changes in the behavior of its work force.

2.5 Keys to Success

Corporate Fitness' keys to success are:

• Marketing services to companies and individuals. • Recruitment of experienced managerial talent. • Dedication and hard work of the founders. • Raising productivity. • Lowering overall costs.

2.6 Critical Issues

Corporate Fitness faces several critical issues:

• Sign up a sufficient number of medium-sized companies. It is more cost effective to service several medium-sized companies than many small companies.

• Continue to drive down the costs associated with serving a customer.

3.0 Marketing Strategy

Corporate Fitness will begin by targeting small- to medium-sized businesses in the downtown Seattle area. The first task is to convince senior executives of the benefits and needs of wellness programs. This will be accomplished by aggressively pursuing interaction and relationships with business professionals who would profit from using this service. Once a strong image is established, Corporate Fitness will use similar strategies to market its services to larger corporations in Seattle and other areas of expansion.

Corporate Fitness

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3.1 Mission

Corporate Fitness is a health service that helps businesses and individual workers attain one of the greatest gifts of all—that of good health. Personal gains, such as improved self-esteem and self-motivation, combined with measurable benefits will create tremendous advantages for both the employer and the employee.

3.2 Marketing Objectives

1. Generate a 10% yearly increase in sales. 2. Increase market penetration every quarter. 3. Continue to cultivate CF's image as the premier long-term wellness program provider.

3.3 Financial Objectives

1. Decrease customer acquisition costs by 4% every two quarters. 2. Lower the cost of service delivery by 1% a quarter. 3. Holding spending, as a percentage of sales, at a steady rate.

3.4 Target Markets

The market for Corporate Fitness is not particularly segmented, as potential customers include all downtown businesses that offer their employees some type of medical benefits, are experiencing escalating health care costs, and wish to more effectively manage those costs.

Corporate Fitness, however, segments its services for individual organizations. Corporate Fitness works with senior management to develop mission statements and provide incentive plans, and with employees to design personalized health and fitness programs.

The targeted customers are corporate and manufacturing employees.

3.5 Positioning

Corporate Fitness will position itself as the most effective wellness strategy and program developer. This positioning will be supported by statistics indicating an increase in worker productivity and a decrease in business operation expenses from the implementation of corporate wellness programs.

Corporate Fitness

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3.6 Strategy Pyramids

The single objective is to position CF as the most proficient wellness program provider in the Seattle area. The marketing strategy will seek to develop customer awareness regarding the services offered, develop the customer base, and work toward building customer loyalty.

The message that CF seeks to announce is that it can have a dramatic effect on the bottom line. This message will be communicated through various methods. The first method will be the production and disbursement of printed materials. The printed materials will describe all of the services offered and will give prospective customers insight into CF's past successes.

CF will also rely on presentations to company's HR departments. These presentations will allow CF to personally address any concerns that companies have and indicate how a wellness program/strategy can help service their needs.

CF will also rely on advertisements in the Business Journal of Seattle for increasing visibility and interest in CF's services among Seattle-based companies. Lastly, Corporate Fitness will use a website as a source for disseminating information.

3.7 Marketing Mix

Corporate Fitness' marketing mix is comprised of the following approaches to pricing, distribution, advertising and promotion, and customer service.

• Pricing: Prices for using Corporate Fitness' services are comparable to those of higher-end fitness centers. An employee choosing to utilize a Corporate Fitness center will pay a $100 monthly fee. For each employee enrolled in the general wellness program, regardless of whether or not they use the fitness facility, the employer will pay $150 annually. The prices reflect the quality of the equipment and service.

• Distribution: This will occur both at the company's worksite as well as at CF's facilities. • Advertising and Promotion: Printed material, presentations, advertising in industry

specific journals and a comprehensive website will be used. • Customer Service: Corporate Fitness will operate on the principle that it is imperative to

achieve total customer satisfaction if the business is going to succeed.

3.8 Marketing Research

Corporate Fitness used focus groups and questionaires when collecting market research. The focus groups were collections of seven to nine people who were asked a series of predetermined questions with the responses recorded and discussed among the group members. In addition to the pre-established questions, there was a free-flow discussion format toward the end of the focus group that provided flexibility in allowing the participants to share information and insight with CF.

Additionally, questionnaires were used to collect market information from perspective customers. The questionnaires were submitted to a total of 100 HR professionals. The response rate was 43, higher than expected. The validity and usefulness of the questionnaire was ensured by utilizing a graduate statistics student to develop the questionnaire. This research confirmed many already held assumptions as well as introduced several valuable perspectives that CF was not yet privy to.

Corporate Fitness

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4.0 Financials

This section will offer a financial overview of Corporate Fitness as it relates to the marketing activities. CF will address Break-even Analysis, Sales Forecasts, Expense Forecasts, and how they link to the Marketing Strategy.

4.1 Break-even Analysis

The Break-even Analysis indicates that $16,667 will be needed to reach the break-even point.

($10,000)

($5,000)

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$5,000

$10,000

$0 $5,560 $11,120 $16,680 $22,240 $27,800

Monthly break-even point

Break-even point = where line intersects with 0

Break-even Analysis

Table 4.1: Break-even Analysis

Break-even Analysis:Monthly Units Break-even 1,667Monthly Sales Break-even $16,667

Assumptions:Average Per-Unit Revenue $10.00Average Per-Unit Variable Cost $4.00Estimated Monthly Fixed Cost $10,000

Corporate Fitness

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4.2 Sales Forecast

Please refer to the following chart and graph for illustration on the sales forecasts.

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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Manufacturing Employees

Monthly Sales Forecast

Table 4.2: Sales Forecast

Sales ForecastSales 2003 2004 2005Corporate Employees $298,783 $389,776 $455,678Manufacturing Employees $242,077 $288,739 $333,890Total Sales $540,860 $678,515 $789,568

Direct Cost of Sales 2003 2004 2005Corporate Employees $29,878 $38,978 $45,568Manufacturing Employees $24,208 $28,874 $33,389Subtotal Cost of Sales $54,086 $67,852 $78,957

4.3 Expense Forecast

The Expenses Forecast will be used as a tool to keep the department on target and provide indicators when modification or corrections are needed for the implementation and maintenance of the market plan.

The marketing expenses will be high during the first quarter of operation, when there is increased usage of fitness facilities. The expenses will decrease during the second and third quarter, but rise during the fourth quarter when HR budgets are typically submitted/reviewed.

Corporate Fitness

Page 11

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Website Production/Maintenance

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Table 4.3: Marketing Expense Budget

Marketing Expense Budget 2003 2004 2005Pamphlet Production $1,000 $1,200 $1,400Website Production/Maintenance $9,200 $8,000 $8,000Advertisements $9,250 $12,000 $14,000

------------ ------------ ------------Total Sales and Marketing Expenses $19,450 $21,200 $23,400Percent of Sales 3.60% 3.12% 2.96%Contribution Margin $467,324 $589,464 $687,211Contribution Margin / Sales 86.40% 86.88% 87.04%

5.0 Controls

The purpose of Corporate Fitness' marketing plan is to serve as a guide for the organization. The following areas will be monitored to gauge performance:

• Revenue: monthly and annual. • Expenses: monthly and annual. • Customer satisfaction. • Wellness program effectiveness within each company.

Corporate Fitness

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5.1 Implementation

The following milestones identify the key marketing plan programs. It is important to accomplish each one on time and on budget.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Marketing Plan Completion

Pamphlet Completion

Website Completion

Advertising Campaign #1

Advertising Campaign #2

Milestones

Table 5.1: Milestones

Milestones PlanMilestone Start Date End Date Budget Manager DepartmentMarketing Plan Completion 1/1/03 2/1/03 $0 Steve MarketingPamphlet Completion 2/1/03 4/1/03 $1,000 Steve MarketingWebsite Completion 1/1/03 3/15/03 $9,200 Steve MarketingAdvertising Campaign #1 3/1/03 8/30/03 $3,750 Robert MarketingAdvertising Campaign #2 9/1/03 12/30/03 $5,500 Robert MarketingTotals $19,450

5.2 Marketing Organization

Steve Perkins and Robert Gomez will share responsibility for the marketing activities.

Corporate Fitness

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5.3 Contingency Planning

Difficulties and Risks

• Problems developing a sufficiently large client base. • Significant economic downturns.

Worst Case Risks Include

• Determining that the business can no longer support itself. • Having to liquidate equipment to cover liabilities.

Corporate Fitness

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Table 4.2 Sales Forecast

Sales Forecast PlanSales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecCorporate Employees $8,766 $10,988 $11,909 $14,554 $16,776 $19,008 $25,443 $29,008 $34,556 $38,887 $42,223 $46,665Manufacturing Employees $7,765 $9,976 $10,007 $11,900 $13,990 $15,009 $19,665 $23,336 $27,887 $31,099 $34,443 $37,000Total Sales $16,531 $20,964 $21,916 $26,454 $30,766 $34,017 $45,108 $52,344 $62,443 $69,986 $76,666 $83,665

Direct Cost of Sales Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecCorporate Employees $877 $1,099 $1,191 $1,455 $1,678 $1,901 $2,544 $2,901 $3,456 $3,889 $4,222 $4,667Manufacturing Employees $777 $998 $1,001 $1,190 $1,399 $1,501 $1,967 $2,334 $2,789 $3,110 $3,444 $3,700Subtotal Cost of Sales $1,653 $2,096 $2,192 $2,645 $3,077 $3,402 $4,511 $5,234 $6,244 $6,999 $7,667 $8,367

Appendix: Corporate Fitness

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Table 4.3 Marketing Expense Budget

Marketing Expense Budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecPamphlet Production $500 $0 $0 $0 $0 $0 $500 $0 $0 $0 $0 $0Website Production/Maintenance $7,000 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200 $200Advertisements $500 $600 $700 $800 $500 $650 $800 $900 $1,000 $1,100 $900 $800

------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------Total Sales and Marketing Expenses $8,000 $800 $900 $1,000 $700 $850 $1,500 $1,100 $1,200 $1,300 $1,100 $1,000Percent of Sales 48.39% 3.82% 4.11% 3.78% 2.28% 2.50% 3.33% 2.10% 1.92% 1.86% 1.43% 1.20%Contribution Margin $6,878 $18,068 $18,824 $22,809 $26,989 $29,765 $39,097 $46,010 $54,999 $61,687 $67,899 $74,299Contribution Margin / Sales 41.61% 86.18% 85.89% 86.22% 87.72% 87.50% 86.67% 87.90% 88.08% 88.14% 88.57% 88.80%

Appendix: Corporate Fitness

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