Monday, January 5, 2015

Market Segmentation for Personal Training and the "Information" Economy

In the Wall Street Journal on January 2, there was an interesting article about personal trainers.  In this article it talked about trainers who work at gyms and trainers who work privately.  The latter type make more money per hour, but the downside, as described by the article, is that these individuals have to find their own clientele.

The article described a number of different market segments to which different trainers have appealed.  Individuals who want very challenging workout three days a week for ten minutes a day.  Plus sized women.  Type-A personalities in general.  Even personal trainers for the dogs of otherwise fit people.  (Although my personal experience is that, at least with larger dogs, I'm willing to give up some of the time I would otherwise use for more intense fitness activities to combine spending time with my dog, my dog's fitness, and a little less intense fitness activity for myself, but that is a matter of personal preference.)

An interesting fact to consider is that at least in the New York City area some  personal trainers can charge up to $100/hour.  That is a pretty hefty price to pay for fitness.

The key is market segmentation.  Defining a very narrow niche of the market in which, if the person is able to offer a service that is directly relevant to that narrowly defined group, the group is willing to pay a large amount and would not change the quantity demanded much with any price change.  In this case, the trainer can find a relatively small number of individuals, charge a high fee, and make quite a bit of money.  Perhaps even making economic profits by recognizing not only an important segment of the market but also differentiating the service in a way that creates few substitutes for exactly what the personal trainer is providing.

What does this suggest more broadly?  There are many services for which no one will ever be able to charge $100/hour.  But as individuals lead increasingly busy lives and are looking for someone to help to hold them accountable, to offer new insights that they cannot get from friends and family, and to provide expertise that they do not have, people will probably be willing to pay for clearly differentiated services.  This is a terrific example of the "information" economy.  This has nothing to do with information technology.  It has everything to do with being rewarded for having information, understanding those who want the information, and understanding how to communicate that information to those who want it and have the resources to pay for it.

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