An $89M Startup’s Most Valuable Product Isn’t Built Yet

ClassPass: A New Feature Proposal

Technology is moving. So are we. Demand has been quickly increasing for products and services that make a healthy lifestyle easier and more accessible. Our schedules are jam-packed and often unpredictable, jet-setting from city to city is becoming a standard commute, and unhealthy options and lifestyle choices are more common by the day. Maintaining our health and well-being must seamlessly fit into our high performing lifestyles, now more than ever. And nothing provides that level of convenience like our dear friend, technology.

The fitness app is the new gym. Apps have helped add ease to nearly every aspect of our lives, from ordering Thai food to booking a last-minute hotel. Fitness is no exception. According to an NYU Langone Medical Center study of US smartphone owners conducted in June 2015, 58% of smartphone users have downloaded a health-related app, and 41% have downloaded more than five. And they’re being used — 65% of these respondents open the health app at least once a day. The idea of the old fashioned gym membership is losing relevance along with most other brick and mortar industries, undoubtedly in part due to this massive growth in fitness mobile apps. Flywheel Sport’s executive chairman, Lew Frankfort, boldly theorizes the death of department stores is the precursor to the death of gyms. (Last month alone, Macy’s announced that it would close 63 stores and Sears said that 150 of its locations will go dark.) As in retail, fitness customers are really looking for value at low end or curated experiences at high end.” Consumers now have more options, they no longer need to settle for rigid, inflexible memberships.

And the industry is delivering. DailyBurn, Zumba Fitness, FitStar, Strava, Aaptiv, Zenrez, FitReserve, MyFitnessPal, and Handstand are a handful of mobile apps started in the past few years with a common goal of providing an alternative to the traditional gym membership. The focuses include on-demand personal training, audio and virtual fitness classes, studio class bookings, and workout tracking.

Enter ClassPass. Now a market leader in this space and valued at over $400 million, ClassPass entered the mix 4 years ago in New York City by Payal Kadakia. Payal’s multiple business ventures always aimed to answer a demand she had herself. The first was Sa Dance Company, an Indian dance studio that fulfilled her Bollywood style dance passion. “When it didn’t exist, I had to build it. I had to dance.” The second was Classtivity, an OpenTable for fitness class scheduling. Payal got the idea for Classtivity after numerous “miserable experiences” attempting to find a good dance class in NYC while working at Bain and Company. After struggling to gain user traction, the company pivoted to become ClassPass — a fitness membership that provides access to thousands of classes at different studios in your city and around the world via their web or mobile app. The leading membership in the world’s largest fitness network, ClassPass now offers classes in 8,000+ studios in 39+ cities worldwide.

They answered a need. Payal’s demand-centered business strategy flourished in the rapidly growing fitness app market, answering the health-conscious consumer’s demand for more convenience, accessibility, and flexibility. ClassPass members loved the diversity of class options, and the $99 Unlimited membership was a godsend to many. But there’s another side to this market, and they weren’t seeing their share of the value. The studios’ classes were becoming overcrowded and it was driving members away. And ClassPass was bleeding money as well, they had to pay studios each time a member attended a class. After failing to make that business model financially viable, ClassPass removed the unlimited option. Naturally, members reacted and complaints flooded in. 10% of users dropped. Studio partner satisfaction has increased but members have expressed grievances with the cancellation charges and late fees, limited access to the same classes, and lack of studio options.

It’s hard to scale as a middleman. ClassPass sits on a narrow fence between the need to incentivize their partner studios and the desire to satisfy their members, meaning there’s a golden number of member attendance for each studio. Any more attendances would cost ClassPass, any less would cost the studio. This isn’t an ideal business model. Many studios have raised concerns, some even canceling the partnership after realizing it isn’t sustainable for their business. Michael Michalski, the owner of Variant Fit, tells FOXBusiness.com after terminating his partnership — “It was great marketing, it brought a lot of great people in the doors, but from my own standpoint, if it’s not going to grow [my business] for me going forward, it’s not sustainable. To use it as a marketing channel is one thing, but to use it as the backbone of your business, there’s just no way it’s going to work.” If enough studios feel similarly, ClassPass will face the problem of transience with partner relationships — easy acquisition and tough retention. While this hasn’t yet been a breaking point for the company, it’s indicative of a need to expand the ClassPass services to include one that doesn’t rely on the middleman role.

Enter VirtuPass. After doing some market research and user feedback analysis, I identified a potential solution to these gaps — a feature to provide unlimited access to virtual fitness classes anytime, anywhere. VirtuPass is an extension of ClassPass offering an additional membership that provides access to on-demand virtual fitness classes that can be streamed or downloaded. The VirtuClasses can be uploaded by popular instructors or studios, licensed from commercial fitness programs, or produced by ClassPass themselves. The VirtuPass feature alleviates the problems currently held by the two ClassPass user sets, i.e. members and studios. Members get unlimited classes, flexibility, and affordability. Studios get scalable exposure and profit share without needing to provide physical class spaces and gym amenities.

It makes sense. ClassPass has the brand people trust, they have the users, they have the capital — according to Crunchbase, they’ve raised $89 million in 5 rounds since 2013. Most people are glued to their smartphones, if a service doesn’t offer a flexible, transportable version of their product, they’re sacrificing thousands of users and hours of engagement. The world is going mobile, fitness is going with it.

ClassPass has changed the fitness game, I want to see it continue. The company has nearly mastered the subscription-based fitness membership. Maintaining a healthy lifestyle is tough for everyone, and common complaints are lack of time and repetitive/boring routines. ClassPass makes it easy and fun. Purchasing a membership places you just a few clicks away from booking an exciting new class nearby that you’ve never tried. Despite a few echoing complaints, most members love the variety and ease it adds to their fitness routine. But it’s time ClassPass further explores the burgeoning world of fitness technology and partakes in an opportunity to increase engagement with their members, relieve user pain points, appeal to more personas, and resolve the middleman problem.

And for my fellow TLDR and visual people, here’s my proposal deck followed by the UI/UX mockups I designed for VirtuPass -

I’m Kori, a Software Product Consultant in San Francisco, doubling as a fitness and health addict in my free time. I regularly think about how technology can improve to further enhance our lives, specifically focusing on the fitness and wellness industries. This is one idea surfaced from my vast mental file of concepts that address problems consumers face today. Apps have made possible what wasn’t even fathomable 20 years ago. There’s no reason why the consistent advancement in technology won’t continue. I want to be a part of that movement.

This project was developed from the wealth of knowledge I gained in the 8-week Product Management course I took through Product School, taught by the brilliant Ryan Black.

I’d love to hear your thoughts! — LinkedIn, www.koriharrison.com, me@irok.co