In response to health restrictions placed on them during the COVID pandemic, many fitness centres added online platforms and virtual workout programs to their product mix. After the pandemic, sales of these online alternatives have continued to grow dramatically, while memberships to their physical locations have declined. The introduction of the virtual products likely resulted in:

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Question restatement: After health restrictions during COVID, fitness centres added online platforms and virtual workout programs. Post-pandemic, online sales grew while physical memberships declined. The introduction of virtual products likely resulted in:

Option 1: saturation. This would imply the market has become fully served or crowded, leaving little room for growth. However, saturation typically describes the overall market capacity or demand ceiling, not the specific dynamic of a new online offering reducing physical memberships. It doesn’t directly explain why online growth accompanies declines in physical memberships.

Option 2: cannibalization. This is the idea that the new online products are attracting customers who would have otherwise used the physical locations, effectively transferring demand from one channel to another within the same company. The scenario described—online platforms growing while physical memberships fall—fits this concept well, as the online option is ‘eating into’ the company’s existing physical customer base rather than attracting new, unrelated customers.

Option 3: brand dilution. Brand dilution happens when a brand’s meaning becomes weaker due to excessive or inconsistent branding, product lines, or messaging. While adding online offerings could potentially contribute to scattered brand perception if mishandled, the specific pattern of online growth with physical membership decline aligns more directly with internal channel competition (cannibalization) than with dilution of brand meaning across markets.

Option 4: customer attrition. Customer attrition refers to customers leaving or stopping their relationship with the brand. While this could be a downstream effect of shifting preferences, the question emphasizes the internal substitution between online and physical channels rather than a broad loss of customers to competitors or to the market in general. Cannibalization specifically captures the channel-to-channel substitution driving the observed pattern.

Synthesis: Among the given options, cannibalization best explains why expanding online offerings would coincide with a decline in physical memberships—the new product channel is drawing demand away from the existing channel within the same company. The other options describe different phenomena that are less directly tied to the described channel-shift dynamic.

COMM_V 296 205 206 2024W2 2024W2 COMM 296 FINAL EXAM - Sec 205 206 - April 22, 2025 - Requires Respondus LockDown Browser

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