Zumba: Four Steps for Leading Innovation and Growth
By Bradley George
Zumba® is a Latin dance-fitness program that now has more than 12 million participants in 125 countries. During the past two years, I've been researching Zumba through in-depth interviews with co-founders Alberto Perlman and Alberto Aghion. (It’s worth noting that Perlman is a 1998 Babson graduate.)
During these discussions, these entrepreneurial leaders talked about their formative experiences and key decisions. Below, I sum up four recurring steps that supported Zumba’s innovation, growth, and resilience during the past decade.
Step 1: Don’t Fear Failure
In March 2001, Alberto Perlman was running an incubator that invested in and advised nine businesses when the Internet bubble burst. Friend Alberto Aghion was working for Perlman at that time to help bring one of those businesses to market.
What would they do next? One idea kept returning through Perlman’s mind. When working for the Mitchel Madison Group early in his career, he had researched direct response television advertising. He was intrigued by the concept as he had watched his grandfather build one of the largest retail businesses in Colombia, and had seen the difficulties suppliers had getting their products into stores. The idea of selling directly to customers and bypassing the middleman was very appealing to him.
Perhaps the two friends could find a product to sell directly to customers via infomercials.
It was at this time that Perlman’s mother suggested that he meet Alberto “Beto” Perez, the originator of a new form of fitness that his mother followed. He was immediately struck by Beto’s energy and enthusiasm. He also realized that not only did this fitness routine fit with the current trends in Latin American music and fitness, but Beto’s infectious personality and spirit would be perfect for pitching the product to customers. Aghion describes his reaction when Perlman pitched the idea to him:
“I remember my stomach saying, I LOVE IT. Ricky Martin was singing “Livin’ La Vida Loca” at the Grammys. Latin music is crossing over in the U.S. Tae Bo. Fitness. Beto. It clicked in my head immediately.”
And, as Perlman recalls:
“It was a gut decision. We were two out-of-work businessmen with no contacts in the fitness industry and a dancer who couldn’t speak a word of English, and here we were deciding to launch a fitness business together. But, we knew if we could capture the excitement of his class on video, people would go crazy for the music and the moves.”
Step 2: Experiment Now with the Means You Have Available
In order to pitch the idea to investors and potential partners, they needed a video. Having little money between them, they decided to create their own video. They spent the night laying down boards on the beach, and, the next morning, made a video of Beto teaching a class. They then built a website, and began going to gyms in the Miami area to market the videos. Eventually, they made a contact that helped them sell to Bally’s gyms, and provided an introduction to a representative from one of the firms that produced infomercials for various fitness products.
The company was impressed with the video and the concept and agreed to produce and air the infomercials, and, in exchange, Zumba would receive a royalty fee for each video sold. The videos were an immediate success, selling hundreds of thousands of copies in the first six months. However, the profits were barely enough to cover the production costs, so Zumba Fitness was asked to forgo its royalty so the money could be spent on marketing the videos through large retail outlets.
They agreed, but, as a result of some miscommunication, the firm failed to get all of the necessary licenses for one of the songs, and they had to discontinue selling the videos. Following lengthy legal discussions, Zumba Fitness eventually bought back the rights to its fitness program in 2003 and started over on their own.
Other low-cost experiments involved their music choices and their approaches to music and distribution. For example, after their experience with the challenges of music licensing, they decided to use their own music to avoid these hurdles in the future.
Marketing and distribution also was an area where they performed multiple market tests that helped them learn and adapt. The company didn’t have the resources to produce and distribute an infomercial in the North American market, so they continued personal selling and selling videos via their website. Each day, they would package the videos and take them to the post office. Eventually, they partnered with a Colombian firm to produce an infomercial for the Latin American market. While this was an initial success, piracy soon became an issue and sales began to drop off. From there, they tried to expand into the U.S. Hispanic market and met with some success. It also was during this time that they got another important break.
“So we were in Beto’s garage, which was our office, and we get a call from this lady saying she was from Kellogg’s. We thought it was a scam, of course. She says that she wants to meet with us. She is from the ad agency for Kellogg’s in Miami. She tells us that the CEO’s wife bought the tapes off our infomercial and she loves them. And, he had an idea that he could use Zumba as part of a health and fitness campaign. So, we started talking and it ended up being a multimillion dollar deal over four years. That was totally the amount of money that we needed to survive from 2003–2006.”
Step 3: Your Product May Have a Different Value Than You Initially Think – Listen to Your Customers
During this time the company also had begun receiving calls from fitness instructors who had purchased the Zumba tapes and wanted to teach classes. So, in 2003, Zumba Fitness held its first instructor training session. To their surprise, more than 150 people flew to Miami to learn first-hand from Beto. They continued to hold the training sessions every few months and this, coupled with the money from Kellogg’s and their video sales, kept them afloat.
Demand for the training courses continued to grow, and, as time went on, they began to notice something unusual. Even though Beto didn’t speak English, he got people smiling, laughing, and even crying, and instructors who had been to the training kept returning despite the fact that they already had been trained. Instructors began asking for CDs of the music being used. Due to their past experience with music licensing, they realized that they couldn’t provide copies of the music, but it did make them realize that the instructors were looking for new music they could use in their classes. So, in 2005, they created the Zumba Instructor Club. For $100/year, members would get their name listed on the Zumba website, and would receive a monthly email with Beto’s music recommendations with the name of the song, the name of the artist, and the type of rhythm so that the instructors knew what moves to use with the song and their name listed on the Zumba website. About 20–30 percent of the 600 or so instructors at the time signed up.
Next, they noticed that the instructors started bringing their cameras to record the classes. It was then that they realized that people didn’t just want music ideas, but also choreography and a sense of community. Given their success with the Zumba Instructor Club, they created the Zumba Instructors Network (ZIN) as a means of meeting the needs of the instructors and generating a steady revenue stream.
They built a website platform and created marketing materials for instructors who joined the network. For $30/month instructors would get marketing ideas, a listing on the website, and a DVD every two months with new music and choreography. Their advertising consisted of a single Flash email offering the ZIN for $260 for the first year, if they joined now. More than 60 percent of the instructors joined, and they realized that they were on to something.
To avoid problems with music licensing, they found a person in Colombia who could do covers of the songs they wanted at a reasonable price, which eliminated the need for a master license, which was the most expensive of the music licenses required. ZIN started in 2006 with a goal of eventually having 2,000 members, which would provide $60,000/month in recurring revenue. While instructors are not required to join the network, many of them do as they see it as an easy and affordable way to get good music and choreography. The program took off, and Zumba classes are now taught in more than 110,000 locations around the world.
While many fitness programs focus on the attendees, Perlman, Aghion, and Beto realized that their customer was really their instructors, which plays a significant role in their business and strategy. Perlman compares their business to a career center at a university. Their focus is on their “graduates” and making them successful. Their mission is to make ZIN members successful by bringing more students to their classes, helping them retain their students, and providing them with additional revenue opportunities through new products or opportunities for new classes. When looking at any strategic decision, the first thing they ask is if it will bring new business to their instructors. While they do not necessarily get any additional revenue from people attending these classes, they realize that the more demand there is and the more successful their instructors are, the more their business can grow. For example, in 2011, Zumba Fitness entered into an agreement with Curves, a women’s fitness franchise, to create a program that integrates Zumba with Curves circuit training. While Zumba fitness does not directly benefit financially from this arrangement, the key aspect is that Curves is required to use licensed Zumba instructors for the classes.
Step 4: Consider Adjacent Offerings, but Learn What Sustains the Core Business
Zumba also launched a popular fitness game for gaming consoles such as the Wii and Xbox. While this is a revenue source for the company, their main focus is to get more people to try Zumba so that they will seek out classes in their area. In examining what else their instructors might need, Zumba looked at what other customers they could attract. This led to the development of Zumba Gold® (targeted toward beginners and active older adults), Zumbatomic® (for children), Aqua Zumba® (low impact in pools), and Zumba Sentao™ (chair-based routines).
The company realizes that the only way in which they can grow is to expand the end user base in order to make their instructors successful and increase the demand for instructors worldwide. The company also created a line of clothing that is available to instructors only. That way, the instructors can retail this to their students, providing them with additional revenue sources.
Another important aspect of the Zumba model is the focus on community. Zumba promotes the sense of community and family rather than competition. Rather than emphasizing weight loss or other aspects of the workout, Zumba puts the emphasis on fun and community—even their slogan—“Ditch the workout, join the party” reinforces this. As Perlman noted in a talk at the 2011 instructors conference, workouts that have focused on weight loss tend to be fads and are popular until the next hot thing comes along. However, exercise routines that have an emotional or spiritual component, such as yoga, have tended to stand the test of time.
Ultimately, people want a sense of community and belonging, and that is what Zumba emphasizes throughout its programs. Instructors regularly attend each other’s classes and fundraisers to show their support for each other. Creating this experience in the class helps to motivate people to come back to the classes—as opposed to exercising on their own, even if they have the videos or the gaming systems—further reinforcing their business model.
By taking each of these four steps, the entrepreneurial leaders not only overcame obstacles but also innovated again and again. The story of Zumba has been less about sticking to a single business plan than using a method to test, learn, and apply fresh insight.