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 ’98 and Alberto Aghion. 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.
During these discussions, these entrepreneurial leaders talked about their formative experiences and key decisions. Here are four lessons from Zumba involving innovation, growth, and resilience during the past decade. By taking each of these four steps, they overcame obstacles and innovated again and again.
Lesson 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.
“I remember my stomach saying, I LOVE IT,” says Aghion. “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.”
“It was a gut decision,” Perlman recalls. “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.”
Lesson 2: Experiment Now with the Means You Have Available
To pitch the idea to investors and potential partners, they needed a video. Having little money between them, they decided to create their own. 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. 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 and website sales. Each day, they packaged 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 became an issue and sales began to drop. 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.
“We were in Beto’s garage, our office, and get a call from this lady saying she was from Kellogg’s. We thought it was a scam, of course. She is from the ad agency for Kellogg’s in Miami and wants to meet with us,” recalls Perlman. “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.”
Lesson 3: Listen to Your Customers
The company began receiving calls from fitness instructors who had purchased 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. This, coupled with money from video sales, kept them afloat.
Demand for training courses continued to grow. As time passed, they began to notice something unusual. Even though Beto didn’t speak English, he got people smiling, laughing, and even crying. Instructors kept returning despite the fact that they already had been trained. Instructors began asking for CDs of the music being used; they were looking for new music they could use in their classes. So, in 2005, they created the Zumba Instructor Club. For $100 a year, members would get their name listed on the Zumba website and receive a monthly email with Beto’s music recommendations. About 20–30 percent of the 600 or so instructors at the time signed up.
Next, they noticed instructors bringing their cameras to record the classes. They realized 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) to meet 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. They knew 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. It’s 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 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. When making strategic decisions, they first 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.
Lesson 4: Learn What Sustains the Core Business
Zumba also launched a popular fitness game for gaming consoles such as the Wii and Xbox. While a revenue source, the main focus is to get more people to try Zumba and seek out classes. 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. 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. 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 again and again.