Executive SummaryCompany DescriptionFitbit, Inc. is in the “wearable device” (offered in clippable and wrist-based form) industry. The primary goal of Fitbit’s products is to help the user’s of their products manage their weight, exercise more, increase activity, and improve sleep patterns by electronically tracking majority of the data associated with an individual’s health.Fitbit’s wearables can track: Daily Steps,·Calories Burned, Distance Traveled, Active Minutes, Floors climbed, Sleep duration and quality, Heart Rate, GPS-based information such as speed, distance, and exercise routesAs of 2017, Fitbit has grown to more than 25 million active users.HistoryFitbit, Inc.
was founded by Eric N. Friedman and James Park in March, 2007 and they are headquartered in San Francisco, CA. Fitbit was considered as “pioneers in the connected/health fitness market in 2007”.
Mission Statement”To empower and inspire you to live a healthier, more active life. We design products and experiences that fit seamlessly into your life so you can achieve your health and fitness goals, whatever they may be.”er they may be.Our goal is to optimize and to make Fitbit, Inc. progress their relevance in the wearables marketplace through our marketing services strategy.Demographic EnvironmentFitBit’s fitness tracker is a part of the “wearables” market, consisting of smartwatches and fitness devices. Fitness trackers remain to be the most popular on the wearables market, accounting for more than half of all wearables shipments in 2015.
Compared to 2015, fitness trackers doubled in growth in 2016 due to their new product releases as well as an expanding customer base.This customer base and demographic no longer consists of the ‘young and fit’ generation in their 20s. FitBit’s consumer Demographics:72% Female, 27% MaleAge 34-44: Usually around the age where individuals take their health seriously, but also have the financial means to purchase a tracker. The largest income group purchasing these fitness trackers have a household income of over $100,000.FitBit targets “middle-of-the-road” consumers. Families, or young women.
As this “fitness craze” has taken over not only our country but all generations, from millennials to the older generation, it has become easier to live healthy as there are more and more resources available. Because of this, more people may be inclined to purchase a fitbit, however this new healthy lifestyle may pose a threat to the company. As more resources and accessibility to health go on the market, more consumers may not see fitbit as a necessity, due to other resources that are either cheaper, or more expensive and do more than the fitbit (like the Apple Watch).II. Economic EnvironmentConsumer Economy:Currently, the United States economy is going through a stage of prosperity, due to lower unemployment and higher total income, creating high buying power since the inflation rate is low. According to the Council of Economic Advisors, the United States unemployment rate is currently only at 4.
4%, which has decreased by 0.5% in 2017 compared to 2016. The amount of national income increased by 3.13% and the GDP has increased by 3.2% year over year. Also, Kimberly Amadeo, president of World Money Watch, states that the inflation rate at the end of 2017 was 1.
8%, which is lower than the Fed’s target rate of 2%. Due to these economic conditions, individuals are able to make more purchases, meaning higher buying power. The amount of discretionary income has been increasing as the national income increases because it allows more money to be spent on non-necessities. Discretionary income expenditures are also increasing due to the reduced savings rate. According to the U.S.
Bureau of Economic Analysis, the national savings rate has decreased from 6.1% in 2015 to 3.7% in 2016 and is now currently at 2.
9% as of 2017. More people are spending their extra money rather than saving it. Consumer spending contributes to nearly 70% of the U.S. economy, so for it to be increasing is a great sign for businesses. Based on another article by Kimberly Amadeo, only 5% of consumer spending is attributed to recreational durable goods (mostly consumer electronics). This would be the category that Fitbit falls under. However, consumers spend 17% of their discretionary income on health care services.
This might affect Fitbit because if they try to make somewhat of a transition over to the healthcare category or even partner with healthcare services, it may increase the sales of their product.Financial Factors Affecting Fitbit & Responsive Actions Taken:In 2017, Fitbit didn’t have a very good year. Its stock fell 22% during the year and its global market share decreased from 21.9% to 13.7% between quarter three of 2016 and 2017 (Sun, 2018). This is because there are many other fitness trackers that are cheaper in the low-end market and many more expensive smart watches in the high-end market that are outperforming the fitness wearable category.
With sales growth down and revenue impacted by these statistics, Fitbit wants to expand its user base. According to Zacks Equity Research, Fitbit has been partnering with several healthcare companies and selling fitness trackers and software subscriptions to employers in order to become a part of their corporate wellness programs. By expanding and integrating more into healthcare system, Fitbit hopes to revive their business. Fitbit is also trying to expand their market is by gearing some of their products toward the smartwatch industry.
The company introduced their first ever smart watch, called the Ionic, at the end of September 2017. Although Fitbit faces tough competition with Apple’s smart watches, they do have a few advantages. Their products are compatible with almost any mobile operating system, the new smart watch has a four-day battery life, and its price is under $300. The Apple smart watches are only compatible with apple devices, have a much shorter battery life, and can cost way more than the Fitbit Ionic.III. Natural EnvironmentProduction of anything ready to run on the market requires various resources and specific environmental conditions.
Before any attempts to commence production, the company is required to have to confirm whether these resources are adequately available and the desired specific conditions are present. The resources may include raw materials, labor and source energy among others. The environmental conditions must also be favorable for the production of the commodity. Absence or inadequacy of any of the resources can significantly affect its production in terms of quantity and quality.
Fitbit is a good example of a product that has been affected by shortage of raw materials, pollution concerns, as well as high cost of energy. Shortage of raw materials Shortage of raw materials has greatly affected the production of Fitbit. The shortage has been caused by external factors and to a little extend internal factors. The external factors include failure by the suppliers to deliver the raw materials on time which has been caused general scarcity of the raw materials, various government regulations which the suppliers have to comply with before being allowed to supply the raw materials among other causes. The Shortage has also been caused by increased demand for the raw materials by other industries in the market. Poor inventory control and planning by the organization has also resulted to the shortage of the raw materials. Alonso, Field, Gregory, and Kirchain (n.d.
) highlights some effects of raw material shortage on production. Fitbit is one brand that has been adversely affected by the shortage of the raw materials. Buckle (Thermoplastic Elastomer)LED lightsScreen – Corning Gorilla Glass 3 (scratch resistant, high resolution 16-bit color display)…TPE (Thermoplastic Elastomer) is a raw material of buckle. TPE is a material with high strength and resilience and almost use in everywhere such as manufacturing of vehicles, medical devices, and earphones. Bracelet of Fitbit is made of TPE.
If the company doesn’t have enough TPE to produce, products of Fitbit will stop producing. Perhaps the company should find other manufactures which have enough thermoplastic elastomer. Also, perhaps Fitbit will find other materials to replace thermoplastic.
The process of replacing will take a lot of time. Employees will need to take more time to produce. Same as display and LED lights, shortage of raw materials will affect the producing and selling of the product. 2. Pollution concerns Another factor that has affected Fitbit brand is pollution concerns.Battery pollution (Rechargeable Lithium Polymer)Scrape pollution..
. It has been argued that production process of Fitbit emits chemicals which are alleged to be harmful to human and animal health. This has led to a lot of government interruptions in terms of investigations to confirm whether there are any health risks concerning its production.
It has also led to negative public perception regarding the product due the claims that its production causes of environmental pollution in the region. 3. High cost of energy High cost of energy used in production of Fitbit has also affected the brand.It is a fact that production process of Fitbit energy-intensive which may prove quite costly to the company.
Such high costs compel the management to raise the price of the commodity which results to reduced purchases by the consumers. In every small bracelet from Fitbit, there is a rechargeable lithium polymer. If consumer want to use their smart bracelets all day, they should charge it. According to this chart, we can know products from Fitbit should alway charge them.
It is very inconvenient for people who forget to charge their smart bracelets. It is a fact that production process of Fitbit energy-intensive which may prove quite costly to the company. Such high costs compel the management to raise the price of the commodity which results to reduced purchases by the consumers.Fitbit has responded to the raw materials shortage by switching to alternative suppliers to ensure steady supply. It’s inventory management system has also adapted to ensure adequate materials are available, while eliminating costs associated with raw material shortages. Concerning allegation on pollution, fitbit has carried out public sensitization programs to inform the public on the safety measures the company has put in place to eliminate any chances of pollution. In order to reduce energy costs in production, the company has employed energy effective production techniques to ensure such costs are kept at minimum as possible. Whereas problems associated with production are bound to occur, like it has been discussed above, the company has put in place measures to ensure the problems are properly addressed.
Such measures are important in improving the activities of the company and also creating good business atmosphere between its suppliers, clients and the government.IV. Technological EnvironmentInnovation with purpose”Our technology has never just been about building trackers. It’s about you—and finding better ways to help you live a healthier, more active life. So when we say we’re dedicated to creating smarter sensors, fashionable form factors, efficient electronics, intuitive interactions and engaging social features, it’s because we’re dedicated to you.”FitBit, Inc. (2018) In 2018, technology is vastly expanding, to where society as a whole norm is to use a tracker or app for every aspect of their lives. It is also becoming a social media centered world.
Around seven-in-ten Americans use some form of social media to connect with others, entertain themselves, and read news.Fitbit recognized and anticipated this technological expansion and were considered “pioneers” in the wearable market and health tracker industry. They have also relied heavily on social media marketing.They have a great deal of first mover advantages, but have substantial competitors, such as the technology giant, Apple. FitBit just released it’s Ionic Smartwatch this last year to compete with the Apple smartwatch. FitBit has the edge of appealing to its consumers with a more affordable price.
According to Forbes, CCS 2016 Insight predicted that the wearable tech market will be worth $34 billion by 2020 (Lamkin, 2016).Currently, FitBit products are sold in over 54,000 retail stores and in 65 different countries around the globe, to keep up with this current market, FitBit has to be be extremely keyed into all the current and upcoming technological advancements. The world has now been introduced to the innovation of Artificial Intelligence, which will definitely be implemented into many competing trackers as it advances. They will have the challenge of taking on an even higher volume of data, while ensuring that data is secure and private. They have to constantly fight against hackers to protect their customers information.
Not only do they need to keep up with the Consumer Fitness/Health market, but Fitbit is entering a whole new market with the healthcare industry called Enterprise Health. They are now, not just marketing to consumers, but to other businesses. They have partnered with insurance companies, employers, health systems, and other healthcare partners. This will require a new strategy of marketing along with an advancement in their tracking technology.
V. Legal/Political EnvironmentAs previously mentioned, FitBit is currently sold in over 54,000 retail stores as well as 65 different countries around the globe. Because of their diverse market, they should be expected to be to be knowledgeable of the diverse governments, laws, political culture, and International business regulations of each country that they currently sell/market in. Currently, there has been a lot of debate on updating international digital laws in order to regulate that industry more carefully. Fitbit is also entering a new market, the healthcare industry.
This brings along a whole new set of laws, liabilities, and regulations. They now have to be even more effective in securing the data of their customers and adhering to the patient privacy laws, HIPPA, and government health regulations. They will also deal with increased liability of their products and recommendations. Because of the personal recording features of Fitbit products, protecting customer private data/information is of key importance for the regulatory aspects of this company.
VI. Social/cultural environmentFitbit is a relative new company, which is founded in 2007. However, it already established strong brand influence and brand awareness.
Fitbit positions itself as the leader in the fitness tracking industry. With the improvement of people’s quality of life?some people change their lifestyle. For example, health and fitness becoming a growing trend, increasingly people are doing exercises and trying to have a healthier lifestyle. This phenomenon stimulates the development of fitness industry. Besides, just like Nick McKay, an analyst at Wedbush Securities mentioned that: “The fact that Fitbit was arguably the innovator in the space, and the combination of brand awareness, stronger products and impact of the network effect has differentiated them(How fitbit is staying a step ahead in the race for wearables)”. As a result, According to report, Fitbit occupy the 77% marketing share in fitness tracking industry in 2015 and compete with big companies such as Nike and Apple.Fitbit’s current marketing strategy is providing the high quality products in order to increase customers’ willingness to pay.
Besides, they are also trying to offer high-end, differentiated products for customers in American market. Their target segment used to be the primarily female between the ages 35 to 45 years old. Fitbit has targeted new segment including male (18-45) and younger female (18-34), when it realized having a healthy lifestyle become a rising trend and felt threats from competitors who has similar products to seize market share.In addition to other fitness tracking devices, users also have the many options of choosing substitutes such as smartwatches and smartphones to track their steps and health data.
In other words, the explosion of new competitors has allowed consumers to purchase their fitness tracker at a reasonable and suitable cost. Besides, more and more users especially the females are not only looking for fitness devices, but also devices that allowed user to have personalizing options. These factors helped devices’ innovation and diversification. For instance, Fitbit cannot rest on providing a quality step tracker, and has since introduced features like text messaging, in-app workouts, and fashion accessories to keep their buyers engaged.What is more, in order to attract more potential customers including people who want to manage weight and adopt a healthier lifestyle, Fitbit will expand its brand awareness by doing charity for the public.
For example, Fitbit planned an event in February 2015 called FitForFood. For this activity, Fitbit users can burn their calories in exchange for food that used to donate for Feeding America, a hunger relief organization. As a result, more than 106000 users participated in this campaign in less than a month.
Furthermore, most users shared and invited their friends to participate this activities. This is useful marketing strategy for brand to expand awareness by engage in meaningful things ,like charity which will lead customers be motivated to participate and shared with others.RecommendationsWe recommend a Distribution, Promotion and Pull strategy with aggressive marketing plan moving to Push strategy.This involves:Continue current positioning at retailers and eCommerce sales and try to maintain their current market.
Attempt to partner up with gyms & fitness/nutritional stores to promotionally market their product and provide their employees with Fitbits.Train/educate these employees on benefits the product brings for fitnessThe threat of new competitors are VERY HIGH in this market, so in order to keep up with their current competition and possibly new competition, it will require a very aggressive marketing strategy.Develop seasonality strategies to market and take advantage of those high peak times during Christmas, New Year’s resolutions, etc.Develop a Contingency Plan to maintain current Fitness business requiring minimal investment and to increase their current revenues.Potential Risks-Risk for substantial increase in expenses-High risk entry into the healthcare industry.
If it’s not successful, it might not justify increase in expenses-Lack of IT development and integration plan to implement Corporate needs and -Artificial Intelligence market needs, along with data privacy/HIPPA requirements/Government regulations-Legal risks due to healthcare entry and liabilityCompany Weaknesses-Lack of knowledge and experience in marketing in a Business 2 Business strategy (health care industry area). They have mainly depended on social media marketing, which can be ideal in a Business 2 Consumer market, but is not as dependable in the healthcare industry-Not being able to maintain and profit off their current consumer market (Revenues have decreased)Action PlanBusiness 2 Business Marketing Strategy-Be more selective with businesses B2B and healthcare capabilities -Finalize and Optimize Product market-Develop business 2 business market strategy, just in-time social media, and create B2B partner sitesBusiness 2 Consumer Marketing Strategy-Focus on core products 80/20 rule (“20 percent of marketing messages produce 80 percent of your campaign results” (Kokemuller 2018) Optimize and focus on the most effective investments/products. -Develop a -Create incentives for employees/businesses to promote products-Plan/develop to maintain current market of consumer buying and retail to maintain business revenue and possibly increase it. -Marketing for the future – engage the right Marketing experts to conduct end to end company 6 week assessment moving forward and attain the best in class marketing internal team to execute the strategy.