Apr 26, 2017

FitBit: The Challenges and Opportunities of the Wearable Devices Market

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By the time Fitbit went public in 2015, the product split opinions among investors. Some believed in the new trend while others called it a fad without any perspective of success in the future. In fact, even though the company had an all-time high stock price on the financial market, some factors contributed to this pessimistic point of view.

Fitbit’s mission is to use technology to help people improve their health and wellness. With a range of seven products in the market, the firm's performance shows an exceptional growth in revenue and leadership. In 2014, the company had 68 per cent of market share of the U.S fitness-tracker industry, and the financial metrics show a progressive advance since 2011. Despite this impressive success, Fitbit has been facing some challenges that decelerated the company’s total potential of growth.

The technological advances allowed the wearable market development. Combining the production facilities that the tech improvements brought with the growing demand for these offers, many companies identified an opportunity and started investing on the market. Then, a wide range of wearable devices was launched by large electronic manufacturers such as Google, Apple, Samsung, and Garmin. However, it did not reflect on a saturation of the market, since analysts predicted a 35 per cent rate grow from 2015 to 2020.

It is clear that the industry maintains its performance, but its not guarantee that Fitbit's leading position will provide a long-term success in this highly competitive market. With many well-known brands joining the wearable business, the company is in a critical competitive environment. After Apple Watch’s launch in 2015, Fitbit market share decreased from 35 per cent to 24.3 per cent. This number reflects the impact that Apple’s product caused on the market. Further, the entry of Xiaomi on the market represented a major threat for Fitbit. The Chinese company launched the Mi Band, a wrist-worn device that appeals to a more price-sensitive target, featuring some basic tracking functions. The company expanded its distribution channels through e-commerce and became the leader in the second quarter in 2015, with 31.5 per cent of market share.

Fitbit is position in an emerging market, which represents a growing consumer demand and an extremely competitive landscape. In this context, the company needs to evaluate its current strategy and make the necessary adaptations in order to keep as a strong player. Fitbit needs to continuously analyze the effectiveness of its marketing strategies, keep tracking the competitors while communicate and deliver its unique value proposition to the target.

Another issue that concerns Fitbit’s managers and investors is the long-term consumer's engagement with the product. The company’s data from the first quarter in 2015 shows that, among the 19 million users, only 50 per cent were active. Therefore, if the company wants to keep growing along with the whole industry, it needs to invest not only in technological improvements but also tries to strengthen the engagement of users for a longer relationship with the brand.

Analyzing this case in a marketing theoretical perspective it is clear that some macro environmental forces are constantly affecting Fitbit success. The technological force contributed for the development of the product because its advances allowed the popularization of wearable devices. According to a study into purchase intention for electronic devices, 18 per cent of Americans planned to purchase a wearable device in the next 12 months. And within this broad category, the wrist-worn products are the most popular, accounting for 90 per cent of the sales in 2015.

Moreover, the shifts on social values towards health-oriented lifestyle favored the rise of the whole fitness industry and, consequently, Fitbit success. In 2014, the spendings on health and fitness services were over $200 billion. The mobile preference is also another social factor that influenced Fitbit. Media consumption and information access are happening increasingly on mobile devices and the wearable products follow this trend. Therefore, all of this events helped to boost the industry and the consumer’s interest in this kind of product. So, Fitbit was launched in a very favorable environment, when technological and social events made it a welcomed product.

On the other hand, the intense competition with global electronic manufacturers such as Samsung, Garmin, and Apple, threatened Fitbit leader position. In 2015, almost all main electronic companies had a wearable device product line. Additionally, the FuelBand, launched by Nike in 2014, represent a direct competitor for Fitbit, since it was focused on health tracking. Although each brand has different positioning strategies, they all share the same market. In this monopolistic competition environment, Fitbit needs to keep innovating in order to remain a strong competitor.

The analysis of Fitbit by means of the BrandAsset Valuator provides a better understanding of the company’s brand equity. Comparing the four pillars of this model, it is clear that Fitbit has a high level of energized differentiation, due to its innovational and primary entrance on the market. The company’s level of relevance is also considerable since the brand is in a leading position. However, both esteem and knowledge still in a lower level, because the brand still relatively new. Therefore, the company has a rising brand strength (differentiation and relevance), but still need to improve its stature (esteem and knowledge).

As the firm has a leading role on the market, there are some competitive strategies that can be implemented in order to help maintain its position. Fitbit can work on expanding its total market demand while protecting its industry share with some defensive tactics. In order to enlarge demand, the best strategy is the geographical expansion. The company should invest in marketing campaigns focusing on growing brand recognition in countries where the Fitbit’s name still unpopular. Then, the product can be gradually introduced in international markets and this will create a global scale demand for the company. Additionally, while trying to expand the total market size, Fitbit needs to keep protecting the current share to have an effective growth. Therefore, it can execute a position defense strategy to maintain its superior status on consumers minds and protect the brand’s position from competitors. Finally, through the coordinate execution of these marketing warfare strategies, Fitbit can sustain its expansion and more effectively face the competitive challenges.

In order to compete with products from other wearable devices categories such as smartwatches, the company should focus on its niche market of health-oriented consumers. By highlighting its unique selling proposition, the brand can differentiate itself from the smartwatches and attract the relevant portion of the market. Fitbit should position its brand striving to communicate its points-of-difference from the others wearable devices. The focus on helping people achieve their fitness goals and inspiring them to be healthier is the main reason that the company exists and it should be most widely advertised. Thus, Fitbit should focus on attracting people that connect with their mission. The company values go beyond technology, Fitbit is committed to improving people's quality of life and this purpose is unique to this product. So, the brand should strive to be the leader on health and wellness technologies.

Besides, some unique attributes such as the reward points program, the online user's community and the Fitbit Premium services represent important competitive advantages that should be used to position the brand. Although the consumers of this market are very price-sensitive, Fitbit should not compete in a cost leadership strategy. A more effective strategy is to focus on creating and communicating the tangible and intangible values of the products, in order to genuinely convince consumers about the benefits of the investment.

Further, in order to overcome the user’s engagement issue, the company should commit with engaging consumers for a long-term relationship with the brand. Unlike Apple and Samsung, Fitbit doesn't have a long history as a traditional company, so it is more difficult to create loyalty with consumers. However, it can apply some strategies to keep consumers active and connected with the brand. An idea would create a mutual help community of people around the product. The users that already achieved their goals could help and inspire new users, in return the company could give some incentives to them. Additionally, an integrated communication plan should be implemented to support the adoption of this community ideal. Another tactic is to advertise the concept of health as a continuous self-improvement and encourage users to challenge themselves with higher goals, push them to go beyond. In a technological perspective, it is crucial that Fitbit keeps innovating in order to maintain its leading position. Understand the target’s desired features is essential to direct the innovation. Since consumers tech preferences are greatly dynamic, Fitbit needs to attentively track users major trends and try to incorporate them into the products. The device’s integration with the Internet and social media, for example, is a widely desired feature that the company should strive to implement. Ultimately, it is clear that Fitbit is competing in a market full of threats and opportunities. If the company works on efficiently reacting to the current challenges and maintaining its innovation strategies, surely it will have a long-term success.


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