Factors Driving The Success Of Fitbit In The American Market, Essay.

1. What factors contributed to the early success of Fitbit? In your answer, conduct a 5Cs and SWOT analyses for Fitbit including consideration of the characteristics of the wearable device market and future opportunities.
2. What competitive advantages does Fitbit possess, including consideration of brand, market share, market position, products and pricing?
3. Evaluate the current segmentation, targeting and positioning for the wearable device market, including the competitors named in the case and other brands (not mentioned) who may have entered or have the potential to enter the market.
4. Develop a perceptual map(s) using traditional price-benefit and/or newly developed mapping tools (e.g., centrality-distinctiveness) that compare the positioning of Fitbit in the marketplace to the positioning strategies of each relevant competitor from Question 3.

Which company and strategy will be most effective in the future and how do you perceive  the future market? Your arguments need to be supported by your understanding of each company’s strategy, strengths, weaknesses, and competitive advantages, in combination with your expectation of the market, with supporting justifications from the case, other sources, relevant theory, your analysis, and acknowledgement of any assumptions.

Product Line as a Driving Factor of Fitbit's Success

The case study presents several factors, which have led to the early success of Fitbit in the American market. Fitbit is an American wellness device manufacturer, which manufactures devices, which can track health conditions like pulse rate of the wearers. The factors, which have led to the success of Fitbit in the market of US, are as follows:

The product line of the Fitbit has proved to be one of the driving factors of the company’s success in the American market. Fitbit entered the market in the United States of America around 2007 as a fitness tracking device maker, which the users could wear, on their wrists. The company expanded its product line to seven variants of fitness tracking devices. Fitbit also manufactures devices, which the users can match with their lifestyle and dressing patterns (Chuah et al. 2016). The fitness tracking devices are available for both technologically sound and ignorant consumer bases. The devices are available in low priced variants, which could do the basic things like tracking pulse rates. Fitbit offered high-end fitness tracking devices for the upper class consumers, which have features of smart phones. The company has made its fitness tracking products available in various forms like straps and necklaces (Fitbit.com. 2017). This vast product line of Fitbit has enabled it to serve diverse customer needs and proved to be one of the drivers of early success of the company in the American market.

The strategic use of diversification and niche marketing proved to be one of the driving factors, which fuelled its early success in the American market. Fitbit manufactured fitness tracking devices in both simple and sophisticated variants. The simple variants like Fitbit Flex serve the basic purpose of tracking health conditions like pulse and were low-priced. The premium versions like Fit Surge allowed the users to access features of smart phones besides availing basic fitness measurements. This analysis shows that Fitbit used niche marketing to serve different segments of customers by offering one product. The company successfully used technology and pricing to different between the basic variant and the advanced to attract the appropriate customer segments (Pradhan and Sujatmiko 2014).

A deadly strategy, which Fitbit used to gain competitive advantage in the American market in its early years, was diversification. The company not only manufactured products in different variants like basic and advanced, but in formats as well.  Fitbit made its fitness available in formats like straps and necklaces, which could suit the style of the wearers. Further, the company did not restrict itself as a fitness hardware manufacturing company and expanded into new areas to serve more needs of consumers. The company diversified its operations to manufacture fitness software, which could track, used and shared by users on Fitbit hardware. The users of the Fitbit software could upload their fitness data on health platforms owned by other IT companies like Microsoft. The company also bestowed rewards points upon users for walking a specified distance or burning a certain amount of calorie (Lim et al. 2015). Thus, Fitbit diversified its operations from that of a mere fitness tracking hardware-manufacturing company into a company, which offers diverse range of products including software and hardware to encourage people to follow a healthy lifestyle. Moreover, the every product of Fitbit is available in both low and high priced variants. This analysis shows that Fitbit combined niche marketing and diversification strategy to earn strong foothold in the American market.  

Strategic Use of Diversification and Niche Marketing

The capability of Fitbit to meet the expectations of the stakeholders proved a strong driver of its growth in the American market. The stakeholder groups like shareholders, press and business analysts looked upon the company as a wearable manufacturer. The company however diversified its product line to incorporate both hardware and software. An analysis of the product strategy of the company shows that it concentrated on expanding its product line to incorporate both hardware and software products. Moreover, the fitness tracking devices were available at both low, high priced which enabled both the lower and upper class customers use them (Ali, Kim and Hong 2016). This customer centric product line enabled the company serve a huge consumer base that generated high revenue. Fitbit was as a result able to give high returns to the shareholders, which encouraged the latter to invest more the shares of the company. This high demand of shares surged the share value of Fitbit, which enabled the company to generate immense capital to fuel its product strategy. This analysis shows that the company benefitted the two main stakeholder groups namely, the customers and investors. This helped the company generate profits and capital respectively. This stakeholder support rendered massive financial strength to Fitbit, which fuelled its growth in the American market (Mannov and Maalej 2015).

The five Cs of marketing comprise of the five important criteria which multinational companies like Fitbit take into account with making marketing decisions. They are company, customers, competitors, collaborators and climate. The following is the 5C analysis of Fitbit, which helps it to hold high position in the fitness market of the United States of America.

The companies before forming an effective marketing strategy require determining the needs and expectations of the customers from their products. An analysis of the case study clearly shows that Fitbit conducted a thorough research of the needs of the consumers, which enabled it to gain deep knowledge about the consumption patterns of the consumers. Fitbit manufactures low-priced basic models to cater to the low-income group of the society. The premium advanced fitness tracking devices, which were expensive and cater to the needs of the upper class customers. This analysis shows that Fitbit has deep knowledge about the customer needs, which help it to form aggressive product strategy to retain its leading market position (Weinberg et al. 2015).

The management of the company must conduct a SWOT analysis of the company before forming the marketing strategies. The SWOT analysis of Fitbit is as follows:

Stakeholder Support Fuels Fitbit's Growth

An analysis of the success factors of Fitbit shows that the company has a huge product line. The multinational fitness device manufacturing company manufactures both hardware and software. The Fitbit products are light, durable and come at different price ranges. The simple fitness tracking products are affordable while the high-end expensive products allow customers to avail facilities of a smart phone. The Fitbit products are technologically advanced and compatible on a wide range of other hardware like Microsoft (Drucker 2014). The customers can use Fitbit software to communicate with each other and share information about fitness. Thus, the vast product line is one of the biggest strengths of Fitbit.

The case study and the official website of Fitbit reveal that the company manufactures a wide of smart watches, fitness tracking software and range of smart accessories. The company sells its products to the huge consumer base to generate huge revenue. The company as a result is able to give the investors healthy return on their investment. The historical share price of the company shows steady growth. This analysis of the steady share index of the company shows that it is able to attract investments from investors, which account for its strong capital base (Mason and Brown 2013). Thus, the huge revenue Fitbit earns by selling products globally and capital it generates from the investors render it strong financial base.

The strong financial base helps Fitbit to invest in technology, which has made the company technologically very strong. Fitbit manufactures smart watches and software. The company invests a huge amount of money to upgrade its technology and acquires new technology. Fitbit fitness trackers are able to receive and send data on smart phones and platforms owned by other companies like Microsoft (Norman and Verganti 2014). This proves that Fitbit is technologically very strong.

The products of Fitbit have limited designs compared to its strong competitors like Samsung and Apple. This makes the products by Fitbit less attractive to the customers compared to its competitors. This as a result, influences the revenue generation Fitbit earns by selling its products which in turn reduces the company’s dividend giving capacity. Thus, limited designs of products available to customers influence the revenue generation capacity of the company and ultimately weaken its capital generation capacity.

Fitbit has a limited global presence compared to its competitors like Apple and Samsung. Fitbit is present in around nine locations in the world mostly concentrated in North America and Asia. Samsung and Microsoft are present in North America, South America, Asia, Australia, Europe and Africa (samsung.com 2017). This vast global expansion helps these multinational companies to serve more customers compared to Fitbit. This analysis shows that the limited global presence of fitbt limits its revenue generation capacity.

5C Analysis of Fitbit for High Market Position

Fitbit offers a variety of fitness tracking devices, which allows the users to avail the facilities of a smart. The company also manufactures fitness detecting software, which the users can access to on a variety of devices like smart phones. However, it must be noted that this product line of Fitbit is very weak the product line of its competitors like Samsung, which manufactures smart phones, smart watches, television sets and a host of other electronic goods. This analysis shows that the limited product line of Fiitbit limits its competitive advantage in the international market.

The above discussion shows that the limited product line of Fitbit hampers its revenue generation and competitive advantage in the market. The company should expand its product line to manufacture new products like smart phones and electronic goods. This would allow Fitbit serve bigger customer bases. The company as a result would be able to earn more revenue by selling several types of electronic goods like television sets, smart phones and smart watches. This shows that expansion into manufacturing of new products would provide new opportunity to the company to generate more revenue. The company would consequently be able to give its investors higher return on their investment and attract higher amount of market capital in return like Samsung as shown in the graph below. Thus expansion of product line would enable Fitbit strengthen its revenue and capital base.

Figure 1. Graph showing increasing earnings per share in Samsung Electronics shares

(Source: samsung.com 2017)

Fitbit must expand into new markets, which would provide it with new business opportunities. The company has limited presence in the international market beyond North America and Asia compared to its competitors like LG and Apple. Fitbit as a result is able to serve a narrower base of customers compared to LG and Apple (Apple 2017). It is evident that this narrow base of customers also limits the revenue generation capacity of the company. Lower revenue generation limits the company’s power to offer dividends to investors. The graph below shows that the share index of Samsung is rising which indicates the growing financial strength of the company. Thus, entering new markets and earning more revenue like Samsung would maximise the power of Fitbit to earn more revenue and investment, thus making it financially stronger.

Figure 2. Graph showing increasing share index of Samsung

(Source: bloomberg.com 2017)

Fitbit faces threats from strong competitors like Samsung and LG (lg.com 2017). These companies have started manufacturing fitness tracking devices and challenge Fitbt with their strong market position. Moreover, these competitors are present in more number of countries compared to Fitbit. They capture the market of Fitbit thus, reducing its revenue generation capability.

SWOT Analysis of Fitbit Reveals Strengths and Weaknesses

The fitness tracker and the smart watch markets in the US already experiences presence of several companies manufacturing similar products. The market has strong indigenous companies like Microsoft as well as foreign international companies like Samsung. Moreover, the American market is experiencing emergence of smaller companies offering more innovative and cost effective products. The consumers of today prefer modern products (ebay.com 2017). This intense competition has led to the saturation of the American fitness tracker market, which has reduced the profitability of the companies like Fitbit.

The next component of the 5C analysis of Titbit consists of analysis of the market competition in the wearable device market in the US and its opportunities. The case study mentions about the top wearable companies in the United States of America namely, Motorola, Samsung and LG. The case study also has mentions the entry of one of the biggest competitors of Fitbit, Apple. The graph below also points out that the smart watch market is largely dominated by Apple and Samsung. The discussion above points out that Fitbit receives stiff competition from these competitors. This analysis shows that the American wearable devices industry has become intensely competitive. Fitbit must restructure its marketing mix to cope with this intense competition (Takata 2016).

Figure 3. Graph showing main smart watch manufacturers

(Source: Business Insider. 2017)

Companies while forming marketing strategies require considering the firms with which they can collaborate to strengthen their business. The analysis above clearly brings into light the fact that Fitbit though has an illustrative product line; it is weak before the product lines of its competitors like Samsung and LG. For example, fitness tracking devices and smart watches form a fraction of the entire product line of Samsung Electronics. Thus, if the sale of smart watches dip, the company can diversify the loss over revenue generated by selling other products like TV sets, refrigerators and smart phones (Fuchs and Köstner 2016). This shows that Fitbit too needs to collaborate with the companies manufacturing other electronic products to be able to develop new products. This would give it more edge over its competitors in its home market, the United States of America.

Context refers to the macroeconomic conditions prevailing in an economy, which companies require to consider while forming their marketing strategies. The analysis of the political and economic conditions of the United States of America shows that they are favourable for electronic companies. The country is technologically very strong and provides opportunities for multinational organisations to conduct open innovation with both local firms and overseas firms (Beck 2014). The American society favours high-end fitness devices. This short analysis of the market context of the United States shows that Fitbit must form aggressive marketing policies to take advantage of the favourable market conditions in the US.

The following are the competitive advantages, which Fitbit possesses in terms of brand, market share, market position, products and pricing:

The following are the competitive advantages, which Fitbit possesses over its competitors in the market:

Fitbit is the leading the fitness tracking hardware and software measuring device manufacturer in the world. The two models manufactured by the company namely, Fitbit Flex and Fitbit Charge lead the fitness tracking market and is ahead of even similar products manufactured by Samsung and Apple (Frösén et al. 2016).

Fitbit recognises its brand name as its important asset and introduces new and innovative products to serve new needs of the users. The company forms a very aggressive marketing strategy to promote the brands among both the middle and the upper class customers. The brand targets the health conscious people between these two segments, which allow it to sell its products to them and generate huge revenue. The company has a deep knowledge about the changing needs of the customers and markets health and fitness products to suit their needs (Liu et al. 2017). Thus, this marketing strategy helps the company to differentiate its products from its competitors, which renders it higher competitive advantage in the market.

The following are the competitive advantages, which Fitbit possesses renders it its high market share:

 The financial strength of Fitbit is one of the factors, which has rendered it the competitive advantage to hold leading market share. Fitbit uses niche marketing by manufacturing products for both upper and middle class customers. The basic fitness tracker model called ‘Fitbit Flex’ is low-priced and attracts the middle class customers whereas ‘Fitbit Aria’ is the high-end model meant for the rich customers. Thus, the company caters to both the upper and middle class customers to generate huge revenue. Moreover, it is a public limited company and can amass huge capital to fuel its massive innovation strategies to bring about new products (Noori 2015). This analysis shows that the financial strength of Fitbit is one of the factors responsible for the competitive advantage, which the company enjoys internationally.

The strategy of acquisitions and mergers is one of the factors, which has rendered Fitbit the competitive advantage it enjoys in terms of market share. Fitbit acquired the smart watch manufacturer Pebble for $23 million and Romanian smart watch start-up Vector for an undisclosed amount. These acquisitions allowed the company to enter the smart watch market, which strengthened the market of the company (Bena and Li 2014). This analysis shows that acquisitions and mergers of new companies from different market have helped Fitbit to augment its competitive advantage and market share.

The following are the competitive advantages, which the Fitbit possesses as far its products are concerned:

The extensive product line of Fitbit has rendered it competitive advantage in the fitness device market. The company manufactures products for both the middle and the upper class customers. For example, Fitbit Flex is a fitness tracker, which is low, priced and target the middle class fitness conscious customer segment. Fitbit Surge, the advanced fitness tracker product target upper class customers. Moreover, the products of Fitbit are wearable both in forms of bands and pendents. Fitbit software is compatible with fitness hardware manufactured by other manufacturers like Microsoft. They are compatible on both IOS and android platform. This product line of Fitbit consisting of both hardware and software render it high competitive advantage in the market.

The products of Fitbit are multitasking and increase customer satisfaction. For example, the high-end Fitbit fitness tracking devices like Fitbit Surge are capable of functioning as fitness tracker, smart watches and smart phones. They can even maintain track of the lifestyle attributes of the users like sleeping patterns and exercise schedules. This multitasking attribute of the Fitbit products maximise the customer satisfaction which make customers prefer Fitbit products compared to products by its competitors like LG. This shows that multitasking attribute of Fitbit products render it high competitive advantage in the market.

The following is the competitive advantage, which Fitbit products enjoy in the market in terms of pricing:

Fitbit manufactures fitness tracking devices for middle and upper class customers by using appropriate pricing models, which gives it competitive advantage in the market. The company manufactures basic fitness tracking products, which are affordable and target the middle class customers. Again, the high-end fitness tracking devices combine the attributes of a smart watch and fitness tracker. They target the high-income segment of customers. This shows that Fitbit is able to cater to both and lower class customers by applying appropriate pricing model. The competitors of Fitbit like LG offer fitness trackers, which are expensive and can be afforded by upper class customers. This proves that a pricing strategy enabling both the upper and middle class customers benefit by Fitbit products, which gives it competitive advantage over its competitors.

The following section would explore the current segmentation, targeting and positing of the wearable device market:

The wearable device industry segments its customer segments based on their lifestyle, education and income. They use the demographic segmentation theory to market their products. They broadly divide the market into two broad categories on the grounds of lifestyle namely, the fitness conscious customers who prefer smart watches with fitness trackers and customers who prefer watches with fitness trackers. They then divide the customer base based on their income. Companies like Pebble and Xiomi manufacture low priced watches. Companies like Apple and Samsung as mentioned in the case study manufacture high-end wearable devices, which are very expensive. There are also new lesser-known companies like Slide, which are not mentioned in the case study, which manufacture wearable devices and have potential to expand in the smart watch market with their affordable products. This analysis shows that the wearable device companies segment the market demographically to market and sell their products.

The wearable devices companies like Samsung and LG target the middle and upper class customers as shown in the case study. As the case study mentions, the companies like Fitbit target customers who are health conscious and want to keep track of the health conditions like pulse rate. Thus, these companies target health conscious customers. The study also mentions companies like Google. Samsung, Motorola and LG which manufacture smart watches to target primarily technologically aware upper class customers. The lesser-known smart watch companies not mentioned in the study like Slide target the lower income group who cannot afford the expensive wearable devices by these big electronic goods manufacturers.

The wearable devices manufacturing companies position themselves according to the products and pricing strategies. The companies like Fitbit, as mentioned in the case study position themselves as companies manufacturing products, which can function as both fitness devices and smart watches. They position themselves as manufacturers of wearable fitness products for both the middle and upper class customers. The companies like Apple manufacture wearable fitness products, which are positioned as high-end devices targeting mainly the upper class customers. The Swiss watchmakers like Rolex also manufacture smart watches positioning themselves as the premium smart watchmakers targeting the rich customers. This analysis shows that wearable device manufacturing companies position themselves in the international market according to their target customer segments.

The perceptual map showing cost benefit analysis below shows the position of Fitbit in comparison with the top ten global wearable manufacturers like Apple and Samsung. The map assumes that higher the brand value, higher the benefit the consumers will derive from their consumption. For example, since Apple holds the top position, it benefit is assumed to be the most. As per the map Fitbit occupies the high position and average cost in the market. The company lacks global market position and hence customer benefits like Apple and Samsung. The company lies ahead of LG and Lenovo in terms global position.

Figure 4. Perceptual map

(Source: Author)

The low cost manufacturers of wearable devices like Lenovo and ASUS with their low cost product strategy would effective dominate the global market.  The future of electronic wearable devices can be considered bright with both expensive and affordable products making manufacturers catering to the customers. For example, Apple would serve the high end customers while Lenovo would serve the middle class customers with their low cost products. This would lead to revenue generation from high and low class customers. It would result in new companies entering the smart phone market and making it more profitable. This analysis shows that the expectations from the wearable devices market are high.

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