Professional Documents
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A Good Marketing Plan 1
A Good Marketing Plan 1
In 2018, 10.207.572 tourists traveled to Madrid for cultural heritage, museums and
gastronomic purposes. However, tourists predominately use their mobile phone for
finding the way around the city, which distracts from experiencing the surrounding
and is not safe. Furthermore, an increasing number of tourists are interested in using
wearable electronics to simplify their lives. Therefore, “Mapit” is the new product idea
for Fitbit, which solves the above-described problems. Mapit are smart wristbands
that guide tourists by indicating travel directions through vibrations.
With Mapit, Fitbit has the opportunity to again lead the wearables market by
developing an innovative product which fulfills a market demand for simplified
wayfinding. Initial sales are to be driven through specific retail stores and strategic
hotel partnerships based on initial user packs (2 units) and single units retailing at
$74.99 and $39.99 respectively. Promotion of Mapit will be via online and offline
marketing activities outlined in the marketing strategy. The objective is to sell
450.000 Mapit units in the first year. In the near future, it is planned to expand Mapit
into other touristic destinations while also enjoying economies of scale. In the long
term, another market opportunity for Mapit could be to help blind people with safer
and more independent wayfinding.
Fitbit, has operational performance issues due to high manufacturing, R&D and
marketing costs, compared to the competition, resulting in a negative net profit which
needs to be addressed separately. Mapit profitability assumes improved
manufacturing and R&D costs in line with competition. Based on the best scenario
sales, a net profit of $1.928.000 can be expected and therefore is an opportunity for
Fitbit to get ahead of the competition while improving their financial situation.
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Table of Content
Executive Summary 1
1. Fitbit Inc. & Competence 3
2. Problem Statement 4
3. The Idea & Opportunity for Fitbit Inc. 4
4. Objectives 6
5. Situation Analysis 7
5.1 Market Needs 7
5.2 The wearable electronics industry in Spain and growth trends 7
5.3 Market Demographics 8
5.4 Competition Analysis 8
5.4.1 Xiaomi 9
5.4.2 Garmin 9
5.5 Porter’s 5 Forces 11
5.6 SWOT Analysis 11
6. Marketing Strategy 12
6.1 Qualitative & Quantitative Objectives 13
6.2 Market Segmentation & Targeting 13
6.3 Intended Change in Consumer Behavior 13
6.4 Market Positioning 14
6.5 Marketing Mix 14
6.5.1 Product 15
6.5.2 Price 15
6.5.3 Place 16
6.5.4 Promotion 17
7. Financial Information 18
7.1 Financial Assessment of Fitbit 18
7.2 Financial Projection 19
7.2.1 Forecast Profit & Loss Statement 19
7.2.2 Funding & Forecast Cash flow Statement 20
8. Action Plan 20
9. Conclusion & Future Direction 21
10. References 22
11. Appendix 30
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1. FITBIT INC. & COMPETENCE
Fitbit Inc., headquartered in San Francisco USA, was founded by Eric Friedman and
James Park in 2007 and has been operating in the wearable electronics industry
since year 2009 (Fitbit.com, 2019). Both entrepreneurs saw the potential in using
sensors in small, wearable devices, thus they were able to raise $400.000. Friedman
and Park communicated their idea at the TechCrunch 50 conference in 2008, where
they attracted the attention of Fitbit. The event was a success for Fitbit, because
2.000 pre-orders were received. After determining the design and finding suppliers,
Fitbit launched its first tracker at the end of 2009 with 20.000 orders received
(Marshall, 2016). In the ensuing nine years Fitbit grew to a 1.694 employee business
(2018) with 56% of employees working in R&D department (Investor.fitbit.com,
2019). The company developed additional products, in four product categories:
Active band; Analogue activity watch; Digital activity watch; and Smart wearables
(Fitbit Inc in consumer electronics (World), 2018).
Although in 2018, 13.9 million devices had been sold in over 39.000 retail stores in
more than 80 countries worldwide, generating revenue of $1.511.983.000, Fitbit was
not satisfied, especially when comparing to the growth period 2014-2016. Back then
the company’s revenue grew by 158% in the USA and 335% in EMEA and amounted
to $2,169 billion. Ever since 2016, Fitbit’s revenue has been decreasing
(Investor.fitbit.com, 2019).
Fitbit’s core competence was leadership in activity bands, since they were the first
company to develop and sell those products. Nonetheless, Fitbit does not have
sustainable competitive advantage, despite a strong start. They could only patent
their technology, but not the idea of tracking daily exercises, thus it was only a short
time until competitors entered the market (Digital.hbs.edu, 2018).
Because of the decreasing sales in year 2017, the pioneer in activity bands changed
its strategy by moving away from its core business of “fitness trackers” which have
become less attractive to consumers. Since then, Fitbit is trying to enter the smart
wearables segment which has became increasingly popular and is seen as a way to
generate higher revenues in the upcoming years (Fitbit Inc in consumer electronics
(World) 2018) (Sullivan, 2018). Another reason for this change is to try “to integrate
more deeply with the healthcare system [...] as explained by Fitbit’s CEO James Park
(Nusca, 2018).
Thus, the subsequent marketing plan is for a new and innovative product for Fitbit,
which should help to boost sales, but also simplify people’s life.
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2. PROBLEM STATEMENT
Cities, such a Paris, London, Berlin and Madrid each attract yearly more than a
million tourists and the number is increasing. There tourists escape their everyday
lives to have new experiences, insights and feed their enthusiasm to explore their
destinations (Zatori, Smith and Puczko, 2018).
Based on observation and personal experiences, to find ones way around a new city,
the optimal route to monuments, museums and restaurants is often a challenge.
Wayfinding entails using directions provided by another person, a map or a mobile
device to find a route. Not surprisingly, people have different perceptions of location
or orientation, with some people having a better sense of direction than others (Hund
and Nazarczuk, 2009).
Nowadays, more tourists use their mobile phone to resolve travel problems in an
unfamiliar environment and to find their way from one destination to another.
However, looking at a mobile phone while walking is not only dangerous considering
high volume of surrounding traffic, but it also impedes in experiencing ones
surroundings. Gretzel (2010) confirms that the use of mobile devices alters the
tourist’s experience because it can cause disengagement, disembodied experiences,
a loss of sense of place and a lack of interaction with the people physically present
(Dickinson, Hibbert and Filimonau, 2016). However, it is just that interaction,
participation and involvement, which creates a positive experience (Zatori, Smith and
Puczko, 2018).
This shows that tourists need a tool, which enables them to: Avoid constantly
needing to look at the mobile phone for the correct path; allowing them to discover
their travel environment in a pleasant way; and alleviating the fear to miss seeing
something of interest while walking to a given destination.
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destination is announced with a long vibration of both wristbands.
Using a modification of Fitbit’s existing app, the destination is selected and there the
route is calculated and displayed based on the person’s current GPS-position. The
modified app will also have an offline map, allowing the system to work even in
constrained Internet connection situations, e.g. surrounding tall buildings or in metro
stations.
Furthermore, the app needs to identify which wristband is used for the left and right
wrist. Thus the built-in distinction marks in the wristbands need to be linked with the
user’s usage. During the initialization process one wristband vibrates and the user
indicates in the app on which wrist the wristband is worn. Logically, the other
wristband is worn on the other hand. It is essential to understand that this
initialization process is always conducted at the beginning of each use. The
advantage is that people have the freedom to wear the wristbands as they wish and
a broken or lost wristband can easily be replaced.
Although Fitbit has already developed a wristband with several of the features
described above, currently they are not using the technology. Only minor
technological changes must be made, e.g. navigational directions translated to
vibration, connection with two wristbands and distinction between left and right using
the same technological principle (left/right) as the Apple EarPods.
However, the major innovation here is the software that can be integrated in Fitbit’s
existing app. The new software can locate the user and uses linked maps in order to
translate navigation data into vibration signals on both user’s wrists. Additionally,
since people also want to measure their steps and burned calories during the
vacation time but dislike wearing several smart-watches, wristbands and alike at the
same time, the following integration concept has been developed: Users who have a
Fitbit already need only to buy one new wristband but must update the old
wristband’s software to assure a distinction mark between the two wristbands. This
update is initiated and conducted by the app and the Bluetooth connection. Once the
software is actualized, the initialization process can be carried out as described
above. New customers will buy two wristbands in one pack, directly starting with the
initialization process.
After the initialization process, users need to activate the localization on their smart
phone. Then a message pops up explaining the purpose of collecting the user’s data
and asking for acceptance.
The following presents the opportunities for Fitbit to develop this product.
In 2018 1.4 trillion trips took place globally, which is predicted to increase by 4% to
1.5 billion trips in 2019. Due to the high number of trips, the global travel market size
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reached an amount of $2.495 billion in 2018 (Euromonitor.com, 2019). Among the
most popular travel destinations such as France and USA is also Spain (Global travel
flows and their impact on fashion, 2019). Spain’s market size accounts for $42.555
million (Euromonitor.com, 2019). The capital city Madrid had 10.207.572 visitors
during 2018 (Anuario de Turismo. Madrid, 2018), which makes Madrid an attractive
test market for Fitbit.
Technology plays an ever greater role and is more and more integrated into human’s
lives. People increasing wish to be part of the digital experience in all aspects.
Especially smart wearables act as an enabler that enhance the overall experience
and is seen as a combination of beauty, fashion, tech and the world. With reference
to the essence of the hospitality sector of creating positive experiences (Bremner,
Geerts and Popova, 2017), smart technology solutions have to be considered as key
tools in order to treat consumers according to their needs (Neuhofer, Buhalis and
Ladkin, 2015). A survey (n=409) supports the importance that technology plays as a
role for three types of travellers. For 53.4% of adventure travelers technology is
important, whereas for urbanites and city travelers, this percentage is 49.2%. Lastly
for vacation travellers, the importance of technology is only perceived by 48.5%.
Additionally, implemented technology increases guest satisfaction, which in return
raises trust, loyalty and the chance of recommending the accommodation to friends
and families by 90,5% (Percepción y uso de la tecnología por el cliente 4.0 en el
sector hotelero, 2018). However, device owners and potential buyers mention
worries regarding the security of the personal data collected through the devices
(Attitudes towards Wearables, 2017).
Overall, the above mentioned interest towards technology as well as people’s search
for tools, which assist them in being more productive and saving time, shows Fitbit
that there is an interest for the proposed product idea.
4. OBJECTIVES
The objectives of Fitbit are to increase the active user base by gaining new
customers. Additionally, more accurate real-life data will be provided for further
product development and personalized services, as well as for other research
purposes. Thus, the more people using wearable devices, the more reliable data will
be available.
Secondly, to enter a new target market. Building new strategic partnerships with
hotels in Madrid would open new possibilities for Fitbit to be closer to their target
group, the tourists. On the other hand hotels can benefit from smart wristbands by
using the technology as a promotion tool - a partnership with a win-win situation.
Moreover, Fitbit’s goal is to increase market share and profitable sales.
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5. SITUATION ANALYSIS
In this chapter, the customer’s needs will be identified, followed by a description of
the wearable electronics industry as well as a competitor analysis. Finally, all findings
accompanied by a 5 Porter’s analysis result into a SWOT analysis.
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Regarding the sales performance of Fitbit in Spain, the company sold 277.000 units
in 2018, which is a 0.36% decrease in volume compared to 2017 (Appendix 3).
Nevertheless, it is forecasted that the company’s sales will increase by around 3.40%
in 2019 (Euromonitor.com, 2019).
Comparing Fitbit’s sales in Western Europe, which amounted to 2.872.500 units sold
(excl. Spain) (Appendix 4), around 10% of Fitbit’s units were sold in Spain
(Euromonitor.com, 2019). Based on the figures from 2018, the unit market share of
Fitbit in Spain is 13.50%. Looking at the competitors, Xiaomi has a unit market share
of 13.18% and Garmin of 10.58% (Euromonitor.com, 2019).
Regarding the most visited months, Appendix 6 exhibits that in 2018 the peak of the
total number of tourists (internationals and nationals) was in October. During this
month, 949.87K people arrived to Madrid. Other months with high volume of tourists
were June, May and September (Anuario de Turismo. Madrid, 2018).
Separating both tourist groups into international and national sightseers, most
internationals arrived to Madrid during October, followed by July and September,
whereas the peak of national tourists in Madrid was during December. Also the
months of November and May showed a high number of nationals in Madrid (Anuario
de Turismo. Madrid, 2018).
It has been determined that 74.87% of the tourists come to Madrid for the following
reasons: culture heritage/museums, the gastronomy and for leisure. Other reasons
are family/friends visits, weekend-trips or for business purposes (Appendix 7)
(Anuario de Turismo. Madrid, 2018). This indicates a strong need for local
navigational assistance.
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concentrated (Appendix 8) (Hayes, 2019).
The product idea does not exist in the market yet, and thus it does not have direct
competitors. Nevertheless, the competitor analysis exhibits two competitors Xiaomi
and Garmin, which can be considered as tough indirect competition due to the
following reasons.
Firstly, Xiaomi offers fitness trackers, which are sold at a very low retail price, which
is the reason why they are so attractive for consumers. Additionally, its bracelet
design is similar to the product idea and their sales in Spain are only 2% less
compared to Fitbit. Thus the competition is high between those two firms.
Secondly, Garmin is a strong indirect competitor since this company focuses on GPS
receivers for an outside life while also having the ability to leverage GPS technology
by creating useful products (Bhasin, 2018).
5.4.1 XIAOMI
Xiaomi Cooperation is a Chinese Internet company that offers primarily smartphones
and smart hardware connected by an IoT platform since 2010 (Blog.mi.com, 2019).
In 2018, the company achieved revenues of $26 billion (Xuequan, 2019) and sold
270.500 units in Spain (Euromonitor.com, 2019). The company attracted attention to
its activity bands due to its invincible retail price. For example its activity band “MI
Band” cost around $35 (Mi.com, 2019). Also, Xiaomi’s newly launched “MI Smart
Band 4” (Blog.mi.com, 2019), is around $21 (Xe.com, 2019).
Xiaomi’s current strategy is to focus on building efficient and new retail channels
through reinforcing its distribution capabilities by creating an omni-channel and a new
full-scene retail network. In addition, Xiaomi continues to optimize its offline
distribution to further strengthen its advantage in efficiency (Blog.mi.com, 2019).
Xiaomi’s capability is the fact that it develops unremittingly new products and sells
them at unbeatable retail prices (Blog.mi.com, 2019). On the other side, based on the
lower number of units sold in Spain, it can be concluded that it’s brand awareness
and loyalty is not as big as in its home market China.
5.4.2 GARMIN
Garmin is a Swiss company that offers global positioning systems (GPS) navigation,
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wireless devices as well as applications. The company has five business units,
including fitness and outdoors, which develop activity tracker and smartwatches
(2018 Annual Report, 2018). Moreover, the company achieved a revenue of $3.347
million in 2018 (Q4 2018 Earnings February 20, 2019, 2019). The total amount of
sold wearables was 217.100 units during 2018 (Euromonitor.com, 2019). With regard
to wearables, Garmin has developed 22 smartwatches and 7 activity trackers
(Buy.garmin.com, 2019).
Regarding the firm’s capabilities, Garmin has a strong focus on R&D and a tight
partnership with engineering and manufacturing (2018 Annual Report, 2018).
Furthermore, the wide product range cut ahead of competitors like Fitbit (Truong,
2019). On the downside, Garmin does not have the immediate name recognition,
such as its competitors (Truong, 2019).
Garmin assumes that the success in wearables has partially to do with the product
design, which is described as industrial. Additionally, the organization believes that
the vertical integration of its manufacturing abilities provides advantages in product
costs, quality and time to market (2018 Annual Report, 2018).
Concerning the future goals, Garmin’s top priority is the expansion of its product
portfolio (Finance.yahoo.com, 2019), for example growing the smartwatch category
in order to service a wider range of consumers. Further, the goal is to expand its
market (Q4 2018 Earnings February 20, 2019, 2019). In the future, Garmin is
interested in new acquisitions and strategic partnerships (Finance.yahoo.com, 2019)
Overall, the growing demand for wearables is a growth driver for Garmin, whereby
the company achieves its success and expects to push the company’s top-growth in
the future (Finance.yahoo.com, 2019).
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5.5 PORTER’S 5 FORCES
The external Porter’s 5 forces analysis is used to identify and analyze the five
competitive forces in order to assess the wearable electronic industry’s strength and
weaknesses.
Supplier Power
The suppliers bargaining power is high and depends highly on the suppliers of
electronic parts that are made from raw materials such as silver and nickel.
The availability of raw materials and price fluctuations impact production costs of
electronic parts resulting in a possible negative impact on profit margins for electronic
component producers. Therefore, those suppliers have a substantial bargaining
power on the prices they charge.
Buyer Power
The buying power of customers can be considered low because Fitbit is the sole
manufacturer and distributor of the new product. Thus, a comparison to other
products in terms of price can only be done with unequal substitution products.
Threat of Substitution
The general need of customers is to find their destination. Besides using vibration
sensors, people can also continue to use their mobile phones for navigation this
activity. However, the switching costs are medium to high, hence the threat of
substitution is considered relatively high.
Threat of new entrants
The threat of new entrants in the wearable electronics industry can be considered
medium, because new entrants mainly require technology knowledge and a
distribution network. However, it needs to be taken into consideration that existing
players already have built up a customer base over the past years. Thus, when
entering this market, building up a big customer base remains the biggest challenge
and creates a disadvantage for new entrants.
Competitive Rivalry
Considering the top global wearable companies, the industry is not highly
competitive. Nevertheless, the companies compete for the retail price. An example is
the low cost entrants Xiaomi, which stoke the competition with its unbeatable low
retail prices. However, the switching costs are medium, thus companies need to
convince clients not only with an attractive price, but rather with special product
features.
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internal as well as external factors of Fitbit to then develop an appropriate marketing
strategy.
Strengths
One of Fitbit’s strengths is the R&D department together with their technical
knowledge that enabled them to launch the first fitness tracker and to develop
additional products, which bring wearable technology closer to customer’s everyday
life. Another strength is their big user base, which started with a hype about the first
product and accompanied increasing health awareness among people. Fitbit also
benefits from high brand awareness.
Weaknesses
One of the biggest weaknesses is the fact that Fitbit focused too long on optimizing
and developing new fitness tracker. Hence, the company lost out on moving fast
enough into the developing smart wearable segment. Fitbit launched its first smart
watch “Fitbit Iconic” in 2017, after the acquisition of the smart watch company
Pebbels in 2016. Whereas competitor Apple launched its new Apple (smart) watch in
2015 and Xiaomi released its smart watch Amazfit in 2016. Another weakness is the
limited product choice of carrying one smart watch model (besides the model “Fitbit
Versa Light”, with less features at a cheaper price) and three fitness trackers.
Opportunities
An opportunity for Fitbit is that tourists are seeking products, which simplify their lives
and satisfy their increasing interest in smart technological products. The growing
number of trips and the booming smart wearable industry in Spain together indicate
growth potential and opportunity for strong product demand. Altogether, consumer
behavior as well as the growing industry creates a chance for Fitbit to widen its
product offering and extend its usability by entering the travel industry.
Threats
The strong competition is a threat to Fitbit. Retail price as well as product features
define the market. To compete, Fitbit is compelled to reduce the retail price of the
new product to below $100. Another threat is that Fitbit only can patent the new
product’s technology and not the whole product. This means that Fitbit needs to fear
direct competition very soon.
6. MARKETING STRATEGY
The new product can be marketed more effectively by adapting the product mix to
customer’s needs. Also, the choice of retail channels and communication programs
can be more efficient, because limited resources are focused on the target market
(Kotler and Armstrong, 2015).
The focused marketing strategy commences with defining the objectives of the
strategy, defining the target group and a customer behavior. Additionally, a
positioning statement is developed followed by the 4 Ps of the Marketing Mix.
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6.1 QUALITATIVE & QUANTITATIVE OBJECTIVES
The aim of this marketing plan is for Fitbit to achieve the following objectives:
1. Sell in total 200.000 packs and 50.000 single units of the new smart wristband
within 12 months.
Relating to the forecasted units sold, the launch of the new product enables Fitbit to
grow their current active user base of 27,6 million by 1% to 27,85 million users during
the first year.
2. Overall revenue growth of 0,13% within the next 12 months, when assuming that
200.000 packs and 50.000 single units will be sold.
3. Market share increase by 0,75% up to 14,25% in Spain within the first year.
The increase derives from the assumption that 250.000 (packs + single units) units
will be sold, but the units of Fitbit’s current fitbits decrease by 5%, since a new
product will be released and over time people are more likely to buy the pack instead
of complementing their Fitbit with a single wristband (Appendix 10).
4. Broadening Fitbit’s retail channels by building 5-8 strategic partnerships with 1 to 4
starts hotels in Madrid during the first six months, because the target group prefers
those hotels.
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attitude towards smart wearables (Appendix 12).
The intended change of consumer behavior is that people do not need to look at their
mobile phone to find they way through the city. People should learn that by using the
smart wristbands, there is no distraction by mobile phones and still there is the
convenience of finding the way through the city easily. Furthermore, the benefits of
wearing a smart wristband are not only the guidance, but also for safety reasons.
When walking around the city looking at the phone, tourists do not pay attention to
their surroundings and are more likely to suffer an accident.
Over the years, the company positioned itself as a premium brand by offering quality
products, which is also perceived by the clients (Deshpande, 2017). Furthermore,
Fitbit is also seen as an innovative brand, because it launches various products per
year and also non-wearable product like the WiFi Smart scale.
As a customer centric company, Fitbit listens to its customer on their blog “Fitbit
Community” and supports by answering and clarifying questions and product issues.
Also based on customer’s feedback, the company improves its products constantly
through up-dates or releasing new versions.
Nevertheless, Fitbit also wants to be seen as a brand, which offers devices that can
do more than counting steps (Gazdik, 2017). Therefore, the company moved into the
smart wearable segment and offered smart watches. With this strategic move, Fitbit
tries to shift the consumer’s perception from just a hardware company to a smart
device company where software is equally or even more important (Howley, 2017).
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6.5.1 PRODUCT
The smart wristband by Fitbit is named “Mapit” and is a tangible good with services
(Appendix 14).
Mapit solves tourists’ problem of finding their way in an unknown city and has the
following characteristics, to fulfill potential customers expectations (Appendix 15):
• GPS connection
• 5 day battery life
• Lightweight 15 grams
• Button fastener for easy fit
• Measure steps and calories burned
• Water proof
• Changeable wristbands that are available in black, white, blue and red
Mapit differentiates itself from its competitors mainly by its guidance via vibration
patterns. Also, Mapit does not run on an additional App, but rather can be easily
installed as an “item” on the already existing Fitbit App. Furthermore, users can share
pictures and recommend routes to their friends and families. Even when walking in a
group, splitting up is no problem anymore, since Mapit can show the real-time
location of other group members on the App. Moreover, Mapit’s compatibility of only
this function with other Fitbit products is unique, because it does not make already
bought Fitbit products redundant. Lastly, services provided by Fitbit are a free
actualization of city map, repair service, 1-year warranty and 24h product support
after sales.
Regarding the packaging, Mapit will be inside a simplistic box with clear defined
colors, forms and a smooth surface. The material should be premium quality, which
means heavy very smooth carton. The box displays the product’s name in a bold and
simple font. This kind of packaging should transmit technological innovation, trust
and the feeling of a premium product.
6.5.2 PRICE
Underselling or even overselling a product means that either the company does not
know the value of their product or the customers do not buy it due to an incorrect
value-for-price relation. By asking potential customers, the result showed that 46%
would pay a price between $50 and $100 (Appendix 16). Although, the majority is
willing to pay between $0 and $50, Fitbit must cover its production costs, but also
want to be seen as a premium brand. Therefore, Mapit’s retail price is determined
based on the cost-based strategy. Moreover, Fitbit has not been profitable for a
period of time and has currently a net profit margin of -12%. Hence, Mapit must to be
profitable, to aid the company to return to overall profitability.
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Therefore, the retail price of Mapit is $74.99 for 2 units (= 1 pack) (Appendix 17).
The production costs of Fitbit Charge 3, which is very similar to Mapit, are $17.00 per
unit (Electronics360.globalspec.com, 2013). Thus, it is assumed that Mapit´s
production costs for 2 units are $34, representing 45.3% of the sales price.
As a component of operating expenses R&D costs are budgeted at $6.75 since Fitbit
has already developed the technology and only marginal software changes are
required. Marketing costs are planned at $15, in order for Fitbit to reach a new target
group together with a new product. General & Administrative expenses remain
unchanged at $6. In total, operating expenses amount to $27.75 and the net pack
profit is $13.24.
The retail price of a single unit is $39.99 (Appendix 17). The production, R&D and
Sales & Marketing costs are half the costs of the pack. Only the General &
Administration expenses are considered as fix costs. Hence, the total operating costs
are $16.87 and the net unit profit is $6.12.
6.5.3 PLACE
In Spain, 53.4% of wearable electronics are sold in physical stores, especially in
Electronics & Appliance Specialist and Non-grocery Specialists. The remaining
46.6% of wearables are sold via the Internet (Appendix 18) (Euromonitor.com, 2019).
In order to reach the target group effectively, Mapit is sold via multi-channels. Those
channels will be Electronic specialists non-grocery specialists and Fitbit’s own
website.
Those retail stores are located in Madrid’s center and neighborhoods that tourists
visit for monumental, museums or gastronomical reasons. Additionally, all those
stores already carry Fitbit’s products, thus a strategic partnership already exists and
it will be easier to convince the Category Manager to add Mapit to the product
category.
Besides, Fitbit seeks strategic partnerships with hotels that want to fulfill tourists
demand for technological products. Both parties benefit from this partnership,
because hotels can add Mapit to their value proposition to attract guests and Fitbit
grows its sold units.
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In the Madrid there are 793 hotels, which rent out in total 43.816 rooms with an
average occupation rate of 76,48%. Customers prefer between 1 and 4 stars hotel,
therefore these hotel categories are of Fitbit’s interest (Appendix 19 and Appendix
20). Examples of hotel chains are NH Hotels, NH Collection, Gran Meliá, Barceló,
Westin, Autograph Collection (by Marriott), Hayatt and Radisson Blue.
6.5.4 PROMOTION
Mapit is advertised through a push promotion strategy, because the new target group
does not know about the product yet. The objective is to create awareness and
knowledge about the product by reaching 3% of the target group (600.000 people). In
order to achieve this, the following actions are foreseen.
Online Marketing
Knowing that before going on a trip, people search online for hotels, transportation
and activities, Fitbit rents digital advertising banners and place them on websites
about Madrid, El Prado, Booking.com and tripadvisor.com. Additionally, short,
informative and entertaining videos for social media platforms are necessary to
generate leads to Fitbit’s website. Those videos can be seen on Facebook and
YouTube, as those platforms generate most of Fitbit’s website traffic (Appendix 21)
(SimilarWeb, 2019). Eventhough Facebook and YouTube have more than 2 billion
active users, Instagram has gained a lot of popularity during the past years
(Appendix 22) (Influencer Marketing Hub, 2019). Therefore, advertisement on
Instagram should also be taken into consideration.
Furthermore, Fitbit promotes Mapit on their own website. In August 2019, Fitbit’s
website has been visited by 22.85 million people, where almost 50% enter via direct
search (Appendix 23). In order to generate leads through paid search, Fitbit buys
keywords like “travel”, “travel to Europe”, “Madrid Spain”, “Map of Madrid”, “Hotel in
Madrid” and “sightseeing Madrid”.
Another approach to inform people about Mapit is through Fitbit’s internal e-mailing
list. The e-mail contains a short description of Fitbit and a call-to-action button. By
clicking this button, people get directly led to the Fitbit website.
Lastly, hotels promote Mapit in their online and offline marketing collaterals. This is
supported by Fitbit in order to maintain brand consistency.
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Most of the tourists arrive per airplane to Madrid, thus the airport is an important
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place to advertise Mapit. Fitbit rents two Backlit 120x175cm panels at Terminal 4 and
one 800x300cm billboard. The Terminals 1, 2 and 3 are also common for
international and national flights, thus four 120x175cm displays are rented. Going
from the airport to the hotel or in the city, tourists often use the metro. Hence,
120x175cm and 200x150cm billboards are leased for 10 metro stations in the center.
The recommended publisher is JCDecaux, because this company has the exclusive
right to publish in the metro of Madrid (Jcdecaux.es, 2019). The advantages of print
advertising are the creation of awareness and the easily registered information by
people because of the big format (MarketingWit, 2018). Additionally, it reaches a
large audience. On the downside, billboards are expensive, only limited information
can be shared (MarketingWit, 2018) and it is difficult to measure the return on
investment.
Trade Show
Trade shows are the perfect location for network purposes and to demonstrate
newest product developments. The international tourism trade show “FITUR” in Feria
de Madrid is a chance for Fitbit to showcase Mapit. Particularly, this trade show has
an area about Big Data, artificial intelligence and smart tourist destinations.
Furthermore, with 253.490 trade visitors, “FITUR” is a well-attended international
trade show. In order to exhibit there, Fitbit has to apply and pay a fee of around
$3.300 (Imf.org, 2019).
7. FINANCIAL INFORMATION
Fitbit’s financial situation is based on ratio analysis. Furthermore, a projection of the
Profit & Loss Statement as well as a Cash Flow Statement portrays the profitability of
the new product launch.
Activity analysis: The inventory turnover ratio of Fitbit is 166 days, far higher than the
leading competitor Garmin at 150 days and Xiamoi at 71 days. This is an indicator
that inventories are much higher and/or sales are slower, and/or less desirable
products are still in inventory compared to Garmin and Xiaomi.
The accounts receivable turnover ratio for Fitbit is approximately 100 days. By
comparison, Garmin leads by 38 days followed by Xiaomi with 23 days faster than
Fitbit. This indicates that that Fitbit sells its products on credit and they need a much
longer time to collect the money, which can lead to cash flow problems and limits
flexibility for new product development and marketing activities.
Liquidity analysis: A liquidity ratio greater than 1 indicates an ability to pay short-term
18
obligations. All analyzed companies are above 1, with Fitbit in the midfield at 1,82
compared Garmin (2,89) and Xiaomi (1,71). Here too Garmin appears to have a
larger short-term liquidity by a factor of 60% relative to Fitbit. The acid-test ratio
indicates the ability to quickly convert assets into cash. As expected Garmin leads
with 2,28 compared to Fitbit with 1,65 and Xiaomi at 1,24. The final analysis, an
evaluation overall profitability shows that Fitbit is confronted with an operative loss
situation compared to the competition and is not able to generate profits. Both Fitbit’s
Return On Assets and Return on Equity are negative. Return on assets is a negative
-0,12% compared with positive performance of Garmin and Xiaomi at 0,13% and
0,09% respectively.
In the worst case scenario, Mapit receives limited market acceptance, achieving only
a 3% share (110.000 total units) of the target market. In this case further market
19
research concerning customer concerns should be undertaken and the project goals
and target objectives should be reevaluated.
8. ACTION PLAN
The following part describes action plans for three different scenarios.
In the best scenario, Fitbit approves the project to develop and produce Mapit after
successful first time prototypes. Furthermore, the marketing team starts preparing the
brochures, presentations etc. for exhibiting the product at the trade show “FITUR” in
January. After rolling out the online marketing campaigns the product is launched in
April, when the touristic season begins and strategic hotel partnerships are in place.
During the summer, further marketing activities are planned, such as billboards,
social media and advertisement videos, etc. which encourage people to buy Mapit.
Due to the marketing campaigns and the interests for technological gadgets, tourists
have a positive attitude towards the product and buy it. Thus, after one year, Fitbit
achieves its forecasted financial results for this type of scenario.
The realistic scenario depicts that Fitbit decides re-test and/or re-developed Mapit.
Since it takes a long time, Fitbit is not able to exhibit Mapit at the “FITUR” trade show.
After prototype approval Mapit is produced in high-volume. Meanwhile, the marketing
team prepares the online and offline campaigns, and sales persons can only now
reach out to hotels to build strategic partnerships. After the launch in June, Fitbit
experiences slow sales of Mapit, because people do not know the new product and
are skeptical towards the functionality. Therefore, Fitbit decides to give some sample
units to hotels, which can then rent out Mapit free and tourists can try them out. After
the tourist’s positive experience and their word of mouth advertising as well as Fitbit’s
advertisements and marketing activities, sales increase.
Lastly, the worst case scenario for Fitbit is that Mapit is produced and launched late,
and that Mapit does not receive full positive response from hospitality specialists and
from the target group after its launch. In this case, Fitbit needs to refocus their market
strategy and conduct further market research to find out underlying reasons for
limited acceptance.
20
9. CONCLUSION & FUTURE DIRECTION
Fitbit started out by developing Fitness trackers, which made the company globally
known, but did not pay close attention neither to its competitors nor to overall
customers demand. Therefore, Fitbit missed the opportunity to enter the smart
wearable segment, which has been overtaken by its competitors.
Therefore, the innovation of Mapit is a huge opportunity for Fitbit to enter a new and
evolving market and to demonstrate that the company is agile and can develop an
innovative and profitable product. Furthermore, in the near future, Mapit can expand
into further Spanish touristic cities like Barcelona, Seville, Malaga and Valencia,
which also receive a lot of international tourists. In 2 to 3 years, Fitbit can consider
expending Mapit to other high touristic cities in Europe, such as London (20.72
million), Paris (16.84 million), Rome (9.53 million) Prague (9.04 million), Amsterdam
(8.48 million), Milan (6.51 million) and Vienna (6.3 million) (Statista, 2019). Also
touristic cities in the USA can be considered like New York City, Chicago and
Washington DC since these cities are known for architecture and museums.
Especially in these cities Mapit can be very helpful since they are busy and chaotic
tourist destinations.
Furthermore, a new market opportunity would be the usage of Mapit for blind people,
because those people have also the wish to travel and to discover new places. Blind
people travel mostly with a partner or with a guide dog, however they always depend
on someone when being in a new city and they need to concentrate highly on their
surroundings. Thus, the vibrational guidance has the benefit that the blind can
concentrate on their surroundings; give them a sense of independence and safety.
For this application, Mapit needs to be developed further with an organization for the
blind. For example, the blind should be able to dictate their destination into their
phone.
21
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28
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29
11. APPENDIX
Appendix 1: Worldwide sold units of consumer wearable electronics
30
Appendix 4: Number of units of Fitbit’s (in thousands) sold by country in 2018
International tourists come primarily from USA (12%), secondly from Italy (6.9%) and
France (6.8%). However, visitors, which cannot remain out of consideration, are
people from China. The growth rate of Chinese visiting Madrid amounted to 17% and
represented 3.2% of the total international tourists in 2018 (Anuario de Turismo.
Madrid, 2018). Compared to other countries, Chinese tourists will be seen more and
more seen in Madrid and gain in importance (Anuario de Turismo. Madrid, 2018).
31
Appendix 6: Overview of amount of tourists during the months
J F M A M J
Total number of Tourists 715,89 763,23 848,59 850,9 907,1 916,41
Total average of nights 2,19 2,02 2,06 2,15 2,12 2,05
J A S O N D
Total number of Tourists 900,55 768,72 905,91 949,87 863,46 816,88
Total average of nights 2,07 2,11 2,1 2,1 2,1 2,14
32
Appendix 7: Main reasons why people visit Madrid & in what they spend their
money
33
Fitbit 13,50 182
Garmin 10,58 112
Fossil 10,29 106
Huawei 8,24 68
Samsung 3,13 10
Apple 2,47 6
Others 38,61 1491
34
Appendix 9: Organizational Capabilities of Fitbit Inc.
2007: Fitbit has been founded in San Francisco by Eric Friedman and James Park
2008: The founders raised $2 million from True Ventures, SoftTech VC and other
investors (TechCrunch, 2008).
2009: Fitbit launched its first fitness tracker “Fitbit”, which was a clip that users could
put on their clothing. The wireless-enabled device used an internal motion
detector to track movements, sleep and calories burn during 24 hours
(Comstock, 2015).
However, this fitness tracker was not smartphone connected, instead the
product synch when it was near the wireless base station or docking unit. In
order to synchronize the data, the user needed to install a software on their
Mac or PC. Once the installment was done, the data was collected on Fitbit’s
online portal (Comstock, 2015).
2010: Fitbit raised $8 million from undisclosed investors as the company worked on
its second device (Comstock, 2015).
2011: “Fitbit Ultra” with an iPhone app had been launched. This device included new
features, such as a built-in altimeter, a chatter motivational message system
and a stopwatch. In addition, new online tools and apps were released, which
included badges for completing fitness challenges and a weight management
tool. The iPhone app also included food tracking and activity-planning features
(Comstock, 2015).
2012: Fitbit launched its weight scale “Aria”, which was the first product outside of
the wearable devices. The scale is an Aria WiFi Smart scale that measures
weight, body fat percentage as well as BMI and collects user’s data on Fitbit’s
online portal (Comstock, 2015).
In 2012, Fitbit launched “Fitbit One” and “Fitbit Zip”. Both trackers connected
directly to smartphones via Bluetooth. Fitbit Zip offered a new smaller form
factor that comes in 5 different colors, a tiny “tap interface” display and a
replaceable watch battery (last for 6 months). Fitbit One is still a clip and
replaces the company’s “Fitbit Ultra” device (Comstock, 2015).
Eventually, Fitbit raises another $12 million from existing investors (Foundry
Group, True Ventures, SoftTech VC and Felicis Ventures) (Comstock, 2015).
35
2013: Fitbit launched its first wristband “Fitbit Flex”. It was a bluetooth smart-enabled,
wrist-worn activity tracker (Comstock, 2015).
The company raised $43 million in order to support growth at the company’s
offices in San Francisco and Boston. The investment should help to hire more
hardware and software engineers, designers, product managers, data analysts
and marketers (Comstock, 2015).
Fitbit launched a new product called “Fitbit Force”. This device’s features were:
LED display that rotated between time, steps, floors climbed, alarm, distance,
calories burned and active minutes. (In 2014, “Fitbit Force” got recalled due to
customer’s complaints about skin irritation. The device has never been re-
launched.) (Comstock, 2015).
2014: Fitbit added passive tracking to its app through Apple’s M7 motion
coprocessor. This allowed user, who did not own a Fitbit device, to track their
fitness (Comstock, 2015). In return, Fitbit gained more customer insights and
data.
2015: In 2014, Fitbit announced three new devices, which got released in the
beginning of 2015. Those products were: “Charge”, “Charge HR” and “Surge”,
which monitored everything that “Fitbit Force” tracked (steps, distance,
calories burned, floors climbed and sleep). All three devices have also a new
feature: Caller ID.
In the same year, Fitbit bought FitStar for $33 million, which is a fitness
coaching app in order to add more training features to its premium subscription
service (Comstock, 2015).
2016: First of all, Fitbit acquired the smartwatch company Pebbles. This acquisition
allowed Fitbit to gain knowledge in the smart watch segment and reduced time
research and development time (Heater, 2019).
36
friendly’ and ‘evening drinks ready’ styles, integrated FitStar guided sessions,
alarm and relaxing breathing program (Stables, 2017).
Then, Fitbit released the fitness tracker “Alta”. The difference to earlier models
was that the design was unisex with a simple discrete look. Also, the band was
available in three different lengths and was removable and could be
exchanged with fancier bands. However, it did not measure heart rate or star
climbing as well it had not a GPS function (Prasuethsut, 2016).
Lastly, Fitbit released its third fitness tracker “Flex 2” in 2016, which is a full
waterproof device. Owners now can switch their bands for bangles, pendants
or select from seven classic bands, which are available in seven different
colors (Prasuethsut and Sawh, 2016). Additionally, “Flex 2” has basic tracking
skills, auto-recognition of exercises and no screen but LEDs (Williams, 2018).
In the middle of the year, Fitbit launched its first smart watch called “Fitbit
Iconic”. The deceive includes personal trainer with Fitbit Coach, tracks running
and GPS tracking, water resistant up to 50 meters, GPS connection, improved
heart rate technology and new sensor technology. Additional features are, the
storage of up to 300 songs that can be listened to without smartphone and a
battery life of up to 5 days (Investor.fitbit.com, 2017).
Moreover, Fitbit up-dated its “Fitbit Alta” with its new released “Fitbit Alta HR”.
Compared to the old model, “Fitbit Alta HR” is more fashionable, lightweight
and has a built-in heart rate monitor. Also the battery lasts for one week
(Langley, 2017).
2018: Fitbit updated its fitness tracker “Charge 2” and released “Charge 3”. The new
version is now waterproof, has a longer battery life and enhanced user
37
interface due to a larger display. The “Charge 3” is between a fitness tracker
and a smartwatch, since the distinctions seem to be diminishing (Langley,
2018).
Another product launch was the smartwatch “Fitbit Versa”. This model is a
cheaper, lightweight and smaller version compared to “Fitbit Iconic”. Besides
the lifestyle tracking features, “Fitbit Versa” offers also the advantages of a
smart watch like music, payments and customization. Due to the smaller body
features like GPS is missing and the battery life is shorter (Langley, 2018).
Additionally, the firm bought the start-up company Twine Health in order to be
also attractive to health insurers and corporate wellness plans. The startup
Twine Health offers a service to connect chronic sick people (e.g. diabetes)
with coaches and doctors who creates plans for help the patients to follow a
healthy lifestyle. Fitbit’s idea is to allow users to import data from their
wearable devices, which tracks physical activity, sleep and other vitals to
Twine’s service (Pressmann, 2018).
2019: Due to cheaper smart watches on the market, this year Fitbit launched a
cheaper version of “Fitbit Versa” and called it “Fitbit Versa Light”. However, it
has limited features and useful characteristics such as altimeter, gyroscope,
music storage and Wifi are not included (Fingas, 2019).
Additionally, the latest launched fitness trackers are “Fitbit Inspire” and Fitbit
Inspire HR”. The latter product is replacing Fitbit’s popular fitness band series
“Fitbit Alta”, “Fitbit Flex” and activity bands “Fitbit Zip” and “Fitbit One”.
Due to the strong competition of other tech companies like Xiaomi, Fitbit
retailed “Fitbit Inspire HR” for $90, which is Fitbit’s first fitness tracker under
$100 (Sawh, 2019).
Regarding the characteristics, “Fitbit Inspire” is a more basic waterproof
model, which tracks steps, distance, active minutes and calories burned as
well as sleep and gives automatic exercise recognition. Whereas the “Fitbit
Inspire HR” has additionally heart rate tracking, guided breathing, sleep
stages, GPS and goal-based exercise modes (Sawh, 2019).
38
Year Resource Based View Knowledge Based View Develop Capabilities
New Product Development SDM
2007 Foundation of Fitbit Inc.
2008 Raised $2 million from
True Ventures, SoftTech
VC and other investors
2009 Launched first fitness tracker
clip "Fitbit"
2010 Raised $8 million in
order to finance second
device
2011 Fitbit released "Fitbit Ultra"
with an iPhone app with
additional features
2012 Raised $12 million from The company launched its
existing investors first non-wearable product,
which is a WiFi Smart scale
39
Appendix 10: Calculation of forecasted market share of Fitbit in Spain
+ 250.000 units
(Mapit) 527.000 2.301.900 22,89%
Assumption: -5% of
Fitbit's current fitbits
decrease 263.150 1.846.710 14,25%
Appendix 11: Result of the question: „When you travel to an unknown city,
which tool do you use in order to find the way through the city?“
1%
19%
23% Other
40
Appendix 12: Result of the question: „Are you interested in smart wearables?“
41
Appendix 13: Results of the questions: „Would you like to wear a smart
wristband that gives you directions via vibration patterns?“ and „Would you
wear a smart wristband on the left and right wrist?“
I like it 43%
Maybe 37%
No 39%
Maybe 35%
Yes 25%
42
Appendix 14: Mapit – Prototype
Description:
The five black rings on the right side of the wristband show the battery level.
43
Appendix 15: Result of the question: „Which characteristics of a smart
wearable are important to you?“
Convenience
Measurement of steps,
38% burned calories, etc.
61% Waterproof
Fashionable design
58%
Appendix 16: Result of the question: “How much would you spend on such a
smart wristband?“
50 - 75 EUR 22,71%
44
Appendix 17: Calculation of retail price and profit margin of Mapit
45
Appendix 18: Percentage and wearable electronics units per retail outlet in
Spain, 2018
1%
Grocery stores
18%
Electronic & Appliance
specialist retailers
46%
Non-grocery specialists
21%
Mixed retailers
Internet 14%
46
Appendix 20: Choice of accommodation per age group
47
Appendix 22: Statistics of active social media users in the USA
Appendix 23: Total number of visitors on Fitbit’s website and traffic source
48
Source: Source: (SimilarWeb, 2019)
Profitability
Formula
ratios
Return on assets Net income/total
-0,12 0,13 0,09
in % assets
49
Net
Return on equity
income/sharehol -0,10 0,17 0,19
in %
der's equity
Sources: Fitbit: (Investor.fitbit.com, 2019), Garmin: (Www8.garmin.com, 2019),
Xiaomi: (I01.appmifile.com, 2019)
Appendix 25: Forecasted Profit & Loss Statement and Cash flow Statement +
Marketing Budget
TOTAL $ 275.000
50
Forecast Profit and Loss - Realistic Scenario
51
Forecast Profit and Loss - Worst Case Scenario
52