Fitbit Market Research Project

Team 3

Kailey Nightingale, Michael Hirsch, Weihao Lin, Qinyu (Hailey) Ji

April 20th, 2018

1. Introduction

2. Background and methods

3. Analysis

4. Conclusion ​& ​Recommendation

5. Appendix
 INTRODUCTION

This report examines Fibit’s current wearable products and brand positioning for the

company’s marketing purpose. The purpose of this project is to better understand the current

wearable market and to help Fitbit regain its dominant market share. In order to make an

accurate assessment, we set our management decision problem for this project as; ​should Fitbit

pivot its current product positioning in align with an high-end smartwatch market focus,

similar to the Apple watch, or degrade to an affordable, low-end fitness tracker focused

band in 2019? ​After this had been established, we broke down our MDP into ​four independent

market research problems​ that focus on preferred product attributes, consumer segmentation,

market competition and brand perception. Our analysis is based on both qualitative in-person

interviews and quantitative survey data collections. This report will then present our analysis

findings of whether Fitbit’s current brand positioning and declined sales are influenced by its

existing product design and target market misalignment. In addition to this analysis, we will offer

recommendations on our management decision problem to better guide Fitbit regain its market

share and ensure its strategic longevity in the wearable industry.

BACKGROUND & METHODS

Founded in 2007, Fitbit, Inc. is known for its innovative, wireless-enabled wearable

fitness trackers that intended to change the ​fitness and health landscape​. Since then, Fitbit has

faced intense market competition from leading brands like Apple and Xiaomi (the Chinese

device maker) who -- in 2017 alone-- have decreased Fitbit’s market share from 28.5% to 15.7%.

Projectively, Fitbit’s market share will continue to decline to a mere 13% in 2018 with Apple

rapidly on the rise. Rapid rollout of new product designs and competitive pricing strategies
among competitors motivates us to identify four key MRPs that we want to address in this

project: ​(1)​ How is Fitbit (the brand and its product) currently perceived in the wearable market;

(2)​ Where does Fitbit stand against its competitors; ​(3)​ What wearable/smartwatch attributes

matter to the consumers the most? ​(4)​ Is the current consumer segmentation leaning more

towards a high-end smartwatch emphasis or a low-end fitness tracker focus?

In the project, our analysis started with an exploratory research on Fitbit through Google

Trends, a preliminary competitor SWOT analysis and qualitative in-person interviews to grasp a

general idea of consumers’ perceptions. Then we designed and distributed two Qualtrics surveys

that focused on competitor perceptions and product attributes. In total, we collected 80 sets of

respondent data and 5 sets of in-person interview recordings. We mainly utilized MS Excel and

IBM SPSS to run our analysis through factor analysis, perceptual mapping, cluster analysis,

regression analysis and conjoint analysis. This extended set of analysis techniques provided us

with solid support for our concluding recommendations.

ANALYSIS

I. Keyword diagnosis + competitor SWOT

Our entire research progress began by compiling exploratory research on the Fitbit brand

as a whole. Based on our Google trends findings, it is clear that Fitbit faces two major marketing

issues moving forward. First, while they are strongly associated with fitness related terms, such

as “​fitness tracker​” and “​activity tracker​,” these search terms’ volumes have been steadily

declining over the past 5 years. ​Refer to Appendix 3​. This declining market interest signals that

Fitbit needs to expand beyond owning the “​fitness tracker​” brand image in order to secure their

financial future. Second, as the “​smartwatch​” term’s search volume has been significantly
increasing since 2013, its key related queries belong solely to their competitors: the Samsung

Gear and the Apple Watch. Thus, it is imperative that Fitbit joins the space in consumers’ minds

for unaided recall in the smartwatch category. Overall, this phase 1 research addressed our​ ​first

MRP​ and established a null hypothesis moving into our next research steps: ​Fitbit products are

immediately perceived as fitness trackers.​ It, furthermore, established another null hypothesis

for our ​fourth MRP​ ​that: ​the high-end smartwatch category is the largest market​, as its

search volume is increasing.

After examining Fitbit itself, we moved on to analyze our main competitors (Apple,

Samsung, Skagen and Xiaomi) applying the SWOT model to comprehensively gauge the

competitive landscape competitive. To summarize our findings, the following points are worth

noticing. Apple watch shows disadvantages in its low battery life and expensive pricing have

been contested while the Samsung Gear boosts a large screen and allows users to text and call

independently from their phones. However, like Fitbit, Samsung needs to close the market share

gap by developing a more potent positioning strategy moving forward. Skagen is a new Danish

smartwatch manufacturer owned by the Fossil Group. Its smartwatch is positioned as a super

modern, minimalist everyday smartwatch. Not directly competing in the techie or fitness-focused

niche, the Skagen Falster Smartwatch emphasizes the importance of aestheticity. Meanwhile,

Xiaomi competes directly against Fitbit as a fitness tracker. Its competitive advantage rests with

its aggressive, low pricing strategy -- selling their wearables for $20-$30. This pricing strategy

easily attracts consumers, yet hinders its potential profit. This signals to us that ​the Apple

Watch is in a league of its own​, which is our ​second MRP​’s null hypothesis.
 II. In-Person Interviews

In the second part, we conducted 5 sets of in-person interviews to further understand

consumers’ perceptions towards Fitbit, their desired attributes from wearables and their overall

expectation towards fitness and wellness. ​Refer to Appendix 1​. Our respondents showed a wide

range of expectations for their wearable product. ​They wanted it to be able to achieve high

accuracy of recording and the versatility of their data collected to be from every aspect of

their health and workout conditions.​ As much as they believe that technology would greatly

assist them to achieve their health goals, interviewers still showed skepticism towards the current

available products’ innovation level. ​Heartbeat tracking, steps exercise, sleep tracking,

calories counting, lasting battery life​ ​are among the important attributes that our interviewers

wish to have in their wearables’ functionalities. Apple watch is considered to have a very

integrated and user friendly interface design. However, some interviewers also prefer the

wearable to excel at solely wellness aspect instead of multi-tasking. Appearance wise, consumers

expect their wearables to be more fashionable and trendy. They believe that one limitation for

both Fitbit and Apple watch is that the current appearance design still falls within the traditional

“smartwatch” stereotype. Additionally, ​one respondent reflects that Fitbit should advertise its

products to the general public instead of skewing towards solely people interested in fitness

because the benefits of the product will improve and motivate every individual to live a

healthier lifestyle.​ ​Fitbit motivates stronger wellness community building through its distinctive

mobile app. Those results of our in-person interviews helped to answer our ​first MRP​ that ​Fitbit

is perceived as a very trustworthy brand with affordable pricing and a wide range of
fitness and wellness-oriented product selections. ​Having this in mind, we proceed to our

quantitative analysis.

III. Survey 1.0 - Aided and Unaided Competitor Analysis

To verify our ​second MRP​’s null hypothesis that ​the Apple Watch is in a league of its

own​, we ran our first Qualtrics survey. ​Refer to Appendix 2​. The survey was designed into two

parts: the first part was unaided recall, while the second part included images and descriptions of

the wearables. We surveyed consumer brand perceptions on the five brands we analyzed in our

SWOT (Fitbit, Apple, Samsung, Skagen, and Xiaomi. Thus, we had our respondents rank the 5

brands on the following 12 attributes from 1 being the worst to 7 being the best: ​Expensive,

Stylish, Innovative, Modern, Useful, Accurate, Prestigious, Ugly, Valuable, High Quality,

Reliable, and High Functionality​. At the end of each section, respondents ranked the brands from

1 being the highest and 5 being the lowest on their purchase likelihood of the wearable devices.

We used this data to run a regression to determine which attributes impacted brand

purchase likelihood the most. ​Refer to Appendix 5​. Ultimately, we found that the most important

attributes were the consumer’s perceived usefulness of each brand’s products and the brand

names themselves. Namely Apple’s brand equity impacted rankings the most with a coefficient

of -3.185. Not only does this mean that Apple’s competitive advantage in the space is its brand

image, but it also means that consumers also care about the functionality/usefulness of their

wearable.

We also noticed an important trend within the purchase likelihood rankings themselves.

For the unaided recall section (Series 1), the Apple Watch ranked first, while Fitbit trailed far

behind in 2nd place for likelihood for purchase. The results remained the same for the aided
recall section (Series 2). However, this time, Fitbit was much closer to the Apple Watch. ​Refer to

Appendix 4​. This result signals that the product images and descriptions influenced consumers’

perception rankings and demonstrates that currently consumers don’t immediately associate

Fitbit as their first wearable choice. Thus, both analyses of our first survey ​confirm​ the null

hypothesis for our ​second MRP​; ​the Apple Watch is indeed in a league of its own​.

IV. Survey 2.0 - Preferred Product Attributes Analysis

After realizing that perceived usefulness was the most important attribute impacting

purchase likelihood, we used our second qualtrics survey to understand which product attributes

matter the most to consumers. The survey itself was divided into three main attribute groupings:

design, pricing, and functionality. ​Refer to Appendix 2.​ Respondents again ranked these

attributes on their importance on a scale of 1 being the least important to 7 being the most

important. We used our 58 respondent data to run a factor analysis.

The first conclusion we were able to draw was that there are six contributing factor

groups: the ​first factor​ we labeled as ‘versatility’, which had to do with attributes that made the

watch function similar to a smartphone; we labeled the ​second​ as ‘health’, having to do with

functions that tracked sleeping patterns and physical fitness; the ​third​ was labeled ‘apps’, with

reference to mobile payment and app downloads from a store; the ​fourth​, the design; ​fifth​,

‘modern’, that is the minimalism of the product; and finally, the ​sixth​ was labeled pricing, and

only had to do with the pricing under $50. ​Refer to Appendix 6​.

When we analyzed the impact of each of the factors, it became very clear that the least

important factor was the product’s price. While the importance of the product being under $50

did register, it was not nearly as important as the other attributes that manifested in our survey. In
fact, the most important factors were with regard to ​Health and Versatility​. It was unsurprising

that Versatility ranked as high as the Health factors on the watch, since the Apple Watch -- who

is predicted to be the market leader in 2019 and who averaged the highest rank for purchase

likelihood in our initial survey-- is both incredibly versatile in its design and has plenty of

functions that have to do with the fitness of the user. We contemplated using conjoint analysis

for this stage of our analysis, however, our data limited its utility. ​Refer to Appendix 11​. The

only attribute we could successfully analyze was battery life and the impact of battery life on

brand ranking doesn’t help us answer any of our MRPs. The other attributes such as sleep

tracking and app connectivity were highly correlated between all 5 brands in our study -- the

wearable marketplace has few product innovation differences other than the brand image itself.

Interesting enough, after running the averages for the different questions in Excel, we

noticed that the attribute questions that scored the highest on average were the questions that

related to health/fitness/wellness: 4D, 4H, and 4A as shown in our appendix. This caused us to

conclude that ​overall the second highest factor of health is the most important for

consumers. ​Additionally, for question 4I, it received one of the smallest overall average scores;

this particular question asked consumers to rank if they would want a wearable that focuses

solely on fitness attributes. Thus, our answer for ​our third MRP​ stands that that ​consumers

care about fitness attributes, yet don’t want a wearable that is only fitness​ -- which spells

trouble for Fitbit, who is largely perceived as a fitness tracker manufacturer as found out from

our personal interviews. Fitbit must then leverage its fitness reputation to let consumers be aware

that their new smartwatch products are as all-around as the Apple Watch and even better since

Fitbit excels at fitness more.

With the 58 responses from the second survey, we were also able to run cluster analysis

to test our ​fourth MRP​ and see whether or not the high-end smartwatch category is truly the

largest consumer segment. Initially, when we ran SPSS, the software was unable to find a

concrete divide between our respondents until we ran the cluster analysis with 6 Clusters. This

was the first time it generated an even split between two cluster groups. Thus, with the 6 Cluster

analysis, we found two main consumer segments from Cluster 2 and Cluster 5.

For instance, in Cluster 2, there are 30 people who care the most about attribute 15 and

19 -- Water Resistance and Fitness Activity Tracking; and in Cluster 5, there are 22 people who

care about attribute 6, 8, 10, 12, 13, 15, 16, 17, and 19 -- which respectively correspond to Touch

Screen, Band Material, $150 Price Point, Heartbeat Tracking, Music Streaming, Water

Resistance, Sleep Tracking, Apps, and Fitness Activity Tracking. Thus, ​Cluster 1 is the fitness

group and Cluster 2 is the high end smartwatch group​. To support our Cluster analysis

findings, we produced additional scatter plots from our factor analysis survey. We chose to focus

on Factor 2 Health and Factor 6 Price as these factors directly correlate to our target

segmentation MRP of high-end smartwatch versus low-end fitness tracker consumer groups.

For our scatter plots, we compared Factor 1 Versatility with Factor 2 Health; Factor 2

Health with Factor 4 Design; Factor 4 Design with Factor 6 Price; and Factor 2 Health and

Factor 6 Price. While these scatter plots emphasized unique factors, the results graphs almost

entirely replicated each other and as such indicated no clear divisions amongst our respondents --

meaning that there was no clear way to divide our respondents into different segments without

detailed precision. For instance, we found that people expect their wearable to have various
health tracking functions as well as a good design and people want their wearable to have both

good design and a good price (under $50). ​Refer to Appendix 10​. Therefore, our 6 cluster model

proves to be the only accurate way to differentiate wearable consumers as all wearable attributes

are interconnected.

Third, we analyzed how gender segmentation influenced people’s purchasing decisions in

the six cluster scenario. Ultimately, Cluster 2 has 15.5% male and 84.5% female, and Cluster 5

has 8.6% male and 91.4% female. To see if there was a significant difference across the clusters

we ran a T-Test and saw that there was no significant difference between the clusters. ​Refer to

Appendix​. Therefore, solely targeting on gender might not be an effective avenue for Fitbit.

Ultimately, our analysis proves that for our ​fourth MRP​ ​the larger consumer segment prefers

fitness centric wearable design.

CONCLUSION & RECOMMENDATION

As a reminder, our initial four MRPs for this project were ​(1)​ How is Fitbit (the brand

and its product) currently perceived in the wearable market; ​(2)​ Where does Fitbit stand against

its competitors; ​(3)​ What wearable/smartwatch attributes matter to the consumers the most? ​(4)

Is the current consumer segmentation leaning more towards a high-end smartwatch emphasis or

a low-end fitness tracker focus? And from our analysis, we found that ​(1)​ Fitbit is perceived as a

very trustworthy brand with affordable pricing and a wide range of fitness and wellness-oriented

product selections​; (2) ​The Apple Watch is indeed in a league of its own​; (3) ​Consumers care

about fitness attributes the most​, ​yet don’t want a wearable that is only fitness; and​ (4) ​People

prefer a fitness centric watch and as such, the fitness segment is larger.​ ​With all the analysis we
performed in mind, we have concluded that there are three main actions Fitbit must take to

regain their lost market share.

Our first recommendation is for Fitbit to strengthen its current advertising and promotion

strategy. Their excellent products need to pair with thorough marketing initiatives to achieve

long-term awareness and consumer loyalty. Specifically, since consumers care about the fitness

attributes the most, they should accentuate that their company operates always as “Fitness First,

Basics Second.” Not only does their current health and fitness smartwatch (the Versa line)

include stellar wellness innovations such as Female Health monitoring, Guided Breathing

Sessions, but it also boosts the same additional smartphone-esque attributes as the Apple Watch.

Additionally, Fitbit must make sure to keep innovating with their fitness attributes as those are

the most important features to consumers.

Our second recommendation rests with the versatility of its product design and

emphasizing the latter half of the advertising message -- “Basics Second”. While it is not the

most important factor in why people would buy a wearable, the ability to have as many functions

as possible is something that many of our respondents valued. Thus, with the Fitbit Versa line,

Fitbit must emphasize that they always include the same “Basic” functions as the Apple Watch

boasts. This will help move Fitbit towards unaided recall as the health and fitness smartwatch

that prides itself with “Fitness First, Basics Second.”

Our last recommendation deals with the competition from the Apple Watch. As price was

not a significant factor in why people would or would not buy a wearable, our final

recommendation is that Fitbit markets their devices with a higher price tag to a higher end
customer. By playing in the high-end marketplace, Fitbit will be able to expand in the future and

compete directly with the Apple Watch successfully quarter by quarter.

1. In-Person Interview questions:

(1) Do you currently own a smartwatch? (2) Do you currently own a fitness tracker? If no, would
you consider buying one? (3) What matters to you most about your fitness? (4) Do you feel that
technology could better amplify your results? (5) If you were to use fitness technology, what
would be the most important factors when considering the purchase? (6) [Have a demo Fitbit on
hand, show functions, etc.] Would you consider using this? (7) What appeals to you about the
design of this product? (8) What doesn’t appeal to you about this product? (9) What are your
final thoughts with regard to the product you just saw?

2. Survey 1.0 link:

https://qtrial2018q1az1.az1.qualtrics.com/jfe/form/SV_9KVSmvyYbT7ZxvT
Survey 2.0 Link:

https://qtrial2018q1az1.az1.qualtrics.com/jfe/form/SV_elY28GJ1rzhKIXH
3.

4.

5.
6.

Factor 1 - 13/14 (music/texts & calls) Versatility

7.
8.
9.

Cluster 1 - 2 （5/8)
Cluster 2 - 30 (15/19) Water Resistant/Fitness Activities
Cluster 3 - 1 (11-15)
Cluster 4 - 2 (8/9/10/13/15/18)
Cluster 5 - 22 (6/8/10/12/13/15/16/17/19) Touch screen/ Band material/ $150/ heartbeat/ music/
water resistant/ sleep/ apps/ fitness activities
Cluster 6 -1 (12/15/16/19/20)
10.
11.