Monetizing fitness platforms — the ‘powered by Misfit, Jawbone, Fitbit’ Model

The real potential of connected devices lies in in the service they are attached to & the data they collect. As fitness tracking hardware gets commoditized (with Chinese knockoffs at rock bottom prices), or absorbed (by multi-function competition such as the Apple watch), services built upon data let those businesses keep making money. Partnerships offer an interesting avenue for tapping new segments & growth in the category. Here are some thoughts around how to make it happen.

Why

With new health and fitness tracking wearables launching by the day, the established Fitness trackers —Fitbit, Misfit and Jawbone have an opportunity to leverage the platforms they have already built — hardware and software — and partner with jewelry brands to unlock a bigger market, monetize services and compete against pure device makers. Here’s why:

• A large % of women hate wearing plastic fitness products. When we were doing primary research for Imbue to understand their relationship to jewelry and test our product thesis, one of the top 3 requests was for fitness trackers built into jewelry so they don’t look ‘ugly’.
• The US Jewelry market is $30B. Fashion jewelry (jewelry priced between $99 — $1000) is a third of this, and has a $200 unit average selling price. Right around the range most fitness trackers play in + possibility for driving it higher.
• Partnerships (vs trying to do it in-house) is the most scalable way to make it happen. I’ve written about this in depth here. This model kills 2 birds with one stone : (1) satisfy the needs of consumers who want variety and (2) drive higher sales via complementary channels : jewelry / fashion brands will drive via their own channels, and since jewelry is bought for design variability, sell > 1 to them (i.e. increase LTV).

How

So, what could this ‘powered by X’ partnership model look like for Fitness trackers that allows it to co-exist with their own products?

1. Jewelry brands want their own designs. Exclusivity is the name of the game in this part of the world. Build hardware into components they can integrate (or license the guts of the hardware to them), and let them innovate on a design that reflects their brand aesthetics. Wholesale hardware core to them and make a % on $ margins that brands/jewelry makers make. Leverage their distribution channels to sell more devices (and although tech co’s make less $ per device, they can make up for it in volume + service subscription — see below).
2. There’s an additional aside here — make money on high margin style-driven accessories. This is an approach that both Misfit and Fitbit are taking that should work out quite well for them, and works well if the core product is designed for accessory attachments.
3. Make the partner products work with the existing Jawbone / Fitbit / Misfit app; bonus points for working with partners to co-brand. Bundle basic (free) and limited-time premium service (subscription, subsequently paid by consumer) tiers with the licensee products. Both Fitbit (Fitbit Premium) and Jawbone (UP System, Marketplace) have some variants of premium offerings already, so this should be relatively easy to implement. Include multi-device sync with premium, and further incentivize purchase of >1 devices.
4. In general, adopting a ‘powered by’ model distances these co’s from the customer somewhat, and hence they must leverage their mobile app to re-establish that connection and upsell services. Presently, discovering and subscribing to additional services / 3rd party device interconnects on Mobile requires much effort — the additional friction is likely to reduce conversion. This is one area where they could do better and surface additional services via ‘recommendations’. Done right, that should increase the attach rates for those paid services.

Comparing…

• Jawbone : Strong software offering with connections to 3rd party devices and services monetized via their marketplace. In it’s current form, not very well positioned to take advantage of the accessory model (UP Move is a good step, but is still made out of plastic), but the guts of UP Move could be the core to provide partners with.
• Misfit : Strong product — use of metal, their accessory model and partnerships with Swarovski are a clear indication that they get it. They’ve taken an ‘integrated product’ approach to partnering, and I find that particularly exciting because it opens up possibilities for selling multiples, in addition to new form factors and marketing (you are buying a Swarovski Shine, not a Swarovski case for the Shine). Moving ahead, I expect they would introduce a premium offering to open up additional revenue stream, and work on 3rd party device and service integrations to level the field with others.

• Fitbit : Fitbit has the software and premium services piece covered, and has dabbled with partnerships as well (Tory Burch case for Fitbit). However, in contrast to Misfit, they took a Product + Case approach. While it’s faster to get to market, it doesn’t help Fitbit leverage the jewelry purchasing mindset to sell > 1 devices. Additionally, I am curious about how buy-a-case-to-make-it-fashionable pitch compares against buy-a-fashionable-product.