UP By: Jawbone Innovation Today for a Healthier Tomorrow April 26, 2012 Term Project: Marketing 406-10 Spring Semester 2012 Walter E. Heller College of Business Administration Roosevelt University Professor: Gordon Patzer, Ph.D. Octavio Vargas, MBA Candidate Octavio Vargas 19 Laurel Trl. Wheeling, IL 60090 847-826-1517 Ovargas1715@gmail.com
Executive Summary Jawbone a brand of Aliph which is a consumer electronics company has revolutionized the hands free mobile marketplace. Now Jawbone is revolutionizing the health and fitness marketplace with its introduction of the Jawbone UP band. In this report you will find information pertaining to how Jawbone has captured an audience of fitness fanatics and is ever expanding. We will explore the history of how Jawbone and Aliph came to be as well as the inception of the Jawbone UP. We will take a look at the objective of the company for its UP band, how it constructed its product mix, the marketplace for UP, and opportunities for the company to thrive. We know that the health and fitness industry is continuously growing year over year. Jawbone has tapped into this market with its innovative technology, strategic partnerships, and world class design. Jawbone has experienced some set-backs down its path towards industry leader but we can see that there is still a lot of opportunity. Jawbone incorporates a level of marketing that would make any business envy them. Thank you and enjoy. Page 1
Table of Contents Introduction.Page 3 Product.Page 4 Objective...Page 6 Price..Page 8 Place..Page 8 Promotion...Page 8 Competitive Advantage..Page 10 Uncontrollable Environment..Page 11 Market Segmentation..Page 11 Buyer Behavior Page 11 Market Research...Page 12 International Market..Page 12 Areas of Opportunity.. Page 12 Appendixes...Page 13 Perceptual Map...Page 18 Works Cited. Page 19 Page 2
Introduction You may be sitting there wondering what in the world is a UP band? With technology advancing at the speed of light, as it may seem, people and companies alike are coming up with new innovative ways to make our lives better. With the creation of the iphone by Apple back in 2007 and later the inclusion of third party application developers in 2008, possibilities have become endless. Steve Jobs left his mark on the world by opening the gates to free innovation via his Apple App store, where people and companies can develop applications for Apple s iphone, ipad, ipod, imac, and MacBook s. According to Wikipedia Jawbone is a brand of Aliph which is a privately held consumer technology company founded by Alex Asseily and Hosain Rahman. The Jawbone brand is known for its top of the line Bluetooth headsets. Jawbone has incorporated state of the art technology called Noise Assassin, which is a signal processing technology. The signal processing technology was originally developed in the military to reduce background noise. How it works is each Bluetooth headset is equipped with a skin contact microphone that will activate when one speaks by feeling the vibration of your voice via your cheekbone or Jawbone. The vibration sensitivity helps reduce background noise which is the number one problem with Bluetooth headsets. Jawbone has won various awards for its design, technology, and engineering. Aliph also does a phenomenal job marketing the Jawbone brand. According to Wikipedia Jawbone offered a $20 discount on all of its Bluetooth headsets to consumers in California who received tickets from the police for talking on their mobile phone. It s no wonder that Jawbone would be the first to market another industry innovation with its UP wristband. Page 3
UP By: Jawbone The UP band by Jawbone is a wristband made of a spring steel frame encased in durable, sweat-proof, water-resistant, hypoallergenic rubber (Jawbone.com). The UP band is combined with an iphone application that tracks your steps, workouts, sleep, and eating patterns. The consumer will need to have an iphone, ipad, or 4 th generation ipod touch by Apple and will need to download the UP application in order to use the wristband. When the application is running on said device, the band can connect to the device by plugging the band into the 3.5mm earphone jack of one of the Apple devices. The 3.5mm plug is concealed with a cap as you can see in exhibit 1-1. The band can collect data 24 hours a day, 7 days a week. *Exhibit 1-1 is am image taken from the Jawbone.com website under the UP product category According to Jawbone.com The UP band has a built-in precision motion sensor that automatically tracks your movement (steps, distance, calories burned, pace, intensity level and active vs. inactive time ) and sleep (hours slept, time to fall asleep, light vs. deep sleep and sleep Page 4
quality). The technology behind the UP band is called MotionX. MotionX uses an accelerometer to keep track of movement; it then uses a sophisticated mathematical algorithm to track steps, calories burned, and distance covered. During sleep the motion sensors keep track of sleep cycles by again using the accelerometer to track micro-movements which then are input into the mathematical algorithm to view, light sleep, deep sleep, and amount of time slept. The band can also work as an alarm clock. The user will need to set a smart alarm via the UP application and the UP band will wake up the user using soft vibrations. For example say I needed to wake up at 8 a.m. the band will wake me up between 7:30 a.m. and 8 a.m. The band will choose according to my sleep pattern which moment between 7:30 a.m. and 8 a.m. I will typically be most refreshed. The food portion of the application allows users to take pictures of the foods they eat, which then are logged into a journal, and at a later time in the day the iphone will vibrate to log how that meal made the user feel. The user can then make healthier and wiser food choices by keeping track of which foods make the user feel good and which ones make the user feel bad or not energized. The band also has a button that the user can push to put the band in active, workout, or sleep mode. A flash of a light will also indicate which mode it is in when pressed. Green will be active, blue will be sleep, and a quick blinking green will be work out mode (Exhibit 1-2). The application to the UP band is free and can be downloaded at the Apple App Store. The band comes in 6 different colors (Black, White, Blue, Red, Brown, and Pink) and 4 different sizes (Small, Medium, Large, X-Large). The band is also water resistant up to 1m. The battery will also typically last up to 10 days on a full charge, and the band comes with a USB adapter (Exhibit 1-3). Page 5
*Exhibit 1-3 shows the adaptor *Exhibit 1-2 shows the cap, plug, and lights Jawbone has revolutionized how we make our daily choices to stay healthy. Now we can keep an electronic journal of the quality of sleep we get, the quality of foods we eat, and how active we are throughout the day. Objective: Goal Not all products can come to market and be absolutely flawless. Such was the case with the first production of the UP bands. Consumers whom purchased the UP band quickly realized that their band began to malfunction. Although the consumer was never in any type of harm the band itself began to malfunction causing a public relations nightmare. The company knew it had to act quickly and they did. Hosain Rahman founder and CEO of Jawbone made a statement that would jeopardize profits but increase customer loyalty; he offered a 100% money back guarantee. How it would work is any consumer that purchased a Jawbone UP band could keep their faulty band and receive either a new band or their money back. The company will also continue to replace any future faulty bands. Then the company stopped production of the UP band to make sure they addressed the problem and fully resolved it. Since Jawbone is not a publicly traded company they did not release sales figures or units sold when they launched the Page 6
Jawbone UP in November. They did in fact sell out of first production and were back ordered through December even after the reviews of the faulty bands continued to pour in. Under the unforeseen circumstances the company now needs to re-evaluate its objective in order to achieve its long term goals. According to Ibisworld, a market research firm, the Health and Fitness industry is a $25 billion dollar industry. I believe that Jawbone made the right decision to move into this industry because it is also growing at an annual growth rate of 1%. Many corporate companies are encouraging its employees to join health clubs and stay active because active employees means healthy employee which in turn reduces a company s expenses. Employees will be less likely to miss work or use their health insurance as much. The media also plays a big role in driving the Health and Fitness industry. Jawbone has entered into a new market with its UP band. The device is revolutionary and even Nike has followed suit. Realistically-Idealistically Jawbone will now need to set a goal of capturing at least 50% of this new market within the next 3 years. The reason I state the goal this high is because there are very few competitors in this market and with any new market, the first company to market is the company that is remembered by consumers. Consumers don t call tissue paper tissue paper, they call it Kleenex. Next realistically-idealistically Jawbone needs to capture at least 10% of the health and fitness consumers which would be roughly 5 million people within the same 3 year time frame. The reason this number is realistic is because this number does not take into account the amount of people who are not health club members. If Jawbone could capture 5 million consumers within three years that would be 5 million units sold which would return 500 million in sales in that span. Page 7
Price: $99.99 The Jawbone UP sells retail for $99.99. This is why we see the numbers that we do in the objective section. Although the cost of manufacturing the Jawbone UP is unknown, it seems that Jawbone used customer value-based pricing. I feel that Jawbone did a great job of pricing the UP band at $99.99. This figure seems affordable to most people unlike the case with Nike whom priced their product at $149.99. Perception in any area of business is more important than reality and Jawbone will make up the $50 difference between their band and Nikes by taking advantage of the importance of perception. The application that is needed for the Jawbone UP to be effective is free for consumers to download onto their smartphones, laptops, and ipads. Place: Distribution Jawbone has chosen a conventional distribution channel system. They have a manufacturer in China whom produces the bands. They use their website as well as retailers to sell to consumers. The Jawbone UP is offered at all Apple Stores, Best Buy Stores, Target Stores, and AT&T stores. Promotion: Marketing Jawbone did a fantastic job with their marketing campaign to drive a lot of buzz prior to the release of the UP band. With a combination of advertising and public relations Jawbone packed enough of a one two punch in order to not only sell out of their first production of bands but also to have the next production back ordered. Jawbone released a series of videos advertising the Jawbone UP via YouTube and the web. This created enough buzz to get writers to start talking about the UP band through blogs and media outlets. Word of mouth spread quickly and people could not wait for its release. Jawbone also has its own station on YouTube Page 8
that has many videos displaying their various products. Jawbone has also sponsored celebrities and artists such as Snoop Dogg and Wiz Khalifa. Jawbone will once again need to come up with a clever marketing campaign when the company chooses to re-release the next production of the UP band. The band is currently on hold due to the malfunctions it had experienced. The way they marketed the UP band prior to its release will be a great way to market the band again only this time the message will need to be different. The message prior to its release was Get UP, Eat UP, and Wake UP. Jawbone essentially showed the benefits that the band will provide to the user. The new message will need to display how Jawbone took responsibility and ownership of their faulty bands and did the right thing by refunding and replacing all bands. Now Jawbone will need to play to the public relations tone and begin to win over consumer trust once again. The consumer needs to realize that the bands will no longer malfunction. Positive reviews and positive articles will need to revive the Jawbone UP once again. If we do a simple Google search on Jawbone UP we will discover a lot negative feedback. It would be wise of Jawbone to contact these writers and offer them the first chance to try the new production of the UP bands that are no longer malfunctioning. Next Jawbone needs to continue to improve their application by listening to consumer feedback. Jawbone has also decided to appeal to corporations by offering discounts on bulk units. Jawbone wants to capture the corporate market by emphasizing health importance in the workplace. Jawbone has also had some corporations create some challenges via their application. For example GE has created a walk around the world challenge. The combination of users of the UP band will try to walk 24,873.6 miles which will be enough to walk around the world. Lastly Jawbone needs to continue to strengthen its relationship with its current UP band users. Jawbone is already building their customer loyalty by offering a loyalty membership club Page 9
that allows users to access to new and upcoming Jawbone products, contribute feedback and see it in action, and an opportunity to win prizes. The loyalty program is called Jawbone Insiders. The best sales team for any business is their customers. When customers wear the Jawbone UP they are marketing the product to other consumers for free. Competitive Advantage The Jawbone UP was released at the same time as the Fitbit. Not too long after the release of the UP and Fitbit did Nike come out with its Nike ID. The competitive advantage that Jawbone holds over the Fitbit and the Nike ID is that it was first to market and its marketing efforts were well received. The marketing team at Jawbone did a great job of marketing the Jawbone UP as we discussed in the Promotion section of this report. Jawbone also is doing a great job at bringing its users together to create a community of Jawbone UP users. The application plays into the social networking trend that we are witnessing right now. The users of the UP band can create their own profiles and create their own teams of people to conquer challenges. Jawbones sleep tracker and smart alarm give it another area of competitive advantage. The Nike ID does not yet have this technology in its band. The Fitbit does have this technology but the inconvenience of having to place the Fitbit into a wristband makes the Jawbone more appealing. The Jawbone UP s design also showcases the Jawbone team s creativity once again. Jawbone is known for its great design and engineer work and this again captures the attention of the user. Wearing the bracelet and making it a fashion statement gives Jawbone the advantage over the Fitbit. The Nike ID can also be worn but its design does not appeal well when making something look great and discrete. Page 10
Uncontrollable Variables The feedback that users write on their blogs or discuss with other people is something that no company can control. The reviews done by writers, analysts, and everyday consumers that are posted all over the internet again is something that no company can control. The most effective way of controlling the feedback received by consumers is working with your public relations department. It seems that Jawbone needed to act much more effectively when it was discovered that their bands were faulty. When the companies CEO decided to make his announcement about the bands, too much damage had been done. Market Segmentation It seems that Jawbone decided to market the UP band to males 25-45. Since the Jawbones release and the incorporation of various colors and sizes we can now say the segment has included females in the 25-45 age range. It also seems that Jawbone has decided to market to the everyday professional who possibly carry a college education as well. The reasoning behind this is the way they have priced their band, designed it, and incorporated it with an Apple iphone application. Buyer Behavior It does not seem that Jawbone focuses solely on a single culture, subculture, or social class. It seems that Jawbone markets to the opinion leaders, to certain lifestyle groups, and it plays to individual need recognitions. I ve stated this before, the health and fitness industry is ever expanding and the consumer is looking for new ways to get in shape. Carrying an electronic device that keeps a journal of our most essential information to stay healthy is the new innovative way of thinking health conscious. Page 11
Market Research The health and fitness industry is so vast that there is a lot of secondary data available to conduct market research for the UP band. Jawbone can then collect primary data from their current customers via surveys, focus groups, online research, and online focus groups. Jawbone already has a strong following so by offering chances to try the new UP band it was able to gather enough information on the market and its potential. Step counters have been around for quite some time now but with the evolution of the smart phone and the applications, it only made sense to create a device that can track more than just steps. Now consumers have an activity log that is interactive and can really be used to make smart every day decisions. International Market I believe that Jawbone needs to keep its focus on the United States for now. The malfunctions of the initial Jawbone UP bands will make it difficult for the company to expand into international markets. Once the situation here in the United States is under control this product would be great in expanding markets such as China, Brazil, and the already developed European market. Areas of Opportunity The design of the UP band is great in terms of fashion but it is difficult to change in and out of clothing while wearing the band. The rubber design gets caught in sleeves of clothing. I have to take the band off multiple times throughout the day and have nearly lost the band by forgetting to put it back on. Also while lifting weights the band gets in the way of certain exercises. The bands application should also incorporate some way to track weight lifting programs because some users are not only cardio conscious. I also have to admit that I have not used my band for the food journal. I find it tedious to take photos every time I eat and log a Page 12
journal. Also I do not see much value in the way the food journal gives you information. The Jawbone UP band should also incorporate GPS to log maps of places traveled. The GPS could benefit people who go on long bike rides and cardio runs. It is only a matter of time before smartphones can incorporate this type of technology. Jawbone will need to really cement themselves as the market dominant fitness tracker by changing their design and fixing their flaws. If they can t capture the market they will need to partner with a company such as Apple in order to incorporate this technology into iphones. Appendixes: Here we see how Jawbone has shown the combination of the iphone and its band in a simple print advertisement. Page 13
Here we can see how Jawbone used print advertising prior to launch. Here Jawbone displays the way the UP band can be a fashion trend with this Print Ad. Page 14
Here is a graph showing how the UP application graphs sleep, cardio work out, and a food log. Jawbone has tapped into the social networking trend by incorporating teams of people into its challenges via its UP application. Page 15
Again we can see how the application is a vital part of the Jawbone UP experience. Another example of the sleek marketing the Jawbone has done. Page 16
Finally we see how Jawbone marketed and advertised the refund offer for all of the UP s consumers. ***Please visit YouTube.com and search Jawbone Channel to view the Video Advertisements of Jawbone and all of its products*** Page 17
200 Perceptual Map 180 160 140 Nike ID 120 Price 100 80 Jawbone UP FitBit 1 2 1 60 40 20 0 0 0.5 1 1.5 2 2.5 Luxury Orientation Performance The Fitbit as we can see is priced competitively at $99.99. The reason I have it off toward the performance side of the map is because it does in fact have great performance and it does not market itself as a luxury item. The Nike ID as you can see is priced at $149.99 and is in the middle of luxury and performance. The Nike ID does have good performance and at its price range it gives the perception of luxury when compared to its competitors. Lastly the Jawbone UP is right below Nike because again when functioning properly the Jawbones performance is right there with the others. The marketing for Jawbone also gives the Jawbone UP a sense of luxury. Page 18
Works Cited Wikipedia. Jawbone (Headset). 15 Apr. 2012 http://en.wikipedia.org/wiki/jawbone_%28headset%29 Wikipedia. iphone. 15 Apr. 2012 http://en.wikipedia.org/wiki/apple_iphone Phillips, Jon. Jawbone explains UP wristband failures and offers full refunds Wired 9 Dec. 2011. 15 Apr. 2012 http://www.cnn.com/2011/12/09/tech/gaming-gadgets/jawbone-explains-up-failures/index.html MotionX. Homepage. 15 Apr. 2012 http://www.motionx.com/ Jawbone. Homepage. 15 Apr. 2012 http://www.jawbone.com/ Jawbone. Frequently Asked Questions. 15 Apr. 2012 http://jawbone.com/up/faqs#!show_faq_band_que17 Fitbit. Homepage. 16 Apr. 2012 http://www.fitbit.com/product/features Nike. Nike + Fuelband. 16 Apr. 2012 http://www.nike.com/fuelband/?sitesrc=uslp Ibisworld. Gym, Health & Fitness Clubs in the US: Market Research Report. 16 Apr. 2012 http://www.ibisworld.com/industry/default.aspx?indid=1655 IHRSA. Industry Research. 16 Apr. 2012 http://www.ihrsa.org/industry-research Page 19