How Fitbit Is Staying a Step Ahead in the Race for Wearables

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The Fitbit Blaze
The Fitbit Blaze Credit: Fitbit
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Fitbit is stepping up its game.

In recent years, the maker of fitness-tracking devices has enjoyed the unmistakable advantage of being the first to market—many consumers even consider the brand a synonym for all products in the entire step-counting category. But now, as the company's market share has grown, the ubiquitous skinny wristbands have hatched a host of lookalike competitors. And a serious challenge is coming from Apple, which has added GPS to its iWatch and is preparing to release a new version with Nike+.

To maintain its share, Fitbit is updating its product mix with new features and offerings, and venturing into fresh advertising streams like this year's Super Bowl spot, Fitbit's first. Later this fall, the brand will be a first-time sponsor of the TCS New York City Marathon; it's also unveiling a new Adventures app to support the effort. In addition, Fitbit is switching up its marketing strategy by moving more creative in-house and searching for a new media agency.

Winning new customers from all steps of life is crucial to the brand's survival, said Tim Rosa, VP-global marketing at the 9-year-old company, which spent $78.6 million on measured media in the U.S. last year, a 228% increase over 2014, according to Ad Age's Datacenter.

"How do you appeal to someone's mother as well as their hipster millennial nephew?" asked Mr. Rosa. "It's doing the dance and finding that middle ground that everyone can relate to."

It hasn't all been an easy sprint for the brand, which generated $1.9 billion in sales in 2015, the same year it went public. In January, a group alleging inaccuracies in Fitbit's heart rate monitor filed a class action lawsuit, which is ongoing, against the tech company. And though Fitbit is making headway with its products -- last month, the company unveiled new versions of its existing trackers with bigger screens, waterproof straps and design injections from fashion hotshots like Public School and Tory Burch -- newcomers are catching up.

Though Fitbit still commanded an impressive 25% of the wearables market for the first quarter of the year, its market share is down from 33% in the year-earlier period, according to analysis from International Data Corp., which tracks worldwide wearable devices on a quarterly basis. This summer, retail brand Kate Spade announced it will sell its own fitness trackers, following similar declarations from the likes of Michael Kors. Even McDonald's has an activity band, though the Happy Meal device was recalled after kids complained about the flesh-scratching strap.

Experts say Fitbit has so far been able to maintain its edge in the more crowded market chiefly because most people are already on board and want to compete on the same platform with their peers.

"The fact that they were arguably the innovator in the space, and the combination of brand awareness, stronger products and impact of the network effect has differentiated them," said Nick McKay, an analyst at Wedbush Securities. He also noted Fitbit's accessible prices -- starting under $100, the product is cheaper than more lavish devices.

With fresh ad vehicles, like the Super Bowl spot introducing Fibit's higher-end Blaze tracker, Fitbit is upping its marketing spending as a percentage of overall revenue, according to Datacenter. Fitbit CEO James Park said on an August conference call that the brand is also investing more heavily in overseas marketing.

Last year, the firm dedicated 13% of its revenue to marketing, up from just 4.3% in 2012. Though Fitbit has worked with various agencies before, including San Francisco-based Argonaut on its Super Bowl debut, the brand decided about six months ago to build its own internal creative team. Called Fitbit Creative Lab, the 25-person group handles advertising, design and digital.

"We need people intimately close to R&D, product development, all of those internal pieces that help us succeed," said Mr. Rosa. "You have to see an opportunity, jump on it and move quickly."

The company also launched an informal media agency review earlier this year and has narrowed its selections to three contenders, Mr. Rosa added. He said Fitbit will announce its choice early next year.

Consumers should expect to see Fitbit's advertising reach skew younger in coming months with appearances on youth-oriented TV networks like MTV, as the brand strives to reach the largely untapped teen demographic. Fitbit research has found that younger customers appreciate the competitive aspect of its fitness challenges. The marketer should also reach new audiences through its NYC Marathon sponsorship, and new apps like Adventures, with which users race virtually in the Big Apple or on a hiking trail in Yosemite National Park.

"You're only as good as your last device and your last experience," said Ramon Llamas, research manager of wearables and mobile phones at IDC. "If you can make this appealing to a broader set of users, your future is that much more secure."