Month: April 2018

Overview of Dragons Den Pitch

1.Introduction to the Team

 

2. Product/service

  • Fitness application to record and analysis personal sports data
  • Online sports community for competition and exercise

 

3. Problem&Solution

  • People are not persevering enough to keep exercising
  • “Carrot and Stick” model contributes to solving it

 

4. Market Opportunity

  • Fitness application is a rapidly increasing market
  • No companies take reward and punishment model to motivate people in the daily exercise

 

5. Business Model

  • “Carrot and Stick” model
  • Revenue is mainly from transaction fee and commission

 

6. Shareholders’ Value

  • 1 million pounds in 3 years
  • Get profits in the third years

What does the literature say about Carrot?

Carrot taps into several aspects of human motivation. In this post we will talk about three areas in which the academic literature supports Carrots design: competition, financial incentives, and the importance of community.

Competition

Burguillo (2010) introduced a concepts called Competition-based Learning (CnBL) which was applied to university courses. CnBL was added to courses in computer programming by adding competitive events as part of the course. Surveys given to students afterwards showed that the competitive element increased their motivation.

Carrot’s competitive aspects has the purpose demonstrated by Burguillo: to create motivation to achieve one’s goal. Competition has the ability to make a task which may feel like shore, such as doing coursework in a programming course or going for a run, and make it a more interesting activity. While friendly competition is a cornerstone in Carrot, there are other powerful motivations built into Carrot.

Financial incentive

Carrot’s betting aspect provides not only a framework for competition, but also a financial incentive to reach a goal.

The effects of financial incentive on exercise habits has been studied. Charness and Gneezy (2009) conducted a study where university students were offered incentives to go to the gym. The study had three groups. One group received no incentive to go to the gym. The second and third group was promised $25 one week later if they had attended the gym at least once in the interim. When the participants returned one week later the third group was promised $100 if they attended the gym at least 8 times the next 4 weeks. The results clearly showed that the financial incentives served to signifiantly increase gym attendance. Interestingly, this effect remained after the 5 weeks of the intervention. For Carrot this suggests that the chance of winning the race will help users to acheive their goal. It also means that winning encourages users to sign up for another race.

These results has been replicated by Aceland and Levy (2010) and Babcock and Hartman (2010). Babcock and Hartman also showed the effect of another important part of Carrot: the effect of having a community.

Community

Babcock and Hartman’s study started with documenting all participants’ social connections. Hence, they noted what participants knew other participants of the study. The participants were then randomly assigned to be offered an incentive or not. Their findings show that the participants who had friends that were also incentivised went to the gym significantly more often than the those who didn’t.

Similar results have been found in other studies. Resnick et al (2002) investigated the effects of social support on exercise habits in older adults. They found that social support affected exercise habits through self efficacy and outcome expectations.

For Carrot, these results suggest that the social aspect of a race is important. Carrot encourages people with similar goals to interact and create a community. These studies lets us think that even without the competative element, Carrot would still tap into the benefits of a social network when attempting to acheive fitness goals.

How is “Carrot and Stick” model different from gamble and online finance?

Why is it not gamble?

According to Gambling Act 2005 in the United Kindom, sports for reward is not gamble.

Gaming & game of chance

(1)In this Act “gaming” means playing a game of chance for a prize.

(2)In this Act “game of chance”—

(a)includes—

(i)a game that involves both an element of chance and an element of skill,

(ii)a game that involves an element of chance that can be eliminated by superlative skill, and

(iii)a game that is presented as involving an element of chance, but

(b)does not include a sport.

(3)For the purposes of this Act a person plays a game of chance if he participates in a game of chance—

(a)whether or not there are other participants in the game, and

(b)whether or not a computer generates images or data taken to represent the actions of other participants in the game.

(4)For the purposes of this Act a person plays a game of chance for a prize—

(a)if he plays a game of chance and thereby acquires a chance of winning a prize, and

(b)whether or not he risks losing anything at the game.

(5)In this Act “prize” in relation to gaming (except in the context of a gaming machine)—

(a)means money or money’s worth, and

(b)includes both a prize provided by a person organising gaming and winnings of money staked.

Why is it not online finance?

According to  Small Business, Enterprise and Employment Act the

finance provider means that a body corporate that:
(a) lends money or provides credit in the course of a business; or
(b) arranges or facilitates the provision of debt or equity finance in the course of a business; or
(c) provides, arranges or facilitates invoice discounting or factoring in the course of a business;
but, in accordance with regulation 2(2) of the Small and Medium Sized Business (Credit Information) Regulations, for the purposes of those Regulations it does not include a body corporate that provides credit only by providing goods or services before payment of part, or all of, the amount to be paid for such goods or services.
Although the platform will charge a little transaction fee in “Carrot and Stick” model, it is just service to cover platform maintain cost. There are no financial services(credit, loan, etc.) on this platform. As a result, it is not a platform involving financial activities.
To conclude, it Carrot is just a fitness application to motivate individuals to keep fitness and enjoy a healthy lifestyle.
Reference
Gambling Act 2005 2005 CHAPTER 19 http://www.legislation.gov.uk/ukpga/2005/19
Small Business, Enterprise and employment ACT 2015, FCA  https://www.handbook.fca.org.uk/handbook/glossary/?starts-with=F

Development Strategy

This is a million pounds profits business, its revenue could be up to 1 million pounds in 3 years.

Expected registrations and user conversion rates

Profit and Loss Projection (3 Years)

 

Start-up Stage
1. Financing Strategies

In start-up stage, the project needs fund for application development, platform maintain, overhead, employment cost, marketing campaign, etc. As there is not enough revenue to cover the operating cost at this stage, the project needs seeking seeds capital to start the business. In this stage, our targeting market is the UK

2. Profit Model

In the early stage, charging subscription fee is not a good idea. In this stage, the users are few, even you charge for them, you can get little revenue. What’s more, the subscription fee will enhance the joining threshold which would cause loss of users. Consequently, all services should be free in the early stage.Advertising would not be allowed at this stage because too much advertising will do damage to the user experience.

As the service fee,  the transaction fee in ” carrot and stick” model will be charged at this stage as well. The rate is 0.4%.

The online store is allowed at this stage as well. Healthy eating and drinkings related merchants, as well as wearable device manufactures, are welcomed to join in. We will charge them  for 8% commission of trading volume.

3. Market strategies

Digital marketing  strategy

Social media will be an effective tool for “Carrot” to communicate with customers and promote the application to the public. There are three platforms used to implement social media marketing, including Instagram, Facebook, and Twitter where the marketing team can post some brilliant video/pictures/articles which can disseminate the application well.

Furthermore, it also recommends implementing social media advertisements. Instagram allows business to put photo advertisements and video advertisements, so we can put attractive photos or videos that can be recommended to Instagram users. they can push messages and brand’s stories to the wider range of social media users according to customer behavior online. It will be efficient to reach our target audiences and communicate with them.

Growth Stage

1.Profits Model

The business is expected to get profits in the third year. The main revenue comes from the commission of online shopping and transaction fee.

With more and more users join this application the business value is gradually increasing. In this stage, we should make full use of data collected from users’ devices. The data could include intensity, time and frequency of sports, the sleep condition, etc. Based on these data, to some extent, we could know users’ partial health condition. And then recommend personality drinks and foods for them to improve their health.

App open screen and self-owned community media can accept commercial advertisements. Sponsors’ brand is also allowed to promote in matches sponsored by these companies.

2. Marketing Strategy

O2O Cooperation

Spots brand companies have a strong motivation to link their business to fitness application. It is a new channel to promote their clothes, shoes and wearable devices. We could cooperate with these companies. They could sponsor the sports match in reality. The reward will be offered by them and in order to broadcast their matches on fitness application. People will have good customer experience in the match which will also raise our brand image. .

We could also cooperate with gyms, we could introduce coaches online and open offline courses. The users could get discounts or enjoy better services in the physical gyms.

Cooperation of online and offline resources is a double-win marketing strategy. This will further enhance fans’ viscosity and complete a virtuous cycle.

Advertising

Social media will still be an effective tool in this stage, and more users participation will enlarge this effect. But at the same time, with increasing cash flow, we could also advertise on the billboard, video websites, etc.

3. Financing strategy

We should seek VC at this stage to expand our business to the whole UK and then all over the world. Although we will get more revenue at this stage, it is not enough to support expanding plan in the first three years, as a result, more fund is in demand in this stage. We have to compete with other similar application. We need to catch the market quickly to build customer stickiness to create barriers to entry this market because its business model is easy to copy.

Market Analysis

1.Market analysis

  • Increasing market size and value

According to Statista, the volume of the mobile fitness app market was $1.778bn in 2016, and it is expected to grow to $4.1bn in 2021. Thus, according to App Annie, the percentage of fitness apps in revenue was about 15% in 2016, and the share will be approximately 12% in 2021, which is not insignificant. Technavio’s market research report predicts that the global fitness app market will grow at a CAGR (Compound Annual Growth Rate) of above 29% during the forecast period.

  • Fierce competition in fitness application market.

The competition in the global fitness app market is higher with over 100,000 apps dedicated to mobile health, and the global fitness app market is largely driven by a blend of global economic momentum, sporting mega-events, and rising focus on healthcare.Key vendors in the market are:

Azumio, Fitbit, Jawbone, FitnessKeeper, Under Armour

Other prominent vendors include Adidas, Daily Workouts Apps, Fooducate, Google, My Diet Coach, Nike, Noom, Polar Electro, Runtastic, Samsung Electronics, Sports Tracking Technologies, and Wahoo Fitness.

  • Manufacturers of  smart wearable devices participation

Here are several famous profitable fitness apps

All of them are manufacturers of connected shoes, watches, bracelets, trackers or smart clothes. They have their application as well. These companies always have enough cash flow and lots of loyal customers to their brand. As a result, they have innate advantages compared to others. Despite the fact that manufacturers of wearable devices in volume than the fitness apps market, the pure fitness application is growing faster and is projected to catch up with the physical devices market in 2021. It means that non-manufacturers participators have many opportunities as well, but they should find a unique development path rather than compete with these companies face to face.

2. Market positioning

Fitness application is a large market, it’s segmented market include sleep tracking, sports tracking, nutrition recommendations, weight loss, home meditation, etc. Our application aims to encourage people to keep exercising. So it is in sports tracking segmented market. And based on data collected from users’ devices, our platform could offer the personalized suggestions about nutrition and training to users as well.

Our targeting users are people who want to keep fit but do not have strong enough perseverance. It is also designed for sports enthusiasts who what to find a kindred spirit.

Our business will start from the UK, and then the English-speaking world and then Europe, and the whole world. But we should make it clear that seeking healthy lifestyle is a fashion in developed countries, so our targeting market is these countries and individuals have demand for keeping fitness by doing sports.

3. Competitors Analysis

There are several similar sports tracking apps (are Nike+, Runkeeper, Garmin, Run with Map My Run, Endomondo, Cadence Trainer, Runtastic, miCoach, Codoon and Sports Tracker). Their products have similar design and functions.

  • Most of these apps allow multi-system and various brand wearable devices access. Some only allow Apple devices.
  • Most are designed for both amateur and professional participators.
  • Online community and offline sports competitions. People could join some online groups or clubs to train and race. People could also join offline challenges.
  • Activities mainly include running, bicycling, swimming, etc.
  • Some have reward function(usually sponsored by sports company) but no charge for users.
  • The similar track, record, and analysis function
  • The record could be shared to third-party social media or in the app
  • Advising, online store, and membership subscription are main profits model.

Our application will have these functions as well, but its most obvious feature is “carrot and stick” model. The reward and punishment model make it different from other application, its a new try to motivate people to keep exercising and have a healthy lifestyle.

4. Social / Ethical considerations

  • Social and cultural trend

There is a trend that people are more and more taking care of their health. However, people are easy to give up and keeping exercising is a hard thing. Competition on social media could be used to motivate people to do sports. Reward and punishment model contribute to solving this problem.

  • Gamble trend risk

Reward and punishment function, to some extent, might be regarded as lottery business by some people. Actually, according to related Act, it is not gamble. But since it is revolved in reward and loss of money, We should also set necessary rules about pledge limit and reward distribution, it should be fair and reasonable to make sure people’s attraction is doing sports for health rather than money.

  • Privacy protection

The healthy industry is with huge development potential in the big-data era, so data collected from wearable devices or other smart devices is important and has potential commercial value. As a result, it might be sold to healthy institutions or used by themselves without individuals’ permission. So related laws or regulation should be made to protect people’s privacy. Necessary technologies should also be used to protect users’ interest.

Profit Model Analysis

There are many profit models in fitness application start-ups:

Advertising-App open screen, home page banner cooperative topics, and self-owned community media can all accept commercial advertisements. Some accept content marketing in the application. There could be some products or service recommendation in articles about health. If the application has a social function, advertising is also allowed in the social community just like Facebook.

Value-added Service-Many applications have membership subscription service, if users want to enjoy more functions or services, they have pay to upgrade to membership. Some fitness application have online fitness course or online consulting service, if users want to enjoy these services, they have to pay for them.

Online store-Some manufacturers sell their smart wearable devices on the online store in their application. According to iResearch, the largest part of China’s current consumer spending on fitness is shoe accessories, which account for more than 70% of total expenditure on sports consumption, which is much higher than the expenditure on stadiums, membership fees, and private education fees.

The problem of advertising is that it may bother the users and damage customer experience. The irrelated and frequent advertisement is an ordeal to users’ patience.  It may cause the loss of users. The membership fee is not suitable for start-ups with the limited amount of users. We are not the manufacturer of wearable devices, so we don’t have the e-commercial gene. As a result, we should rethink these profit model and take a further excavation to them.

Our Profits model

 

Online store

Wearable devices such as shoes, clothes, watches, and bracelets could also be sold to users in the online shop. We are not manufacturers, but we could gather cost-effective products from all kinds of brands. In this way, our platform could be fairer and give more choices to customers.

Commercial Cooperation

Spots brand companies have a strong motivation to link their business to fitness application. It is a new channel to promote their clothes, shoes and wearable devices. We could cooperate with these companies. They could sponsor the sports match in reality. The reward will be offered by them and in order to broadcast their matches on fitness application,  they should pay for us to enlarge the public participation. This will benefit both sports companies and us. It is a double-win marketing strategy. We could also cooperate with gyms, we could introduce coaches online and open offline courses. They have to pay for us or cooperate with us if they want to expand their business. This will further enhance fans’ viscidity and complete a virtuous cycle.

Transaction fee

In “carrot and stick” model, we could charge 0.4 percent transaction fee from total amount pledge of a race. The percentage should be as low, if charging too much, it will be regarded as an exploitation tool which will have a bad impact on expanding the business. Furthermore, transaction fee model can make a huge contribution when the application has oceans of registers and users. At the early stage, the revenue from the transaction could be neglected since the amount is so little.

Advertising

If the advertisement is useful to users, users will have less antipathy. The application could collect users’ sports data from their wearable devices. These data could reflect users’ heart rate, exercise intensity, sports rhythm and even their blood pressure and quality sleep. These data have high business value. Based on user’s personalized data, our system could recommend related products.  For example, healthcare products, nourishment drinks or food.  Our platform will charge for advertising from these companies. We could give suggestions about eating-habits or training skills to users for free as well according to their sports data.

How does “carrot and stick” model work?

“Carrot and stick” model is the most obvious feature that makes Carrot different from other similar application. Carrot means rewards and stick means punishment. This is a creative idea to motivate people to keep exercising. Additionally, this function is not compulsive, users could use it and could refuse as well. It is flexible. This article will discuss how it works and what measures could be taken to make sure it does work.

How does “carrot and stick” work?

Every user could create a group in the application. Take running as an example. A runner could create a 5km running group and anyone can join this group. Group members could set a goal of every race in the group, for example, finishing 5km running in 30mins. Group creator sets the amount of money every group member should pledge before a race. And the amount could be discussed and decided by group members as well. After a race, people who finished 5km in 30mins will get the reward raised by all group members while people fail to finish the goal will lose their pledge. The reward will be equally distributed to all winners.

How to make people exercise for health rather than money?

The high reward will make people run for money rather than health. To avoid this, we should set rules about the upper limit of pledge and reward distribution. Everyone’s contribution should be less than 1 pound and maybe 20 pence is enough. What’s more, we should also be careful about the definition of the winner.  If winners are few, every winner will get more money while others will feel unfair. So we should set rules to enlarge the number of winners. Of course, we have a clear ranking, but the goal should be set lower which could make sure most people could finish the goal and win reward. There are rich statistical data about people’s average record. The system will regulate the upper goal based on sports data which will guarantee the group goal is general rather than professional. In this way, there will be less economic interest involved and every group member could have the chance to win and will lose less money if they fail to get the goal.

How to avoid cheat?

Since this model involves with pecuniary benefit, to get reward some people may cheat in the race(dog wearing devices, handshaking, etc.). As a result, there should be technologies measures to avoid these situations. Firstly, the Motion trail must display on your application vision based on GPS and anyone else in the same group with you will watch and supervise it. Secondly, your real-time speed will display on the application and the system could detect it. If it is above the normal level, it will be regarded as a cheat. And the cheater will lose their pledge in this race.

These rules and technologies cannot absolutely avoid cheat, but it could substantially guarantee a fair race and encourage people to keep exercise to seek a healthy lifestyle.

Privacy

Privacy will be a concern in any social network. The idea behind Carrot is that users share information about themselves in order to compete, motivate each other, and create a community. While the sharing of information is essential to the function of the network, we must carefully consider privacy concerns.

Blocking other members

It is important that the users have the ability to block other members. If the two people are in the same race, this means that the blocked user will not be able to see the data or posts of the blocking user.

Keeping precise location secret

Users will be able to give basic location information, such as country and city. However, data such as route when running or home address will be kept secret on the platform.

Informing users how their data will be used

The terms and conditions will make sure users understand that their data will be visible to other members of the race they are in. They will also have to give explicit consent when the app access their fitness tracker data.

Keeping data within the group

The user data regarding workouts and similar will only be accessible by other members of the group. It will not be freely available for anyone who is on the platform.

Not sharing data will third party

Carrot will not sell user data to third parties. This will be detailed in terms and conditions.

The technology behind the scenes

The idea behind Carrot is great, but is it technically feasible? This post will explain how Carrot will work behind the scenes.

iOS and Android

Carrot will come as both an Android and iOS app so that the most amount of people will be able to use it. Statistics show that over 99% of devices sold run either iOS or Android. The majority of devices world wide (85% in early 2017) run Android. However, in countries such as the UK and USA, the proportion of iOS users is higher; about half in the UK (ref).

Android and iOS apps require separate development, but because of the distribution of users of the two platforms, we consider it worth the effort to develop for both.

Importing data from health tracking devices

A central function for Carrot is that uploading data from health tracking devices is automatic. To make Carrot useful for as many users as possible, we will implement support for all the major fitness tracking devices.

Many fitness trackers offer web based APIs, or libraries, to help developers access data from the devices. However, both Apple and Google have made single tools which gathers data from a multitude of devices.

Apple offers HealthKit and Google offers Goolge Fit. Both support the majority of popular fitness trackers with the exception of Fitbit, which is supported for Google Fit, but not HealthKit. However, Fitbit offers a web based API, which we can use to download data on the iOS devices. Hence, in the Carrot Android app, we will use Google Fit, and in the iOS app we will use HealthKit and the Fitbit API.

Both Google Fit and HealthKit not only supports fitness devices, but also a number of fitness apps. Both also generate their own data, such as step counting. For Carrot, this means that users who does not own a separate fitness tracking device can use their smartphone for goals that are measured with steps, runs, etc.

Payments and betting

The element of financial risk and reward makes Carrot a light betting app.

Not Android, nor iOS, allow betting apps which handles payments and payouts in the app itself. However, both platforms allow apps that facilitate betting. This means that betting is allowed, as long as the app is free, and no money is transacted in the app.

For Carrot, this means that we will have to make a website where users can purchase Carrot credits, which are used to enter a race. Winning a race is rewarded in credits that can be redeemed on the website.

The website will use the Paypal API to handle the payments and payouts. The website will also be integrated with the app as much as possible. When the user wants to enter a race, the app will start the device web browser with the website. The user login with the same details on the website as the app, make their purchase, and when they return to the app their account has been credited and they can enter the race. When a user win, the app again starts the web browser with the website, and they can have their winnings payed out.

Backend

Carrot will have a backend server where all the data will be synced. The data gathered by the app will be uploaded to the server and distributed to the other users of the app. Hence, the timeline for a given race will contain the same data for all the members in the race.

The backend will also store all the necessary information about users, how many Carrot credits they possess, etc.