Frameworks and models

What’s The Big Whoop?

Laura Scholes
StoryHouse Creative

Over the past decade, the demand for wearable tech has been rising steadily, with no end in sight: analysts project the wearable tech market will grow from nearly $27 billion in 2019 to $64 billion by 2024.

While almost all of this revenue comes from the sale of the devices themselves, Boston-based Whoop is betting on a different business model: charge for the insights from their sensor-packed activity tracker (beloved by elite athletes), not the tracker itself.

But this isn’t the business model they started out with. At launch, they charged pro and collegiate sports teams between $1,000 and $2,000 per player to get the Whoop device, along with access to unprecedented levels of physical data and insights. But three years ago, they decided to do a 180° and dive into the consumer market. sat down (virtually) with Whoop Co-Founder and CTO, John Capodilupo and Chief Product Officer Ben Foster to talk about why they made the switch, and what they’ve learned from transitioning to a subscription business.

What was the big idea behind Whoop?

John Capodilupo: My co-founder, Will Ahmed, has been an athlete all his life, and when we met at Harvard, he was captain of the squash team. During college, Will started thinking that given all the time he was putting into his workouts, there should be something that could give him objective data about what was happening inside his body.

“Wearables” wasn’t even a word back then, so he did a ton of research, and before we even graduated (I’m the tech guy; studied astrophysics and computer science), we launched Whoop to answer that all-important question: What’s happening in your body the other 23 hours of the day you’re not exercising?

Who did you market to originally?

John Capodilupo: By the time we launched, there was a lot of noise in the consumer wearables space. FitBit had become ginormous and there were thousands of Kickstarters (most never saw the light of day). But we knew we had built a truly novel technology and analytics system that could help people better themselves and go beyond what these other wearables were claiming.

As a young startup, we couldn’t spend the millions and millions of consumer marketing dollars needed to breakthrough. So we decided to stick to our vision of creating a product to help the best athletes in the world get even better. We believed by selling to elite athletes and teams, we could use the brand validation and halo effect to enter the consumer market later.

So how did you know when it was time to make the switch from your launch business model to the consumer space? John Capodilupo: Though we were successful in the elite athlete market, it’s a very small one. We knew to expand our business, we needed a bigger reach. And more fundamentally, we believed that it shouldn’t just be the best athletes in the world getting this data. Everybody could benefit from knowing more about their own body, their own baselines, and their own physiology. Seeing the seemingly unstoppable growth in health and fitness, we decided to take the leap.

“We launched Whoop to answer that all-important question: What’s happening in your body the other 23 hours of the day you’re not exercising?”

— John Capodilupo, Co-Founder and CTO, Whoop

Did you change anything about the device itself when you went mainstream?

Ben Foster: The core of the product has remained the same, but we did change some of the data privacy aspects of the product to meet the needs of the consumer market. But the data we gather and the analytics we share is the same whether Whoop is on LeBron James’ wrist or the wrist of an average Joe.

So let’s talk about that all-important business decision: going from selling a high-ticket device and basically giving the data for free to charging a fairly sizable monthly subscription fee and giving the device for free. How hard was it to shift your business in this way?

John Capodilupo: To be honest, it was really difficult. We had to have a total shift in mindset for the company: from focusing on product release cycles to focusing on providing continuous value for the customer. There were a lot of other challenges, too, because we’re so unique: we had to construct the membership model from the ground up and everything had to be thought of in a brand new way because no one else was doing it like we were doing it.

Ben Foster: From a financial standpoint, it was a really difficult transition to go through as well, especially from a cash flow perspective. When you’re selling devices, you get paid for the whole retail cost upfront and that corresponds with your COGS a lot more closely. Moving from that to a subscription, you’re having to watch your revenue trail off into the future while you take on all those hard costs upfront. It makes sense once you get the flywheel turning, but that transition is really difficult.

How did you handle that transition until that flywheel was spinning at a speed where you could take a breath?

John Capodilupo: Before we made this decision, we saw that we had really strong engagement and retention numbers with our users. Daily use was extremely high, especially compared to other companies like FitBit. And even though it wasn’t a subscription service, we saw people using Whoop regularly even after 18 months and longer after getting it. We were really encouraged by what we saw, and so we made a bet on ourselves and worked to figure out the details of the membership program in order to make the transition as smooth as possible from a financial standpoint.

We also saw that transitioning to a recurring revenue business model would make us much more attractive to venture capitalists. After the crash in the wearable market—Jawbone and all these other companies going out of business—investors became very cautious about investing in hardware. But once we showed we could make this new business model work, a lot of investors got very interested in us because it looked a lot more familiar to them than the traditional hardware company.

It takes a lot of experimentation, money, and mistakes to shift your model to subscriptions, and we’ve seen that without buy-in from the top down, it’s hard to succeed. What was your experience?

John Capodilupo: When we decided to make the transition, we discussed it with the whole company—management, investors, staff—and got buy-in from everyone. It’s a tremendously huge undertaking; we had to bring in departments and teams we didn’t have before: finance, specialized teams for software, the subscription management tools, business analytics teams. It was a lot and having full buy-in was key. You call your subscribers “members.”

What’s your take on the importance of building a loyal “tribe”?

Ben Foster: We use membership to drive people to achieve their goals. We don’t just get revenue because we have a subscription model, we’re “allowed” to get subscription revenue because we deliver ongoing value. That changes the entire orientation for us. We invest in the product experience, and we invest in the services we’re providing to our members to ensure that they’re deriving improved value over time for the product they’ve bought. So to us, the Whoop product is the membership, not the device.

Subscription pricing is notoriously difficult. How did you decide how to set up your pricing when you launched into the consumer space?

Ben Foster: I don’t know that we’re ever really done with figuring out the optimal price points that make sense both for our customers and for our company. But we actually haven’t changed our pricing since we launched the subscription: it’s $30 a month with a six-month commitment for new members. If they’re willing to pay upfront for a year or more, they’ll get a discount. But we continue to experiment with different pricing strategies. And we’re probably like a lot of other companies; we have to feel around for the appropriate pricing.

How important has customer data and customer feedback been in the evolution of Whoop since you went to a subscription model?

Ben Foster: Securing the privacy of our members’ data is our first and foremost concern. That said, the data is critical for helping inform our product development strategy and find ways to enhance the value of membership.

John Capodilupo: One of the things we’re really excited to be investing in is the ability to proactively coach our members based on the data our coaches are seeing. For example, a coach might analyze a member’s sleep data and recommend melatonin. This kind of thing gets to the heart of what’s special about our subscription model. We really care about the long-term engagement with our customers and the results they get from our product. And we’re willing to make those investments to ensure our customers get the best possible experience, even if it costs us more. We know it’s beneficial to our customers, and so we both win.

“We use membership to drive people to achieve their goals. We don’t just get revenue because we have a subscription model, we’re “allowed” to get subscription revenue because we deliver ongoing value.”

— Ben Foster, Chief Product Officer, Whoop