eCoach Inc.
A Business Plan
Mobile Computing Systems and Applications
Carnegie-Mellon University
Executive Summary
This entrepreneurship opportunity is to provide both a product and a service to current commercial fitness centers. The product is to retrofit current commercial fitness centers with an electronic Coach (eCoach) that automatically records member exercise information and uses this information to interact with the user and to provide real-time audio feedback in order to help them reach their health goals more quickly and to enhance their overall fitness experience. All the exercise information is stored and accessed from a database through an off-the-shelf wired or wireless network. The motivation logic and coach profiles are downloaded from the server and processed in a computer embedded in the exercise machine—the eCoach. The users can access their personal exercise histories via the Internet, where the commercial gym can create an online community that provides fitness information, discussion groups moderated by professional fitness trainers, other products for sale, etc. The service is to install and maintain the eCoach electronics, the network, the server and the database. The web-site services will be sub-contracted by us. Once the system has proven effective, the eCoach will be transformed into a new product be fully integrated and reduced it to a compact form factor allowing it to be sold for household use.
The current market conditions are ripe for the introduction of the eCoach. Club memberships have been increasing, and consumer’s are becoming more health conscious and exercising more. Health Clubs report professional fitness trainers to be among the most profitable services they offer to their members. The eCoach is lower-cost alternative to consumers who would enjoy the luxury of a professional fitness trainer, but are not willing to pay the steep hourly wages. By including the eCoach, commercial fitness centers will be able to differentiate themselves from competition, and with a break-even point just after the first year of use, the fitness center will begin to realize profits very quickly.
The initial working prototype has been developed at Carnegie-Mellon University. eCoach Inc. is seeking $1 million of initial capital to continue developing and beginning manufacturing the product.
Product Description
Phase 1:
In the first phase, we establish the basic concepts of the system, network, and back-end server and database. The user only wears an identifying bracelet that the eCoach recognizes. Each exercise machine has an eCoach attached to it, which consists of a small computer, user interface, network connection, headphone jack, and accelerometer inputs. When the user uses the machine, the eCoach loads the user’s profile, which contains information such as their name, gender, weight, height, and age. The eCoach displays the user’s history, and preferred settings. Depending on the type of exercise, anaerobic or aerobic, the history contains information such as weight, number of repetitions, or exercise duration, distance, and calories burned.
Accelerometers are added onto each exercise machine, and the eCoach processes the information in order to detect and count each repetition out-load. For aerobic machines, the eCoach monitors the user’s heart rate via a Heart Rate Strap and modifies the playback rate of music accordingly. If the user’s heart rate is too slow, the playback rate is increased, motivating the user to speed up. Conversely, if their heart rate is too fast, the playback rate is reduced. When the exercise is complete, the eCoach records all exercise information to a database thereby allowing users to track their progress by viewing the information at the facility or via the Internet.
Since much of the work for this phase has been successfully completed by a team of graduate students at Carnegie Mellon University, the technical risk for this phase is moderate. The principal challenge here is to make the system robust and scalable to accommodate large gym sizes. Additionally, interference from wireless communications as the number of users increases will need to be addressed.
Phase 2:
The most interesting feature of the eCoach is the coach’s motivational logic, which will be included in the second phase of development. Depending on the user’s history, the eCoach can set new goals and interact with the user in various ways in order to motivate them to reach their goals. In this phase, we will develop several coach profiles (such as a militant sergeant or sexy female)
Another important feature is to inter-network the facilities such that members can access their profiles and history data from any gym. This will increase user mobility thus reducing disruption in their exercise routines when they relocate to another city, or simply when they are on vacation.
The final component to implement in this phase is to create an online community where users can share their progress and success stories through discussion boards and chat forums. By having professional trainers moderate the groups and answer questions, users can have a more active involvement.
The technical feasibility in this stage is reasonable. The motivational logic has been previously developed at Carnegie Mellon University. However, adapting the motivational logic to a large number of users will be challenging. In addition, as was observed by the team during initial field trials, we expect initial user resistance to the motivation provided. The distributed database and online community, however, are proven technologies and well within the technical capabilities of this engineering team.
Phase 3:
In the final phase, we plan to integrate the entire system (accelerometer sensors, coach profile, motivation logic, exercise logging, and variable-rate music feedback) into a mobile eCoach that can be easily worn on the back of one’s arm. This will allow the system to be used in the free-weight section of commercial gyms, outdoors, and most importantly, at one’s home. The mobile eCoach device will have enough battery and memory to last several workout sessions.
The technical risk of this phase is very high. The ability to fully integrate the entire system into a compact form factor is a difficult task. However, by partnering with companies such as Palm or HP, we can reduce the time to market for the mobile eCoach and improve its reliability and effectiveness.
The other technical risk lies in the use of the mobile eCoach with mischievous users. Recording repetitions for free weight exercises has been successfully demonstrated. We assume the user cooperates with the eCoach; otherwise the system will attempt to provide feedback to the user in order to help them correctly use the system.
Market
According to IHRSA/American Sports Data Health Club Trend Report, current membership to U.S. Health Clubs is increasing (Figure 1), and was 33.8 million as of Jan 2002. The total industry revenues for 2001 were $12.2 billion. In addition, according to the IHRSA trend report (Jan. 2003), “Clubs that reinvested the most also generated almost $70 more in revenue per member.” There is a strong incentive for commercial fitness gyms to reinvest in the facilities. By incorporating the eCoach, their memberships and profits will continue to grow.
Figure 1: U.S. Health Club Membership.
Source: IHRSA/American Sports Data Health Club Trend Report
According to a report conducted by the IHRSA, 50.5% of clubs responding to their survey reported that personal training was among the top 5 most profitable programs or services they offered. Members are interested in personal trainers because they provide knowledge, motivation, and confidence. The eCoach provides a low-cost alternative to one of the most profitable services health clubs offer. Like a personal trainer, the eCoach interacts and motivates the user to exercise in real-time. With professional personal trainers charging over $50/hour, members who would like to take advantage of the eCoach would willingly pay $25/month for unlimited access.
The recently enacted Workforce Health Improvement Program Act of 2003 states that employers can deduct the cost of health club memberships for their employees on a pre-tax basis. With such cost reductions, members will be more likely to pay higher membership prices to take advantage of the eCoach features.
Person Power Projection
Initially, a team of six engineers, two salesmen, one fitness trainer, one manager and three technicians would be needed. The engineers will work in three teams of two. The first team will develop the system into a compact form factor that can be easily adapted to any exercise machine. The second team will focus on the repetition counting and motivation logic. The third team will develop the back-end server and database. The fitness trainer will actively assist the engineers to ensure the eCoach provides effective motivation for the user.
The technicians will be responsible to install and test the system on-site. They will conduct the monthly services of the eCoach and ensure the system is always up and running. The salesmen will be responsible to find potential customers and have one or two of them try out the system. They will communicate the customer’s requirements and concerns to the engineers. They will work closely with the customer to ensure a smooth and satisfactory system installation.
The manager will be responsible to lead the team, ensure milestones are met, find potential business partners, as well as keep track of the competitive environment.
eCoach Cost
The cost model for the eCoach at a moderate size gym is shown in the following Tables.
With a selling price for the eCoach at $300, the fixed cost of retrofitting a facility with 75 exercise machines, including computers, network, web-site and installation is estimated at $42,500.
The yearly operating and maintenance cost of the system is estimated at $29500. This includes maintaining the servers, database, web-site, and technical support. A $20 monthly fee will be charged to service and support each eCoach installed. This will ensure correct and safe functionality as well as continuous upgrades and improvements to the system.
The eCoach membership usage price will be recommended at $25/month. Given a facility with 1200 members, where half of the “core” 1 members subscribe, we predict 246 eCoach subscribers providing additional revenue of $73,800.
Assuming a ROR of 15%, the eCoach system breaks even before the end of the 2nd year. The NPV of using the system for 5 years is $106,000.
Table 1: eCoach Fix ed Cost
Network / 7000
Website / 3000
eCoach/machine / 300
Number of Machines / 75
Total eCoach / 22500
Total Fixed Cost / 42500
Table 2: eCoach Operating Cost
month / yearComputers / 20000
Network / 4000
Website / 4000
eCoach/machine / 20
Number of Machines / 75
Total eCoach / 1500
Operating and Maintenance Cost / 29500
Table 3: eCoach Revenue
month / yearUsage / 25
Members / 1200
Core Members / 492
eCoach Members / 246
Subscription Revenue / 6150 / 73800
Table 4: Net Present Value
Fixed cost / 42500Cash Flow / 44300
ROR / 0.15
Year / 1 / 2 / 3 / 4 / 5
PV / 38,522 / 72,019 / 101,147 / 126,476 / 148,500
NPV / (3,978) / 29,519 / 58,647 / 83,976 / 106,000
[1]
Competition
BodyMedia / HealthWear Armband
BodyMedia develops and manufactures a wearable body monitor that provides continuous measurements of various biomedical sensors. This information, however, is only used during offline analysis. Adding an interactive coach requires the ability to create the mobile software, as well as include significant additional hardware.
The armband has a retail cost of $500, and works in conjunction with a Web site that accumulates information about diet, exercise and sleep, for a $50 monthly subscription.
SportBrain
The SportBrain is an electronic device that is attached to one’s waist. It is a passive pedometer and logs the user’s caloric expenditure. The information is uploaded to their website, which analyzes and displays the user’s progress graphically. In addition, the web-site creates a community where users interact with each other, creating an indirect source of motivation for its members to use their product.
The SportBrain’s advantage is that it has a proven product and an established community. Our main advantages are that we provide significantly more features, and real-time interaction with the user. In addition, the online community we establish can be more personalized since members of each facility live in a smaller geographic area and are more likely to know and trust each other.
The SportBrain costs $100, with a monthly fee to use the web-site portal of $15.
eCoach
The eCoach motivates a user to exercise by interacting with the user. Compared to other products on the market, it is the only that motivates the user in real-time. The price of the eCoach is very competitive. Amortized over the subscribers, the commercial gym incurs a cost per user of only $91, which is significantly less than the retail price of the BodyMedia armband.
The eCoach subscription of $25/month is competitive compared to the value of the SportBrain web portal ($15/month) and BodyMedia web site ($50/month). Whereas the SportBrain’s web service only tracks information based on caloric expenditure and the number of steps taking, the eCoach’s web service provides a complete view of the user’s entire exercise routine. The BodyMedia web service is priced higher, but offers more sophisticated medical feedback based on heart-rate, blood pressure, and other vital signs.
[1] Core members are those who use the facility 100+ days per year. In 2001, the number of core members as a percentage of total membership was 41%, up from 31% in 1987. Source: 2001 IHRSA/ASD Health Club Trend Report