Subscriptions that Combine Hardware and Software with Ben Foster, Chief Product Officer of WHOOP

The first wave of the membership economy was mostly digital software, content and services but increasingly, we’re seeing subscriptions around physical products. There are all kinds of new challenges when manufacturing comes into play especially with the pricing model. Many companies are selling a physical product and then offering subscriptions on top of that. Examples include Peloton, where much of the value is in the subscription but also with products like Tile, Ring and Tesla, where the subscription is truly optional.

One company that’s getting a lot of attention for its innovative model is WHOOP. They offer a subscription-based service combining a wearable fitness tracker with software to achieve its mission of unlocking human performance. I’m talking to WHOOP’s Chief Product Officer Ben Foster. He has written the book on product management, along with his co-author Rajesh Nerlikar, Build What Matters: Delivering Key Outcomes With Vision Led Product Management. In this wide-ranging conversation. Ben and I discussed the best metrics for tracking customer value, the unique challenges of a subscription that includes hardware and software and why scrappiness is a key attribute of the best product managers.

The following interview is adapted from my podcast, Subscription Stories: True Tales from the Trenches.

Robbie Baxter: You’re a longtime product manager, almost a product manager’s product manager. You’ve worked on so many products, not just WHOOP that where you are but eBay, Adchemy, Webvan, Opower, Zoosk and Higher Logic. I’m wondering, with all those experiences, what do you think makes an excellent product manager? Let’s start there.

Moving to a subscription model is really more of gamble on yourself so that your customers don’t have to gamble on you instead. — Ben Foster, WHOOP

Ben Foster: I would say that the role of product management is making the product successful in the market. Embedded in that is understanding who your market is and how you can be innovative with thinking about new products and technologies that can be used to solve customer problems in brand new ways. Find a way to make it work.

There are always going to be things that get in the way. Scrappiness is important for a great product manager. It’s those combinations of being innovative and creative, being focused on who the customer is and what problems you’re trying to solve and being scrappy so you can deal with the issues that you’re going to run into along the way.

Robbie Baxter: Scrappiness is not usually on a job description but you’re right. I’ve found that a lot of times, product management teams might be under-resourced or be given outsized expectations of everything that isn’t being handled by someone else but that is critical to the product’s success. Scrappiness is an important word.

Ben Foster: It doesn’t go away as you get more senior. Sometimes, it forces you to be even more that way.

Robbie Baxter: You wrote a book on this topic, Build What Matters: Delivering Key Outcomes With Vision Led Product Management. Did you talk about scrappiness there?

Ben Foster: We talk about product leadership, how you have to have this discipline and focus around customer outcomes, customer concerns and stay true to a vision that you have. We also talk in the third part of the book about the real world. It’s easy to call or talk about the theory of, “It’d be great if we had this vision and we can go realize this vision.” The reality is business challenges get in the way. You run out of funding as a startup, you’ve got to appease investors at the right stage or there’s a big competitor that gets into your way.

The way that I think about those things fitting together is on the one hand. You want to have this vision-led approach, where you can say, “Here’s the problem that we’re focused on trying to solve for our customers.” You stay true to that and adhere to it. At the same time, you have a buffer built into the system and a willingness to change course as you need to about the best way of arriving there.

Maybe separate Google Maps versus Waze, if you think about the ways that you might use those two different products. Google Maps is good for saying, “You got a big long road trip in front of you. What is the general path that you’re going to take?” It doesn’t necessarily mean that you need to take the exact turn-by-turn directions that were programmed out of your computer before you started upon a one-day trip.

You might use Waze in the real moment when you go through a city, closed road or traffic. The reality is you’re always having to react to the situation. It doesn’t mean that you’re changing your destination. The key to this is that you stay true to your vision about what it is that you’re trying to solve for your customers but that is where that scrappiness comes in even at the most senior levels of product.

Robbie Baxter: I like the Waze and Google Maps analogy so much because it conveys the tension. A lot of themes feel between, “I have this vision and forever promise that I’m making to my customers. I’m very committed to that but also, I have to hit this number this quarter or somebody went on leave and I don’t have enough staff to do exactly what I want to do. I have to make a compromise.” What is great about the way you described that is that even though, at the moment, you might have to take a detour, you’ve always got your eyes on the destination. You don’t necessarily change direction because there’s a boulder in front of you. You make your way around it and keep going.

Ben Foster: If you’ve got to take a side step or you’re taking a side step that’s helping you to get to where you need to go or you are taking a side step that is impeding your progress. Will you look back on this and say that was helpful or not? That’s where that vision can play an important role.

Robbie Baxter: After many years of being an advisor to a whole portfolio of organizations, which sounds like a lot of fun, you decided to take a full-time role at one of those organizations, which is WHOOP. Can you talk a little bit about WHOOP? What it was about that particular organization that made you say, “Maybe I’m going to jump back into the fray and run product again.”

Ben Foster: It’s such an amazing company that has such an amazing brand and promise around what it can do for customers. Interesting part one was the actual impact that we can have on customers to help them to be successful in their own lives with their health and fitness. Back in the day, when I had been an advisor to WHOOP, that was the time that the company hadn’t yet adopted the subscription model.

We were out there selling devices, people were buying them and they were utilizing them but the company never got an enormous amount of traction with that model. In the intervening years, it had switched to that subscription model. The business was taking off. As a result of that, the company decided to invest much more heavily in the product, technology, user experience and things like that in such a way that it became a compelling and interesting, exciting challenge for me to go pursue as a leader of the product myself.

Robbie Baxter: Originally, you bought the hardware, wearable bracelet, the tracking device and then you had access to an app that helped you track your health, recovery time and a bunch of different biometrics. What was the thinking as the company moved from that to subscribe, get the hardware and software as part of your ongoing subscription?

Ben Foster: If you rewind the clock to those years and look at the wearable space, there was a dominant player at the time, which was Fitbit. It laid a lot of the groundwork for the wearables industry and they did make a normal, commonplace thing to do to wear a device like that, which wasn’t the case before that. At the time, you had an explosion of a bunch of different competitors that were out there that were all building devices because they had seen a successful model around that. It became interesting to the general consumer to wear something like that and monitor their health track, steps and things along those lines.

What was interesting about WHOOP was they came in at the tip-top of the market. In other words, it was the most advanced wearable out there. It tracked 100 data points up across several different dimensions per second, which a lot of other devices never do anything like that. The actual technical complexity of the product drove the price to be relatively high.

At a time when Fitbit was out there selling for $100 or $60 and things like that, WHOOP was coming in and trying to sell a device that was at the time priced at $500. What happened was you naturally found that it was those very elite athletes and things like that that wanted to buy the product at the time because of the price point. It was almost the price point that dictated the market rather than saying, “This is the market we want to go after. How do we price the product to go make that work for them?”

You don’t get recurring revenue because you switched to a subscription model. You get recurring revenue because you deliver recurring value to your customers. — Ben Foster, WHOOP

That was the transition where we, as a company, had realized that given the impact that we knew that we could have on a more broad-based customer segment that was going to include but not be limited to those elite athletes. We could provide that same technology as long as we could price it in such a way that it worked for them and worked for the company at the same time.

The clear direction that was going to work in that case was moving to a subscription model so that the cost of entry wasn’t high and you could get started for as little as $30 upfront. At the same time, there was revenue potential for the company, as long as people were realizing the value of the product that they wanted to continue to pay for it month after month.

Robbie Baxter: If I were going to summarize what you were saying, we had confidence that once somebody tried it, they would love it and stay engaged. They would get good value but the biggest challenge to the model was getting them into the market and trying it because of that $500 or so hardware purchase. A lot of people think of WHOOP, especially people who’ve been using WHOOP for a while, that it’s an elite athlete product. It sounds like you’re saying that your vision for it is much broader than that elite community.

Ben Foster: It’s already the case. When we are checking with our customers, we survey them and learn more about who they are, we realized that the majority of our customers are people who wouldn’t get that all class but themselves as being elite athletes. They are people who are motivated, interested and unlocking human performance.

Human performance, we’ve come to realize, has a wide array of different kinds of definite definitions for different people. It’s a product that can be highly personalized and customized to the things that you’re trying to accomplish. For some people, their goal is to shave 10 seconds off their 1-mile time and for other people, their goal is to shave 10 pounds off the scale. You see a wide variety of different interests that people have. People want to live ten years longer especially in the wake of COVID and things like that.

There are a lot of people who are starting to pay attention to their health, the way that they’re sleeping and recovering, things like that. They want to have the right kinds of monitoring tools that help them to live the best possible life that they can. That applies both to athletes and anybody else who cares about their overall performance whether that’s their performance in their job and goals in their lives as parents, spouses or anything like that. They want to do their best and WHOOP is a great product for that.

To make it appealing for that broader group of people and make it something that they could afford and something that was going to work for them, that moved to a subscription model was important. Robbie, you had touched on something in here that was important but I want to double down on, which is that I’ve heard a lot of people reach out to me and say, “It’s great that WHOOP moved to a subscription model because that’s why you get recurring revenue.”

I’ve corrected them in those cases to say, “It enabled us to get recurring revenue but it’s not what drives recurring revenue.” You’re picking a big bet when you do this. You switch to a recurring revenue model but that means that what if the product doesn’t work for them? It means they’re not paying us $500 upfront. They’re paying us $30 upfront. What happens if it doesn’t accomplish what they’re looking for? We’re the ones that are out in that case.

Moving to a subscription model is more of a gamble on yourself so that your customers don’t have to gamble on you instead. That, to me, was a big takeaway at the time that I was joining the company to realize what this means is that we get to invest in what the value proposition is for our customers because the more valuable they find the product to be, the more profitable we’re going to be as a business. Other companies have to make those hard trade-offs.

Do I want to invest in things that give me more profitability for myself or do I want to invest in those things that increase the value proposition of the company? Those two things are the same for a subscription-based company. One of the great powers of being a company like that is that you don’t have to make that trade-off. Every time you put $1 in one direction or another, it’s not compromising what the dollar could have otherwise been spent either helping the company and the shareholder or the customer. That dollar increases both.

Robbie Baxter: A lot of organizations that are moving to subscription models don’t fully understand that this is taking a huge risk. Enough to say they bought the device and if they never use it, if they wear it as a bracelet, that’s their problem. Not my problem. If they use it as a bracelet, they’re going to cancel their subscription.

Define what success looks like purely from your customer’s vantage point. — Ben Foster, WHOOP

In your case, there are pretty high variable costs with each new subscriber, the hardware. I have a couple of questions. One of them is how did you build up the confidence to take that risk? Did you already know how people were using the product once they bought it, that they were falling in love and that they were using it every day? Did you have some data? Was it anecdotal? Did you experiment in a small area? How did you make that transition to subscription for the complete offer?

Ben Foster: We had plenty of data available that indicated to us that this was going to be likely a successful move. You never know until you do it. It was a bet the farm moment for the company to make that transition, simply because of cashflow implications. What happens if you send all these devices out into the world and don’t get people paying for a recurring subscription? You’re out that money.

When you’re a smaller-scale startup, it can be a threatening proposition. We had a lot of data that suggested that it was going to be effective because we had net promoter scores from our customers. They were high. We knew that people enjoyed the product and they were getting a lot of value from it. You can run a survey, which is a product-market fit survey question. What would be the impact to you if you no longer had access to this product?

Depending on how painful it would be to lose it, they tell you how loyal your customers are. We had that data. We had data around usage metrics of specific features, and we can see that there were people who never missed a beat. 365 straight days, in their 1st year they would check their recovery score every single morning.

What makes you think that they’re not going to do if you change the pricing model? If you see that’s how people are naturally behaving with your product, it gives you a lot more confidence that this is the move that you’re willing to make. It is the case that you don’t get recurring revenue because you switched to a subscription model. You get recurring revenue because you make that switch and because you deliver recurring value to your customers. The metric that we needed to see was that there was a lot of triangulation to imply that we were delivering a lot of value for our customers.

Robbie Baxter: When you were talking about your book and some of the key ideas, you talk about focusing on outcomes with your customer. When you were talking about WHOOP in a more general audience, you were saying, “Some of them want to shave 10 seconds off their mile time and others want to shave 10 pounds off the scale.” Lots of different ways that your customers and subscribers would measure the value that they’ve gained from you. You mentioned the net promoter score. You talked about that Sean Ellis question around product-market fit. Are there other metrics that you use to try to assess how well you’re delivering on the expected outcomes for your subscribers?

Ben Foster: There are a few of them that are out there. One of them is a class of metrics that probably varies a lot from company to company. What we’ve tried to do is looked at feature engagement on a daily or a very consistent basis. You’ll get that at different levels of consistency. People who do this one thing versus never do it at all or people who do this one thing but they do it every single day versus the people who don’t do it every single day. Depending on the products and on how you expect it to be engaged with, it might be very different than a B2B SaaS company or a non-tech company that’s out there as well.

I don’t think that Taco Bell should be deciding whether somebody is enjoying tacos because they only eat there every single day out of 31 days. That’s probably not the right metric to use. Are they going once a week or once a month? Maybe that’s an indication as to whether that’s the right engagement that they’re looking for.

For us because of the nature of our product, which is giving you metrics every single morning about the quality of your sleep and the level of recovery that you have, it’s actionable during the day to understand what level of strain you should take on that day, we look at daily active user engagement metrics. We don’t just look at the wearing of the device, the opening of the app on your phone or the number of times per day that it’s open. We look at the engagement with specific features that we know are differentiated in the market.

Do you view the breakdown of your sleep to better understand how you slept throughout a given night? Do you, when you start a workout, open first to try to see what level of workout would be appropriate for you given the level of rest that your body has. These are differentiated features that we know are valuable and things that you wouldn’t want to have to give up if you were to lose your subscription. We pay attention to those kinds of metrics and look at how people are adopting those. We try to measure the impact of the changes that we make on the product to see whether they’re moving those metrics in the right direction, yes or no. That’s one class of metrics.

The other one is to see whether people are excited about the product. It’s one thing to see their NPS score, which is the question of how likely would you be to refer this product to a friend, colleague, which people can read on a 0 to 10 scale. The other thing is to see what they do. Are they referring their friends?

We look at the percentage of our customers who are referring their friends, how many people they’re referring whether those referrals are yielding new customers. For products that can grow virally, it’s a good metric to pay attention to. Generally speaking, you’re not going to get a referral from somebody who themselves is not satisfied with the product.

Robbie Baxter: Knowing which features are differentiated and drive value for your most engaged subscribers is important to understand. Ensuring that new subscribers are also using those features, saying, “This is how you get value from this product. If you’re not using them, you’re less likely to be getting value and more likely to leave.”

That’s something that every organization needs to figure out for themselves, which features are key. Sometimes those features aren’t what I think of as acquisition or headline benefit features. The ones that you talked about, you might not be able to explain that in a landing page or an end cap. Once somebody uses it, they’re like, “This is the thing that is valuable to me.”

Ben Foster: Those differentiated features for the adoption of your product and deriving a value, once you already are a customer. The way that you need to think about the subscription business is that you’re not just selling somebody initially. Every single month or year that goes by, whatever the billing frequency is for your product, you’re reselling the product every single time. You’re trying to convince them not to stop paying you for the value that you’re delivering. Keep that in mind what that forever transaction looks like.

The other thing that I would encourage companies to take a look at when they’re trying to identify which of those few features are that matter is not just those things that are highly differentiated or valuable for a subscription but look at those things that correlate most closely with retention. You might look at a feature and say, “We think that this is high value.”

Your market isn’t your market. Your market is a collection of individual customers that all have their own individual needs. — Ben Foster, WHOOP

If at the end of the day, people who use it or don’t use it either way, are either more or less likely to retain you as a customer then it’s an indication that maybe even though you think it’s valuable and differentiated. It’s not showing up in the numbers that way. I encourage people to look for that correlation between retention and feature adoption, choose those features that are the most correlated and say, “Those are the ones that we’re trying to drive people towards.”

Robbie Baxter: Designing for retention is interesting. I had as a guest Bob Baxley, a product designer who has worked at Apple and designed at ThoughtSpot and Pinterest as well. One of the things he said is, “When you build a subscription product, it has to market itself.” The marketing spends almost inside the product as opposed to outside the product, which I found helpful in terms of thinking about the difference in product design and product management for a subscription-based business. You talk about long-term value creation. What is that? How should one think about measuring it in long-term value?

Ben Foster: We talked a lot about feature engagement and adoption. Do people choose to set their workouts based on recommendations that come from the product? Did they choose to go to bed at the time that is recommended from the root product based on what we’ve learned about the third day? It’s good to see that they’re using the product regularly. I’ll separate that from things that are not tied to individual features but are more tied to the goals that your customers have at the outset.

We talked about some of the goals that people might have in terms of trying to lose weight. They’re trying to live longer or have better objective performance measures in their athletic endeavors. There is a whole variety of different things that people are looking to try to get from WHOOP and at the end of the day, we try to measure are they getting it.

The great thing is these things are highly measurable. If they want to live longer, we know that resting heart rate is inversely correlated with longevity. The lower your resting heart rate is, the fewer heart heartbeats you have to have to pump the same amount of blood through your veins because your heart is that much stronger. Strong heart, long life. We all know that. We try to measure the impact that we have on the resting heart rate for our members for 6 to 12 months.

If we’re seeing people getting stronger and healthier then we know that we’re doing our job. If people are getting twenty more minutes of sleep, which is what we see from our members on average, when they use a WHOOP, that is a meaningful impact that’s going to help them to have better mental and physical health. Those are the things that we try to look at.

I built out a feature. You adopt the feature. I’m measuring the success of that. Is that feature driving towards the long-term value for your customers that you’re trying to get? I try to encourage every company and I talked about this a lot in Build What Matters, to identify not just the key outcomes that you look for yourself as a business, revenue, total addressable market, growth rates, things like that but to define what success looks like purely from your customer’s vantage point.

What does it look like to them? How would they measure the impact? How would they talk to a friend about why they love the product so much? It shouldn’t be because of specific features and things like that. It should be because of the actual outcomes in their own lives that they’re looking to improve in a B2B world where the outcomes that business could improve in terms of maybe the relationships that they have with their customers.

Whatever customer it is that you’re trying to serve, try to get into their head and think about how would they think about the success of this and measure the impact that you have with your product by whether you’re driving those outcomes. If you do a great job there, it’ll make it so much easier for you to realize great business outcomes for yourself as well.

Sometimes you need to go around obstacles that you run into, and sometimes you need to change direction and sometimes you need to work through them. — Ben Foster, WHOOP

Robbie Baxter: What is it that they expect from you? “I continue paying WHOOP $30 a month or whatever the price is in exchange for the fact that they helped me understand how I’m doing so that I can maximize my potential. They understand my situation and advise me. For that reason, I continue to stay with them.” Something also important for people to keep in mind when it comes to the product is the product has to keep changing to continue to deliver on that promise in the best way possible.

I’ve had another guest on the show, in the world of news, where young people aren’t subscribing to newspapers the way their parents did. Journalists and publishers are getting more sophisticated about this, but they used to say, “That’s because young people don’t read. Young people don’t care about understanding the world around them.” It is not true at all.

A newspaper promises to help you understand the world around you so you can make better decisions and feel more confident. What they’re seeing is, “I no longer find that a newspaper is the best way of delivering on that promise.” A lot of longstanding companies that have been successful fall into the trap of they create their initial product or experience around a real promise and this is the best way I’m delivering on this promise but then they stop iterating on the product. They fall in love with their product. They start looking at their product metrics, which is a circular argument and somebody else comes up with a better way of solving the problem and you lose your customers to something that you never saw coming.

WHOOP is a very ambitious company with an ambitious goal. Unlocking human potential is no joke. Do you have systems in place to continue to take a step back and say, “This wearable device or this set of metrics is this the best way to deliver on human potential?” Are there things that we should be thinking about incorporating into our subscription that is not necessarily the core skills we have?

Ben Foster: In the metrics that I described, resting and heart rate variability improvements, all metrics are out there or biomarkers. The good news is we’re working in a space where it’s quite easy to measure those things and our device naturally measures them on its own. We don’t have to go through a bunch of rigorous surveys and things like that to find out whether our customers are getting those benefits. We can see it directly within the data itself, which is nice.

A lot of other companies don’t necessarily have that benefit. How would a newspaper try to research whether they’re helping people to better understand the world around them? That seems a more difficult challenge. It’s solvable. I’ve never yet run into a company that couldn’t somehow solve this problem by doing the right customer research and building the right mechanics and metrics around it but for us, it’s relatively easy to do that at WHOOP.

The key here is focused, which is not letting yourself fall into the trap. You build a product as a solution to a problem. You can operate in the problem space or the solution space. Your product is a solution to a problem that you’re trying to address in the market. What happens is you can be successful to the point that you start to mix up those two things. You measure the success of your solution as opposed to measuring whether you’re impacting the problem that you’re trying to solve for your customers.

I love the way you phrase that when it comes to the newspaper. It’s not about how many pages did you read or things like that. You get into Twitter. There are no pages. You’ve built the metrics and the whole model for how you measure and interpret your success around yourself instead of around your customer.

The key is that you never lose sight of the customer presentation on that. It comes back to how would your customers measure impact. One of the things that’s interesting here is that it also evolves. The customer’s expectations change over time and often especially if you’re a startup, you may find that you get product-market fit and get success with a particular group of customers.

What I’ve found to be the case is that while people talk about product-market fit as this binary outcome either you have it or you don’t, the reality is it’s never quite as black and white as that. What happens is there is a core group of customers for whom you are the right product and you do fit into the problem that they’re trying to solve.

As soon as you get that success, what do you start to do as a company? You start to say, “How do I take the show on the road? How do I extend my market?” As you expand your market, you get people that are further on the periphery of what used to be that central target customer. Your product-market fit maybe isn’t as good for them as it was for that core customer in the beginning.

As you try to go solve problems for those other customers who might describe their problem in slightly different ways than that core customer, you may realize that you lack product-market fit. Even as you solve it for them, you might dilute the quality of the experience that you create for the original core customer.

The reality is these things are always moving around a little bit. It’s important to always orient yourself around the customer needs and to be willing to go the extra mile to break down who the different customers are into personas and segments. Try to understand at a great level of depth that your market isn’t your market. Your market is a collection of individual customers. They all have their individual needs. You got to talk to a lot of them to try to understand what’s common and what’s different across those customers.

Robbie Baxter: Product-market fit is a non-binary metric that’s very important. It’s especially true with subscription-based businesses because not only you are thinking about new segments and new people that you’re trying to reach but also the people that are your longtime subscribers, their needs change over time. Sometimes you can be lulled into a sense of false confidence because of inertia.

Once I’ve decided how I’m going to solve a particular, especially with a subscription, I’m less likely to go looking for other solutions. If I read one newspaper, I’m less likely to be looking for other newspapers to subscribe to you but for the new people, even if they fit the target market, they’re still in consumer mode. You must continue to evolve the offering over time for people as they grow and for new people as they come in.

Ben Foster: Consumer expectations have shifted. When I buy a product that is tech-enabled with software and things like that, I have an expectation upfront that the software is going to continue to improve over time, which is interesting. You bought a car and thought, “The car that I bought works the way that it works. If I ever wanted to get a different car or I wanted upgrades to that car, I’d have to go buy another car. I’m locked into what I have.” Products through technology have become so much more dynamic in this world.

Somebody buys a WHOOP subscription and they don’t expect that they see the features that they see upfront but there are also a set of expectations that they have that it’s going to be an even better subscription down the road. By not investing in your product and improving upon it, not only are you not realizing the possibilities you have to increase your retention, get better customer engagement and things like that.

You’re missing the mark and on a core expectation, the customer has for your product from the outset, which is that it’s going to continue as they improve and evolve. Consider a Tesla as a car. It used to be the case, you had these physical buttons for listening to music on a car and then you have this touch screen. As new music services and things like that come out there, I expect as a Tesla owner that they will integrate with those other music subscription offerings.

I expect it to be up to date all the time. If it’s not, it’s a deficient product
. It requires us to rethink the role that R&D plays in a company, not just in creating the next version of a product but in satisfying the upfront expectations that the customer has and from the onset. If you don’t meet those things in a subscription business, you’re likely to lose that customer over time.

Robbie Baxter: WHOOP was the first hardware-software combo product that you’ve worked on. How is that different when you’re thinking about the product when there’s a whole hardware team with something that is probably harder to change? The software world is more fast-paced. You’re continually improving the offering. It’s harder to continually improve the hardware. How does that change the role of product lead, particularly in this world of subscriptions where people are expecting it to be current, great and to some extent limited by the hardware that the person is wearing?

Ben Foster: There are a couple of things. One of them is we strive to hold and stay true to our vision of a dynamic product experience that what you’re paying for is not the hardware. You’re paying for a subscription, coaching, guidance, feedback and information that’s provided to you to help you unlock your game and performance. If that requires software updates, we’ll provide those software updates. If that requires hardware updates, we will provide those hardware updates.

A good example of this that is unique to WHOOP is that we launched our WHOOP 4.0 device. We didn’t say, “It’s there. Here are all the things that are great about it. It’s up for sale.” If anybody who’s an existing customer wants to upgrade, they can pay us X amount of money to go get it. We said, “As long as you’re a WHOOP subscriber and you have a future of your subscription and WHOOP of six months or more, we’re going to send you one for free.” That’s part of the promise and set of expectations.

People don’t want a device that tracks certain things. New sensors come out and new technologies are available to help them better understand their bodies. They were WHOOP subscribers so somehow they fall behind? No. It’s supposed to be the exact opposite. They’re supposed to stay ahead of the game. We must innovate on our customer’s behalf and make sure that their subscription is always staying up to date and current with the latest capabilities, trends and things like that.

We try to apply that in both the hardware sense and the software sense because we see our subscription as being something that’s an umbrella that spans across both. That’s the value of a WHOOP membership that you’re paying for. It includes but is not limited to the device itself. The interesting thing is we’ve stayed true to that. There are a lot of other hardware companies that have a subscription component but if you ever want to upgrade the hardware, you’re on your own. That’s your problem.

I’ve got all these subscriptions for things but still, at the same time, you have to replace the hardware itself on my dime. That’s to say that the subscription is only layered on top of the device, as opposed to the device being embedded as part of that. We thought that was the better approach. On the one hand, a lot of companies think that it forces you to have to think about subscriptions differently. I don’t think that it does and WHOOP is a good example of showing this new class of company that can provide you value as a subscription.

Other companies do this as well. Even in the B2B world, you see things with heavy construction equipment. That is used to move towards leases because it was getting closer to that. Rolls Royce for airlines has a subscription model for engines. It doesn’t matter whether you have this engine advantage. The key is that it flies. “We’re going to keep you flying. You pay us for that. We’ll figure out the rest and make that happen.”

You’re seeing more of this model that’s out there, even if it’s got a hardware component to it. What’s interesting is in a world that’s usually dominated by software, tech companies and things like that, there’s this sense that you could pivot very quickly and reactive by building new features in short windows. One of the things that’s amazing about software is how quickly you can turn things around relative to hardware.

What’s interesting about WHOOP is that there is this hardware component. A lot of times, if there is a dependency between hardware and software, we can’t just pivot super quickly in certain cases. Sometimes we can. Sometimes it requires a hardware upgrade to go make that happen. On the one hand, it can be frustrating because I wish, through software alone, I get to solve this problem. That would be it. If you need another sensor to be out there, you’re going to have to build that into new hardware. That’s one of the reasons that we are committed to continuing to improve our hardware for our members over time.

The other thing that is a silver lining to all this is it is a nice forcing function to make us have to think and never lose sight of that long-term value that we’re trying to create for our customers. When we think about the software direction that we’re having to take, we think about it in conjunction with our hardware strategy. We think about both of them holistically over the long-term.

A lot of other companies may be making a mistake by being too shortsighted with their software development roadmaps. We have this reason that we have to think longer-term about our software roadmaps and the direction that we’re going because of the bundling that comes between software and hardware.

Robbie Baxter: The hardware takes so much longer to update and upgrade. Back to your Waze versus Google Maps example from the beginning of our conversation, this forces you to think about the destination. The software has the advantage of being very easy to be iterative and easy to tinker but it pushes you back, managing between vision and the right next step. I’d never thought about that before but the hardware does serve a forcing function to help you stay grounded on your bigger vision.

Ben Foster: It’s a note for anybody who’s in a startup or a founder of a company who’s getting started. You’re going to get that advice of, “You need to pivot and be very reactive to the feedback that you’re seeing in the market.” That’s all true. One of the things that I’ve seen time and time again is the founders are struggling with, “Is this a pivot that I should make? Is this me not staying true to the vision that I had set out with in the first place?” I’ve seen so many times where people pivot away from what was going to make them successful in the first place. Sometimes you need to go around obstacles that you run into, change direction and work through them.

At some point, you’re going to have to work through an actual problem that you encounter. I see a lot of companies that think this fail-fast mentality is going to serve them well. If all you do is fail fast over and over, you’re very fast running yourself into an entire failure with your company. Eventually, you’re going to have to find a way to succeed and pivoting away from everything that you don’t like isn’t going to work.

It’s almost continuing to put in ways where it’s like, “What is faster going straight, left or right?” If turning left takes you backward, even if it’s the faster path to go, it’s taking you farther away from your destination. You have to have a destination in place to be successful after that vision comes in to be very handy. It’s an important tool for any founder.

Robbie Baxter: What is a product that you didn’t work on that you think is a masterpiece of product management?

Ben Foster: Everybody talks about Apple all the time for this thing but I’m going to focus on a part that people don’t talk about that much, which is the settings app within your phone. It’s pretty amazing when you think about it. The level of customization of how you want to experience your phone is quite remarkable. The way that you can use Do Not Disturb to make sure that it doesn’t impede on your life in certain ways.

The way that you can change the language to work in the ways that you want it to. The way you can get different accents in Siri is quite remarkable. All the different things that you can do. If you multiply all the settings differences that are out there, there are so many different configurations that are possible for phones. It’s probably in the millions or billions and yet it works for every single person each time. That’s an incredibly hard problem to solve and one that I’m always impressed by.

Robbie Baxter: What advice do you have for other manufacturers that are thinking about software-based subscription models, not just wearables but the ones making the cars, refrigerators, hammers, furniture, everything?

Ben Foster: The piece of advice that I would give is that you get so much benefit from thinking about things from your customer’s vantage point. You have to do that and constantly force yourself every single week to think about it as a customer. If you try to convert a model of paying for a product upfront to paying over a subscription, you’re going to think that that’s going to be successful and it’s probably going to bite you pretty bad because the product does have to sell itself.

The way you market it, the way that people consider interacting with it, the way that they refer other people to it are foundationally different. If you don’t think about things from a customer vantage point, you’re likely to make the mistake of expecting that people are going to interact with your product in the same way, only to discover that they don’t.

I’ve seen companies where they had 80% retention at a three-year mark of using their product when you had to buy it upfront. They switched to a recurring revenue model and a subscription model. They see that they change nothing about how the product works. It turns into 1 year or 6 months. They destroy their business because they’d never put their selves in the perspective of the customer, which is to say, “Why am I going to continue to pay for this?” They would continue to use it if it was free incrementally every single month but they wouldn’t continue to pay for it if it costs additional money every single month. That’s an important part of the story that you’ve got to consider.

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Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing. http://www.robbiekellmanbaxter.com

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Robbie K Baxter

Author of THE FOREVER TRANSACTION & THE MEMBERSHIP ECONOMY; Leading expert on membership models and subscription pricing. http://www.robbiekellmanbaxter.com