Tonal's Bundle Opportunity
Introduction
Effective bundling has enabled brick-and-mortar gyms to thrive despite growing competition from more focused rivals. Over the past few decades, gyms have seen a proliferation of new, specialized competitors. These competitors—such as boutique studios and connected hardware manufacturers—have pursued strategies that anchor on specific training modalities such as spin, boxing, or boot camp. While their singular focus has created opportunities for differentiated training experiences, such differentiation has come at the expense of solution breadth and broad-based consumer appeal. As a consequence, emergent rivals have remained relatively niche; they have failed to supplant brick-and-mortar gyms as consumers’ default training option.
Recently, however, a new competitor—Tonal—has begun to replicate many of the solutions offered by brick-and-mortar gyms. While the company’s hardware primarily caters to more sophisticated consumer segments, targeted product investments—specifically around personal training—could broaden the device’s appeal and position it to compete more effectively against the brick-and-mortar bundle.
Gyms: Analog Training Bundles
Brick-and-mortar gyms offer consumers an analog training bundle. Within their four-walled environments, gyms host multiple training solutions. The most common solutions—the training trifecta—include ready-access to a wide selection of exercise equipment, instructor-led classes, and on-site personal training. The first two, equipment selection and group classes, can be delivered at scale with no incremental customization; the last, personal training, is delivered individually and is—by definition—tailored to a consumers’ specific needs. While consumers may value certain solutions more than others, they often cannot purchase them on an a la carte basis.
Gyms integrate their training solutions via pricing. Consumers gain on-site access to most—if not all—training solutions for a single price: the monthly membership fee. Membership fees, or bundle pricing, consolidates brick-and-mortar gyms’ solutions into a single, consumer-facing product. In theory, bundle pricing enables members to access multiple training solutions at an all-in price lower than that of every solution were it purchased individually. And when strategically assembled, a bundle can unlock this incremental value—this incremental consumer surplus—across market segments with differing training preferences and training know-how.
We see evidence of this bundle’s success in gyms around the world. On any given day, a typical gym will see members navigating rows of equipment, participating in group fitness classes, or working out with personal trainers. Revealed preference suggests that those navigating the gym floor likely value equipment selection more than group fitness options. The opposite likely holds for those participating in group fitness. Yet, both consumer segments convert via the same, standardized offering: the brick-and-mortar bundle.
Tonal: Narrow Bundle, Limited Appeal
The Tonal Bundle
Tonal offers consumers two solutions found within the brick-and-mortar bundle: equipment selection and instructor-driven classes. Unlike other at-home weightlifting options, Tonal hardware can replace virtually all exercise equipment found on the typical gym floor. The hardware’s adjustable arms and multiple attachments can stand in for most free weights and machines, while electromagnetic resistance obviates the need for weighted plates and multiple sets of dumbbells.
Tonal also offers on-demand and live group fitness classes. Similar to those found in gym settings, these classes span multiple modalities (e.g., strength, dance cardio, yoga) which do not necessarily rely on specific equipment or hardware. For example, Tonal users can enjoy dance cardio and yoga classes without ongoing, direct engagement with their devices. For these classes, users need only sufficient floor space. Thus, Tonal’s current offering—the current Tonal bundle—closely mirrors the scaled offerings available at most gyms.
While Tonal has successfully replicated brick-and-mortar’s scaled offerings, the company falls short on a critical, custom solution: personal training. At first glance, Tonal appears to offer personal training. The company’s marketing materials claim that Tonal devices offer “personalized training for every level”. Upon closer inspection, however, one finds that Tonal offers users personalized training feedback, not a personal training solution comparable to that delivered by fitness professionals.
Tonal delivers its training feedback via hardware and software integration. Sensors provide feedback on users’ technique and form, while proprietary algorithms and metrics track performance and recommend training progressions. Although this feedback provides user-specific guidance, such guidance is delivered in a user-agnostic way. Every user—regardless of individual circumstances—receives predictable, automated responses based on a set of pre-defined user inputs. As such, one could argue that Tonal effectively standardizes training across its install base. Those seeking a tailored training solution must look elsewhere.
Market Implications
As constituted, the Tonal bundle delivers disproportionate value to a subset of the market: self-sufficient consumers with relatively high training know-how. The company implicitly caters to this user segment via its hardware and software interfaces, which feature multiple attachments, self-serve menus, and objective- and modality-based content groupings. These interfaces encourage a self-directed training experience, wherein all training-related decision-making sits with the end user.
In theory, high know-how consumers will confront less friction when navigating Tonal’s self-directed user experience. When using Tonal devices, these consumers will have an easier time aligning Tonal’s specific use cases with their training goals. In contrast, low know-how consumers may struggle to find such alignment. Given their struggles, these consumers may prefer to outsource training decision-making. Whereas brick-and-mortar environments facilitate such outsourcing via on-site trainers and coaches, Tonal—which lacks comparable personnel resources—does not. As a result, every Tonal user—irrespective of training know-how—must in-source training decision-making. For low know-how users, this in-sourcing introduces relatively more user friction and may lead to suboptimal training outcomes vis-á-vis those with more know-how. On net, then, those with high training know-how will—all else equal—be able to realize relatively more value from their Tonal devices.
Tonal marketing materials make this implicit, high know-how appeal, explicit. The company’s advertisements feature public ambassadors at the far end of the sophistication spectrum. These ambassadors—professional athletes such as LeBron James, Serena Williams, and Steph Curry—embody the self-directed, high know-how consumer, not the faceless neophyte. By featuring these athletes, Tonal ensures that its outbound marketing speaks to those whom will likely capture the most value from its devices.
Tonal: Achieving Bundle Parity
To expand its relative appeal and further its mission of delivering “personalized training for every level,” Tonal should build a personal training solution. If built, a personal training solution would enable Tonal to offer consumers the training trifecta—equipment selection, instructor-led classes, and personal training. With this trifecta, Tonal would achieve relative solution parity with brick-and-mortar gyms.
Tonal’s enhanced bundle would deliver more value to consumers on both a relative and absolute basis. A personal training solution would enable low know-how Tonal users to offload training decision-making to third parties. This added functionality could significantly reduce—if not wholly eliminate—the incremental friction generated by Tonal’s self-serve interfaces. By addressing this pain point, Tonal could drastically improve its relative value proposition among less sophisticated user segments, particularly in side-by-side comparisons with brick-and-mortar gyms.
Moreover, on an absolute basis, a new personal training solution would unlock incremental value across Tonal’s entire install base. Every user, regardless of know-how, would benefit from new functionality enabling tailored training experiences. Importantly, this incremental value would accrue to all prospective buyers, too. And while not every user would utilize this new functionality, its availability would ensure that Tonal delivered on the user experience promised in its mission.
Product Approaches
To sustainably deliver a personal training solution, Tonal must first enable third-party access to its platform. Today, Tonal restricts access to its training platform. In technology parlance, Tonal operates as a “walled garden”. Users can only access Tonal-curated workouts and classes taught by in-house trainers. While the walled garden approach ensures that Tonal content meets a minimum quality threshold, it also prevents the customization necessary to deliver truly tailored training experiences.
By opening its walled garden—by expanding platform access—Tonal would make it possible for trainers and users to collaborate across its devices and platforms. And unlike its brick-and-mortar counterpart, Tonal could deliver a personal training experience without directly employing fitness professionals. Tonal would only need to build products that facilitate trainer-user coordination.
Two product approaches that could facilitate this coordination include:
Trainer Profile Access: This first product—enabling third-party read/write access via user profiles—could unlock the most user value with the least technical investment. Tonal could build third-party permissioning such that users could easily add, authenticate, and onboard any fitness professional through their Tonal profile. Upon receiving read/write permissions, fitness professionals could monitor users’ progress over time, build and upload tailored workouts using Tonal’s Custom Workouts feature, or curate a specific training curriculum using Tonal’s first-party video content.
User value would accrue from 1) the option to outsource all training programming to third parties, 2) receiving customized workouts and tailored support, and 3) the ability to work with any fitness professional. And while user value would take precedence, trainers may also find this solution a more seamless experience than sharing workouts via Google Docs or tracking user progress with pen and paper.
The Tonal profile, which could host the Trainer Profile Access entry point. Trainer Content API: This second product—which could leverage the permission outlined above—would allow trainers to directly upload videos to users’ Tonal devices. In theory, these videos could cover any topic that a trainer might want to address with a client. For example, trainers could upload follow-along content, which could be consumed much like Tonal’s on-demand classes; how-to content, which could walk through new exercises and training cues; or even coaching content, which would explain the rationale behind a specific workout or diet plan.
Users would benefit from improved content relevancy and tonnage. In all cases, uploaded content would assume a specific audience (of one) rather than an entire install base. And because this product would make trainer-uploaded content available only to a specific user, neither the user nor Tonal would need to worry about content leakage into the wider ecosystem.
Both product recommendations could efficiently deliver a personal training solution. From the Tonal perspective, this efficiency follows from both products’ relative scalability. Perhaps counterintuitively, neither the Trainer Profile Access nor the Trainer Video API would require incremental customization to unlock tailored, personal training experiences. In practice, both products would enable and facilitate on-platform, trainer-user collaboration. Delivering customized training experiences would ultimately fall to third-party trainers, not Tonal. Therefore, Tonal would only need to build a single iteration of each product, which could scale across the company’s entire install base with a single software update.
Users would also capture certain efficiencies from these products. Both would leverage existing interfaces, the profile and video content library. By relying on these familiar surfaces, Tonal owners would not need to learn new pathways or fundamentally change how they interact with their devices. Thus, consumers could access and enjoy these personal training solution while avoiding the incremental overhead typically associated with onboarding to new, custom solutions.
Accelerating Value Capture
If necessary, Tonal could accelerate adoption of its new personal training solutions by entering into strategic partnerships. To capture the value created by the Trainer Profile Access and Trainer Video API products, Tonal users would need to have either an existing relationship with a trainer or an easy way to onboard with one. Whereas the former group could immediately adopt either of the proposed products, the latter could not. If Tonal wanted to make these training solutions immediately actionable for all current and prospective users, the company could take proactive steps to facilitate trainer discovery and onboarding.
Tonal could achieve both objectives by establishing strategic partnerships with platforms such as Future or Playbook, both of which offer access to remote-first personal trainers. In practice, these partnerships could see Tonal steering users interested in personal training to either platform. In exchange for this traffic, Future and Playbook could support the trainer discovery process and, if successful, manage all backend logistics associated with maintaining these relationships. And though unlikely, Tonal could eventually bring either partner in-house. Though large, Tonal could likely digest either partner were it a suitable acquisition target.
Wrap
While Tonal’s current bundle lacks the breadth of its brick-and-mortar counterpart, the company has a clear path to achieving parity. By opening its walled garden and investing in products that would unlock tailored training experiences, Tonal could replicate the gym trifecta and expand its appeal to underserved market segments.
Solution parity would also enable Tonal to reposition itself as a viable alternative to brick-and-mortar gyms. And, for the first time in decades, gyms would confront the prospect of disruption by a competitor capable of generating broad-based appeal and delivering a comparable, if not superior, user experience.