AP The Apple Watch could radically alter the way consumers use iPhones.
The Apple Watch represents the biggest product bet Apple has placed since the iPhone in 2007. Apple will never be the same kind of company once Apple Watch pricing is revealed on Monday. Management's primary focus during Monday's "Spring forward" Apple Watch event will be showing how a premium mass-market technology brand can embrace luxury without alienating a portion of its customer base. On one hand, Apple Watch is a device that seemingly no one asked for, but on the other hand, it is a device that holds enough potential to reshape the mobile landscape by altering the way consumers use iPhones.
Goals for Monday's Keynote
Reposition Apple as a premium mass-market luxury brand. Apple is currently a premium mass-market brand, selling gadgets to addressable markets that number in the hundreds of millions. With Apple Watch, Apple is entering new territory, embracing luxury and the required scarcity of supply that comes with a luxury label. Such scarcity at the high-end is obtained by controlling the demand side of the equation through high prices. Apple Watch Edition collection prices will likely shock those observers who aren't aware of Apple's motivation to become more like a luxury brand. At the same time, Apple is holding on to its premium mass-market heritage by selling Apple Watch Sport at a $349 starting price.
As confirmed in The New Yorker Jony Ive profile, Apple's decision to embrace luxury is deliberate and likely taken in recognition that to be successful in the wearable space, a new strategy would be required. Consumers need to feel connected to a wearable accessory as the device becomes an extension of their personality. Apple's new premium mass-market luxury brand will also help drive subsequent demand for new product categories that position fashion and emotion as key buying determinants, with materials utilized as differentiation between luxury items and premium mass-market goods.
Apple will need to frame this branding message a bit before revealing Apple Watch pricing in order to clearly demonstrate that Apple Watch is targeting everyone from high school students to senior executives with three distinct watch collections, and not just luxury items with low-end counterparts.
Explain Apple Watch. Apple will likely demonstrate through app demos and talking points why the Apple Watch exists: to shift some utility from the iPhone to the wrist. Management can also discuss stand-alone features such as health tracking. There is some risk involved here. Talk up the device functionally too much, and the iPhone upgrade cycle may be put at risk as consumers hold on to iPhones for longer and instead buy new Apple Watches. Talk down the device, and consumers will choose to bypass it altogether. The ability to market Apple Watch in context of the entire Apple ecosystem is a powerful variable that literally no other company can copy, and I would expect Apple to reiterate that. In many ways, some of Apple Watch's features may need to be demonstrated not so much to sell Apple Watch, but to sell the Apple Watch plus iPhone combination.
Soft sell the Apple Watch. Apple has consistently used timekeeping, communication, and health & fitness as Apple Watch marketing tent-poles. If one is expecting Apple to drastically change from this strategy when it positions Apple Watch to the public on Monday, there may be some disappointment. Apple spent only 12 minutes demoing Apple Watch last September. On Monday, there will undoubtedly be much more time to demo various apps, including possible in-house apps or features that Apple kept under wraps.
Contrary to consensus opinion, Apple will rely on soft sell messaging where the overall message is that Apple Watch is a personalized device capable of doing various tasks. Relying on a strategy similar to the way iPhone and iPad were sold may fall flat for a luxury item. Instead, Apple needs to rely on the device itself, including its look and design, to spark interest. The hardest part will be getting consumers interested in the device. Once that relationship is established, Apple can rely on its retail infrastructure to turn interest into a sale, and then that's where Apple's marketing message comes into play.
Questions
What will be the price range for the Watch collection? Edition collection pricing will be established with scarcity in mind. Watch collection pricing will determine how big of a seller the mid-tier option will be when compared to the Sport collection. If Watch collection is priced near $500, it may be tough to forecast which will sell more: Watch or Sport. However, if Watch collection is priced above $1000, the Sport collection will be the primary beneficiary from a unit sales perspective.
Will there be new watch bands? While most of the attention has been given to the various watch faces, the bands may be the bigger story of the day. Details ranging from price to availability will help determine how versatile Apple Watch can be and how much fashion enters the buying decision. Is there a possibility Apple will unveil new ultra-luxury bands priced well over $10,000?
What will the Apple Watch rollout look like? Reading in between the lines, it would seem that the Apple Watch rollout will be more measured than previous product launches that we are used to. The going assumption will be that the U.S. will get the device at launch. Tim Cook mentioned Germany will see the device in April, which implies that there will at least be a handful of countries receiving the device within the launch month.
The Apple Watch is a big deal for Apple. Not only does the device represent a new product category, but success will be dependent on behavioral change related to iPhone usage. Wrist real estate is in precious demand, and I continue to see an upcoming battle for ultimate wrist supremacy. Apple's strategy will be to mask additional utility with fashion and design. Luxury presents a number of opportunities, and challenges, for Apple. As recent executive hires have shown, Apple is ready for the challenge. Apple will never look the same after Monday.
This is a post from Above Avalon, a new site from Neil Cybart, an analyst who previously commented on our site under the name Sammy The Walrus IV. You can sign up for his Apple newsletter here.