The iPhone is such a big part of Apple’s revenue that we have seen a lot of coverage and attention paid post-launch event to iPhone 7 and 7 Plus. While Apple Watch is nowhere near iPhone revenue yet, it deserves our attention because of the role it will play in Apple’s future.
Early Adopters’ Learnings
When Apple originally introduced Apple Watch, it focused on design/style, communication, and fitness. While design made Apple Watch stand out from the competition, I think it is fair to say it captured more tech adopters than it did jewelry buyers and fashionistas.
Communication was about two main things: notifications and digital touch. Notifications ended up being a strong driver of satisfaction but not necessarily of purchase. This is because it is quite hard to articulate how notifications can impact your phone usage and the value they bring to you. This is a feature that delivers different returns to different people that will be discovered as they use Apple Watch. For some, it is about being in control. For others, it is about being in the moment. For others, it is about never missing what is most important. Precisely because it is so personal, it is quite hard to pitch it to potential buyers, especially as many see their phone playing the exact same roles.
Digital touch was an attempt to broaden the way we communicate by adding more of a personal touch from a device that is the only one consumers see as more personal than their phone. However, the limited number of users early adopters could interact with, coupled with the fact that, more likely than not, people they wanted to interact with might not have had a Watch, a spose or a child, limited the appeal.
When all is said and done, fitness remains the strongest purchase driver for wearable buyers at the moment, especially as we expand beyond early adopters.
Doubling Down on Fitness is not a Change in Focus
Wearables are not a must have. I have been saying this since the very beginning of the market. This means consumers need to be convinced to invest in them. Fitness has been, from the beginning, what resonates with them because it is the obvious use case, compared to what could be done with smartphones.
77% of American consumers we interviewed in the spring said they bought a wearable device because of the step counting feature. Another 38% said they wanted a heart rate monitor and 36% wanted a sleep tracker.
Apple, by adding GPS and a swim proof design to Watch Series 2, combined with an improved CPU GPU and a brighter display, provides a solid upgrade for current Watch owners as well as a more attractive proposition for users who are either looking at upgrading from a fitness band or who are wearing a smart device on their wrist for the first time, especially given the $369 starting price.
With fitness at the center of Apple Watch’s line up, having a Sport edition no longer made sense. But adding a trusted sport brand like Nike to the portfolio makes a lot of sense particularly as the price of the entry-level Watch now starts at $20 more than the Sport edition did. As Apple did with the activity and workout features, with Watch Nike+ it tries to appeal to both serious and occasional runners with dedicated workouts. Apple’s gamification effort, which started with the badges users could earn, increases with watchOS 3 as users can now create groups they share, compare, and challenge in their achievements. While personally I am not a fan (mainly because I hate public shaming), the social aspect is certainly more rewarding for some than any badge of honor Apple could ever give them. The activity rings can also now be more central to Apple Watch with some new faces that display the information in a more effective way for users who really want to stay focused on their daily goal.
There is Luxury and then There is Luxury
Apple Watch buyers certainly appreciated the design, the quality of material, and the overall look and feel of the product. While they might have bought Apple Watch instead of another smartwatch based on looks, I am not sure many bought it thinking they were buying a piece of jewelry. As it is the case in the traditional watch market that Apple now measures itself against, there are different kinds of high-end watches. Apple repositioned its luxury threshold, going from the Gold Edition, priced at $10,000, to the ceramic edition priced at $1249. From an addressable market perspective, there is certainly a bigger segment for the ceramic edition than there was for the gold, especially as Apple is still working on establishing a more comprehensive brand status that includes more than just tech..
Hardware Only Tells Half the Story
Most of the learnings from the first Apple Watch release are best demonstrated by how the UI has morphed. As for the marketing messaging, Apple only tweaked what it had initially delivered with watchOS to improve the experience and widen the appeal.
Digital touch has now been integrated as an option to respond to messages in the same way it has been added to messages in iOS. It might just be me but, even the way scribble and digital touch have been added to iOS, it links nicely to the Watch, helping to socialise this way to express ourselves as well as widen the circle of people who can now receive and send heartbeats or kisses or fireballs or even a heartbreak. It sure is something my eight year old has happily embraced on her iPad.
Swiping, now part of our muscle memory thanks to iPhone and iPad, also plays a more proactive role in watchOS 3 as it is the case for the revamped launch screen. Force Touch is still there but is not highlighted – the same as for iOS.
After using Apple Watch Series 2 for over a week, it is the speed and the improved battery life I came to appreciate. While I have been waiting to be able to swim with Apple Watch (I wish it was available when I went on holiday), it is speed and battery life that positively impact my daily experience. The new GPU and CPU make a great deal of difference when launching apps and interacting with Watch. Apple built it and now I hope apps will come. This is still what I hope to see now that developers can no longer use the excuse of a sluggish OS that did not allow them to design Watch apps. Apple tried to kick things off with Breathe an app that aims at showing there is more to health than calories and steps. While I am still getting used to it and have it set for every three hours rather than every hour, I find that between stand and breath I am more conscious of how long I sit and how caught up into things I get and these help me take a moment.
With developers more likely to be waiting for a broader addressable market, I think we will see sales pick up, thanks to the lower priced but upgraded experience of Watch Series 1 now at $269 and the broader appeal of GPS and swim mode in Series 2.
It’s hard to see any other brand top Santa’s smartwatch list for this coming Holiday Season.