Discuss about the Smartwatch and Wearables Research.
Apple Watch is a smartwatch series by Apple Inc. The market for smartwatch brands is burgeoning. Forecasts suggest a two-fold increase in consumer adoption. It is also fuelled by the pressures of modern lifestyles. Pre-mature illnesses and sedentary lifestyles dictate a change in routine. Rising expendable incomes have assured that technological fitness solutions have a market. So consumers are ready to spend money to safeguard their fitness goals. Smartwatch technology integrates several layers of personal lifestyle functional monitors. This helps users to monitor and track their progress.
The smartwatch market is predicted to grow at a rate of 18% annually (Beaver, 2016). By 2021, the number of units sold could touch 70 million units. Apple’s focus will be to establish its existing presence and foray into new markets. The effort will be to garner more market share in saturated markets through better product offerings. While the lines between a smartphone and smartwatch are delineating, there is equal emphasis on form as much as function on smartwatches. Unlike smartphones, smartwatches can be reliably fastened over the wrist. The risks of a smartwatch falling down and breaking are low, unlike a smartphone that requires constant care. There are requirements for a special pouch and a slew of connectors for a smartphone that makes for cumbersome logistical issues. Smartwatches are the next wave of smart technological solutions that could soon become ubiquitous. Apple has foreseen this trend and will have to work on a long-term decade-long product innovation and marketing strategy.
Apple is one of the world’s largest companies in terms of revenue. Based in Cupertino, California, this multinational technological behemoth is known for its flagship iOS operating system. Apple has transformed from a PC manufacturing firm to a company that manufactures high quality consumer electronics. The company is also renowned for its software, hardware, firmware and online products and services. From the Safari web browser to the Apple TV digital device to the iPad tablet; Apple’s products attract a massive user-base.
At the heart of Apple Watch is Apple’s integrated approach of combining its native OS with hardware, software and connected services. This product wins hands-down on the form factor. The company has publicized the SDK to give software programmers the leverage to build apps for the smartwatch. The core strategy of Apple is to enable users to use Apple’s iOS apps (Bajarin, 2014). The smartwatch’s seamless connectivity ensures that apps such as the HomeKit can allow users to use the power of Bluetooth and NFC to control home devices. The most important strategy for this product is related to personal fitness and welfare.
There are intelligent sensors on the watch that keep track of physical activity of the wearer. The surmounting pressure on modern humans to maintain an active lifestyle could be the propellant to purchase such smartwatch products. While Apple’s strategies are clear, it is unclear if a needs-analysis supplements the company’s strategies. Consumerism is often dictated by prevailing market conditions, economic conditions, socio-political statuses and micro-economics.
The Apple Watch has always been positioned as an expensive personal efficiency enhancement product cum connected device. Being a convenience gadget, this iOS integrated and iPhone compatible device comes in scores of flavors (Swider & Beavis, 2016). This means customers can interchange watch bands with new ones, or choose from a variety of case materials with different hues and sizes. The demand for the smartwatch product is high. At its peak demand, the product reaches $17000 in price. This means that the smartwatch has thousands of customers waiting to be early adopters.
But as of 2016, the sales of this product have dipped by more than 50% (Baptiste, 2016). Worldwide, the smartwatch market is witnessing a year on year sales dip in double digit percentages. Although the Apple Watch commands the largest market share as per the International Data Corporation, shipments have largely decreased. In 2015, the number of units shipped was in excess of 3 million. But in 2016, it is a mere 1.6 million.
Apple Inc. adopted a knee-jerk reaction to prop up sales. It cut prices of its sports model by $50. Consumers were adopting a wait and watch approach in anticipation of a newer release with more apps and a discounted price of the smartwatch. They were ready to wait for even a year. It indicates that the company is releasing its product versions too early. There are some pertinent implicit consumer demands such as an improved battery to support WiFi, GPS and video camera usage. There is also a need to offer better waterproof capabilities. These issues were not addressed in subsequent releases. So a new version of the Apple Watch generated low interest and anticipation.
The consumers for smartwatches have different criteria based on their geographical location. As indicated in the following figure, the China market smartwatch consumerism is dictated by accuracy. In Germany, the purchasing criteria are dictated by price and functionality. In South Korea, there is also the parameter of ease of use that affects purchasing decisions.
Apple’s vision for the smartwatch as a luxury watch or a replacement for a luxury watch is unclear. A majority of luxury watch consumers prefer luxury watches over this smartwatch – only about 27% of them preferred the smartwatch (John, 2015). Staunch luxury watch loyalists considered craftsmanship and timeless appeal of the luxury watch products as the main parameters. So it is clear that customers understand the difference between luxury watches and smartwatches. Therefore, Apple cannot market the Apple Watch as a luxury watch.
From an investment standpoint, luxury watches have low depreciation compared to smartwatches. They also command a higher appreciation and are considered as collectibles. So the Apple Watch’s price caters to that segment of buyers who are able to afford a high-end smartphone or a luxury watch. Apple’s product proposition should be strong to persuade buyers in this category to adopt a smartwatch solution for their daily needs. Therefore, consumers of the Apple Smartwatch are driven by motivation to buy the watch. The motivation comes from a strong reason for personal efficiency enhancement. Another personal consumer influence is consumer personality. A sporty and challenging personality defines consumer behavior towards adoption of personal productivity products.
It is clear that customer motivation is one of the driving forces to purchase the Apple Smartwatch product. The premium nature of this product ensures that it is on a higher stratum to a bare necessity product. The people who purchase this product are generally highly motivated individuals who seek to redefine their personal style, productivity, efficiency and social status. Therefore, Apple should design customer strategies that apply theories and practices of consumer motivation.
Customer motivation falls under the psychological paradigm of consumer behavior models (Jisana, 2014). At the basic level, motivation is driven by a hierarchical pyramid of needs. Maslow’s hierarchy of needs is a well-known Theory of Motivation that explains the needs of people at different phases in their lives. Applying this model on consumer motivation for purchasing the Apple Smartwatch indicates that people who are in the second last level will purchase this product.
This means that those seeking Esteem, Self Esteem, Confidence and Achievement will opt for this product. There could be a small overlap between this level and the last level of this pyramid though.
Although this product is not explicitly termed as a luxury brand, it falls in the price range of luxury brands. Often the purchasing motivation over price in this price range is the same for a luxury brand as for the Apple Watch. A luxury item is defined as a necessity that starts where necessity begins (Knag, 2012). This smartwatch product could fulfill a person’s need for pleasure and comfort. It could also enable them to make a statement to the outside world by procuring something expensive. In the digital era, a technologically expensive device, software or hardware, when owned is also regarded as a status symbol.
Consumers who might buy a luxury brand might also buy an Apple Watch. There could be consumers who could buy this Watch even without having a personal preference for luxury brands. For Apple the company, its brand recall is immense. A category of customers it could cater to is brand loyalists. Another interesting fact is that men above the age of 65 preferred Apple products, so they could prefer Apple Watches too. The following figure clearly indicates this preference.
Statistics indicate that the Apple Watch commands sales in the age group of 35 to 44. But there could be cases where older customers buy this product as gift items.
Motivation is often the incentives to think, act and choose. A motivated person makes purchasing decisions that align with their reasons and sources of motivation. There is also proof that motivation enables speedy decisions. A well-motivated customer makes a purchase faster, than a skeptical customer, who would look for alternatives. If the customer motivation for buying the Watch are personal productivity, social appeal, personal efficiency, luxury brand alternatives or Apple product loyalist tendencies; then this Watch could be an automatic buy.
If the customer motivation for purchasing is price parity, cost effectiveness, necessity over luxury, budget device and non-Brand consciousness, then this Watch could be a skeptical buy. Therefore, it is important for marketers to understand these aspects.
Customer personality is a spoke in the wheel when deciding to purchase an Apple Watch. A customer’s personality is a combination of internal, external, social, psychological and environment influences (Sarker 2013). It could also be the sum total of their hereditary influences, cultural backgrounds and sometimes ethnicities. Some of the prevailing theories of personality are:
The Neo-Freudian theory is based on the premise that social relationships define personality. Trait theory postulates that predisposed personal, physical and psychological attributes define a person’s personality. Given that personality is a proven constituent for customer purchasing decisions, it is important to measure personality in order to align marketing objectives. Based on the Neo-Freudian and Trait theories some personality types to consider are Detached, Aggressive, Dogmatic, Ethnocentric, Compulsive, Unique, Innovative and Social.
Personality traits of a target consumer group often become the basis to converge brand propositions that fulfill the target consumer groups’ personality needs. The traits of a brand personality intentionally coincide with that of the target customer group or groups. The personality effects of a brand can be measured in as a simple instance as a clearance sale. There is an anthropomorphizing of brands done by customers by according brands their personal personality traits. Marketers should take cognizance of these aspects and reinforce such beliefs. It could lead to new loyalty marketing programs. It could lead to better interventions of Internet-based marketing communications, interactive strategies and many other innovative channels of marketing (Rajagopal, 2008).
The consumer decision making process for Apple Watch is based largely on consumer personality types. Often personality and personal factors coincide to create the need to purchase. The following figure demonstrates this.
As indicated in the figure, personality co-exists with other personal traits of a consumer such as age, lifecycle stage, occupation, economic condition and lifecycle.
Apple’s current brand architecture is monolithic. All products maintain their brand identity with the master brand. From the Apple logo to the design, there is a similarity in design, styling, ergonomics and function across all products. While most products have the “i” prefix, in 2014 the company moved away from this prefix for its Apple Watch and Apple Pay products. This was an attempt to move these products closer to the Apple brand name.
The proposed marketing mix for Apple Watch based on the 4 Ps of marketing are:
Although the Apple Watch is a flawless product, there are recorded glitches. Bluetooth connectivity is inconsistent. The device has poor battery life. When connected to the iPhone, it is reported that the Watch drains the iPhone smartphone’s battery fast. This product’s closest competitor is Fitbit in the fitness smartwatches category. A gap analysis reveals that the Apple Watch can increase its fitness apps. This allows for providing a variety of fitness apps catered to different types of customers.
Price has always been the contentious issue for Apple Watch aspirants. Although Apple announces discounts, it is not frequent and could be limited to certain geographies. Apple can increase its product churn by giving discounts and participating in exchange offers. Although Apple may not be able to decrease price of this product due to its niche nature and the fact that the company does not rely on volume sales, there are other ways to increase sales. Some novel pricing methods could benefit churn (Munnukka, 2004).
Complementary servicing – This type of servicing could be free of charge or at a nominal rate. It could affect the overall perception of price.
Bundle pricing – Pricing of services offered by the Watch as a lump-sum.
Usage charging – The company could adopt a product-lease approach that lets consumers use the product on a leased basis.
The current promotional mix is restricted to advertising, personal selling, sales promotions and public relations. Apple can leverage the power of social media marketing in a more emphatic direction. It can adopt go-to-customer strategies much like its go-to-customer strategies. There could be an increased focus on Big Data Analytics to leverage content and context based marketing strategies.
Apple undertakes a holistic approach to marketing and promotion of its products (Greenspan, 2015). Using a variety of distribution channels, the company takes advantage of the economics of cost advantage. But selective association with a distribution channel creates exclusivity and lack of market access. In the company’s distribution chain, products are retailed or distributed at Apple Stores, e-commerce outlets, online Apple e-commerce stores, authorized company retailers and dealers and fulfillment stores & services. Currently, the company’s products are highly visible. To enhance customer appeal of its Watch product line, the company can showcase this product on a higher priority via its various distribution channels.
Conclusion
Apple cannot market the Apple Watch as a luxury product. However it can market this product as a hybrid sports and personal convenience product. Apple can target customers in this market segment by addressing their motivational and personality needs. By integrating identification factors that fall in the sphere of brand identity with personal and motivational identification factors of target consumer groups, Apple can create perceived value. The company can augment its pricing strategies with more discounts, free services and bundled service offerings.
Apple’s distribution network is robust. Its proposed distribution can be modified to enhance the visibility of Apple Watch. The company’s promotional strategies can include Big Data Analytics to deliver content based marketing. More emphasis should be given to social media marketing. There could be several event-based marketing campaigns too that could increase brand visibility and association.
References
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Bajarin, T. (2014). Understanding Apples Watch Strategy. Retrieved 26 January 2017, from https://in.pcmag.com/wearable-tech/50161/opinion/understanding-apples-watch-strategy
Swider, M & Beavis, G. (2016). Apple Watch. Retrieved 26 January 2017, from https://www.in.techradar.com/reviews/wearables/Apple-Watch/articleshow/47122887.cms
Su, B. J. (2016). Apple Watch Sales Plunge 55% As Samsung Doubles Market Share: Report. Retrieved 26 January 2017, from https://www.forbes.com/sites/jeanbaptiste/2016/07/22/apple-watch-sales-plunge-55-as-samsung-doubles-market-share/#6319754b6790
eMarketer. (2014). Does the Apple Watch Have What Consumers Want. Retrieved 26 January 2017, from https://www.emarketer.com/Article/Apple-Watch-Have-What-Consumers-Want/1011199 2014
John, D. (2015). Is the Apple Watch a Luxury Watch. Retrieved 26 January 2017, from
https://themarketmogul.com/is-the-apple-watch-a-luxury-watch/
Jisana, K. (2014). CONSUMER BEHAVIOUR MODELS: AN OVERVIEW. Sai Om Journal of Commerce & Management. Volume 1, Issue 5. Pp: 1-10. Doi: 10.1.1.916.4415
Knag, M. S. (2012). Luxury Brands, A Study of Consumers’ Motivation to Purchase Luxury Brands. Retrieved 26 January 2017 from https://brage.bibsys.no/xmlui/bitstream/handle/11250/169929/knag2012.pdf?sequence=1&isAllowed=y
King, H. (2015). Who is buying Apple products?. Retrieved 26 January 2017, from https://money.cnn.com/2015/10/29/technology/apple-customers/.
Sarker, S. et al. (2013). Influence of personality in buying consumer goods-a comparative study between neo-Freudian theories and trait theory based on Khulna region. International Journal of Business and Economics Research. 2013; 2(3): 41-58. doi: 10.11648/j.ijber.20130203.12
Rajagopal. (2008). Interdependence of personality traits and brand identity in measuring brand performance. Retrieved 26 January 2017 from https://core.ac.uk/download/pdf/6929283.pdf.
Guru Nanak Institute of Management. (2014). Apple – Consumer Behavior. Retrieved 26 January 2017 from https://www.slideshare.net/siddharthabbi/apple-consumer-behaviour
Marketing Minds. (2016). Apple’s Branding Strategy. Retrieved 26 January 2017 from https://www.marketingminds.com.au/apple_branding_strategy.html
Greenspan, R. (2015). Apple Inc’s Marketing Mix (4Ps). Retrieved 26 January 2017 from https://panmore.com/apple-inc-marketing-mix-4ps ROBERTA GREENSPAN 2015
Munnukka, J. (2004). Perception Based Pricing Strategies for Mobile Services in Customer Marketing Context. Retrieved 26 January 2017 from https://jyx.jyu.fi/dspace/bitstream/handle/123456789/13195/9513917886.pdf Juha Munnukka 2004
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