APPLE WATCH CREATING VALUE OUT OF THE GATE - TECHNOLOGY-FUELED CREATIVE
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APPLE WATCH ® ™
CREATING VALUE OUT OF THE GATE
1
TECHNOLOGY-FUELED CREATIVE
Index
5 The wearables playing field
9 Caveats and considerations
14 Creating value
23 Closing thoughts
2
Guidance for bold brands
Apple’s WatchKit will be made publicly available
in just a few short weeks, ushering in a new era of “BRANDS THAT
interaction between people, technology and commerce.
As consumers begin to learn this new platform’s
functionality, they will be looking for brands and
EMBRACE THIS
technology providers to develop applications that not
only make buying easier, but also make life better, more OPPORTUNITY
productive and more entertaining.
Brands that embrace this opportunity will be seen
WILL BE SEEN
as technology leaders. Just as important, first-mover
brands will essentially gain the upper hand, taking AS TECHNOLOGY
advantage of the opportunity to shape the category
and define the rules of engagement that will define the
business and consumer world for many years to come.
LEADERS.”
3
Ready to make an impact?
Here’s guidance and insight for
brands focused on making smart,
bold moves as the wearables
market unfolds.
4
THE WEARABLES
PLAYING FIELD
5
The current landscape
To date, the performance of wearables is a mixed
bag. The category isn’t well defined either in terms
of what constitutes wearable technology or how it
is perceived by consumers/end-users.
Currently, wearables encompass multiple
platforms, including:
ACTIVITY TRACKERS WEARABLE CAMERAS
3D MOTION TRACKERS SMART GLASSES
SMART CLOTHING HEALTHCARE DEVICES
The category disorder has done little to abate
growth. The overall appeal and long-term prospects
for wearables remain very bright.
THE WEARABLES PLAYING FIELD 6
Growth mode for wearables
The wearable computing market is expected to ship 90 million units in 2014, a 67% increase over 2013.
The same market coverage projects a 72% rise in 2015 shipping over 146 million units. Inside this growth is a surge in
the now nascent smartwatch category, more than tripling its output from 7.4 million units in 2014 to over 24 million
in 2015. This projection is in line with other forecasts predicting high double-digit category growth in wearable
technology in the coming years.
396%
4
WEARABLES PROJECTED
GROWTH 2014-2015
3 Smartglasses are projected to grow the most
in 2015, but its growth is misleading, as the
235% category is moving from roughly 2 million
shipped units in 2014 to 10.5 million in 2015.
2
Conversely, smartwatches are projected to
130%
ship around 7.5 million units in 2014, growing
1
to roughly 25 million units in 2015.
62% 72%
52%
16% 35%
0
WEARABLES CAMERAS GLASSES WATCHES HEALTHCARE TRACKERS 3D MOTION CLOTHING
SENSORS
Source: MobiHealthNews
THE WEARABLES PLAYING FIELD 7
The power of Apple’s ecosystem
Apple is uniquely positioned to reshape the wearable
computing category and reorganize it into a simpler
and more discernible system of products and services
for brands and consumers.
When considering Apple Watch’s potential impact,
it’s important to recognize that it’s a component of a
larger ecosystem—something almost no other wearable
computing product can boast.
Apple Pay, now in its infancy, will go to market with the
help of the surging iPhone 6, the App Store, an updated
iPad and the Apple brand, which is once again creating
outrageous, almost irrational demand for its products.
And while Apple Pay waits for many large-scale retailers
to publicly jump on board, it offers a broad portfolio of
financial service providers who are confident enough to
align with the transaction service prior to its public debut.
THE WEARABLES PLAYING FIELD 8
CAVEATS AND
CONSIDERATIONS
9
Not an overnight sensation
The Apple Watch is an important evolutionary step for mobile and wearable technology. Over time, it will grow
into a mainstream product.
To better understand how Apple Watch may enter the market, it’s helpful to look back at the introduction of another
revolutionary product that drew much speculation before its release: the iPhone.
Today’s iPhone sales (35.2 million in Q3 2014) were GLOBAL iPHONE SALES, 2007-2014
preceded by very modest first quarter sales of SALES IN MILLION UNITS
270,000 units in Q3 2007. And that was well after
200
most consumers had been exposed to the iPod
169.22
and were craving any creation from Steve Jobs.
Significant sales didn’t happen until a year after 150.26
150
the iPhone’s introduction. 125.05
Apple Watch’s hype will likely help lift sales well 100
beyond the iPhone’s humble beginnings, but there 72.29
are several factors that promise to make those
50
gains incremental as opposed to wholesale in the 39.99
near term. All signs point to incremental Apple 20.73
11.63
Watch growith initially. Many brands will take a 1.39
0
wait and see approach before investing time and 2007 2008 2009 2010 2011 2012 2013 2014
resources. We think this is a mistake. Fiscal years
Source: Apple
© Statista 2014
CAVEATS AND CONSIDERATIONS 10Expensive isn’t a bad thing
One of Apple Watch’s restraining forces is actually
an asset: price. FIRST-WAVE BUYERS WILL BE:
It’s important to remember that for each iPhone Apple More affluent with the
sells, its wireless partners pick up nearly three-quarters discretionary spending power
of the actual price. There is no similar subsidy for the needed to fork out hundreds of
Apple Watch. dollars for an untested technology.
It’s safe to assume that consumers will initially be asked
Younger with a greater digital
to pick up the whole tab like they do with the iPad.
nativity and a heightened
desire for statement or badge
First-wave buyers are desirable targets for marketers products.
and brands, but can be difficult to segment out of the
larger consumer audience. Apple Watch offers the
potential to work with them directly, absent the rest of Tech-forward and driven by a
curiosity and craving for the
the consumer universe.
newest and most novel
technology experiences.
Brands will essentially have a straight line of sight to
high-end influencers who will be the driving force
behind Apple Watch evolution and the wearable
category as a whole.
CAVEATS AND CONSIDERATIONS 11Tapping into impulse spending
Recent consumer credit card innovation efforts have the consumer’s almost insatiable urge for near-
been either incremental enhancements or flat out instantaneous transactions. This helps explain the long
misfires. Those who tried, unsuccessfully, to use the list of mostly failed attempts to make spending easier.
contactless credit card POS stations that now sit
idle in many fast-food restaurants can relate. Google
By enabling credit spending with a flick of the wrist,
Wallet is reputed to have lost $300 million because of
it’s very likely that apple watch consumers will actually
the charges it had to absorb from semi-cooperative
increase their transaction velocity and spending.
creditors.
Despite the somewhat grim history of credit card The disparity between debit and credit card spending
transaction format innovation attempts, it’s clear that confirms what behavioral economists have been
the urge has always been there and that card providers saying for years and proving in experiments: a lack of
have driven almost all of it—mostly in the name of transparency obscures consumer mental accounting,
increasing credit card transaction frequency. allowing them to more freely give in to their impulses.
A 2013 Federal Reserve study of pre- and post-recession
spending patterns reveals a staggering rise in credit
card usage from 2003 to 2012—credit, debit and pre-
paid card transactions rose by over 45 billion a year.
The skyrocketing number of card transactions illustrates
CAVEATS AND CONSIDERATIONS 12Privacy and data concerns
Much of the spotlight has been cast on Apple Pay, but Interestingly, cbsnews.com recently ran an article, “Are
just as important is iBeacon. Apple Watch and its likely impenetrable phones a threat to national security?”
impact on the wearables category will move consumers It quotes FBI Director James Comey on Apple’s new
one step closer to hyperpersonalization, whereby their encryption standard, “It’s the equivalent of a closet that
data cloud is analyzed in various retail environments to can’t be opened, a safe deposit box that can’t be opened,
enable contextualized offers, discounts or services. The a safe that can’t ever be cracked.” While most technology
expected net result is an as-yet unseen level of customer professionals will tell you no system is unbreakable,
intimacy. As most of this will be permission-based, Apple’s response was, “We wouldn’t be able to comply
consumer confidence will be a key element of success. with a wiretap order even if we wanted to.”
“IT’S THE EQUIVALENT OF A CLOSET THAT
CAN’T BE OPENED, A SAFE DEPOSIT BOX
THAT CAN’T BE OPENED, A SAFE THAT
CAN’T EVER BE CRACKED.”
CAVEATS AND CONSIDERATIONS 13CREATING VALUE
14GUIDELINES FOR SUCCESS
Each business category offers a unique set of opportunities and challenges for
capitalizing on Apple Watch in the near term. The following guidelines should help
kick-start concept development and expedite solutions.
EXTEND EXISTING GIVE IT A JOB BUILD FOR INTEGRATE IT INTO
MOBILE PROPERTIES SEGMENTS DAILY LIFE
ASK PERMISSION SIMPLIFY CREATE VIPS
CREATING VALUE 151. EXTEND EXISTING MOBILE PROPERTIES
It’s important to remember that Apple Watch will be an untested and unknown
commodity for consumers and brands alike. As a result, there’s wisdom in first
capitalizing on Apple Watch as a part of a larger system (rather than as a
standalone innovation), then pushing outward.
Finding ways to simplify and extend the reach of a brand’s existing mobile
platform will be key in helping consumers become more comfortable with the
device’s capabilities and a brand’s ability to develop for them.
CREATING VALUE 162. GIVE IT A JOB
Apple Watch is the first device in years to offer consumers an opportunity for
discovery, fascination and actual learning. As a result, consumers and users
will be asking themselves either explicitly or implicitly, “What job do I need
this to do?” Because it will be app-driven, consumers will instinctively begin to
customize with a set of applications that work best for them.
Content-only plays that don’t differ from what consumers experience on
their existing devices will likely disappoint.
CREATING VALUE 173. BUILD FOR SEGMENTS
The basic rule of thumb when designing a gender-specific product is physical
proximity. Gender-specific cars? Not so much. But gender-specific clothes, hair
care products and hygiene are no-brainers. Rather than developing one-size-
fits-all applications, brands should attempt to drill down into the utility needs of
specific customer segments.
Apple Watch’s always-on presence will offer brands and developers a
markedly different opportunity to address a broad range of needs for
specific segments—women, kids, moms, dads, etc. Don’t ask what your
customers (plural) need. Ask what that customer needs.
CREATING VALUE 184. INTEGRATE INTO DAILY LIFE
Another key opportunity is for brands and products to subsume related
categories and streamline multiple functionalities into a more seamless
experience that accurately reflects the real world.
The Apple Watch’s ever-present nature will demand simplicity and order from
brands consumers interact with. It’s important to remember that consumers
construct their daily lives around the services they require and clearly
understand how they interact with one another.
Brands would be wise to offer applications that organize the disparate
parts of a consumer’s daily life. This presents a unique opportunity for
financial services brands, for example, to manage diverse digital assets,
including loyalty programs, coupons and discounts.
Conversely, retail brands with a consistent presence in a consumer’s life also
have an opportunity to help organize the day-to-day and integrate related
consumer functions into a digital butler-type functionality.
CREATING VALUE 195. ASK PERMISSION
While Apple Pay is getting most of the buzz, Apple Watch promises to deliver
unique experiences using beacon technology. Imagine getting off your flight
with gate information instantly ported to your wrist or having your device alert
you to products that go well with products you’ve purchased in the past.
There are already many reasonably priced beacon platforms to facilitate these
realities, ranging from Gimbal to Passkit to Roximity.
But before brands roll these applications out en masse, it will be critically
important to help consumers stick their toe in and begin to trust these newer,
more intimate relationships with brands. It will be important for brands to
explicitly ask permission for and get incrementally greater levels of access
over time rather than going for the big data grab all at once.
Brands traditionally follow users in technology adoption. In this instance, brands
and consumers will be discovering the technology at the same time, so it will be
important to handle the relationship with care.
CREATING VALUE 206. SIMPLIFY
It’s very important to be mindful of the Apple Watch’s limited physical platform.
While iPhones are getting larger, the Apple Watch is going to make consumers
get much smaller.
Brands should work within the size limitations by divining ways to
communicate with limited visual cues that are both intuitive and informative.
The fields of semantics, syntactics and pragmatics all have very specific value in
this instance. How can the relationships between signs, symbols, structures and
agents come together to communicate effortlessly as the platform they’re being
delivered on?
Mobile devices have created the expectation that existing digital platforms can
be retrofitted to suit the mobile platform. It’s doubtful the same strategy will
bear fruit in the short term for Apple Watch and other, similar platforms.
CREATING VALUE 217. CREATE VIPS
End-users ultimately hold a platform’s fate in their hands. But organizations and
brands also play a role. Acceptance can and largely will happen through the
adoption of Apple Pay.
Creating value for customers can also come in the form of Apple Watch
enablement in the sales or customer-facing organization. Brands could easily
create simple processing systems to facilitate information sharing between a
consumer with the Apple Watch platform and a representative on the other
half of the transaction.
Customer service screening, order taking and other functions could exist in two
lines, those with Apple Watches and those without.
CREATING VALUE 22CLOSING THOUGHTS
23Get ready. Jump in.
Backing a new technology is never an easy decision.
Committing to it fully is even more difficult, especially when OPPORTUNITY FOR MARKETERS:
there’s no real market or proven track record.
• Get on the ground floor with Apple,
While it’s true questions remain to be answered,
essentially riding the wave that iPod,
iPhone and (to some degree) iPad
opportunities for commitment and exploration exist that experienced.
allow more cautious brands to test the waters just like more
cautious consumers likely will. • Help steer the ship with the customer/
consumer.
We believe our guidance offers a broad enough set of
recommendations for different brands to assess which
opportunity fits them best and move forward accordingly.
CLOSING THOUGHTS 24Let’s talk.
BEN GADDIS JAMES LANYON
Chief Innovation Officer Innovation Director
512.721.1380 512.721.1763
ben.gaddis@t-3.com james.lanyon@t-3.com
Copyright © 2014 T3. All rights reserved.
Other products, charts, logos and company names mentioned herein may be trademarks or service marks of their
respective owners. Images courtesy of Apple, Google, Intel, Moticon, Ralph Loren, Withings and Motorola.
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