Why the Apple Watch price cut is smart thinking – TechCrunch

Last week Apple co-founder and general all-round-nice-guy Steve Wozniak made headlines via a Reddit AMA in which he was quoted as criticizing the Apple Watch for taking the company in to “the jewelry market”.

Typed Woz:

I worry a little bit concerning – I mean I adore my Apple Watch, however – it’s taken us in to a jewelry market where you’re going to buy a watch between $500 or $1100 based on exactly how vital you believe you are as a person. The only difference is the band in every one of those watches. Twenty watches from $500 to $1100. The band’s the only difference? Well this isn’t the company that Apple was originally, or the company that truly changed the globe a lot. So it could be moving, however you’ve got to follow, you know. You’ve got to follow the paths of where the markets are.

This week Apple gained a couple of headlines of its own, including its announcement of a $50 rate cut of said smartwatch. The brand-new entry degree rate for deciding on up Apple’s wearable is $299, for the smaller sized sized Sports model.

Does that rate lose mean Apple has actually realized it has actually an expensive dud on its hands and is desperately attempting to entice buyers to believe otherwise? In a word, no.

The Apple Watch remains the category leader in the smartwatch space. And while the long term sustainability of ‘lifestyle wearables’ (if I can easily call them that) remains a matter for debate at this still-nascent stage, it’s reasonable to say an early price-cut for an Apple device is not unexpected, provided the company’s past pricing strategies.

It’s additionally smart business if you make cash off selling an interconnected ecosystem of equipments and accessories, as indeed Apple does.

On the price-cut front, the original iPod, for example, cost some $400 at launch in fall 2001. In the complying with years the rate of personal iPod models pretty gradually declined, even as brand-new models launched, enabling Apple to reinstate better rate points for the current top-of-the-line device. Today you can easily select up an iPod nano for ~$150 (or a screenless shuffle for ~$49) — a far cry from the $400 original. And yet these (relatively) cheap and cheerful iPods are still apparently worth Apple’s while to make and sell.

The original iPhone additionally had a rate haircut of $200 mere months after launch spine in 2007 — yet that device went on to be a rip-roaring sales success, and continues to be the core engine of Apple’s business even today. So a price-cut, in and of itself, doesn’t tell us fairly much.

Interestingly, though, in the case of the Apple Watch, Apple has actually not reduced the prices of the extra Watch bands it sells. So while Apple’s core wearable is now a little cheaper, the Apple-gained Watch accessories are holding steady.

CEO Tim Cook yesterday gained a point of noting that concerning a 3rd of Apple Watch users “regularly” adjustment their bands. Which means that about a 3rd of its wearable owners have actually shelled out for (or been gifted) a second (or additional) band — expanding the profit margin Apple can easily make from the wearables.

apple watch pricing

Apple introduced one more band yesterday for the entry degree Apple Watch; a woven nylon option that it’s additionally selling separately for $49. others bands in its range include the $199 Milanese Loop band; a $449 Link bracelet; a $149 Classic Buckle leather band; a $149 Leather Loop band; and a $249 Modern Buckle option. And as quickly as you consider the pricing of those Watch band accessories it’s fairly clear where the biggest Apple hardware margins are being made: accessories.

Apple already follows this playbook with cases and dongles, charging frankly eye-watering prices for official connectors, substitute cables, fancy leather iPhone cases or battery-equipped variants, for example.

The Apple Watch, then, is a clear bid to open up a whole new spectrum of accessories — Watch bands — that the company can easily charge premium prices for.

And the point along with these wearable accessories is that people will certainly pay over the odds for personalization. In naked truth people are far happier to pay for personalization compared to to fork out a premium for something they probably truly demand but which won’t be displayed on their person, like a replacement charger cable.

After all, personal preference is the fuel of the fashion industry — and its that impulsive commerce Apple is seeking to tap in to via its wearable. No wonder the company dubs the Apple Watch its “most personal device ever”.

So while Woz could talk disparaging concerning the ‘jewelry market’ — provided his geek pedigree it is entirely his right to be dismissive of such fripperies — the chunky price-tags on those fancy Apple bracelets need to not be sniffed at as a strategy for Cupertino to eke much more mileage from its hardware business model.

A model that it’s been suggested could be flagging, as the smartphone market saturates, mobile growth rates sluggish even in massive markets enjoy China and tablet substitute cycles appear stubbornly stuck in far much less expeditious orbits. Swappable Watch bands that can easily snatch the fleet-of-foot whimsy of fashion aren’t chained half so rigidly to the strictures of upgrade necessity — and can easily therefore turn a profit outside the widening upgrade arcs of consumer electronics devices.

So, by making the Apple Watch a little cheaper, Apple is playing on the psychology of wearable buyers — by not only urging them to adopt its wearable in the initial place, however additionally implicitly encouraging them to spend a little of exactly what they’ve saved on the core device by additionally purchasing that much more expensive band. Y’know, the one they really, really like.

And talking of personal preference, mine is for a pro-privacy consumer electronics company that can easily afford to take a stand to defend customer data since it makes cash off of selling hardware (and, yes, additionally off of #fashion) vs the others kind of tech giant whose business model apparently demands the continual data-mining of users to energy ad-fueled revenue.

Seen from that perspective the jewelry market could — after every one of — contain fairly much more value and substance for consumer electronics users compared to Woz’s sideways glancing assessment of its skin-deep surface suggests. Privacy can easily command its own fashion-type premium too.

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