Apple – What Are They Thinking?

$24,000 for a watch. Repeat after me, $24,000 for a watch. I am a loyal Apple fan-girl, but I can’t help but think that this time, they have got it wrong.

Do you think Apple has overestimated their brand power and customer loyalty to warrant this kind of pricing? Do they really know their customer or do you think they are taking the Mickey here?

What really baffles me is the disconnect between their image of being one with the people and then creating something SO exclusive and out of reach for what I would suggest would be a significant portion of their customer base.

Think of your local Apple store and the Apple geniuses working within. I picture scruffy, ultra casual and laid back; a bright blue t-shirt thrown over whatever they happened to be wearing that day – stylish or not. If you were about to purchase a luxury vehicle, or even your first Rolex… would you expect to be served by a hipster in a t-shirt? Most likely not.

So if you had $24,000 to spend on a watch, which experience would you prefer?

This: Or this? Admittedly they have attempted to tailor the pricing structure to include a broader segment of their customer, but it is clear they have used the ‘high price’ structure – estimating the upper bound and pricing just below it. Have you ever paid $1000 for a watch, or even $500? I certainly haven’t, and had never considered it …until now. Apple have very cleverly created a need in the customer that we didn’t know we had, but how are so many people willing to spend an exorbitant amount of money on a technology we haven’t even tried yet?? The watch needs to be paired with an iPhone; not only does that add $1000 to the cost of the watch but we don’t know how long the battery will last, the subsequent battery drain on the iPhone, the excess data being used by the constant pairing, the current model becoming obsolete with future releases (probably within 12-24 months) etc. 2 billion pre-sales means people clearly don’t care. How do Apple do this?

 As a 30-something woman, style is important to me, and there is no way that I’m going to pay even $500 for a watch that resembles a Fitbit.

    

 However, I have caught myself calling it ‘the cheap one’. A $500 watch. Cheap. Although this model is closest to my price bracket (chuck me in the price-sensitive segment), not only is it not stylish enough for my taste, I don’t want to be perceived as wearing ‘the cheap one’. The next model up looks slightly classier, and if I were ever to purchase one, I suppose it would be that one. As much as I’d love a rose gold Edition, I certainly can’t fathom ever spending $24,000 on one either (and make that $26,3000 if you want the AppleCare warranty that goes with it). This is classic use of the compromise effect, the upper end is way out of my reach, the lower end is not my taste at all – and now I’m considering spending $1000 on a watch, that doesn’t even exist yet.

Apple have trained their customers to accept their prices without question. There are no blitz discounts, end of financial year sales or reduced prices for out of date models. This is how each product creates so much hype because there is no need to wait for a sale that is never going to happen. People want to be early adopters, for the prestige of owning the latest technology.

Except that this time, they lost me. I know that 2 billion other customers weren’t lost along the way… but were you?

Have you pre-ordered an Apple Watch or did the hefty price tag deter you too?

 

Iacobucci, D 2013, Marketing Management, 4th edn, Cengage Learning , Mason, OH, USA.