Apple Watch: Success or Failure?

While estimated sales of 3.6 million units in the first quarter after its launch would be a success for most products, it may not be for Apple. Apple set the bar very high for itself with the very successful launches of the iPhone and iPad.
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Last year at about this time, Apple announced a number of new products including the Apple Watch. Without knowing the constraints Apple faced in the introduction of this watch, I was critical of the branding -- particularly the name choice. I thought it should have continued the i-single syllable brand platform of the iMac, iTunes, iPhone and iPad to be called the iWatch. To determine the success of the Apple Watch, I have been looking for definitive data. Unlike other product launches, Apple has been less than forthcoming with sales data on the Apple Watch. On Apple's financial reports, it has included Apple Watch sales into the "other products" category.

Estimated sales to date

Perhaps the best data available on Apple Watch sales is the IDC estimate, which pegs Apple Watch sales in the second quarter at 3.6 million units. If those numbers are accurate, it puts Apple Watch sales in second place behind Fitbit, with sales estimates of 4.4 million units, and just ahead of Chinese maker Xiomi with 3.1 million units of estimated sales over the same period. IDC had initially forecast that Apple would ship 22 million units in 2015. It appears that the real sales figures will be substantially less.

What happened?

Even though the Apple Watch marks the first product shepherded by Tim Cook and Angela Ahrendts outside the shadow of Steve Jobs, it appears that it is not living up to expectations. There are many possible culprits.

Branding issues

In my Business Insider post nearly one year ago, I cited five reasons I thought that calling this product the Apple Watch was a branding mistake.

  1. The brand platform is violated. When he explained the use of the i-prefix, Steve Jobs said that it stood for a lot of things including the Internet, individual, inspire, instruct, inform, and individual.
  2. Brand Family is broken. iWatch shows a direct relationship with iPhone, iPad, iMac, iTunes, and iBook. They are all members of the "i-single syllable" brand family. The Apple Watch is not.
  3. Less Personal. "i-this" and "i-that" helps the product to be more personal since "I" is the pronoun that refers to oneself. Apple Watch leaves the buyer out of the relationship.
  4. Customer focus. Apple Watch makes the product company-centric rather than customer-centric because it leads with the company name - putting the company before the customer. It is "inside-out" rather than "outside-in" or company-driven rather than customer-focused.
  5. Less value-added. Apple Watch adds little value since the market already knows the i-prefix followed by a single syllable word is the branding platform of Apple, and it adds another syllable to the product name.

Launch strategy

Unlike other product launches, the Apple Watch was initially sold online. The "lines" strategy Apple is famous for using to market its iPhones and iPads were absent with the Apple Watch.

Why is creating lines of people waiting to get their hands on new products an effective promotional tool?

  1. Shows demand. It is perhaps the most visible way to show the product is in high demand.
  2. Promotes at a lower cost. Lines promote the product at a significantly lower cost.
  3. Creates media leverage. Lines generate publicity that attracts the news media, more customers, and social media.

The synergistic affect of all this attention creates a viral word-of-mouth pyramid that is invaluable to Apple -- all for an investment that is small compared to the cost of advertising in paid media.

Fueling speculation

With the Apple Watch launch, it is unclear if Apple executives (1) were afraid lines wouldn't form, (2) did not have sufficient product to sell at launch time due to manufacturing problems, or (3) really wanted to try a new strategy that would save customers from the inconvenience of waiting in line. Whatever the real reason, the absence of lines combined with the fact that Apple did not break out sales of the Apple Watch in their financial reports gives the appearance that Apple was insecure about the success of this product from the start.

Fallen short of expectations

While estimated sales of 3.6 million units in the first quarter after its launch would be a success for most products, it may not be for Apple. Apple set the bar very high for itself with the very successful launches of the iPhone and iPad. In fact, sales of the iPad exceeded the wildest speculation of analysts in its first year. It looks as if the Apple Watch is likely to fall short of the 22 million units IDC projected would sell in its first year. Apple's burying the figures in "other products" and changing the launch strategy from store lines to online does not inspire many to label the Apple Watch a hit by Apple standards.

Still the most successful smart watch

Even though the Apple Watch has not yet met or exceeded expectations, many believe it is the most successful smart watch launched to date.

Kaisen (aka continual improvement)

Judging by Apple's past behavior, this first release of the Apple Watch is likely to point out some issues that will be fixed and improved on the next release of the product. My bet is that that, as technology improves and Apple learns from its launch mistakes, it will significantly improve the product, and it will be the hit that many expected it to be.

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