Sales Channel Strategy for Apple Watch

One thing that I am very interested in learning about is, what will be Apple’s marketing strategy for the Apple Watch?

Most of the discussion on the Internet has been about the product. After all, that is basically all that Apple has shown us thus far. However, to gain any serious idea of whether it will sell well or not, we have to understand at least the promotion, pricing and channel strategies.

Here, I would like to touch on some possible marketing strategies;

  1. It is very likely that Apple will extend the distribution channels for the Apple Watch to fashion and jewelry. These are obviously new channels for Apple, and it is unclear whether these channels will be very cooperative.
  2. Apple could possibly repeat the channel strategy that they forced on retailers after the introduction of the Bondi Blue iMac; that is, they might demand that jewelry shops treat the Apple Watch in a very special way with a dedicated display.
  3. Apple already has a very strong brand, but it is not yet associated with watches. It will be an uphill battle into which Apple is likely to dedicate a huge amount of resources. We can expect Apple to work with news outlets to increase media exposure of the Apple Watch, while Apple will also invest heavily in advertising.
  4. Jewelry outlets typically do not have to explain how the products work. Watches do not have many functions, and the functions that they do have not changed much in decades. The precious watches are typically displayed behind glass cases, and only when you ask the shopkeeper to open the lock, can you touch the device. This will not work for the Apple Watch. Customers will have to touch it and to test its wide variety of features to understand how it will suit their needs. There also needs to be a person who can explain it to them. It is very likely that the vast majority of jewelry outlets will not be up to this task. If this is the case, it is possible that Apple will severely restrict outlets and demand that they reserve dedicated space and staff for the Apple Watch.
  5. If getting jewelry outlets to carry the Apple Watch in a sufficient way turns out to be too difficult, then Apple might restrict retail to the Apple Store and online.

All in all, there are many challenges in the channel strategy. It would be ideal if Apple could get jewelry outlets onboard, but that could turn out to be very difficult. Advertising and promotion however should be more straightforward and we can expect a lot of that going forward.

Why the Apple Watch Exists

Following the introduction of the Apple Watch, many people have suggested that it still lacks a reason to exist. That the keynote lacked an explanation of what the purpose of an Apple Watch is. That it lacks a so called Killer App.

This is probably an extremely misleading way to think about how new product categories come to life and subsequently flourish. The idea that the inventors of a new product category have a good idea of how it will evolve and what needs it will fulfill is not supported by history. Apple executives have also repeatedly mentioned how the killer application came only after a product’s introduction, and how success has often been beyond their wildest dreams.

Take the iPhone for example. At the time of introduction, it was marketed as i) a great phone, ii) an iPod and iii) an Internet communicator. Fast forward to today and you find that i) people don’t use smartphones much as phones, ii) they don’t use them much as iPods, iii) they don’t spend time browsing the web very much. Instead they use smartphones predominantly for Facebook, messaging and taking photos/videos, with app money being mostly spent on games. We can also add video viewing. The killer app is nothing like the initial “reason to exist” that Apple presented.

Hence the fact that Apple didn’t convincingly present a “reason to exist” for the Apple Watch is only relevant for the initial marketing push. Although it will affect how strong the initial uptake will be, a “reason to exist” has no consequences for whether it will ultimately succeed long-term.

Therefore, I think that the question “why does it exist?” is completely the wrong question to be asking. That will be answered in the long term by products that may not even exist yet. In fact, when you come to think of it, the definition of a killer app itself almost precludes it from being known at the time of product introduction.

The question should simply be, “what is Apple’s initial marketing push going to be based on?”. “Does Apple have a good strategy for that push?”

From what I’ve seen, Apple’s initial marketing strategy is plainly obvious. It is going to be based less on technical or functional merits and more on the fashion aspect. It will be about creating brand awareness. It will be about creating a buzz, not necessarily in the Internet community, but in the more conventional media. This is probably based on the realization that explaining the functional merits of the Apple Watch is going to take time to win the general public, too much time to sustain the excitement of developers.

And that is why the “why does it exist?” of the Apple Watch, does not exist yet.


All other attempts to create a popular smartwatch have failed to date. Interestingly, they have had a clearly communicated “reason to exist”, for what it’s worth.

What If Apple Pay Succeeds?

Similarities and differences

Apple announced its entrance into mobile payments on Tuesday. In many ways it is very similar to the ill fated Google Wallet. They both use NFC technology and they both use software on your smartphone. In terms of security, they are both vastly superior to credit cards and their magnetic strips (or 3-digit security codes). I do not claim to know the details of both systems, but at least superficially, they seem to be much more similar than different.

What seems to be very different is the way they handle privacy issues. Eddy Cue, during Tuesday’s announcement, strongly emphasized that Apple will not store credit card details on the phone, nor will they store transaction details.

We are not in the business of collecting your data. So, when you go to a physical location and use Apple Pay, Apple doesn’t know what you bought, where you bought it, or how much you paid for it. The transaction is between you, the merchant and your bank. It’s fast, it’s secure and it’s private.

This means that Apple cannot use and is not interested in using Apple Pay as a means to collect point-of-sales data.

Obviously, this data is extremely valuable for advertising. Hence for a company like Google that generates the vast majority of revenues from targeted advertising, this data is too important to simply discard. In the Google Wallet Privacy Notice, Google says the following;

When you use Google Wallet to conduct a transaction, we may collect information about the transaction, including: Date, time and amount of the transaction, the merchant’s location, a description provided by the seller of the goods or services purchased, any photo you choose to associate with the transaction, the names and email addresses of the seller and buyer (or sender and recipient), the type of payment method used, your description of the reason for the transaction, and the offer associated with the transaction, if any.

Regarding how Google plans to use the data, they say the following;

In addition to the uses listed in the Google Privacy Policy, we use the information you provide us, as well as information about you from third parties, in order to provide you with Google Wallet services, and to protect you from fraud, phishing or other misconduct. Such information may also be used to assist third parties in the provision of products or services that you request from them.

This basically means that Google will treat your financial transaction data in the same way as they treat other data; it will be used to learn as much about you as possible, and to send you advertisements.

Can Google change its business model?

If Apple Pay is to succeed, it is very possible that Apple Pay’s business model will be the reason. Merchants and credit card companies will be understandably more willing to work with a company that promises to do only a single function, rather than work with a company that could possibly disrupt them in the future. However, this is not what I want to discuss. I am more interested in what would happen if Apple Pay does succeed.

Let us assume that Apple Pay does succeed and the business model plays an important role in it. Since all previous attempts have failed, this will set the standard for mobile payments. Merchants and credit card companies will expect new entrants to abide by store-no-data policies that are similar to Apple Pay.

Google will naturally have a hard time with this. Accepting a store-no-data policy directly conflicts with their basic business model. It will be interesting to see how Google will manage the situation.

Will other companies step in?

If Google hesitates to provide a store-no-data policy mobile payment solution, other companies might step in. For example, Samsung might add a mobile payment feature to their Samsung Wallet app. Samsung has a large share of the high-end Android market, and hence has access to a large proportion of the customers whom are attractive for a mobile payment scheme. They can also incorporate specialized hardware (secure enclaves and/or biometric sensors) which will enhance security.

Moreover, Samsung has no business model conflict in adopting a store-no-data mobile payment scheme. Like Apple, Samsung makes money by selling phones. They make money when their phones are better and have more meaningful features than the competition. In fact, Samsung would very much like to differentiate itself from the Android competition by including any compelling features that Google will hesitate to provide. If they can make money while doing this, that’s wonderful for them.

Other companies may also step in with a different business model, but still abiding a store-no-data policy.


Some other articles that suggest that Apple store-no-data policy is a big deal, but that other companies could technically adopt the same scheme if they were willing (Google does not currently seem to be willing);

“Here’s How the Security Behind Apple Pay Will Really Work”

There are a number of interesting implications here. First, while it may seem that Apple isn’t using any new technology, Lambert maintains that the combined use of tokens and biometric security features distinguishes Apple Pay from others. Second, Apple will not be handling the tokenization — the credit networks like Visa and MasterCard will be doing so. This essentially takes Apple out of the payment process — Lambert said that Apple will be acting “more as a channel and not a party,” and Apple already said in its major product announcement this week that it will not retain any transaction data. With Apple acting as a payment conduit and not a processor, it would already see little data, but Lambert said Apple has put up “some Chinese walls” to further prevent it from gaining access to payment data.

“Google Wallet Is Leaking Money”

For Google, the goal wasn’t to generate fee revenue from the transactions, as banks, PayPal (EBAY), and other companies do. The idea was to collect data on consumer habits and target ads to them. Google pays such high fees to the credit-card companies it works with, though, that it loses money on every transaction, says Osama Bedier, who stepped down as head of Wallet on May 20 and will shortly leave the company.

“Banks Did It Apple’s Way in Payments by Mobile”

“There are schemes that don’t respect and honor the payment networks,” said James Anderson, the senior vice president for mobile product development at MasterCard. “We want to invest in programs that respect our role in the ecosystem.”