Apple Watch Pricing Strategy Thoughts: 2

In my previous post, I suggested that if Apple took a cost-based pricing strategy for the 18K gold Apple Watch Edition, then the price differential might not be too large ($500 – $1000) and within reach of a normal fashion conscious consumer. I also argued that Apple should not be pricing to maximize profits, but they should be pricing to expand the ecosystem. Hence it would be in Apple’s best interests to make the 18K gold Apple Watch Edition affordable.

One thing that caught my attention while I was researching for this article, was that roughly 70% of the gold metal in a Rolex 18K gold watch is in the bracelet. In a teardown analysis of the Gent’s Rolex President, the pure gold content by component was;

  1. Case ring: 13.875 grams
  2. Case back: 5.41 grams
  3. Bezel: 3.98 grams
  4. Bracelet 51.46 grams

Coming back to the Apple Watch Edition, Apple has not announced an 18K gold bracelet. If you look at the photos, you also notice that the back side of the 18K gold Apple Watch Edition is not gold, but is dominated by the heart rate sensor which is identical to the one on the Apple Watch Sport. Therefore, the gold content of an Apple Watch Edition is most likely only a small fraction of what is used in a Rolex.

This corroborates the idea that if Apple follows a cost-based pricing strategy, then the price differential doesn’t need to be very large.

Even more interestingly, it shows us what strategies Apple could use to appeal to the people who for some reason want to spend fortunes on their watches. Simply put, they or some third-party could sell solid gold or diamond-laden bracelets which would snap into a 18K gold Apple Watch Edition. Ordinary folk can use the beautifully designed straps that Apple has announced.

A similar discussion on Apple Watch bracelets has been given by Drew Breunig (via @royrod) which is also worth reading. Drew also discusses the compelling idea that this solves the obsoletion problem caused by rapidly evolving technology.

It is my conviction that Apple has given this pricing and affordability thing a huge amount of thought. I believe that there was intense discussion on how they could cover the mid-range and the ultra-high end in one swoop. Instead of following what the Swiss watch makers are doing, I’m sure that they thought different.

The idea that I have presented above is a hypothesis of how they might have come up with a solution.