$400?! For A Smartwatch?!

The cost of the “iWatch”

An Apple wearable nears, it seems. So that leads to the inevitable next question: how much will it cost?

Naturally, whispers of would-be price-points have appeared as well. And perhaps unsurprisingly, they’re high. Or rather, higher than the average tech pundit would hope.

And yet, we’ve seen this play before. In fact, we always seem to see this play with Apple. It’s the exact play that led to the famous Steve Ballmer scoff. Apple charges a premium price for what they consider to be a premium good.

This still confuses people for some reason. Maybe it’s because Apple is such a successful company now – the biggest (in terms of market cap) in the world, in fact. How could they be so mainstream yet so premium?

Here’s the thing. The thing that has remained constant with Apple for a long time now. Apple doesn’t let the price dictate what they’re going to build. They build something and then dictate the price. And the market is made accordingly.

Said another way: Apple could certainly price most of their products cheaper than they do. And if they sucked, they might still sell a bunch thanks to the attractive price. But instead, they focus on making the products not suck.

And shockingly, it works. People buy more expensive computers and phones from them. Not because they’re more expensive, but because they’re good.

Would you rather own two mediocre “smartwatches” at $199 or one really good one that you’ll actually use at $399? The answer should be obvious.

But it’s not always. Because the lower up-front price point is such a glittering lure. So it takes time to sell that more expensive device. It takes word-of-mouth. And what drives that? Quality.

This isn’t rocket science. Yet for so many other companies, it often seems like it is. If your product is mediocre, don’t launch it. I don’t care if it is cheaper. That’s often a disguise masking the obvious. And it won’t last. It never does.

Apple products tend to last because they take the opposite approach. The focus is all on the product, not hitting a price point. It may take longer to succeed out of the gate as a result, but it’s the smarter play.

Two caveats here:

iWatch v1. Gun not included.

1) You could argue that the iPhone only became a massive success after they were able to cut a deal with the carriers to subsidize the price to consumers. This is the argument Ballmer Scoff-defenders point to. He did in fact say it wouldn’t sell hugely at the original $600 price point.

But the wearable industry seems entirely different. There’s no dominating force at any price point yet. So Apple can still set the price. And likely will.

2) Before the iPad launched, leaks suggested it may cost upwards of $1,000. At the time, this was outrageous to people – and perhaps rightfully so. It sure seems like Apple planted the $1,000 price for Steve Jobs to get up on stage and drop the $499 bomb. I was there that day. It was by far the loudest applause. More so than for the device itself.

It’s possible Apple is playing the same card here. But it doesn’t feel like it. Notably, I’d trust John Paczkowski to sniff such an obvious ploy out, regardless of the source. So I do suspect we’ll see prices in the range of what he’s reporting. Maybe $299 — $399.

And I wouldn’t write the device off at that price. Ultimately, all that will matter is if it’s any good or not.