Is Apple trying to disrupt the wearables ecosystem with the Airpods?

A broad spectrum of wearable technology is available in the market today, including Airpods, the Apple's hearables just launched yesterday and a lot of devices for tracking fitness, health, sleep, and other activities.  However, none of the products appear to be gaining traction with consumers. In fact, a 16Q2 report from market intelligence firm IDC shows that Apple Watch sales have dropped 55% since the product was launched in early 2015. The big question is: 

Why wearable products are not succeeding with customers? 

In our recent published article: “Modeling Customer Loyalty for Wearable Technology Products with the Grabber Holder Dynamic Systems Model”,  we applied a  linear system model to analyze why these products are not retaining customer loyalty, then described how the overall wearable ecosystem lacks customer retention and discuss multiple underlying factors that may influence whether consumers are loyal to a particular product in this market.

We also identified common limitations for the current wearable technology adoption and market growth including:

Value proposition to the user: Rather than acting stand-alone, the data archived from the wearables need to be integrated more broadly in an inter-operable ecosystem. Service providers in this ecosystem would be able to introduce a greater value to users by offering a wide range of services.

Lack of long-term impact on user’s behaviors and habits: Wearable segment has conditioned consumers to expect instant gratification and ease of use. Devices and services in this segment have failed to provide a perception of long-term impact on user’s health and quality of life.

Lack of standardization and reliability of measurements: There are significant errors with several of the wearable technology products. Validation and reliability of the measurements and the lack of standardization of devices have been a concern.

Integration with artificial intelligence (AI): Developers are integrating AI in wearables in hopes to introduce a more compelling set of features. Unfortunately, few existing AI features and services provide a relevant usefulness to rational consumers for a competitive price.

Complex design: Need for high technical complexity and miniaturization beyond the standards for smartphone and tablets.  Earbuds need to be small and light. Current wireless standards take too much power and run off of internal batteries.

As in previous disruptions, Apple needs to create strong "Holders" in the ecosystems.

Hearables devices have the potential capability to incorporate functionalities and services from other wearable devices and segments. This would allow hearables to become the "de facto" device for the future human-machine interaction, making hearable technology and its ecosystem more ubiquitous for entire world’s population.  We could expect even more promising exponential growth and disruption if Apple is able to present the ear as a compelling alternative to the wrist for capturing vital signs, fitness sensors and delivering meaningful and actionable information while integrating i-tunes platform in a single hearable device. In the model we defined "Grabber" of a product as the visible features and advertising that persuade a customer to try a product.

As Apple enhance the efficiency of bio-metric data collection, there will be a greater need in the ecosystem for a more robust software infrastructure that will allow both people themselves as well as medical professionals to monitor their health information and derive actionable insights from.  Moreover, insurance companies are beginning to offer discounts on their policy premiums to those wearing activity trackers. Initiatives like these will create financial incentives for people to adopt wearables in addition to the health merits, creating holders in the ecosystem. We call "Holder"  to anything that allows a customer to derive value from a new product and the ecosystem over the time.

Emotional consumers are associated with the grabber effect because they will buy the product based on being excited about the new features without having seen anyone receiving value from the product. Normally, they are the early adopters but do not represent more than 16% of the potential consumers, while rational consumers perceive the holders and purchase the product after having seen someone else already receive value from the product.  They represent the mainstream consumers.

Apple success with wearables will depend on the ability to create strong holders, let's see what happens in the mid-term.

Learn more about the "Grabber-Holder Model" and the wearable adoption in our article: “Modeling Customer Loyalty for Wearable Technology Products with the Grabber Holder Dynamic Systems Model”