Premium, not Exclusive

Following Apple’s hiring of Patrick Pruniaux, from very high end watch company Tag Heuer, there has been much renewed speculation that Apple will venture far into the ultra luxury end if the market. I have one big issue believing this will happen. Apple has always positioned itself very nicely as a premium brand. Yes, there are cheaper computers, phones, tablets, and MP3 players on the market, but Apple’s have always been within reach of your average middle class person. They are not a budget brand, but the extra you will pay is worth it for those of us who love the high quality of their products. Someone with an Apple product more says, “I have a good job and am reasonably well off” rather than “Look how stinking rich I am”.

Contrast that with the high end watch market, where some timepieces can go for upwards of $10,000. These are not products for normal people, it’s for people who talk about their homes plural.

This is the difference between a premium brand and an exclusive brand. Premium costs a little more for quality, while exclusive costs a whole lot more than that to be a member of the club.[1]

Apple has really never played in this sandbox, and the few times they have didn’t end well. The last product I can think of that could truly be considered an Apple attempt at an exclusive product is the 20th Anniversary Macintosh. This nearly $10,000 computer was quite a showpiece, right down to its white glove delivery service that was includes in that astronomical price.

And it was a terrible failure. Very few were sold and within a year the price was cut to $1999 to burn off the remaining inventory.

The biggest issue with exclusive brands is that they are inherently limited. There is a limit to how many people there are who even can, much less will, afford a watch that costs thousands and thousands of dollars. Apple wants as many people as possible to own it’s products so long as they can maintain their high quality.[2]

None of this is to say Apple may not try. But I find it really hard to believe that when the iWatch is finally revealed that it will be so far out of reach for the average iPhone owner. It will probably cost more than many other smartwatches on the market, but at the end of the day I would expect to see something closer to that than to a third home in the Hamptons showpiece.

  1. Which is not to say these exclusive products are not of high quality. They almost undoubtedly are, but when the costs get this high you start to see diminishing returns.  ↩
  2. And high margins.  ↩
Premium, not Exclusive was last updated July 11th, 2014 by Michael Truskowski