iWatch

A PROJECT FOR APPLE, INC.

Prepared By:
Donevan Baker Craig Holden Taylor Nickel Ryan Lucas

Table of Contents
Background ........................................................................................................................... 3 Goals ..................................................................................................................................... 3 The Scope.............................................................................................................................. 3
Research Questions.......................................................................................................................................................................4 Managerial Questions .................................................................................................................................................................4

Findings: Qualtrics Survey ...................................................................................................... 4

Activities ............................................................................................................................................................................................5 Phone Utilization ...........................................................................................................................................................................6 iWatch Usages ................................................................................................................................................................................6 iWatch Price ....................................................................................................................................................................................7 Purchasing Venues........................................................................................................................................................................7 Interest ...............................................................................................................................................................................................8

Findings: Conjoint Analysis .................................................................................................... 8

Price & Performance ....................................................................................................................................................................9 Watch Material ........................................................................................................................................................................... 10 Face Shape ..................................................................................................................................................................................... 11 Color ................................................................................................................................................................................................. 12 Brand ............................................................................................................................................................................................... 12

Findings: R-Commander....................................................................................................... 13
Overall Satisfaction With Current Phone ........................................................................................................................ 13 Loyalty To Current Phone Brand ........................................................................................................................................ 14 Interest In SmartWatch Concept ........................................................................................................................................ 15 Interest In SmartWatch Concept By Gender.................................................................................................................. 15 Correlation Of Fair Price For SmartWatch .................................................................................................................... 16 Factor Analysis Of Activity Attributes............................................................................................................................... 16

Recommendations .............................................................................................................. 19
Who ................................................................................................................................................................................................... 19 What ................................................................................................................................................................................................. 19 Where............................................................................................................................................................................................... 19

Conclusion & Summary........................................................................................................ 20

Background
Apple was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne on April 1, 1976 to develop and sell personal computers. Since then Apple, Inc. has become a worldwide, household name in the electronics and technology world. You cant step 3 feet without seeing Apple products, whether you're at school, work, or just out-and-about. Apple has become widely known for their Mac laptops and computers. Along with Apple computers, they have continued to be innovative and change the way we interact with technology with products such as iPods, iPads, and iPhones.

Goals
Our goal in this project and written report is to help Apple see a potential and profitable market that they can easily penetrate. This market deals with technology, just another direction within it. This direction deals with the innovative idea of smart watches. You have seen glimpses of this technology with others companies, but no one has dominated the space. We believe Apple has a huge opportunity to create a product called the iWatch that will dominate the market and add to their already huge success. In helping Apple see the vision for this opportunity, our group has participated in a variety of market research platforms that has given us confidence in this new direction for Apple, as well as provided us with answers to research and managerial questions. Based on the data collected, we will provide marketing recommendations to help get the iWatch off the ground.

The Scope
Upon taking this new product for Apple, there are many key business and managerial problems that arise with a new product in a new market. One problem, is where to market the iWatch. Is this a product that should be exclusively in phone provider stores, or should it be extended towards wristwatch stores. Another problem arises with the price. What are 3

consumers going to pay for this specific item. The main focal managerial problem comes with the circumstantial use of the iWatch. Will this product be the primary phone device or will serve more of an add-on product to the iPhone. This question is important as it provides possible future direction with Apples phone product line. Some additional valuable managerial problem also comes with competition with Samsung and their phonewatch device. How can we differentiate our product over theirs and gain a competitive advantage. The following are research and managerial questions that we want answers to. We have shaped our market research outlets around these questions.

Research Questions
Would you use the iWatch over other phone products? When and under what circumstances could you see yourself using the iWatch? What would you be willing to pay for the iWatch?

Managerial Questions
Willingness to pay? Age range? Most profitable usage circumstances for iWatch? (i.e. Sports Enthusiast/ Business Related) Most profitable strategies? (Phone Stores vs. Watch Providers) Advantages of using iWatch over competitors?

Findings: Qualtrics Survey

Qualtrics is a marketing research platform that allows users the opportunity to gain key insights. We utilized this tool to gain a better understanding of our typical user. We wanted to understand key demographic, purchasing behavior, and lifestyle information. As we look into the information compiled I will focus on key findings received from different questions and share the significance.

At the beginning of the survey we wanted to understand the current landscape of the cell phone market. With so many different available cell phone companies plus a very similar market to smart watches this could very well correlate. We surveyed 88 people with 66 of those people choosing Apple as the current smartphone that they possess. That is over 75% of the members we surveyed stating that they have an apple phone, which generally brings a large following.

This graph gave us great news about the behavior of our consumers. Over 66% of those who were surveyed are loyal to the brand that they use. That helps us correlate to future products that you make in that market not to mention our product that opens in an emerging market like smart watches. They will stay loyal to their brand that they usually buy such a brand like Apple.

Activities
We included a question in our survey to configure the activities that any consumer would participate in on a daily basis. This would help us understand our user as we included some of these key interests to be compatible with the iWatch. They are more likely to use the product if they can relate to it while doing these activities. We understood that physical fitness would be important but volunteer work and book reading came as a surprise. Based on these activities that individuals enjoy daily, we must incorporate them into the iWatch.

Phone Utilization
We attempted with this question in the survey to convey the ways that users used their phones. The iWatch is an extension of the phone that has phone like capabilities. For this survey they needed to divide 100% of their usage of the phone into 6 different categories. Some of these werent as significant as others but the communication, social media, internet/mail, and music are pivotal to be involved in the iWatch.

iWatch Usages
When it came to usages for the iWatch we wanted to go into even more depth to understand why our consumers would use it. For what specific reasons would they utilize our product in which ways. We were able to uncover that 52 out of the 82 respondents would utilize the iWatch for fitness/sports. 49 respondents would use it for personal use, and 34 would use it for everyday use. We need to capitalize on these users as we are able to understand in what ways they will use the product. Through these types of promotions/advertisements we know how we can target our consumer. We also see the main usages that we need to focus on.

iWatch Price
We did not receive the results that we were looking for with this question. We were attempting to see the average price that an individual would pay for a smartphone that is a watch. The price that they responded was $159.77. This does give us key information as we are able to analyze the iWatch. We didnt unveil any specifications with the iWatch, what it can do, and its capabilities. In order for our consumers to be willing to pay a higher price we need to expand on its capabilities so that they feel its worth a lot more.

Purchasing Venues
This question allowed us to understand which venues would be the best way to reach our consumers. We wanted to grasp where they would want to purchase the iWatch because it is an item unlike any other. Its part of an emerging market, which makes it more difficult to know where you should sell it. We were able to understand from this information that electronic stores and cell phone stores would be the best venues to sell the iWatch.

Interest
We just wanted to see the interest of individuals if they would actually buy an iWatch. You can see by the presented information that over a combined 44 respondents would be interested in purchasing a smart watch. That comes out to over 54% of the respondents interested in this type of technology. That leads us to believe that in this emerging market it would be worth it to 1) enter it, 2) be as innovative as possible as we care for our consumers opinions.

In conclusion we have learned a lot about our consumers when it came to the key findings of the Qualtrics survey. We understand how our customer would utilize the iWatch product. We can see the loyalty that consumers have towards brands, with Apple being one of the most successful in this category. Not to mention we learned about a similar market in the cell phone industry. These findings will translate to the SmartWatch market. This helped gather the insights of our consumers so that we can generate the most successful product in the market.

Findings: Conjoint Analysis

Through Sawtooths market research platform, our group created and developed a conjoint survey, with which we exposed to many participants, giving us a valuable market sample. The data collects from this conjoint survey sample, allowed us to understand the market and see valuable trends among potential consumers. Our hopes in analyzing the conjoint survey was to understand the physical dimensions and attributes that our consumers desire. We wanted to know what to stay away from and what to move towards, when it came to the appearance of the iWatch. In outlining the iWatch, we tested elements such as price, color, face shape, watch material, brand, and performance. After reviewing the data, we received an importance summary that showed us that price(20.5%) and performance(20.3%) were the leading elements that consumers truly cared about the most.

After reviewing price and performance, it was valuable to know that the next leading elements of importance were watch material(19.9%) and color(18.6%). This data is important to know, when figuring out the development of the iWatch product, showing that consumers care about the certain appearance attributes over others. This helps Apple know where to spend their time, money, and resources towards(like color & material) and what attributes to not spend much time towards (like face shape). Within these six elements that have to do with the iWatch, we were able to break down each element and find the optimal and preferred attribute within those elements. The following graphs display each attribute, which easily helps us identify what is the preferred attribute type as well as what attribute types to stay away from as they have a trend of negative responses.

Price & Performance

The first two graphs (below) that display attributes of price and performance were fairly expected and predictable. These graphs mainly show us that consumers want the cheapest option along with the best performance. However, it was interesting to see that consumers preferred not to have the expensive product(-62.9) more so than actually wanting the cheapest option(47.9).

Watch Material
After analyzing price and performance, we moved onto watch material graph(below), which was rated as one of the top attributes of importance. This data shows us that out of the preferred options, leather and metal were the only attributes that rated positive. Leather, however, was the preferred favorite at 43.0. This data obviously helps us understand our consumers and what they want in a product, but it also gives us insight into attributes that we should stay away from, which can easily be seen in the attribute of Velcro with a rating of -68.6.

10

Face Shape
After watch material, we then moved onto the attribute of the face shape(graph below). In analyzing this graph, we discovered that circle was the best optimal choice preferred by our sample. Everyone other choice available brought negative ratings, which helps us understand more what our consumers would prefer in an iWatch product.

11

Color
In analyzing the preferred color attribute(graph below), we found that neutral colors like black and white were highly rated. It was interesting to see that alternative colors like red, green, and blue were negatively rated. Allowing customization of color offering, would be preferred but offering neutral colors to the masses is preferred due to this data.

Brand
In analyzing the brand(graph below), we found that our market sample preferred the company Nike(34) to Apple(14). This graph brings positive and negative insights for Apple. Positive, consumers have a positive attitude towards the Apple brand and positively desire them over competitors like Samsung and Nokia. Negatively, people prefer the Nike brand and see the technology coming from them. Although, this is a negative, its good for Apple to know their competitors ahead of time, which can help in the marketing campaign and strategy.

12

In conclusion with our conjoint analysis, we have learned a lot when it comes to the specific attributes regarding the iWatch. This data has helps us understand our market and what would be preferred by consumers. Putting all of these utility summary graphs together, the optimal product would consist of an iWatch that is black, leather, and with a circle face shape. This optimal product would also have excellent performance with a cheaper price tag ($200-$250).

Findings: R-Commander
Overall Satisfaction With Current Phone
Output 1 > t.test(Dataset$OverallSatisfaction, alternative='greater', mu=3, conf.level=.95) One Sample t-test data: Dataset$OverallSatisfaction t = 9.624, df = 82, p-value = 2.071e-15 alternative hypothesis: true mean is greater than 3 95 percent confidence interval: 3.946722 Inf sample estimates: mean of x 4.144578 Summary 1 Since p < .05, we can reject the null hypothesis and conclude that people have greater than neutral satisfaction with their current phone (Scale 1-5). Output 2 > t.test(Dataset$OverallSatisfaction, alternative='greater', mu=4, conf.level=.95) One Sample t-test data: Dataset$OverallSatisfaction t = 1.2157, df = 82, p-value = 0.1138 alternative hypothesis: true mean is greater than 4 95 percent confidence interval: 3.946722 Inf sample estimates: mean of x 4.144578

13

Summary 2 Since p > .05, we cannot reject the null hypothesis and cannot conclude that people are more than satisfied with their current phone (Scale 1-5).

Loyalty To Current Phone Brand

Output 1 > t.test(Dataset$LoyalBrand, alternative='greater', mu=3, conf.level=.95) One Sample t-test data: Dataset$LoyalBrand t = 7.7745, df = 82, p-value = 9.753e-12 alternative hypothesis: true mean is greater than 3 95 percent confidence interval: 3.719722 Inf sample estimates: mean of x 3.915663 Summary 1 Since p < .05, we can reject the null hypothesis and conclude that people have greater than neutral loyalty with their current phone (Scale 1-5). Output 2 > t.test(Dataset$LoyalBrand, alternative='greater', mu=4, conf.level=.95) One Sample t-test data: Dataset$LoyalBrand t = -0.7161, df = 82, p-value = 0.762 alternative hypothesis: true mean is greater than 4 95 percent confidence interval: 3.719722 Inf sample estimates: mean of x 3.915663 Summary 2 Since p > .05, we cannot reject the null hypothesis and cannot conclude that people are more than loyal with their current phone (Scale 1-5). From the last four analyses, we can see that people are generally satisfied with their current phones, and are generally loyal to the brand of their phones. This is both a good and bad thing for Apple. Its good because Apple has a pretty devout following. Its bad because there is an increase in loyalty and following of other brands, such as Samsung, which could be threatening to Apple. If Samsung, or similar competitors, continue to make comparable or even better products, 14

current Apple users may be tempted to switch over.

Interest In SmartWatch Concept

Output > t.test(Dataset$SmartWatchConcept, alternative='greater', mu=4, conf.level=.95) One Sample t-test data: Dataset$SmartWatchConcept t = 0.8359, df = 81, p-value = 0.2028 alternative hypothesis: true mean is greater than 4 95 percent confidence interval: 3.842951 Inf sample estimates: mean of x 4.158537 Summary Since p > .05, we cannot reject the null hypothesis and cannot conclude that people have greater than neutral interest in the concept of a SmartWatch (Scale 1-7). This could potentially be explained by the fact that a SmartWatch is a relatively new concept, and it may be hard to grasp for the general person. If people were more fully educated on the SmartWatch, knew friends that had one, or tried one out themselves, we believe overall interest in the SmartWatch would increase.

Interest In SmartWatch Concept By Gender

Output > t.test(SmartWatchConcept~Gender, alternative='two.sided', conf.level=.95, + var.equal=FALSE, data=Dataset) Welch Two Sample t-test data: SmartWatchConcept by Gender t = -2.3562, df = 73.242, p-value = 0.02114 alternative hypothesis: true difference in means is not equal to 0 95 percent confidence interval: -1.6272241 -0.1359338 sample estimates: mean in group Male mean in group Female 3.750000 4.631579

Summary

15

Since p < .05, we can reject the null hypothesis and conclude that there is a difference in interest in the concept of a SmartWatch between females and males. We can conclude that females are more interested in the SmartWatch concept by almost a whole point (Scale is 1-7). This is actually very interesting data, and went against our prior beliefs that men would be more interested in the SmartWatch concept. This is something Apple may want to dive into a little bit more and see if this is really the case.

Correlation Of Fair Price For SmartWatch

Output > RegModel.3 <- lm(FairPrice~Age+Income+SmartWatchConcept, data=Dataset) > summary(RegModel.3) Call: lm(formula = FairPrice ~ Age + Income + SmartWatchConcept, data = Dataset) Residuals: Min 1Q Median 3Q Max -198.860 -42.821 -8.264 32.853 295.680 Coefficients: Estimate Std. Error t value Pr(>|t|) (Intercept) 1.285 42.170 0.030 0.9758 Age 21.629 9.027 2.396 0.0190 * Income 5.461 3.105 1.759 0.0825 . SmartWatchConcept 12.057 4.973 2.424 0.0176 * --Signif. codes: 0 '***' 0.001 '**' 0.01 '*' 0.05 '.' 0.1 ' ' 1 Residual standard error: 75.24 on 78 degrees of freedom (1 observation deleted due to missingness) Multiple R-squared: 0.1774, Adjusted R-squared: 0.1458 F-statistic: 5.608 on 3 and 78 DF, p-value: 0.001554 Summary Since p < .05, we can reject the null hypothesis and conclude that there is at least one attribute that is correlated to the fair price of a SmartWatch. Based on the data above, we can conclude that there is a direct correlation between age and fair price, and SmartWatch concept and fair price. This just validates our prior beliefs. If someone is interested in a SmartWatch, they would be inclined to pay more for it. Also, as people get older, they usually have more discretionary money to spend. Older people are willing to spend more money on items that may be considered luxury, or non-essential.

Factor Analysis Of Activity Attributes

16

Output > screeplot(.PC) > remove(.PC) > .FA <+ factanal(~ArtAntiques+Bible+BicyclingRunning+BookReading+Camping+CD+CharitiesVol unteer+Crafts+Dieting+DIY+FashionClothes+FitnessExercise+ForeignTravel+Gardening+G ourmetFood+HealthFoods+Knitting+MoneyMakingOpportunities+RecreationalVehicles+Se lfImprovement+Sewing+SportsTV+Stereo+Sweepstakes+Wildlife, + factors=4, rotation="varimax", scores="none", data=Dataset) > .FA Call: factanal(x = ~ArtAntiques + Bible + BicyclingRunning + BookReading + Camping + CD + CharitiesVolunteer + Crafts + Dieting + DIY + FashionClothes + FitnessExercise + ForeignTravel + Gardening + GourmetFood + HealthFoods + Knitting + MoneyMakingOpportunities + RecreationalVehicles + SelfImprovement + Sewing + SportsTV + Stereo + Sweepstakes + Wildlife, factors = 4, data = Dataset, scores = "none", rotation = "varimax") Uniquenesses: ArtAntiques Bible BicyclingRunning 0.686 0.864 0.904 BookReading Camping CD 0.540 0.500 0.960 CharitiesVolunteer Crafts Dieting 0.860 0.518 0.850 DIY FashionClothes FitnessExercise 0.683 0.775 0.798 ForeignTravel Gardening GourmetFood 0.862 0.754 0.882 HealthFoods Knitting MoneyMakingOpportunities 0.733 0.443 0.310 RecreationalVehicles SelfImprovement Sewing 0.605 0.694 0.778 SportsTV Stereo Sweepstakes 0.648 0.882 0.750 Wildlife 0.877 Loadings:

Factor1 Factor2 Factor3 Factor4 17

ArtAntiques -0.108 0.151 0.495 -0.188 Bible -0.108 0.320 0.124 BicyclingRunning 0.158 0.246 BookReading -0.240 0.613 0.161 Camping 0.547 0.441 CD 0.123 0.148 CharitiesVolunteer 0.342 0.137 Crafts -0.536 0.288 0.334 Dieting -0.151 0.149 0.319 DIY 0.398 0.386 FashionClothes -0.315 0.286 0.188 FitnessExercise -0.105 0.431 ForeignTravel 0.203 -0.298 Gardening 0.487 GourmetFood 0.121 0.320 HealthFoods -0.346 -0.130 0.354 Knitting -0.177 0.721 MoneyMakingOpportunities 0.543 -0.223 0.146 0.570 RecreationalVehicles 0.616 -0.124 SelfImprovement 0.183 0.517 Sewing -0.443 0.128 SportsTV 0.360 -0.293 0.262 0.260 Stereo 0.336 Sweepstakes -0.109 0.386 0.291 Wildlife 0.298 0.164 Factor1 Factor2 Factor3 Factor4 SS loadings 2.081 1.639 1.632 1.494 Proportion Var 0.083 0.066 0.065 0.060 Cumulative Var 0.083 0.149 0.214 0.274 Test of the hypothesis that 4 factors are sufficient. The chi square statistic is 230.54 on 206 degrees of freedom. The p-value is 0.116 Summary Since p > .05, we cannot reject the null hypothesis and cannot conclude that the four factors are significant. Because the p-value is somewhat close to 0.05, the addition of a couple more factors might make this data significant. Based on the four factors present, we could assign them names that would have association to certain types of groups/people. The four group would be named as follows: Sports/Outdoor, Nerds, Worldly, Social.

18

Recommendations
After analyzing and understanding the data collected from the market research platforms, we have created marketing recommendations of execution to help Apple become profitable with the launch of their iWatch product line.

Who
In analyzing the data, we have illustrated the target market in which Apple should put forth their efforts. The gender is pretty evenly spread, so both men and women could be targeted which is expected for this product line. The main age range that we should focus on, based on our findings would be between 25 and 34. Our target market loves fitness and sports and sees the iWatch in the personal sports and fitness realm. The amazing stat that we found was the loyalty to current phone providers. Over half of the market is loyal to their current provider and 38% listed themselves as very loyal. Therefore, we should market those that currently have Apple products and especially the iPhone.

What
The optimal product is found through our conjoint analysis and would be black, leather, and with a circle face shape. Along with these physical attributes we have learned that the product usage of this product would be sports and fitness enthusiast. This product needs to be able to withstand sweat, heat, and anything else that sports enthusiast would endure. The price is obviously a serious attribute that our consumers care much about. Through our findings, we understand that consumers are willingness to pay for a smart phone watch would be $160. However, they also said that they spent over $200 for their current smartphone and were loyal and satisfied with it. Because of this data, we would price Apples product between $150-$250. Along with price, we have learned that consumers would mainly want the iWatch to be able to communicate (phone & text), play music, and search internet (social media).

Where
Now that we know the product and who we are marketing to, now we need to know where we should market this product. After analyzing our findings, we have found that the best place to provide this product would be in electronic stores and phone provider stores. Because we know our target market are sports enthusiast, we recommend to promote and advertise through sports and fitness outlets such as sports magazine, TV commercial spots (ESPN), and in sponsoring athletes.

19

Conclusion & Summary

We have found that this is a fledgling market, however there is great potential. Brand loyalty is very strong in the cell phone market and Apple holds the majority share. This would indicate that if Apple were to move into the SmartWatch market they would be able to pull in some customers just because it is an Apple product. With their track record of customer satisfaction in the phone market, as an accessory, the iWatch has great potential. In response to our research questions, consumers are willing to use the iWatch over other SmartWatch options in conjunction with their phone. The markets with the highest potential from our findings are personal fitness and activity, as well as personal use. The price range is approximately $200. We found the target age range to be predominantly 25 to 34 years of age and tested slightly better with women than men. The product placement makes more sense in the eyes of the consumer to be found where cell phones are sold namely big electronics stores and phone carriers. The features of the iWatch that tested the best are a leather band, circle face, and a neutral color (black/white). We think this would be a profitable opportunity for Apple to capitalize on and recommend proceeding with production.

20