MACRO-TREND: WEARABLE

TECHNOLOGY

Smartphones pave the way for Smarter Watches

Part of 13toWatchin2013

Knowing smartphones will eventually reach saturation, companies are looking for the next source of revenue. It seems as if smartphones might be migrating out of our pockets and onto our wrists. If they do, the wealth of data they generate and technology they integrate, may offer marketing new ways to connect with consumers.

Based on current smartphone market share growth, some predict that smartphones will reach 80% saturation in the U.S. by August 2014.

“A LOT OF TIMES, PEOPLE DON’T KNOW WHAT THEY WANT UNTIL YOU SHOW IT TO THEM.”

-STEVE JOBS

Smartphones have caused disruption at retail as consumers are empowered to shop, compare and purchase anytime, anywhere through any channel via their digital mobile device. Smartwatches may serve as an extension of that behavior. Smartwatches act as mini dashboards of information on your wrist and can be tethered to other devices. The latest version of the iPhone and a unique chip present in the new device may provide clues to what’s on the horizon for Apple. Smartwatches may add a whole new dimension to the mobile market with implications for retail and marketing. Just last week Samsung launched the Gear smartwatch and Pebble was the darling of Kickstarter most of last year. Google and Apple are rumored to be entering the market soon. As smartphone growth slows manufacturers are looking for new revenue streams and they’re hoping consumer’s lust for electronics extends into wearables.

WHY IT’S RELEVANT

Smartwatches are seen as the next major consumer electronic opportunity now that cell phones and smartphones are quickly reaching a level of saturation among core users. They can be tethered to smartphones and other digital devices for a variety of other uses and applications. The potential data they generate may in turn be captured, and new ways to engage and interact with consumers may develop as a result.

HOW IT AFFECTS MEDIA AND MARKETING The use of a smartwatch may be another potential opportunity and threat for retailers. Further engagement is possible in-store through these devices. There are a variety of ways consumers that are connected can be leveraged for deeper dialogue and richer customer experiences. These sensor-laden devices are capable of monitoring and reporting on a myriad of data points providing context and meaning behind data like never before.

The devices serve a more contextual and utility driven role potentially for marketing. In some cases the marketing becomes the product (Nike+ FuelBand). They have the potential to nurture brand engagement with consumers versus simply providing another path to jam a marketing message home.

WHAT’S THE MARKET POTENTIAL

Juniper Research is projecting 170 million smart wireless devices by 2018 which mirrors the trajectory for smartphones. They estimate 18 million for 2013. Smartwatches are expected to make up over 31 percent of the growing wearable technology market.

Consumer’s interest in wearable technology is relatively low. Key barriers include the perception that it will cost too much as well as compromise their privacy. However, smartwatches seem to be the most likely device to be accepted among a wide range of wearable technology.

RELATED DEVELOPMENT Along with the new A7 chip, Apple unveiled their iPhone 5S with a new co-processor called the M7. The chip is a standalone chip for tracking sensor data when the phone is not actively in use. The new processor harvests all of the data from the iPhone’s compass, accelerometer and gyro-motion sensors, and can power a variety of other tethered devices for things like fitness, other health applications and games as well as a variety of other extensions. It can tell if you’re walking, driving, running, etc. and alter the device accordingly. It provides much more data about the user that can be connected to other experiences and devices – namely a rumored iWatch. This may in turn evolve Apples’ strategy beyond the wristwatch into a variety of wristband tech-devices with various functions. Anticipated launch is mid-2014.

HURDLES There are many hurdles to overcome. These include going beyond the clunky and geeky looking sci-fi crowd, actual usability and functionality beyond “glitz”. Creating a seamless and elegant experience is critical. Do people need another device in addition to their phone? Battery life has been questionable in early entrants. Currently few functions can be inherently better performed on a watch than other already existing devices. Technology is still developing and in some cases doesn’t seem to perform as advertised…yet.

MAJOR PLAYERS RIGHT NOW

There are many players entering or rumored to be entering the smartwatch race. Sony Smart Watch2 (Launching end of Sept.), Samsung Gear, COOKOO, MetaWatch, I’m Watch, Hot-Watch and Pebble with Google rumored to be entering the market (Recently purchased smart watch maker WIMM Labs). Apple is hotly rumored to be developing a version for 2014 (iWatch). Several other small and niche players also exist.

THE BOTTOM LINE Smartwatches are natural extensions of smart phones and another extension of our larger always connected world. Moreover, the likelihood of ownership is consistent with smartphone ownership. To truly grow beyond tech geeks and gizmo nerds, smartwatches must deliver on the consumer experience seamlessly. Augmenting existing experiences, greater integration of hands-free voice commands and extending physical awareness into more horizontal needs and functionality will bring them into broader adoption. Earlier attempts have failed and in some cases, failed miserably. However, recent technology advancements and saturation of smartphones have brought them back. Less intrusive than Google Glass, a watch may gain a broad adoption for a variety of uses from health & fitness to gaming, connecting with people, personal identification, verification and more.

IT’S THE DATA STUPID The data they collect adds another dimension to contextual understanding. In turn, this may bleed into marketing and retail applications enhancing and driving greater consumer interaction and brand engagement at point-of-sale with push notifications and check-ins among other engagement opportunities. Privacy concerns over the data they generate may hinder broad adoption and increase regulatory pressure. Consumers are willing to give up some level of privacy in exchange for value, but are wary of being tracked, especially when it relates to sending advertising messages. It remains to be seen whether consumers will actually be interested in this category which seems to garner so much manufacturer and start-up interest.

THE INEVITABLE Mobile Internet Usage Eventually Surpasses Desktop Access

The internet is quickly becoming untethered. The mobile web is driving consumers to a state of ubiquitous connectivity. This is primarily why analysts are so bullish on smartwatches and consumer adoption of smartwatches.

For retailers, the store is still the most critical touchpoint. But increasingly it’s tethered to many other touchpoints and online connections. These connections create expanded opportunities to reach them in more places through more devices.

WEARABLE TECHNOLOGY AS A DISRUPTIVE FORCE This new generation of physical data sensing technology is what Forrester Research refers to as “smart body, smart world” and Forrester believes this will be the next big wave in personal computing. The key ingredient is the data output wearable devices are capable of generating. These devices shift marketing away from pushing messaging and more into contextual engagement and utility. Forrester characterizes these disruptive forces across several areas.

Relationship Marketing & Utility versus Push Messaging: counter to a Minority Report future, these technologies may allow for greater contextual involvement and engagement opportunities with existing customers.

Deeper product insights: sensors will provide previously unavailable data about how consumers are using products. e.g. Progressive Insurance “Snapshot” product.

Contextual Retail Experiences: they make it easier to signal a retailer when a repeat customer has entered the store, track the customer’s in-store behavior, record their purchase information, then relay that contextual data in real-time. This creates a predictive model of consumer behavior over time and provides foresight and anticipation versus reactionary marketing: experiences linked with other commerce services that anticipate and predict consumer needs before they actually happen, ultimately driving sales.

Consumers are quickly becoming perpetually connected and always-on. Understanding the dynamic of the consumer experience in this contextual, data heavy environment will be critical to success. Will this Dick Tracy vision really come to fruition? Keep an eye on this new paradigm and be prepared to engage and monetize this new group of consumers in the near future. Watch for Apple’s moves in the category. If the watches continue to evolve and truly do create seamless, elegant experiences, chances are consumers will follow.

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