T3, a technology-fueled creative agency, offers its insights as to how brands and developers can mine opportunities with Apple's new Apple Watch platform the day it is first released.

1. 1
TECHNOLOGY-FUELED CREATIVE
APPLE WATCH
CREATING VALUE OUT OF THE GATE
® ™

2. 2
Index
5
9
14
23
The wearables playing field
Caveats and considerations
Creating value
Closing thoughts

3. 3
Apple’s WatchKit will be made publicly available
in just a few short weeks, ushering in a new era of
interaction between people, technology and commerce.
As consumers begin to learn this new platform’s
functionality, they will be looking for brands and
technology providers to develop applications that not
only make buying easier, but also make life better, more
productive and more entertaining.
Brands that embrace this opportunity will be seen
as technology leaders. Just as important, first-mover
brands will essentially gain the upper hand, taking
advantage of the opportunity to shape the category
and define the rules of engagement that will define the
business and consumer world for many years to come.
BRANDS THAT
EMBRACE THIS
OPPORTUNITY
WILL BE SEEN
AS TECHNOLOGY
LEADERS.”
“
Guidance for bold brands

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Ready to make an impact?
Here’s guidance and insight for
brands focused on making smart,
bold moves as the wearables
market unfolds.

5. 5
THE WEARABLES
PLAYING FIELD

6. 6
To date, the performance of wearables is a mixed
bag. The category isn’t well defined either in terms
of what constitutes wearable technology or how it
is perceived by consumers/end-users.
Currently, wearables encompass multiple
platforms, including:
The category disorder has done little to abate
growth. The overall appeal and long-term prospects
for wearables remain very bright.
The current landscape
THE WEARABLES PLAYING FIELD
ACTIVITY TRACKERS
3D MOTION TRACKERS
SMART CLOTHING
WEARABLE CAMERAS
SMART GLASSES
HEALTHCARE DEVICES

7. 7
The wearable computing market is expected to ship 90 million units in 2014, a 67% increase over 2013.
The same market coverage projects a 72% rise in 2015 shipping over 146 million units. Inside this growth is a surge in
the now nascent smartwatch category, more than tripling its output from 7.4 million units in 2014 to over 24 million
in 2015. This projection is in line with other forecasts predicting high double-digit category growth in wearable
technology in the coming years.
Growth mode for wearables
THE WEARABLES PLAYING FIELD
Smartglasses are projected to grow the most
in 2015, but its growth is misleading, as the
category is moving from roughly 2 million
shipped units in 2014 to 10.5 million in 2015.
Conversely, smartwatches are projected to
ship around 7.5 million units in 2014, growing
to roughly 25 million units in 2015.
WEARABLES PROJECTED
GROWTH 2014-2015
396%
235%
130%
72%
35%
62% 52%
16%
0
1
2
3
4
WEARABLES CAMERAS GLASSES WATCHES HEALTHCARE TRACKERS 3D MOTION
SENSORS
CLOTHING
Source: MobiHealthNews

8. 8
Apple is uniquely positioned to reshape the wearable
computing category and reorganize it into a simpler
and more discernible system of products and services
for brands and consumers.
When considering Apple Watch’s potential impact,
it’s important to recognize that it’s a component of a
larger ecosystem—something almost no other wearable
computing product can boast.
Apple Pay, now in its infancy, will go to market with the
help of the surging iPhone 6, the App Store, an updated
iPad and the Apple brand, which is once again creating
outrageous, almost irrational demand for its products.
And while Apple Pay waits for many large-scale retailers
to publicly jump on board, it off ers a broad portfolio of
fi nancial service providers who are confi dent enough to
align with the transaction service prior to its public debut.
The power of Apple’s ecosystem
THE WEARABLES PLAYING FIELD

9. 9
CAVEATS AND
CONSIDERATIONS

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The Apple Watch is an important evolutionary step for mobile and wearable technology. Over time, it will grow
into a mainstream product.
To better understand how Apple Watch may enter the market, it’s helpful to look back at the introduction of another
revolutionary product that drew much speculation before its release: the iPhone.
Not an overnight sensation
CAVEATS AND CONSIDERATIONS
Today’s iPhone sales (35.2 million in Q3 2014) were
preceded by very modest first quarter sales of
270,000 units in Q3 2007. And that was well after
most consumers had been exposed to the iPod
and were craving any creation from Steve Jobs.
Significant sales didn’t happen until a year after
the iPhone’s introduction.
Apple Watch’s hype will likely help lift sales well
beyond the iPhone’s humble beginnings, but there
are several factors that promise to make those
gains incremental as opposed to wholesale in the
near term. All signs point to incremental Apple
Watch growith initially. Many brands will take a
wait and see approach before investing time and
resources. We think this is a mistake.
39.99
72.29
150.26
125.05
11.63
20.73
0
50
100
150
200
2007 2008 2009 2010 2011 2012 2013 2014
169.22
1.39
GLOBAL iPHONE SALES, 2007-2014
SALES IN MILLION UNITS
Source: Apple
© Statista 2014
Fiscal years

11. CAVEATS AND CONSIDERATIONS 11
One of Apple Watch’s restraining forces is actually
an asset: price.
It’s important to remember that for each iPhone Apple
sells, its wireless partners pick up nearly three-quarters
of the actual price. There is no similar subsidy for the
Apple Watch.
It’s safe to assume that consumers will initially be asked
to pick up the whole tab like they do with the iPad.
First-wave buyers are desirable targets for marketers
and brands, but can be difficult to segment out of the
larger consumer audience. Apple Watch offers the
potential to work with them directly, absent the rest of
the consumer universe.
Brands will essentially have a straight line of sight to
high-end influencers who will be the driving force
behind Apple Watch evolution and the wearable
category as a whole.
Expensive isn’t a bad thing
Tech-forward and driven by a
curiosity and craving for the
newest and most novel
technology experiences.
More affluent with the
discretionary spending power
needed to fork out hundreds of
dollars for an untested technology.
Younger with a greater digital
nativity and a heightened
desire for statement or badge
products.
FIRST-WAVE BUYERS WILL BE:

12. 12
Tapping into impulse spending
CAVEATS AND CONSIDERATIONS
Recent consumer credit card innovation eff orts have
been either incremental enhancements or fl at out
misfi res. Those who tried, unsuccessfully, to use the
contactless credit card POS stations that now sit
idle in many fast-food restaurants can relate. Google
Wallet is reputed to have lost $300 million because of
the charges it had to absorb from semi-cooperative
creditors.
Despite the somewhat grim history of credit card
transaction format innovation attempts, it’s clear that
the urge has always been there and that card providers
have driven almost all of it—mostly in the name of
increasing credit card transaction frequency.
A 2013 Federal Reserve study of pre- and post-recession
spending patterns reveals a staggering rise in credit
card usage from 2003 to 2012—credit, debit and pre-
paid card transactions rose by over 45 billion a year.
The skyrocketing number of card transactions illustrates
the consumer’s almost insatiable urge for near-
instantaneous transactions. This helps explain the long
list of mostly failed attempts to make spending easier.
By enabling credit spending with a fl ick of the wrist, it’s very likely that apple watch consumers will actually increase their transaction velocity and spending.
The disparity between debit and credit card spending
confi rms what behavioral economists have been
saying for years and proving in experiments: a lack of
transparency obscures consumer mental accounting,
allowing them to more freely give in to their impulses.

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Much of the spotlight has been cast on Apple Pay, but
just as important is iBeacon. Apple Watch and its likely
impact on the wearables category will move consumers
one step closer to hyperpersonalization, whereby their
data cloud is analyzed in various retail environments to
enable contextualized offers, discounts or services. The
expected net result is an as-yet unseen level of customer
intimacy. As most of this will be permission-based,
consumer confidence will be a key element of success.
Interestingly, cbsnews.com recently ran an article, “Are
impenetrable phones a threat to national security?”
It quotes FBI Director James Comey on Apple’s new
encryption standard, “It’s the equivalent of a closet that
can’t be opened, a safe deposit box that can’t be opened,
a safe that can’t ever be cracked.” While most technology
professionals will tell you no system is unbreakable,
Apple’s response was, “We wouldn’t be able to comply
with a wiretap order even if we wanted to.”
Privacy and data concerns
IT’S THE EQUIVALENT OF A CLOSET THAT
CAN’T BE OPENED, A SAFE DEPOSIT BOX
THAT CAN’T BE OPENED, A SAFE THAT
CAN’T EVER BE CRACKED.”
“
CAVEATS AND CONSIDERATIONS

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CREATING VALUE

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Each business category oers a unique set of opportunities and challenges for
capitalizing on Apple Watch in the near term. The following guidelines should help
kick-start concept development and expedite solutions.
GUIDELINES FOR SUCCESS CREATING VALUE
EXTEND EXISTING MOBILE PROPERTIES
GIVE IT A JOB BUILD FOR SEGMENTS
INTEGRATE IT INTO DAILY LIFE
ASK PERMISSION SIMPLIFY CREATE VIPS

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It’s important to remember that Apple Watch will be an untested and unknown
commodity for consumers and brands alike. As a result, there’s wisdom in first
capitalizing on Apple Watch as a part of a larger system (rather than as a
standalone innovation), then pushing outward.
Finding ways to simplify and extend the reach of a brand’s existing mobile
platform will be key in helping consumers become more comfortable with the
device’s capabilities and a brand’s ability to develop for them.
1. EXTEND EXISTING MOBILE PROPERTIES
CREATING VALUE

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Apple Watch is the first device in years to oer consumers an opportunity for
discovery, fascination and actual learning. As a result, consumers and users
will be asking themselves either explicitly or implicitly, “What job do I need
this to do?” Because it will be app-driven, consumers will instinctively begin to
customize with a set of applications that work best for them.
Content-only plays that don’t di†er from what consumers experience on
their existing devices will likely disappoint.
2. GIVE IT A JOB
CREATING VALUE

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The basic rule of thumb when designing a gender-specific product is physical
proximity. Gender-specific cars? Not so much. But gender-specific clothes, hair
care products and hygiene are no-brainers. Rather than developing one-size-
fits-all applications, brands should attempt to drill down into the utility needs of
specific customer segments.
Apple Watch’s always-on presence will o†er brands and developers a
markedly di†erent opportunity to address a broad range of needs for
specific segments—women, kids, moms, dads, etc. Don’t ask what your
customers (plural) need. Ask what that customer needs.
3. BUILD FOR SEGMENTS
CREATING VALUE

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Another key opportunity is for brands and products to subsume related
categories and streamline multiple functionalities into a more seamless
experience that accurately reflects the real world.
The Apple Watch’s ever-present nature will demand simplicity and order from
brands consumers interact with. It’s important to remember that consumers
construct their daily lives around the services they require and clearly
understand how they interact with one another.
Brands would be wise to o†er applications that organize the disparate
parts of a consumer’s daily life. This presents a unique opportunity for
financial services brands, for example, to manage diverse digital assets,
including loyalty programs, coupons and discounts.
Conversely, retail brands with a consistent presence in a consumer’s life also
have an opportunity to help organize the day-to-day and integrate related
consumer functions into a digital butler-type functionality.
4. INTEGRATE INTO DAILY LIFE
CREATING VALUE

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While Apple Pay is getting most of the buzz, Apple Watch promises to deliver
unique experiences using beacon technology. Imagine getting o your flight
with gate information instantly ported to your wrist or having your device alert
you to products that go well with products you’ve purchased in the past.
There are already many reasonably priced beacon platforms to facilitate these
realities, ranging from Gimbal to Passkit to Roximity.
But before brands roll these applications out en masse, it will be critically
important to help consumers stick their toe in and begin to trust these newer,
more intimate relationships with brands. It will be important for brands to
explicitly ask permission for and get incrementally greater levels of access
over time rather than going for the big data grab all at once.
Brands traditionally follow users in technology adoption. In this instance, brands
and consumers will be discovering the technology at the same time, so it will be
important to handle the relationship with care.
5. ASK PERMISSION
CREATING VALUE

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It’s very important to be mindful of the Apple Watch’s limited physical platform.
While iPhones are getting larger, the Apple Watch is going to make consumers
get much smaller.
Brands should work within the size limitations by divining ways to
communicate with limited visual cues that are both intuitive and informative.
The fields of semantics, syntactics and pragmatics all have very specific value in
this instance. How can the relationships between signs, symbols, structures and
agents come together to communicate eortlessly as the platform they’re being
delivered on?
Mobile devices have created the expectation that existing digital platforms can
be retrofitted to suit the mobile platform. It’s doubtful the same strategy will
bear fruit in the short term for Apple Watch and other, similar platforms.
6. SIMPLIFY
CREATING VALUE

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End-users ultimately hold a platform’s fate in their hands. But organizations and
brands also play a role. Acceptance can and largely will happen through the
adoption of Apple Pay.
Creating value for customers can also come in the form of Apple Watch
enablement in the sales or customer-facing organization. Brands could easily
create simple processing systems to facilitate information sharing between a
consumer with the Apple Watch platform and a representative on the other
half of the transaction.
Customer service screening, order taking and other functions could exist in two
lines, those with Apple Watches and those without.
7. CREATE VIPS
CREATING VALUE

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CLOSING THOUGHTS

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Backing a new technology is never an easy decision.
Committing to it fully is even more di’ cult, especially when
there’s no real market or proven track record.
While it’s true questions remain to be answered,
opportunities for commitment and exploration exist that
allow more cautious brands to test the waters just like more
cautious consumers likely will.
We believe our guidance o ers a broad enough set of
recommendations for di erent brands to assess which
opportunity fi ts them best and move forward accordingly.
CLOSING THOUGHTS
Get ready. Jump in.
OPPORTUNITY FOR MARKETERS:
• Get on the ground fl oor with Apple,
essentially riding the wave that iPod,
iPhone and (to some degree) iPad
experienced.
• Help steer the ship with the customer/
consumer.

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BEN GADDIS
Chief Innovation Officer
512.721.1380
ben.gaddis@t-3.com
JAMES LANYON
Innovation Director
512.721.1763
james.lanyon@t-3.com
Let’s talk.
Copyright © 2014 T3. All rights reserved.
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respective owners. Images courtesy of Apple, Google, Intel, Moticon, Ralph Loren, FPO and Motorola.