Market Insight

Partially subsidizing Apple watches is not the same as giving away activity monitors

October 17, 2016

Roeen Roashan Roeen Roashan Senior Analyst, Healthcare Technology
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- And that is a good thing! Last week, Apple and Aetna announced a partnership that would incentivize the health insurance giant’s members for using an Apple Watch. Yes, the market has seen this model before – a technology company joining forces with a payer to push devices that enable a healthier lifestyle, and further engages consumers of healthcare products and services. Technology providers diversify its distribution channels and payers establish unique engagement opportunities. Oscar Health pioneered this model with shipping Misfit devices to all its members for free, Fitbit is actively working with payers through Fitbit Group Health, and Qualcomm designed a unique activity monitor (TRIO Tracker) with UnitedHealthcare in a similar setup. A recent article published by Time Magazine  deem many of these programs unsuccessful, as a yearlong study of 800 individuals in Singapore shows that 90% of participants choose to stop wearing activity monitors when given the choice – 40% very early on, despite financial incentives.

This cements a common notion i.e. financial incentive cannot sustain long-term engagement if there is no meaningful use of an innovation. Does this imply that the Apple and Aetna partnership is set to fail? It definitely does not.

The Apple Watch is the best performing smartwatch on the market. It is so not because of a first mover advantage, but because the company has established a successful minimal viable footprint with its watches – an achievement not matched by any other smartwatch manufacturer. This minimal viable footprint is now being extended to a diverse number of ecosystems including healthcare, and is powered by Apple’s healthcare platforms (Aetna will make its health apps available on WatchOS). What all this means is that an Apple Watch is an entirely different experience for consumers than activity monitors, as in an Apple Watch is integrated in the overall flow of consumer’s use of mobile technologies and not solely focused on health. This multifunctionality is a competitive advantage rooted in a considerable relative value to consumers in using an Apple Watch. This relative value will in itself ensure engagement. Certainly the cost of Apple Watch is higher than any activity monitor, and that is why Apple watches are partially subsidized.

The higher level of sophistication provided by the Apple Watch and its ecosystem, compared to activity monitors that have very little interactivity and multifunctionality, will allow providers and payers to manage patients better. This is still the purpose behind why the healthcare community is branching out to emerging technologies – not just shipping hyped up gadgets.

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