Apple, Inc. Scores a Major Apple Watch Win

By Markets

Apple Watch Series 2. Image source: Apple.

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Just a few weeks after Apple, Inc.(NASDAQ: AAPL) pointed out at its September event that it is now the second-largest watchmaker in the watch industry (as measured by revenue), the company has just scored another major victory with Apple Watch.

Insurance giant Aetna (NYSE: AET) has announced a new program that aims to improve people's health through Apple Watches, as well as iPhones and iPads. The company will help subsidize a "significant portion" of Apple Watches at a handful of large employers and for some individual customers. The remainder of the cost will come right out of payroll deductions for added convenience. Perhaps more exciting is that Aetna will also cover the full cost of a new Apple Watch to its almost 50,000 employees if they participate in Aetna's wellness reimbursement program.

Apple will also help Aetna develop some exclusive health-oriented apps for iOS and watchOS.

Corporate wellness inroads

While Apple has historically shied away from big enterprise contracts, instead preferring to target individual consumers, it has recently started to generally give this market vertical a little bit more attention.

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In the context of wearable fitness trackers, big orders are typically associated with corporate wellness programs that a wide range of companies implement with the hopes of improving the health of employees. Health insurance expenses are always one of the biggest costs for companies, so there's still a business rationale by improving health, as that translates into cost savings.

It's worth noting that this is precisely an area where market leader Fitbit (NYSE: FIT) has also been devoting a lot of attention. Fitbit has enjoyed success in both the consumer and enterprise markets. Last October, the company announced that it had scored 20 new enterprise customers, representing hundreds of thousands of employees combined. In June, Fitbit launched a new suite of software and services called Fitbit Group Health that targets corporate wellness, insurance companies, and medical research institutions.

Apple Watch clearly challenges Fitbit in the consumer arena, but the Mac maker is now taking the fight to the enterprise. The reason why Apple prefers appealing to consumers directly is that they make the purchase decision. In enterprise contracts, some executive makes the purchase decision on the behalf of the company and a large number of users. As a business decision instead of a personal one, that often means that price points deserve more weight. In this regard, Fitbit still has a big advantage since its stand-alone fitness trackers cost a fraction of what Apple Watch costs.

Needing to justify the higher price point, Apple is likely to underscore that Apple Watch is a burgeoning platform full of third-party apps and services that can cover a wider range of a person's health. Fitbit is very much interested in getting into the smartwatch game, but at the same time it has no way to create an actual platform around its products.

Aetna may be one of Apple's first big enterprise wins, but it probably won't be the last.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple and Fitbit. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.