Plenty of digital ink’s already been spilled about the Apple Watch. Most of the reviews did a terrible job at actually reviewing the product. Many reviewers and casual observers alike have complained aggressively, but for the wrong reasons, about how it’s priced.

I discussed the mediocre world of reviews in Part One. Below is Part Two of three thoughts on the product’s present and future.

Part Two: “OMG! $10,000! That’s insane!!” — Everyone

I think Apple’s pricing strategy has some hangups — but not for the reason you hear everywhere else.

The thing with Luxury Goods is that pricing never makes practical sense. In fact, it’s not supposed to make practical sense. In Luxury Goods world, price isn’t just a signal of quality, it’s a driver of quality. The Porsche 911 Carrera, at ~$117,000, won’t (legally) get you anywhere twice as fast as the Porsche Boxter priced at ~$50,000, but it’s about twice as good a car because it’s priced twice as high.

It’s weird to think that while Apple is inarguably the maker of the world’s most luxurious phones and laptops, they’ve never really made a “luxury” product. The iPhone and the Macbook are typically among the most expensive products in their respective markets, but their price is determined by rational drivers: quality craftsmanship and effective marketing.

The Smart Watch industry has been in a weird position since its inception because expensive watches are a Luxury Good. So pricing on the order of $300 – $600, though it’s in-line with the pricing of phones and similar digital devices, are confusing in watch world: It’s hard to appeal to either the purveyors of Luxury Goods or to the people who just want a practical way to tell the time.

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On a slightly different note:

It’s interesting to consider the plausibility of a $10,000 watch being a tenable purchase for an average Apple consumer.

Matt, Kevin and I exchanged a few emails on this subject. In 10 years, Matt’s purchased two laptops, two iPods, and two iPhones — that’s roughly $6,000 spent by one typical guy from his late teens through his late 20’s. At this rate, it’s realistic to think that Matt will spend somewhere between, say, $20,000 and $60,000 in his life on Apple products. (Though I may be off by an order of magnitude if the rumors about Apple Cars are true.)

From that lens, spending $10,000 on the watch category doesn’t seem so far out. Apple might need to establish a payment plan, and Matt could realistically afford to buy a Watch Edition. That’s not so far-fetched. Payment plans exist for every other hard-to-reach product (houses, college educations, etc.).

The other important caveat impeding Matt’s purchase is that luxury watches like Rolexes and high-end watches are considered “buy it for life” investments. With Apple’s traditional product line, it’s more or less assumed that you’re going to replace your product once every 2-3 years (like Matt’s laptops and phones in our example above). He couldn’t afford to spend $10,000 every two years. But committing $10,000 in exchange for a lifetime of having the world’s best wrist-worn device? I don’t think that’s out of the question.

Interestingly, there’s precedent here too: My dad mails his Rolex back to the manufacturer once every few years for regular maintenance and cleaning — I’m sure this sort of thing is far from unique. And I’m confident Apple could arrange a similar program to ensure its Watch owners were always, ahem, up-to-date.

In sum, we can think about consumer use cases for a watch like the Watch:

1. I need to tell the time (probably for relatively cheap)
2. I want a luxury good to impress my friends (probably for very expensive)
3. I want to buy an accessory for life (probably for very expensive)
4. I like Mac stuff and whatever just give me the newest thing

Compared with Apple’s offerings:

• Watch Sport for $350
• Watch Edition for $10,000
• Watch (regular) for $550

So the Sport version is too expensive for people in Use Case 1, and it’s also priced in the middle of the pack among the market of smart watches, which is unusual for Apple product introductions. The (regular) Watch I guess was designed to appeal to Use Case 4 but I can’t see why the #4’s wouldn’t just opt for for the Watch Sport to save a few dollars. (Perhaps creating a pricing structure to make it look like the Sport version is a relative bargain was precisely the point.) And the Edition version, as far as I can tell, bears none of the lifetime assurance and customer service markings which are essential for luxury and lifetime products.

What I mean to say is: The pricing and value propositions and product differentiation fail on all fronts.

What I would have done instead:

1. Nix the Sport edition. That way, you’re priced at the top of the market with Apple Watch (regular) and you’re getting an extra $200 from all the Category 4 buyers who are going to get this thing regardless.
2. Lifetime service stuff for Edition buyers. A guarantee that (for a nominal fee of, say, $150) every two years they can mail in their Watch and get a brand new one back. This massages the fear of buying an obsolete device, and puts Edition owners in rarified air as members of an elite Apple club. Apple might break even or lose a little money on those $150 upgrades, but who cares because a) they’ve already made $10,000 off a customer, and b) as long as the customer is wearing a Watch, she is forced to be using an iPhone — she can’t switch or her Watch becomes… just a watch. A $600 every-other-year customer for life is worth is worth a few bucks in maintenance here and there.

In the end: That $10,000 price tag is actually, improbably, maybe among the least insane decisions Apple made in launching its new product.