SWATCH Strategy

1. Prior to the introduction of the Swatch, what kind of watches were popular among consumers? In what ways was a Role different from a Timex, or from a gold-plated Sheik? How did consumers make buying decisions?

Initially wathing was almost an art. Watches were luxury goods, produced by skillful Jewelry makers and mechanically engineers and consisted of a lot of little mechanical movements. Made in Switzerland they automatically became symbols of status, prestige and a very high Swiss quality.

The price of the watches was very high as they were made from precious metals. People perceived watches as financial investments. It was quite common that they were handed down from generation to generation; they withstand years of mechanical wear as a result watch producers constantly generated revenue from their reparation. However the perception of watches has changed when such companies as Timex, Wheaton-Sheik and Citizen entered the market. The deference between watches produced by these companies and “traditional Swiss watches” such as Role was dramatic.

Role Timex/Sheik Positioning Luxurious, status, financial investments Functional – can work everywhere Materials

Jewels – synthetic rubles, sapphires, other hard stones, drug metals Low cost mechanical movements made of hard alloy metals – first, quarts movements – later, cheap exterior materials I. E. Plastic Price High – over $350 Low ?below $50 Aftertastes revenues Repaired – generated aftertastes revenues Disposable – could not be opened, impossible to repair Production process Hand-made, low volume Fully automated production, high volume Sales – no aftertaste revenues Exclusive distribution channels: Jeweler’s and upscale department stores Mass distribution: Low-priced outlets. As It can be seen from the table above Timex and Sheik made emphases on product to the market, which was much cheaper and widely available. It is not surprising that the buyer decision making process changed significantly as well. Due to their availability these watches became limited involvement products, people didn’t plan their decision in advance before buying them.

Decisions were made right at the point of sales for low cost models. I believe that they were quite close to impulsive. More expensive models could probably have more complex decision making process. However it was much easier in comparison with Role, which arches was carefully planned. It wasn’t an accident decision, people went to specialized up-scale department stores where professional consultants could advise them and provide with necessary information. In case of Timex they didn’t need it as watches were disposal and were used during much shorter period of time.

2. Why was Swatch so successful? In what way was the Swatch different than any watch the industry had seen? When Swatch was first introduced to the market in 1983 it immediately became a breakdown?

In my opinion they turned a watch production industry from upside down. Swatch chose a brand-new concept that fractionated it from any other company on the market. Watches were not a functional product anymore, but emotional. They were an important part of self- image, a way of self-expression, a reflection of mood, character, interests etc. Swatch were provocative, youth, inspiring and Joyful.

This clear strong message became a cornerstone of the whole marketing strategy. There were some other factors that were an integral part of SWATCH strategy and definitely influenced its success.

First one is a vertical integration. SWATCH was manufactured entirely in Switzerland, a leader in production of premium watches.

As a result Swatch could offer an elevated quality of a product. The second factor was a price. Despite the fact that the production was organized in Switzerland, one of the most expensive countries in the world, SMS managed to decrease labor costs by organizing of a fully automated production line and optimizing the amount of individual parts. Low price was a crucial factor for SWATCH in order to make a decision making process very easy for customers.

A high Swiss quality for a low price was a paradox for the industry, SWATCH provocation, perfectly aligned with their message. The third factor was a unique design that had never been used by any watch company before.

It was bald and very colorful. Each design was thoroughly elaborated, tested and selected by a team in Italy and then in Switzerland. Swatch issued 2 collections a year which is quite typical for a fast fashion industry. People tended to buy watches from different collection with a several month interval in order to follow trends.

Apart from that they introduced exclusive limited editions of watches for the same price, which generated an interest from media and customers.

The fourth factor which is closely correlated with a sign was a variety of models in different collections. There were dozens of different watches to choose from depending on the occasion, mood etc. People could create their own image and find a design which could reflect their identity.

3. What elements of the original marketing plan were most critical to the brand’s promotional strategy? Given the huge demand for Swatches  did the company make a mistake in not raising prices for some of its styles?

Swatch introduced not Just a product to the market, but a new culture, which became the basis of a marketing plan. Each element of its marketing mix clearly reflected the idea that Swatch delivered to the customer: Swatch is a fashionable accessory of Swiss quality at a very affordable price, carefully designed in accordance with the latest trends to become a way of self-expression.

I believe that according to this statement Swatch product and price strategy became key elements of Swatch success. As Swatch wanted to make an emotional rather than functional, they decided to elaborate a product strategy that included a highly diversified line of watches. Swatch changed collections twice a year, each collection included 70 efferent models of watches. On the one hand this way was quite challenging, as it required constant innovation. Swatch designers were always under pressure, traveling around the world, looking for new ideas, new trends in order to make each collection unique, provocative, stylish and unpredictable.

On the other hand this strategy not only differentiated Swatch from other companies on the market, but became a reason why so many people loved them. Years before Swatch launch its product people tended to buy one expensive watch and used it for several generations, therefore companies had to generate revenues by introducing repair revive. Then Timex chose another strategy – people changed watches quite often as they couldn’t be repaired. Swatch in its turn created a brand-new scheme – people bought new watches in order to keep up with fashion.

People collected watches; it wasn’t uncommon to have 3-4 models.

I believe that Swatch product strategy was a total success, as it was based on people’s irrational behavior, which helped Swatch to sell millions of units of watches every year. Swatch also introduced new types of product to the market such as see-through watch and scented watch. However this strategy couldn’t be successful if not an affordable price. Swat wasn’t blinded by its success worldwide. Despite a huge demand for their products worldwide, they had a very strict price policy.

Swatch never raised prices and controlled how much suppliers charged for their products.

Despite the fact they constantly introduced limited edition of watches they set the same price for them as for a regular collection. It wasn’t typical for a fashion industry however Swatch realized that a price was an extremely important factor for its customers. The company tried to build credible relationships with them and customers appreciated that. As a result Swatch gained n incredible loyalty worldwide. The distribution strategy was also tightly correlated with a Swatch message.

It is quite hard to be innovative and provocative while choosing a channel strategy, however Swatch perfectly accomplished this task. They adopted an unconventional retail approach that included nontraditional point of sales, such as vegetable markets for the Veggie Swatch line. They preferred shop-in- shop system and exclusive Swatch boutiques to Jewelry displays. In my opinion their decision to franchise was very wise. Mono-brand freestanding Swatch stores in high- assign districts helped to support an image of a fast-fashion brand.

The best prove for that was their profitability in spite of very high operating costs.

The key for such a successful performance was a supply strategy. These stories presented only a limited willing to buy a new Swatch from the latest collection. In order to deliver their message to customers Swatch decided to use their provocative, untraditional approach tin its promotion strategy. Unlike other Swiss watch companies, which preferred selective advertising in magazines, they decided to advertise heavily on TV, as this channel could cover a larger audience. One more uncommon decision was a wide BTL promotion.

In order to target a youth audience Swatch sponsored beak- dance festivals, sport competitions, celebrity endorsement. They used a product placement, the best example of which was a huge outside the tallest skyscraper in Frankfurt and became a pure provocation. The message was speaking for itself as well: Swatch. Swiss. DEEM. Another important part of the promotion was building a brand advocacy.

As Swatch gained a huge popularity in the world, it was a very wise decision to unite loyal customers into a huge fan-club.

Heating up the common obsession about the brand the company organized Swatch Collectors Club. For a reasonable fee members received exclusive models every year and Swatch Street Journal with the latest collections and overall fashion trends. By organizing this society Swatch also proved one more time that it loved its customers and was ready to give them more as a sign f gratitude for their loyalty.

Conclusion Swatch is one of the best examples how a company could influence the whole market.

They revalidated the image of Swiss companies as world leaders in a watch making industry. Swatch passion and courage helped to generate an idea which became a red line for a marketing strategy. Their provocative message penetrated into every aspect of their activity. This helped the company to achieve a tremendous success on the market. Swatch is not Just a brand; it’s a “alveolar”, which found its own place in the hearts of millions of customers.