Positioning

Swiss watches usually rank in the higher- priced market segment. But Swatch used a different positioning approach: low price for high quality - but still including quartz accuracy, water and shock resistance.

Let's not forget that positioning is also the process by which marketers try to create an image or identity in the minds of their target market for its brand. This is where the real genius of Swatch's approach takes place: positioning the product as the famous "fashion watch" thereby creating a whole new market, much larger in size than the original watch market.

This positioning was, and still is, very innovative compared to those of the competitors. Swatch watches are to be put in the entry- level category of watches. Made out of plastic, they differ from those more traditional, stainless steel or leather watches. Swatch made the watch a fashion object, to be changed every season. The objective is to offer a watch for everyone, at any moment of his life. To paraphrase N. Hayek's words,"Swatch it about provocation colors, rejection of conventions. Swatch cocks a snook at pretentious and snob people. Swatch is made for rich and for poor, for men and women, for young and for old".

Even if this product is no technological invention per se, it revolutionized the use of the watch. Indeed, by making it a fashion accessory, Swatch managed to alter consumers' behavior. Watches are now consumables and most of all, a way to express yourself, which represents a real added value - it allow the customer to differentiate himself from others.This is why Swatches are so successful: you don't buy one only watch, but several of them, to better express your mood, or better fit with your outfit. This strategy enables small budget buyers to purchase a watch - but knowing that the production for each model is limited, you better buy the Swatch you like the first time you see it.

Based on the analysis of market trends and how market shares were captured, we find that each of the previous leaders captured the market share by innovation: Citizen was able to capture the market share by innovating a new way of creating watches that are cheaper than the industry standard at that time. Seiko was able to capture a big market share by innovating the quartz technology. Swatch was able to capture the market share by finding innovative uses of watches. 

(source: http://www.scribd.com/doc/75098982/Swatch-and-Global-Watch-Industry)

By making the watch fashionable and representative of one's personality, Swatch managed to reach a high brand awareness and most of all, a positive emotional connection. These features allow it to differentiate itself from its competitors in a stronger and more durable manner.

Market Overview - Porter's 5 Forces

By Guillaume


The watch industry analysis

The bargaining power of buyers :

When consumers are looking for a watch, they are confronted to the multitude of brands competing and the various segments : fashion brands watches, haute-horlogerie watches, mass-market watches, etc. As we have seen previously, the number of watchmakers is very important and therefore, buyers have to make a choice. The different criteria involved in the decision-making process may be :

·       Price – we can find watches for 10€ as well as spending thousands of euros

·       Quality – made in China vs. Swiss made

·       Style – colorful plastic watch vs. Leather wristband and golden watch

·       Size – from the Piaget Altiplano (2.35mm thick) vs Rolex Sea dweller (15mm thick)

·       …

 

This important number of competitors means a broader offer to the consumer, which enhances his bargaining power. This power is also reinforced by the fact that buying a watch is usually not an utility purchase. This point is more and more true as people have time on their mobile phones and a watch is becoming of a second importance.

The bargaining power of suppliers :

There is an important difference between the mass market brands and premium ones. If both of them often have the « swiss made » inscription, they have two different meanings. For the first ones, the watch components are usually made in a low labour cost country, with a low to medium quality, and then are assembled in Switzerland, allowing the watch to be « swiss made ». For the second ones, both manufacturing the components and assembling them are made in swiss by the company, which is often synonym of a good quality. For the first group of manufacturers – that includes Swatch, suppliers don’t have to have a very strong know-how, and can therefore be relatively numerous. This is diminishing their bargaining power over watch brands.  

The threat of new entrants :

Eventhough the haute-horlogerie segment has very strong barriers to entry (manufacturing costs, brand heritage, distribution selection…), Swatch can be attacked by new entrants. Indeed, its products are simple, accessible, playful, and colorful – the exect opposit of haute-horlogerie watches – and entering this segment does not have very specific requirements (as brand heritage can be). It also can be attractive as there are not a very strong competition on this specific segment.

The threat of substitutes :

The way we use a watch shifted drastically these years. As the wristwatch was a revolution (opposed to the pocket watch), the mobile phones are changing the rules of the industry. The utilitarian aspect of a watch a decreased a lot, the time being now available on mobile phones, computers, and more. People would rather consider a watch as a style accessory, an expression of their personality. Therefore, we can see the threat of substitute as relatively high. The primary function of watches – that is giving the time ! – is seriously challenged by all the electronic devices we carry everyday (mobile phones, mp3 players, Kindles/iPads, laptops, etc.).  

The Five Forces of the watch industry:

Brand equity

by Lisa 


Since the emergence of the marketing concept of brand equity in the 1980s, many nuances and theory on the term has evolved. Before, it was recognized as a financial and economic measurement of brand value; whereas today researchers believe also that the consumers contribute in brand’s value creation. 

The Customer-Based Brand Equity (CBBE) places the customer’s mindset in the center of brand equity. Brand knowledge and brand loyalty are essential elements for this kind of approach on brand equity. Brand knowledge itself includes the customers’ awareness of brands and the brand image, i.e. associations they have when confronted with that brand. Brand loyalty reflects customers' tendency to repeat purchases even in appearance of competitors offering products superior in price or features. Some researcher extend the CBBE model with the element of 'perceived quality' or other important  proprietary brand assets depending on the typ of brand. Customers decide what to buy, so ultimately it is in their discretion whether or not a brand is successful. In order to increase sales it is therefore necessary to create confidence in the brand and establish unique association. This in turn will result in improved financial standing of the company.


For Swatch the developed CBBE:

Sources: 
Aaker, D. A., (1991). Managing brand equity: Capitalizing on the value of a brand name (1st ed.), New York, USA: The Free Press. 

Keller, K. L., (1993). Conceptualizing, measuring, managing customer-based brand equity, Journal of Marketing, 57(1), 1-22. 

Keller, K.L., (2008). Strategic Brand Management, Building, Measuring and Managing Brand Equity, 3.Edition, Part I, 2-42, Part III, 288-290

The Swatch building blocks

By Guillaume


ATTRIBUTES : Rational product features

·      Gives you time

·      Low price

·      Resistant

·      Waterproof

FUNCTIONAL BENEFITS : rational expectations as a result of using the brand

·      Being on time

·      Wear it anywhere

EMOTIONAL REWARDS : emotional benefits expected form using the brand

·      Being cool

·      Being trendy

·      Differenciate/express yourself

VALUE FOR USERS : what the users of the brand care about most

·      Style

·      Low cost

·      High quality (made in Switzelrand)

PERSONALITY : the image of the brand expressed in human characteristics

·      Young

·      Playful

·      Funny

·      Passionate

·      Creative

ESSENCE : the enduring soul of the brand. The single idea that fuses the key emotional and functional roles of the brand.

·      Time can be fun

The Model:

The brand building blocks : source Peter Dyson

Brand Emotions - (S)watch out for Fun and Excitment!

by Lisa
 

„I understood that we were not selling a consumer product, or even a branded product. We were selling an emotional product.“

(Nicolas Hayek, cofounder & chairman of the board of directors Swatch group)

Beyond doubt, the key to understand the nearly two-decade success story of Swatch is the ability to transform the purpose of a watch from timekeeping to emotion. Swatch did not invent emotional design, but it is a real challenge to find a better example of how emotional design can impact the success of a product, organization, industry and even a country. By engaging buyers to multiple watch ownership to change the model to match mood, activity or even time of the day, Swatch turned a low price essential into a high-order fashion accessory loaded with feelings and expressions.

In theory, brand feelings are customer’s emotional responses and reactions to the brand. These feelings can be mild or intense, positive or negative. Six important types of brand-building feelings can be defined: Warmth, Fun, Excitement as well as Security, Social approval and Self-respect.

“Add genuine emotion to the product” (Hayek)

Applying the theory into practice for the Swatch brand, it seems obvious that the first three, so called experiential and immediate brand feelings, are most relevant.  The feeling of fun and excitement are incardinated by product design and brand communication. Thus, differentiate from competitors and increase the level of brand experience intensity. Swatch is fun, consumers feel amused, lighthearted, joyous and cheerful. Swatch creates excitement, energizing consumers and  let them experiencs something special. Excitement generates a sense of “being a live”, being cool and sexy.

The last three key feelings are characterized as private and enduring, increasing in level of gravity. Concerning the emotion Swatch evokes, the social approval can be taken into account. By wearing a Swatch watch, the consumer becomes part of a trend conscious community receiving acknowledgement by others for being fashionable and cool. Swatch has its own successful growing members club  (http://www.swatchtheclub.com/index_home.php) and around 600000 Fans on facebook.

Sources:
Avery, G., Bell,A., Hilb, M., Witte, A.E., (2004) Understanding leadership: paradigms and cases, London, p.264-266
Donald A. Norman, D.A., (2004) Emotional Design: why we love (or hate) everyday things ,New York, p. 67 
Franzen, G. & Moriarty S., (2009) The Science and Art of Branding von Giep Franzen,Sandra Moriarty, New York, p.92

Keller, K.L., (2008), Strategic brand management: building, measuring, and managing brand equity, p. 69-71

Lindwell, W., & Manacsa (2009),Deconstructing Product Design: Exploring the Form, Function, Usability ..., S.96

www.swatch.com

Pictures:

http://trendland.net/swatch-colour-codes-contest-favorite-mag/#

http://fashionolic.blogspot.com/2008/05/swatch-springsummer-ad-campaign.html

http://www.ftape.com/media/?p=28022 

10 Specific Criteria to Help Understand the Value of the Brand

By Julia

1. Commitment

Swatch attracts many committed collectors and passionate fans. In general Swatch represents differentiation, simplicity and high value for low price.

2. Protection

The brand name and designs are protected by intellectual property rights.

3. Clarity

Even though Swatch's customer base is extremely wide, the brand is clearly definable and positioned.

4. Responsiveness

Swatch is able to adapt the changes in the market. In case of recession, Swatch watches are generally affordable and even low price. in case it seems the consumers are ready to invest more on their watch, Swatch offers dress watches for up to $370. Swatch offers a watch for everyone.

5. Authenticity

As a Swiss watch brand, Swatch can be described as authentic. Even the brand logo point out the Swiss heritage, which definitely affects on the value of the brand. Swatch surely has loyal customers for decades due to their high quality and renewable collections.

6. Relevance to customer needs

The product selection of Swatch is extremely relevant for any consumer. An added value is created with the quality, simplicity and affordable price, which reflects from customer needs.

7. Clear messages

Watches are pretty simple products, and Swatch is keeping low profile with the technicality, which helps Swatch to communicate about their products. Swatch is able to communicate very clearly and consumer are able to recognize the brand wherever it appears.

8. Duration

Swatch has been able to communicate consistently over the years. This far Swatch hasn't faced any scandals. On the other hand the ongoing "Playground" campaign with MTV brings constant publicity and visibility to Swatch.

9. Presence

Swatch is not remarkably present in the social media. On the other hand, the strategical locations of the boutiques and high visible campaigns such as the "Playground" guarantees that the brand won't be forgotten.

10. Differentiation

The highly creative but simple product range of Swatch has created the distinctive brand image for Swatch. The brand is one of a kind and the computing low-cost brands have not been able to create such community and hype around their watches.

Sources: www.swatch.com, www.swatchandbeyond.com

Six Brand Elements

By Julia

Memorability

In order to gain customers the conumers must be aware of the brand. A memorable brand will definitly strenghten brand awereness. Memorable brand must be recognizable as well as easily recalled. A distictive brand name or a logo helps a potential customer to associate your specific product and services to your brand. Swatch is a playful name as it combines the words Swiss and Watch. It actually stands out of the crowded watch market and it is very easy to remember. 

Meaningfulness

Based on many assumptions, a brand should literally represent the products or the services of the company. The logo or the name should indicate or at least hint what the company is all about. On the other hand, the brand could be linked somehow to their typical customer instead of their products. 

Swatch is a playful name as it combines the words Swiss and Watch. Its is easy to associate the brand with the product and anyone who hears about the brand could tell they are doing watches. The logo is very simple but distinctive. The Swiss flag represent quality and the know-how of Swiss watchmaking.

Likability

Aesthetically pleasant communication is very often appealing to the consumers. Of course it is depending on the target audience and also the product range, but in general people want to see fun and interesting communication. Swatch is very careful with their communication and in general their communication is very consistent. Swatch has a very positive image, which increases the likability of the brand. Swatch can awake positive and neutral opinions, but very rarely provokes consumers.

Transferability

When building a brand, one must consider the chance that later on the company will do a line or category extensions. In order to do that, the brand must be transferable. The company might also be expanding to other counries and cultures, when a specific element of the brand can challenge or even prevent expanding the operations. Swatch has proven to be very transferable, as the brand exist all around the planet.

Adaptable

In a long run, any brand element might reguire little tweaking and updating. When we look at the logo of Pepsi, it has been remade several times, respecting the original logo. In any case, the brand must stay relevant through the years.

Swatch logo has maintained the same throughout all the years. The logo has seen some international adaptations, but the official logo has not changed. The simple but distinctive logo is rather adaptable, but this far the market hasn't required any changes.

Protectability

The brand elements should be protectable in legal as well as in competititve sense. In case the company goes international, there is even more legal protection and registrations to be considered. Protectability is not only about the legal actions, but also protectability concering the competitors, meaning can the conpetitors legally adapt to your brand and in that way devrease your value in the market. The Swatch logo and brand is registered and as a part of a big and powerful group, Swatch is properly legally protected.

Source: Lane Keller, K. 2008. Strategic Brand Management: Building, Measuring, and Managing Brand Equity. 3rd edition. New Jersey. Pearson Education.