Swiss Watch Industry

Drop in share from 80% to 42%.

What were the problems:

Strategy, Structure, Management,

Price, Technology

Retreat

Hayek: “I decided we could retreat no more”

Turnaround

- Stop retreat -a shift in company strategy

- Hayek’s company strategy = broad market

presence (one profitable, growing brand in

each segment including the low-end)

- Communicating their message for each

brand

The Swatch (Swiss +Watch) Concept

- Hayeks low end product initiative - a quartz

watch called Swatch

- Not a commodity product

- Leveraging Swiss reputation

- ‘build where we live’

- Low-end use watch

How?

- Vertical integration

- Automated production - labour less than 10% of costs

- Reduced the number of individual parts from 91 to 51,

resulting in production cost of <10 SFr

- Encased watch in cheap plastic but not a commodity

(point of difference)

- Add genuine emotion to the product -strong message to

low end user

- Unique message = “an emotional product”

Positioning Strategy

Product Strategy

Design- non-commoditised product

- An emotional product

- Spontaneity

- Two collections per year (Similar to Zara)

- High-end, multidisciplinary designers

- Superficial over the utilitarian (WSJ)

Channel Strategy

- Targeted non-traditional points of purchase- Veggie line in Fruit & Veg markets

- Monobrand stores on high-street (e.g. Links,

Pandora)

- Mini-Boutiques in department stores

Promotional Strategy

- Everything we do and how we do it sends a

message

- Advertising in early 80’ Earlier video

- Double the industry standard for marketing

spend

- The most important innovation and marketing -

everything else is a cost

Promotional Strategy

- Avoided the normal above-the-line mass

media marketing and favoured below-the-

line “Guerrilla” marketing:

E.g. Hung an operational watch outside German bank

- Collectors Club: Wear your membership

Pricing Strategy

- $40 = spontaneity, guilt-free purchase. A

clean, consistent price.

- Price was key to everything:- Enabled multiple purchases

- Low production cost enabled this pricing

strategy - still made good margin

- A volume strategy - best selling watch in

history (26m in 1992)

- Increased demand

Swatch Now

- $1bn cash in the bank

- Over 30,000 staff

- Run by Hayek’s daughter & son

- $8.8bn revenue

Swatch this space: Sustaining Value

● How can Swatch ensure they stay relevant today?

○ Continued Innovation...positioned with synergistic products and brands (e.g. Apple watch, Google glasses, etc).

● How can they use digital marketing?

○ Focus on the Consumer Decision Journey (CDJ) and ensure that their marketing spend is in the correct part of the journey that matches

their consumers’ journeys (e.g. post-purchase PWOM on social networks)

Bibliography

- Aaker, D. A. 2007. Marketing Strategy with Digital Marketing, European Edition, Wiley,

Chapters 3-5

- Clerizo, M 2010. Nicolas Hayek: Time Bandit http://magazine.wsj.com/features/behind-the-

brand/time-bandit/ Accessed on 11/10/2014

- Dibb, S. and Simkin, L., 2009. ‘Implementation rules to bridge the theory practice divide in

marketing segmentation,’ Journal of Marketing Management; 25 (3/4), pp 375-396

- Edelman, D., 2010. Branding in the Digital Age, Harvard Business Review, December, pg 63-

69

- Kotler, P and Keller K. 2012. Marketing Management 14th ed: 274-294. New Jersey: Pearson

Prentice Hall

- Quelch J,A and Jocz K,E 2009. ‘How to Market in a Downturn’, Harvard Business Review,

April, pp 1-12

- Swatch Group Annual Report 2013

http://www.swatchgroup.com/en/investor_relations/annual_and_half_year_reports/annual_report

_2013 Accessed on 11/10/2014

- Exploring Strategy 9th Edition, Johnson, Whittington & Scholes.