Birth of Swatch

Introduction

Before the end of Second World War marketing strategy was not needed for Swiss watch producers as market was monopolized by them, therefore it was no competition (two neighboring holdings in market only), and therefore no need for product development (golden Swiss watch were not principally changed/developed for hundreds of years).

As it described in Case, the market development was started by U.S. company “Timex” with cheap alternative for expensive Swiss watches and continued by Japans’ companies with quartz watches sales.

The Figure A analysis and fact of “Swiss watch free fall” at 1983 gives impression that expensive watch market was decreasing from 1950 while middle and low priced watch markets were growing.

Swiss watch producers were doing almost nothing with new markets for 33 years (only 3% of middle prose market share for 1980), having a huge share in high-priced watch niche only, till Swiss watch industry “free fall” has not happened at 1983.

Why was Swatch so successful? In what way was the Swatch different, then any watch the industry had ever seen?

Swatch reached the success because of Nicolas Hayeks’ innovative marketing strategy development and efficient management control creation.

1. Swatch organized production processes in a way which provided Swatch with possibility for price competition with Asian producers and other competitors.

2. Market segmentation and target market selection were made.

2.1. Swatch has entered both competition oceans:

Red ocean – by taken competitors market shares with price competitive products, sales of which were supported with high reputation of Swiss watches and decreased production cost.

For Red ocean entering a “Good positioning and Competitive differentiation” were made by Nicolas Hayek:

75-95% of European customers and 51-75% of U.S. customers would prefer to buy Swiss watch instead of Japan of Hoh Kong, if Swiss watch would be prices for 10 and 20 USD higher than Swiss one.

Blue ocean – by attraction of potential / new customers (younger generation) who were out of watch market target population, with principally new watch stile creation (form, color, etc.).

2.1.1 At same time the high-priced watch niche was out of dander for retaliation from competitors’ site, as are were not experienced in luxury watches production (Swiss produces had 97% of this niche at 1980).

3. Watch advertising and market positioning was based mainly on promotion of watch’s quality reliability (“It takes a lickin’ and keeps on tickin” by Timex) and innovation, before Nicolas Hayeks’ idea to sell the product with strong message, and creation of spontaneity emotional reaction for the product which makes customer to buy it without long thinking. This is the main difference of Swatch with competitors.

4. Swatch positioning and customer oriented position made customers to buy more and more watched from new collections, which was principally new, especially if to take in to consideration that Golden Swiss watches were inherited.

What elements of the original Swatch marketing plan were most critical to the brand´s success?

1. Creation of principally new watch style (and watch style as such) and principally new way of watch positioning (as part of style and provocation).

2. Active advertising (2 times more of advertising costs than in industry in average).   

It’s important to mention that Swatch advertising was made with TV, which is right when aiming high sales volumes (not as it was done before by Swiss watch producers – by magazines).

Do you agree with the original product strategy?

Yes, I do.

1. Development of new product for new market (younger generation) and product cost decrease for price competition are right decisions from my point of view.  

2. Swatch production organization in Switzerland provided Swatch with image / “reputation” and the bran-name as such – “Swiss + Watch”.  

3. As well we have not to forget that new brand launch was not the only target of Nicolas Hayek. He had to support the Switzerland watch production industry, which would not be easy to be done, if Swatch would be produced not in Switzerland.

The channel strategy?

1. It was clearly senseless and impossible try to start watch sales, produced by Swatch, in jewelry shops, as it was done by expensive watch Swiss producers.      

2. Sales in pharmacies or similar places (as it was done by competitors) would not provide Swatch watches with strong effect of differentiations from other watches.

So from my point of view creation of boutiques owned by Swatch or franchise sales to same looking boutiques is right decision.

We have to take in to account idea of quarterly supply of product to boutiques, which gathered crowd of people, hunting for the new collection, which must be capturing attention of potential customers to Swatch shops.          

3. For me it’s still not totally clear if idea of Swatch boutiques location at area of high fashion brands sales is totally right, as Swatch is not the luxury product, and buyer of Dolce & Gabbana may not have high potential for Swatch buying, but from other point of view it could be a motivation to buy Swatch for person who cannot let himself to buy Dolce & Gabbana. + If to take in to account that bet was done for the emotion and spontaneity buy, I say that idea of sales in luxury boutiques area is OK.