Selling The Irrational To The Rational: Three Ways To Craft A Unique Value Proposition

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Jean-Claude Biver is a talented salesman. At Hublot, a watchmaker that he has run since 2004, sales are down by only 15% this year—a considerably better performance than Switzerland’s luxury-watch …

Jean-Claude Biver is a talented salesman. At Hublot, a watchmaker that he has run since 2004, sales are down by only 15% this year—a considerably better performance than Switzerland’s luxury-watch business as a whole, which has seen sales slump by about 30%. Hublot’s sales increased more than fivefold between 2004 and 2007, a record that enticed LVMH, a luxury-goods conglomerate, to buy the firm last year.

This case study describes the three approaches he has taken to crafting a unique value proposition in this market, or, as he puts in, "selling the irrational to the rational."

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  • A. Patek Philippe: $200,000 B. SNT 006 Seiko Men’s Watch on Leather Strap: $205.50 C. Blancpain Watch: $1,000,000
  • “ Keeping inventories tight is a strategy Mr Biver refined in 1981 after he and a friend bought the rights to the name Blancpain—all that was left of a firm that had once supplied watches to divers in the American navy but had gone out of business in the 1970s. Two things attracted him to the brand: it claimed to be Switzerland’s oldest watchmaker and it had missed out on the technological revolution of quartz timers powered by batteries. Mr Biver decided to turn this anachronism into a strength. At the time the Swiss watch industry had been in decline for 15 years as Asian digital watches selling for $20 displaced Swiss ones costing ten times as much. Even Rolex, the undisputed champion of Swiss watchmakers, eventually relented and started adding electronics to its timepieces. Mr Biver developed a new, backward-looking slogan for the firm: “Since 1735 there has never been a quartz Blancpain watch. And there never will be.” It turned out to be an industry-changing move. Last year mechanical watches accounted for 70% of the value of Swiss watch exports. A decade after restarting Blancpain, Mr Biver sold it for SFr60m ($43m) to the Swatch Group, having initially paid SFr22,000.”
  • Additional Background Information On Blancpain Watches: “ Million dollar watch sold in Guernsey A local jewelers broke a record in June 2009 when they sold the world's most expensive "non-jewelled" watch. The 1735 watch was produced by the world's oldest watch makers, Blancpain, and took 24 years to produce from the original concept in 1985. The watch consists of more than 740 parts, all of which were handmade, and took a single watchmaker a year to assemble. Most of the parts are so small they can only be manipulated with the aid of a microscope. Some parts of the watch took 80 hours to engrave On top of this the watch features six "complications" which Martin Search of Ray and Scott Jewellers said were "complicated pieces of engineering" such as the date or moon phase indicator. He described the watch and the workmanship involved as being "to the finest point" of the craft. The watch was brought by a Guernsey based collector for $1,024,000, Martin said the collector had "a great passion" for watches and commented that he would actually wear the piece, unlike some collectors. Martin added: "Part of its beauty is it's ordinary to look at until you look at the mechanisms". *The source for this article and the 2 pictures above is the website: http://www.google.com/imgres?imgurl=http://www.bbc.co.uk/guernsey/content/images/2009/06/12/expensive_watch_203_203x152.jpg&imgrefurl=http://www.bbc.co.uk/guernsey/content/articles/2009/06/12/record_breaking_watch_feature.shtml&usg=__2KDfodISYgp_v38q7F4WaQqvuSo=&h=152&w=203&sz=9&hl=en&start=16&tbnid=3HLZqDTzKQ4ZJM:&tbnh=79&tbnw=105&prev=/images%3Fq%3Dpicture%2Bof%2Ba%2BBlancpain%2Bwatch%2B1985%26hl%3Den
  • “ Swatch promptly charged Mr Biver with turning around its own ailing brand, Omega. Although Omega had made the first watch taken to the moon, it had become something of a national joke by the 1980s. Mr Biver’s approach was pure marketing. He pioneered techniques that would seem commonplace now, such as product placements in James Bond films and celebrity sponsorships. Under his leadership Omega’s sales almost tripled.”
  • “ Oddly, Mr Biver is also a talented salesman. At Hublot, a watchmaker that he has run since 2004, sales are down by only 15% this year—a considerably better performance than Switzerland’s luxury-watch business as a whole, which has seen sales slump by about 30%. Hublot’s sales increased more than fivefold between 2004 and 2007, a record that enticed LVMH, a luxury-goods conglomerate, to buy the firm last year. Hublot’s success stems in part from Mr Biver’s penchant for rationing his products. He was careful to restrict supply when business was booming, delivering only seven watches, say, when ten were ordered. Jewellers pay cash for stock, so it seems foolish not to sell as many watches as possible. Yet for Mr Biver it is an essential strategy. “You only desire what you cannot get,” he says. “People want exclusivity, so you must always keep the customer hungry and frustrated.” This approach has helped shield Hublot from the downturn in two ways. Cash-strapped retailers who have cut costs by running down stocks of other firms’ watches keep buying his, since they did not have many on hand to begin with. And they have not slashed prices for Hublot’s watches, as they have with those of its rivals (watchmakers get only about a third of the final selling price of a watch). That has helped preserve the brand’s image of luxury and exclusivity.” *The source for this case study is: The Economist, Salesman of the irrational, November 12, 2009.
  • “ The Story Of Hublot A young brand by any standard, Hublot is indeed an infant among the centuries-old Swiss giants with which it competes...Yet within years of its founding in 1980 became known as the watch of European royalty. Few brands can claim such a speedy successful rise as Hublot, a feat made possible by the purity of vision belonging to Carlo Croco. The vision was indeed simple at first, he just wanted his own watch, to break away from his uncle’s watch company, the Italian firm Binda. What he ended up breaking away from were the traditions of luxury watchmaking, in the rubber strap. Hardly a watch enthusiast can be found today without at least one rubber strapped watch in their personal collection. They are standard equipment on sport watches and can be found in the collections of many of the centuries-old Swiss giants: Patek Philippe, Audemars Piguet, Blancpain and others. At the time Croco introduced his Hublot (French for ‘porthole’), rubber was not to be found on a fine timepiece and much less paired with a gold case. Luxurious black leather or reptile would have been an acceptable material to the purists, but it just didn't offer the clean line that Croco found himself suddenly obsessed with. It cost Croco nearly three years and over $1 million to find just the right type of rubber. A rubber specially formulated to not crack or stain. It had to have the right combination of strength and comfort - found by chemically fusing steel with the rubber. It was mixed with an especially rare and potent vanilla to eliminate the odor associated with rubber. In 1980 it was ready for Basel, but not for the watch purists. Luckily for this brand, their advertising caught the eye of the King of Greece, quickly followed by the King of Spain, then the King of Sweden and the Prince of Monaco. The Hublot had found a niche market for it was luxurious, but not flashy, comfortable, but not dressed-down. There was only one Hublot style: porthole-case, black- dial, and black rubber strap. It was perfect for the jet-set of the 1980s. -  Hublot Watch Selection from Bernard's  - Trouble came slowly for the Hublot brand, after surviving rashes of copycats by holding to the purity of the Hublot style, change seemed inimical to the company and popularity began to wane. There were small steps toward the evolution of the Hublot. In 1987 Croco allowed the watch to be made with a white dial and began bringing in mechanical movements to replace the ETA quartz that had been the soul of Hublot. Croco added two models to compliment the Hublot Classic; the Hublot Elegance with dial markers and no bezel screws and the Hublot Sport. The company seemed to have lost direction until it caught the attention of a man in search of a brand. While Croco’s Hublot was capturing the wrists of royalty and the trendy, Jean Claude Biver was capturing the imagination of watch purists with his relaunch of Blancpain as an all-mechanical line. He describes himself at Blancpain as an extremist concentrating exclusively on the mechanical movement. This attitude so well described in marketing parlance -- "Since 1735, there has never been a quartz Blancpain watch, and there never will be." A series of personal tragedies in the late 1990s had left him in search of a brand. His analyses over the years of Swiss watch companies gave him a clear target: Hublot. Months after approaching Croco, Biver found himself struck by the message of the original Hublot. The porthole form had originated in a purely functional manner: steel bound to the wood of a ship. Croco had replicated this in a luxurious, ornamental material and then paired it with rubber; a material foreign to the gold and to the origins of the form. Gold and rubber were only the medium. The message was a fusion of elements that would never ordinarily come together. None of the makeup of the original Hublot had ever been paired before both in form and material. Biver believed these unusual joinings could lead to a big bang. The goal of Hublot, under Biver’s leadership would be to join unusual materials and styles and then extend that fusion into the movement. The Big Bang has been the result, a signature watch for the fusion ideal. Its groundbreaking style won Hublot the Design Prize in the Geneva Watchmaking Grand Prix in 2005. Having won the respect of professionals it is also winning the respect of customers who are often willing to wait nine months just to buy one on their wrist. Several variations of the Big Bang exist. The 14-piece case comes in Steel or Rose gold. The bezel is available in ceramic, tantalum or steel with six H-shaped screws made of titanium. Rubber is certainly not forgotten in the piece. In addition to the rubber strap, it graces the crown as well as the push pieces of the automatic chronograph. Viewed from the side, the rubber strap seems to run right through the case, a visual trick achieved using black Kevlar inserts in the side of the case. Some incorporation of fusion has been added to the movement itself: using a tungsten rotor treated with black PVD, visible through the exhibition back. Biver has promised that the Hublot Classic line will not be touched, although an updated line called Tradition has been introduced. Biver’s plans to introduce his fusion concept into a movement will be revealed at Baselworld 2006. Tantalizing hints of new materials have been dropped in interviews, but Biver says the real revolution will be in the technology itself.” *The source for this article is the website Bernard Watch: http://www.bernardwatch.com/Hublot-History-and-Story .

Transcript

  • 1. 1
  • 2. 2
  • 3. A. Patek Philippe: $200,000B. SNT 006 Seiko Men’s Watch on Leather Strap: $205.50C. Blancpain Watch: $1,000,000 3
  • 4. 4
  • 5. “Keeping inventories tight is a strategy Mr Biver refined in 1981 after he and a friendbought the rights to the name Blancpain—all that was left of a firm that had oncesupplied watches to divers in the American navy but had gone out of business in the1970s. Two things attracted him to the brand: it claimed to be Switzerland’s oldestwatchmaker and it had missed out on the technological revolution of quartz timerspowered by batteries.Mr Biver decided to turn this anachronism into a strength. At the time the Swisswatch i d t h d b t h industry had been i d li f 15 years as A i di it l watches selling f in decline for Asian digital t h lli for$20 displaced Swiss ones costing ten times as much. Even Rolex, the undisputedchampion of Swiss watchmakers, eventually relented and started adding electronicsto its timepieces.Mr Biver developed a new, backward-looking slogan for the firm: “Since 1735 therehas never been a quartz Blancpain watch. And there never will be.” It turned out tobe an industry-changing move. Last year mechanical watches accounted for 70% of movethe value of Swiss watch exports. A decade after restarting Blancpain, Mr Biver soldit for SFr60m ($43m) to the Swatch Group, having initially paid SFr22,000.” 5
  • 6. Additional Background Information On Blancpain Watches:“Million dollar watch sold in GuernseyA local jewelers broke a record in June 2009 when they sold the worlds mostexpensive "non-jewelled" watch.The 1735 watch was produced by the worlds oldest watch makers, Blancpain, andtook 24 years to produce from the original concept in 1985.The watch consists of more than 740 parts, all of which were handmade, and took asingle watchmaker a year to assemble. Most of the parts are so small they can onlybe manipulated with the aid of a microscope.Some parts of the watch took 80 hours to engraveOn top of this the watch features six "complications" which Martin Search of Rayand Scott Jewellers said were "complicated pieces of engineering" such as the dateor moon phase indicator indicator.He described the watch and the workmanship involved as being "to the finest point"of the craft.The watch was brought by a Guernsey based collector for $1,024,000, Martin saidthe collector had "a great passion" for watches and commented that he wouldactually wear the piece, unlike some collectors.Martin added: "Part of its beauty is it s ordinary to look at until you look at the Part itsmechanisms".*The source for this article and the 2 pictures above is the website:http://www.google.com/imgres?imgurl=http://www.bbc.co.uk/guernsey/content/images/2009/06/12/expensive_watch_203_203x152.jpg&imgrefurl=http://www.bbc.co.uk/guernsey/content/articles/2009/06/12/record_breaking_watch_feature.shtml&usg=__2KDfodISYgp_v38q7F4WaQqvuSo=&h=152&w=203&sz=9&hl=en&start=16&tbnid 6=3HLZqDTzKQ4ZJM:&tbnh=79&tbnw=105&prev=/images%3Fq%3Dpicture%2Bof
  • 7. “Swatch promptly charged Mr Biver with turning around its own ailing brand, Omega. Although Omega had made the first watch taken to the moon, it had becomesomething of a national joke by the 1980s. Mr Biver’s approach was pure marketing. He pioneered techniques that would seem commonplace now, such as productplacements in James Bond films and celebrity sponsorships Under his leadership Omega’s sales almost tripled ” sponsorships. Omega s tripled. 7
  • 8. 8
  • 9. “Oddly, Mr Biver is also a talented salesman. At Hublot, a watchmaker that he hasrun since 2004, sales are down by only 15% this year—a considerably betterperformance than Switzerland’s luxury-watch business as a whole, which has seensales slump by about 30%. Hublot’s sales increased more than fivefold between2004 and 2007, a record that enticed LVMH, a luxury-goods conglomerate, to buythe firm last year.Hublot’s success stems in part from Mr Biver’s penchant for rationing his products.HeH was careful t restrict supply when b i f l to ti t l h business was b booming, d li i only seven i delivering lwatches, say, when ten were ordered. Jewellers pay cash for stock, so it seemsfoolish not to sell as many watches as possible. Yet for Mr Biver it is an essentialstrategy. “You only desire what you cannot get,” he says. “People want exclusivity,so you must always keep the customer hungry and frustrated.”This approach has helped shield Hublot from the downturn in two ways. Cash-strapped retailers who have cut costs by running down stocks of other firms’ firmswatches keep buying his, since they did not have many on hand to begin with. Andthey have not slashed prices for Hublot’s watches, as they have with those of itsrivals (watchmakers get only about a third of the final selling price of a watch). Thathas helped preserve the brand’s image of luxury and exclusivity.”*The source for this case study is: The Economist, Salesman of the irrational,November 12, 2009. , 9
  • 10. 10
  • 11. “The Story Of HublotA young b d b any standard, H bl t i i d d an i f t among th centuries-old S i giants with brand by t d d Hublot is indeed infant the t i ld Swiss i t ithwhich it competes...Yet within years of its founding in 1980 became known as the watch of Europeanroyalty. Few brands can claim such a speedy successful rise as Hublot, a feat made possible by thepurity of vision belonging to Carlo Croco. The vision was indeed simple at first, he just wanted hisown watch, to break away from his uncle’s watch company, the Italian firm Binda. What he ended upbreaking away from were the traditions of luxury watchmaking, in the rubber strap. Hardly a watchenthusiast can be found today without at least one rubber strapped watch in their personal collection.They are standard equipment on sport watches and can be found in the collections of many of thecenturies-old Swiss giants: Patek Philippe, Audemars Piguet, Blancpain and others.At the time Croco introduced his Hublot (French for ‘porthole’), rubber was not to be found on a fine porthole ),timepiece and much less paired with a gold case. Luxurious black leather or reptile would have beenan acceptable material to the purists, but it just didnt offer the clean line that Croco found himselfsuddenly obsessed with. It cost Croco nearly three years and over $1 million to find just the right typeof rubber. A rubber specially formulated to not crack or stain. It had to have the right combination ofstrength and comfort - found by chemically fusing steel with the rubber. It was mixed with anespecially rare and potent vanilla to eliminate the odor associated with rubber. In 1980 it was readyfor Basel, but not for the watch purists. Luckily for this brand, their advertising caught the eye of theKing of Greece, quickly followed by the King of Spain, then the King of Sweden and the Prince ofMonaco. The Hublot had found a niche market for it was luxurious, but not flashy, comfortable, butnot dressed-down. There was only one Hublot style: porthole-case, black- dial and black rubber dressed-down porthole-case dial,strap. It was perfect for the jet-set of the 1980s.- Hublot Watch Selection from Bernards -Trouble came slowly for the Hublot brand, after surviving rashes of copycats by holding to the purityof the Hublot style, change seemed inimical to the company and popularity began to wane. Therewere small steps toward the evolution of the Hublot. In 1987 Croco allowed the watch to be madewith a white dial and began bringing in mechanical movements to replace the ETA quartz that hadbeen the soul of Hublot. Croco added two models to compliment the Hublot Classic; the HublotElegance with dial markers and no bezel screws and the Hublot Sport. The company seemed to havelost direction until it caught the attention of a man in search of a brand. brandWhile Croco’s Hublot was capturing the wrists of royalty and the trendy, Jean Claude Biver wascapturing the imagination of watch purists with his relaunch of Blancpain as an all-mechanical line.He describes himself at Blancpain as an extremist concentrating exclusively on the mechanicalmovement. This attitude so well described in marketing parlance -- "Since 1735, there has neverbeen a quartz Blancpain watch, and there never will be." A series of personal tragedies in the late1990s had left him in search of a brand. His analyses over the years of Swiss watch companies gavehim a clear target: Hublot.Months after approaching Croco, Biver found himself struck by the message of the original Hublot. 11The porthole form had originated in a purely functional manner: steel bound to the wood of a ship.