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Swatch presentation
The Swiss watch industry lost market share from 80% to 42% due to problems with strategy, structure, management, price, and technology. Hayek decided the industry could no longer retreat and spearheaded a turnaround. Hayek's strategy included broad market presence across price segments and developing the Swatch brand - a low-cost quartz watch marketed as an "emotional product" through unique design, frequent collections, and guerrilla marketing. This approach was a success, making Swatch the best-selling watch in history. Currently, Swatch ensures relevance through continued innovation across synergistic brands and a focus on the consumer decision journey with digital marketing.
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- 12. Drop in sharefrom 80% to 42%. What were the problems: Strategy, Structure, Management, Price, Technology Retreat Hayek: “I decided we could retreat no more”
- 19. 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
- 21. 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
- 22. 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”
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- 32. Product Strategy Design - non-commoditisedproduct - An emotional product - Spontaneity - Two collections per year (Similar to Zara) - High-end, multidisciplinary designers - Superficial over the utilitarian (WSJ)
- 34. Channel Strategy - Targetednon-traditional points of purchase - Veggie line in Fruit & Veg markets - Monobrand stores on high-street (e.g. Links, Pandora) - Mini-Boutiques in department stores
- 36. Promotional Strategy - Everythingwe 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
- 37. Promotional Strategy - Avoidedthe 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
- 39. 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)
- 42. Swatch Now - $1bncash in the bank - Over 30,000 staff - Run by Hayek’s daughter & son - $8.8bn revenue
- 44. 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)
- 48. 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.
Editor's Notes
- #10 · Thanks Jamie · In 1970 the introduction of quartz changed the game and industry once more. · Quartz was comparable in accuracy to Swiss-made mechanical watches i.e. accurate to less than one second per day. · Quartz technology also had a couple of advantages over mechanical watches: · It allowed for more sophisticated functionality i.e. calculator · Much cheaper to manufacture with costs continuously being driven down by chipmakers such as TEXAS INSTRUMENTS · JAPANESE – SEIKO & CITIZEN LED THE WAY WITH ANALOG QUARTZ FOLLOWED BY CASIO FOR DIGITIAL · By 1984 more than 3/4s of watches around the world based on Quartz technology. · Ironically Quartz technology was invented by the Swiss they chose to keep with traditional mechanical production as they felt Quartz unsophisticated, unreliable and beneath Swiss standards!
- #12 · Early 80’s finds Swiss watch industry in freefall · This slide show the Global market was in the early 80’s. · Swiss watches continued to dominate the higher end with 97%. · Swiss reaction to Quartz was to retreat. They believed Quartz watches a passing fad. · Swiss believed there was no margin in watches below $350 and particularly below $100 · Attitude was one off “why should we compete with Japan and Hong Kong, “they make junk then they give it away”
- #20 In 1983 Hayek takes over as CEO. He immediately identifies problems with Strategy structure and management Hayek believed that Asuag needed a strong brand in every segment of the watch industry including the low end (he realised that at similar prices, customers would identify Swiss watches as higher quality than the competitors) The SWATCH (Swiss and Watch) concept was a low end product initiative Hayek was fully commited to: · Vertical Integration – build and assemble the low priced quartz watch in Switzerland ‘We build where we live’ · Focus on labour and ensure that it is less than 10% of total costs · Designed proprietary production techniques enabling mass production in a fully automated way with fewer parts (down from 91 parts to 51) resulting in a production cost of less than 10 Swiss Francs · The Swatch team decided to use cheap plastic to encase the watch. · Probably most importantly they decided that the SWATCH would have a unique message, unlike any other watch brand that had been seen to date · ‘We were selling an emotional product’ –Hayek If they could add genuine emotion to the product coupled with a strong message to the lower end consumer, Hayek believed they would succeed. · Designs and Collections BOLD Designs and Colours – never used before Lots of fun models-internally designed- seeking an immediate emotional reaction –spontaneity Collections were replaced rapidly, no repeat production runs, new models hitting the market on an ongoing basis-resulting in repeat buying patterns, with people owning several SWATCHs They were seen as a fashion item Introduced the first see-through watch in 1985 · The customers were intensely loyal-always on the look out for new designs · The low price tag allowed ‘impulse buying’ Did not increase price over time! Forbid their dealers from raising prices – part of the communication – ‘Swatch is not just affordable, its approachable’ · Make buying a SWATCH an easy decision- don’t think too much ‘EVERYTHING WE DO AND THE WAY WE DO EVERYTHING SENDS A MESSAGE’
- #44 Smart watch: 1. Swatch and Apple in a possible collaboration, idea worth exploring given these two brands, together, could define the smart watch market – (and would have a significant positive impact on Swatch shares.) 2. Swatch could bring design strengths, efficient energy capabilities and access to its global distribution network, Apple could provide the necessary software platform and customer reach. Continued Innovation...positioned with synergistic products and brands (e.g. Apple watch, Google glasses, etc). 3. There has been a subtle change in tone from Swatch with regards to the wearable’s market, , with CEO Nicolas Hayek indicating the launch of a fitness product next year (Reuters). 4. Historically, partnerships have not worked well for Swatch (Microsoft, Tiffany).