MARK4210 Class 10 Spring product Swatch - Product Strategy...

Unformatted text preview: Product Strategy MARK4210 Spring 2014 2014 Course Roadmap Fundamentals Elements of Marketing Strategy Application Situation Analysis (Customer, Competitor, Company) - Quantitative Analysis - Consumer Behavior Market Selection (Segmentation, Targeting, Positioning) Marketing Mix Formulation (Product, Pricing, Distribution, Promotion) Simulation Game PharmaSim The Birth of the Swatch
Case Discussion Questions: 1. 2. 3. Prior to Swatch, what was the watch industry like in various historical stages (prior to 1950s, between 1950s1950s-1970s, 1970s 1970s-1980s)? Consider the various aspects of the watch category (e.g., category usage, marketing mix, consumer behavior). Why did Swatch become a success, what are the key elements of their marketing plan (e.g., positioning, marketing mix) that contributed to their success? How has Swatch influenced/impacted the watch industry in terms of how people view the category and consumer behavior? Swatch: Company Background
SSIH & ASUAG (parent companies) faced insolvency in 1983; potentially selling premium brands to Japanese companies
Inefficient structures – separate watch companies within companies; own marketing, own R&D, own manufacturing 1945: Swiss companies had 80% of watch market  15% in 1983
The Watch Industry PrePre-Swatch Prior to 1950s A specialized form of Positioning jewelry 1951 Functional tools -rugged, utilitarian, and masculine 1970s Cheap jewelry Product Contained jewels; require great care and precision; handed down from one generation to next Quartz technology. Mimic Timex. inexpensive the traditional appearance mechanical watches using of more expensive, Swisshard alloy bearings made mechanical instead of jewels counterparts. Channel Sold through jewels and upscale department stores, repaired by jewelers. Drugstores, discount houses/shops Promotion Pricing Financial investment; probably on par with Jewelry Department stores (n/a in the case) Jewelers (n/a in the case) Macho "torture tests" that mocked the delicacy Ad of high-end watches $6.95-$7.95; so low that they were considered Between $50 to $350 disposable The Watch Industry PrePre-Swatch
Market share continuously dropped


Market share in different price segments



80% of the world's total watch production prior to 1950 Global share declined from 80% in 1946 to 42% in 1970 $350+ watches: ~ 8 million units, 97% Swiss $100~$350 watches: ~42 million units, 3% Swiss <$100 watches: 450 million units, 0% Swiss Companies in lower price categories moving up to compete with Swiss companies 1983: SSIH & ASUAG merged to become Societe de Microelectronique et d'Horlogerie (SMH), Swatch was launched 1986: Nicolas Hayek (Chairman), left, and Dr. Ernst Thomke (CEO 1984-1991) Swatch’s Marketing Mix: Product
First to use brash expressive colors & pop art (artists)
Stayed as “Made in Switzerland;” Switzerland;” revamped manufacturing (automation) to lower costs [also cited as a manufacturing success case] case]
Clever branding: “Swatch” – traditional perceptions of Swiss quality/reliability, but also friendly, approachable, trendy Swatch’s Marketing Mix: Product Lines
Tremendous diversity, 70 designs that changed 2x/year; lowered risk if one design flops
Encourage mix & match
Swatch Design Lab
Innovations that are nonnon-functional but playful and provocative (e.g., seesee-through watch, scented watch) Swatch’s Marketing Mix: Price
Relatively affordable price encouraged impulse buying, but maintained ‘high’ gross margin
All items priced the same ((US$40/SFR50) US$40/SFR50)
Uniform pricing forces consumers to develop purchase criteria based on their subjective, emotional reactions to a particular design Swatch’s Marketing Mix: Distribution

Deliberately eschewed normal channels of watch distribution (e.g., jewelers) Created nonnon-traditional distribution channels: shopshop-inin-shop systems, minimini-boutiques, freefree-standing Swatch stores in highhighfashion districts Swatch’s Marketing Mix: Promotion
High profile, TV focused 1
30% of retail price on advertising; highest advertising budget in industry in 1992 (top 56 in overall Europe)
Special editions to create hype (not profits)) profits
Unconventional 1984 Launch in Germany: 162m, 12 ton giant Swatch in Commerzbank HQ, Frankfurt Swatch’s Strategy
Created a totally new category for mature product
“Played a different game”
In contrast to technological innovation driven success of Timex/Citizen/Seiko (i.e., low cost manufacturing, quartz technology), Swatch pivoted based on a radical product vision How did Swatch Change the Game? Prior to Swatch Swatch Definition of quality & value workmanship, value of materials, or accuracy subjective, emotional value Purchase criteria price, quality, function design, subjective feeling Decision process deliberate, planned spontaneous, impulse Consumption patterns from occasionally buying one/few watches frequently purchasing multiple watches Customer base attracted younger customer customers who use watch for base, esp. those previously functionality or investment disinterested in watches The Birth of the Swatch: Key Implications & Learnings
Created new category for existing mature product by ‘borrowing’ successful approaches from a different existing category – relatively lower risk than the total ‘unknown’ The Birth of the Swatch: Key Implications & Learnings The Birth of the Swatch: Key Implications & Learnings
Created new category for existing mature product by ‘borrowing’ successful approaches from a different existing category Breakaway Positioning
Strategic direction backed up by the right competencies to ensure success in ‘new’ category (e.g., manufacturing, design lab)
Integrated, consistent and orchestrated marketing plan (4 Ps) – Product + Price + Promotion + Place decisions were in sync/synergistic, none could be as successful standalone Examples of “Breakaway Positioning” Examples of “Breakaway Positioning” Examples of “Breakaway Positioning” Examples of “Breakaway Positioning” Examples of “Breakaway Positioning” Product Mature Category “Borrowed” Category New/Different Category (same basic offering) Ikea Cheap Furniture Fashion + DIY warehouse Stylish Affordable Lifestyle Home Cirque du Soleil Circus Theater, dance, opera Theatre acrobatic performance Heinz Squirt Condiment Paint (art) Edible art (kids) Curad bandage First aid Body art Fashion tattoo/sticker (kids) Elements of Breakaway Positioning

“Borrow” association from a different & existing category – for consumers to categorize product differently Swatch: “borrowed” from fashion industry Require development of new competencies (e.g., manufacturing, distribution) Swatch:: low cost Swiss manufacturing, new channels Swatch
Integrated marketing plan (4 P’s) to educate the consumer on the “new” positioning Swatch:: 4 P’s execution Swatch ...
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