Swatch case study
1. Prior to the introduction of the Swatch, what kind of watches were popular among consumers? In what ways was a Rolex different from a Timex, or from a gold-plated Seiko? How did consumers make buying decisions?
Initially watchmaking was almost an art. Watches were luxury goods, produced by skillful jewelry makers and micromechanical engineers and consisted of a lot of little mechanical movements. Made in Switzerland they automatically became symbols of status, prestige and a very high Swiss quality. The price of the watches was very high as they were made from precious metals. People perceived watches as financial investments. It was quite common that they were handed down from generation to generation; they withstand years of mechanical wear as a result watch producers constantly generated revenue from their reparation.
However the perception of watches has changed when such companies as Timex, Hattori-Seiko and Citizen entered the market. The difference between watches produced by these companies and “traditional Swiss watches” such as Rolex was dramatic.
Rolex
Timex/Seiko
Positioning
Luxurious, status, financial investments
Functional – can work everywhere
Materials
Jewels – synthetic rubies, sapphires, other hard stones, drug metals
Low cost mechanical movements made of hard alloy metals – first, quarts movements – later, cheap exterior materials i.e. plastic
Price
High –over $350
Low –below $50
Aftersales revenues
Repaired – generated aftersales revenues
Disposable – could not be opened, impossible to repair – no aftersale revenues
Production process
Hand-made, low volume
Fully automated production, high volume
Sales
Exclusive distribution channels: jewelers and upscale department stores
Mass distribution: Low-priced outlets (drug stores, discount houses etc.)
As it can be seen from the table above Timex and Seiko made emphases on functional aspects of watches, rather than on the status. They introduced a new product
Initially watchmaking was almost an art. Watches were luxury goods, produced by skillful jewelry makers and micromechanical engineers and consisted of a lot of little mechanical movements. Made in Switzerland they automatically became symbols of status, prestige and a very high Swiss quality. The price of the watches was very high as they were made from precious metals. People perceived watches as financial investments. It was quite common that they were handed down from generation to generation; they withstand years of mechanical wear as a result watch producers constantly generated revenue from their reparation.
However the perception of watches has changed when such companies as Timex, Hattori-Seiko and Citizen entered the market. The difference between watches produced by these companies and “traditional Swiss watches” such as Rolex was dramatic.
Rolex
Timex/Seiko
Positioning
Luxurious, status, financial investments
Functional – can work everywhere
Materials
Jewels – synthetic rubies, sapphires, other hard stones, drug metals
Low cost mechanical movements made of hard alloy metals – first, quarts movements – later, cheap exterior materials i.e. plastic
Price
High –over $350
Low –below $50
Aftersales revenues
Repaired – generated aftersales revenues
Disposable – could not be opened, impossible to repair – no aftersale revenues
Production process
Hand-made, low volume
Fully automated production, high volume
Sales
Exclusive distribution channels: jewelers and upscale department stores
Mass distribution: Low-priced outlets (drug stores, discount houses etc.)
As it can be seen from the table above Timex and Seiko made emphases on functional aspects of watches, rather than on the status. They introduced a new product