MGT

856: Managing Marketing Programs Raymond Albuero, MAM 2020

Case Write-up: The Birth of the Swatch

1. Why was the Swatch so successful?

The following were the reasons why Swatch was so successful:

• The first choice of Hayek to achieve competitive advantage for Swatch was to
have a vertical integration that aimed to bring down the cost of production to
Asian levels. They made sure that the manufacturing process was fully
automated to reduce the cost of labor. The choice of material was cheap plastic.
This resulted to a competitive price of Swatch that the consumer can afford
given that the product was positioned for mass market.

• In terms of branding and marketing, they positioned swatch as an emotional
product. This resonated well with the customers that translated to loyal ones.

In what ways was the Swatch different than any watch the industry had ever seen?

There were many ways that Swatch was different than any watch the industry had ever
seen.

Designs and Collections. In terms of design, unlike the traditional watches available in
the market, Swatches featured witty, outlandish designs. It used brash, intense colors.
These were new to watch to have bold designs and colors. There were also a lot of
variety being offered by introducing two collections a year. This encouraged a repeat
purchase for existing customers.

Promotion and Branding. With the goal to control the swatch message, the company
spent roughly 30% of the retail price. The high-profile advertising approach was not
common to Swiss watch industry (usually preferred a more discreet promotional
approach). The marketing strategy emphasized below-the-line activities which was
unique in the watch industry. The company also created loyalty clubs for Swatch ardent
fans.

2. Prior to the introduction of the Swatch, what kinds of watches were popular among
consumers?

Before Swatch was introduced to the market, prior the 1950s, mechanical watches were
the standard and regarded as financial investments. Then, in 1951, low-cost competition
emerged with the development of cheap mechanical movements that used hard alloy
metals instead of the precious ones. In 1970s, quartz technology came making quartz
watches popular among consumers during this era.

In what ways was Swatch different from a Timex, or from Seiko?
MGT 856: Managing Marketing Programs Raymond Albuero, MAM 2020

The table below summarizes the difference between Swatch, Timex and Seiko.

Swatch Timex Seiko
Technology Quartz movement Mechanical movement Quartz movement
Price $40 $6.95 - $7.95 >$50
Made in Switzerland Unites States Japan
Design Fashionable Functional Functional

How did consumers make buying decisions?

In terms of buying decision, the innovative design and quality were the main decision
point for consumers. Also, the price point also became a factor in the purchase. A lot of
consumer became loyal to the brand.

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

In terms of marketing plan elements of Swatch, one of the most critical was the
message it was trying to communicate to its consumers. Being a Swiss product, the
essence of Swatch message was high quality.

Another one was the way it was communicated. The use of unorthodox promotional
stunts such as breakdancing sponsorships, celebrity endorsements, special events, and
product placements – these were effective in reaching the target customers to learn
more about Swatch watches.

Do you agree with the original product/channel/promotion/price strategy?

The innovative designs coupled with high quality standard of Swiss watch craft at an
approachable price, Swatch’s position in the market was advantageous. It was
strengthened by the choice of promotion and channels. Therefore, the original
product/channel/promotion/price strategy were agreeable.

Given the huge demand for Swatches (particularly for certain models), did the
company make a mistake in not raising the price for some of its styles?

The choice to maintain the price of Swatch regardless of the demand was consistent to
the strategy chosen by the company to make it affordable. Though there was an
opportunity to raise the price, it was not a mistake since maintaining the price point
created loyalty among customers. As a result, repeat purchase among them became a
norm which is a win-win scenario for all.