The Birth of the Swatch Case Solution

1. Why was Swatch so successful? In what way was the Swatch different than any watch the industry had ever seen?

First of all, Swatch carried the ‘Made in Switzerland’ tag, which made it stand out from remaining low-priced global brands. Majority of consumers in United States and Europe preferred Swiss watches particularly because of their high quality so when Swatch entered the low-priced segment, it immediately caught the eye of all consumers. Secondly, the overall strategy of Swatch was the main reason behind its success. The idea of vertical integration, reducing the number of parts, decreasing direct labor, identifying right suppliers, selecting appropriate distribution network; all contributed towards making Swatch a different product then what the industry had ever seen. In addition to this, designs and collections of Swatch played a crucial role in attracting customers, particularly youth. Before the introduction of Swatch, youth was always considered to be indifferent towards wrist watch market, but the launch of Swatch changed the scenery, completely. Swatch used to launch 2 collections per year with approximately six dozen designs in each collection. Availability of such a wide variety meant that Swatch had something for everyone. Apart from regular collections, Swatch’s limited edition models, which were designed by popular celebrities from various fields, attracted the attention of customers from around the globe.

Besides Swatch’s collections and organizational strategy, the communication message was the most critical element in making Swatch a desirable product for its target market. It was a prime example of a low priced – high quality product. The top management also laid special emphasis in pursuing out-of-the-box promotion strategy; break dance sponsorships, celebrity endorsements, giant Swatch models, Swatch membership club etc. all played an important role in breaking the clutter and making the brand reach its target market. Lastly, the belief of the top management in a new idea was also the key to success. Despite the failure of Swatch at the test market and concerns of most industry veterans, the top management decided to go forward with the plan as they had a belief in the message and ultimately the belief turned out to be right as market surpassed the company’s expectation of sales.

2. What elements of the original Swatch marketing plan were most critical to the brand´s success? Do you agree with the original product strategy? The channel strategy? The promotional strategy? What about the pricing strategy - what does Franco Bosisio mean when he says that the Swatch is sold at a “clean price”? 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?

First of all, SMH, the holding company of the Swatch, spent 30% of the retail price of the Swatch, which was more than double the industry average. This showed the importance of delivering the right message to the target market, in eyes of the top management. Secondly, pursuing completely different channels than the industry for promoting Swatch was also a key element for the brand’s success. The company spent considerably on television advertisements, which was uncommon back then in a watch industry. Other than this, company also laid special emphasis on below the line marketing by carrying out various promotional activities like break dancing sponsorships, celebrity endorsements, giant Swatch watches etc. These promotional stunts played a major role in creating a different image of Swatch in the mind of consumers.

Though, the original product strategy did not make sense because taking on Asian giants was a risky decision. The cost of production and labor were considerably lower in Asia than in Switzerland, which made the idea of producing high quality watches at low prices a distant dream. But the way the top management restructured the entire organization and pursued a vertical integration strategy allowed this plan to become a success. Similarly, selling Swiss watches in a vegetable or fruit store was a different, if not a crazy idea. It is hard to agree with the strategy based on past trends, but the channel strategy was well-though-out considering the overall mindset of the top management to deliver a different message. The pricing strategy of Swatch was perfect because of the high competition in the low-end market. Despite the inability of the Swatch team to fulfill the huge demand, keeping the same price level was the right decision as it allowed the company to deliver the same message as they wanted.

By the term Clean Price, Franco Bosisio, most probably meant that the price was not dependent on demand, and it would not vary frequently. Despite the company’s success and huge demand, the price range was never increased and was kept affordable so to reinforce the communication message. Apart from this, the price of Swatch was simple i.e. almost similar, in all countries around the world.

3. Prior to the introduction of the Swatch, what kinds of watches were popular among consumers? In what way was a Rolex different from a Timex, or from a gold-plated Seiko? How did consumers make buying decisions?

Before 1950s, the industry was dominated by Swiss made high end brands like Omega, Piaget, Movado, Rolex etc. Watches were considered to be an investment and were often passed on to generations showing a symbol of preciousness and self-worth. Gradually, low end market appeared on the horizon, which was dominated by Asian countries like China, Japan etc. The low end market became popular with brands like Timex, which promoted the idea of disposable watches because of their low prices. Before long, the industry got dominated by low end manufacturers and consumers and the demand for high quality super-expensive Swiss watches had started declining.

A Rolex was usually made with 100 different components and required a skill of a master jewelry maker and a micromechanical engineer. The result was a meticulously crafted watch made with precious jewels, to last for generations. On the other hand, a Timex was a low end watch, made from hard alloy metals rather than jewels.