The first main reason why Swatch managed to gained so much popularity in the watch industry is because they managed to cut costs. Heyek had started a low-end product initiative and was fully committed to vertical integration, that is, he intended to build and assemble the low-price quartz watches entirely in Switzerland.
This, along with the decision to encase the watch with cheap plastic, helped the company lower costs substantially whilst managing to maintain a high quality opinion from the customers (as it was made in Switzerland). Heyek had an important role in the success of Swatch. Heyek wanted to give a whole new meaning to buying and wearing a watch, create value out of it. He decided that the Swatch would have a unique message, one unlike that of any other watch brand in the market. The fact that the company was not only selling a watch, but an important part of people’s self image, in my opinion, is the main reason for which the Swatch succeeded.
The Swatch was different from the other watches in many ways but the factor that distinguished it the most from the rest is the fact that it could add genuine emotion to the product. It basically changed the consumer’s perspective of the product. Previously, watches were considered to be timekeeping instruments which had no personal meaning. Swatch started to design and sell watches that allowed customers to show their individuality, “they featured witty, sometimes outlandish designs that used brash, intense colors”.
2) Do you agree with the original product strategy? The channel strategy? The promotional strategy? What about the pricing strategy?
I definitely agree with the original product strategy. Before the merger, SMH had no market share whatsoever in the price segment below $100 and had only 3% market share in the segment of watches between $100 and $350. Heyek was of the idea that it was essential to have a broad market presence and that by having a good position in the lower end market would allow them to further profit by the upper end market.
The idea of introducing a low cost watch, which would be targeted to the low end market, was an excellent work. Swatch quickly gained popularity due to the previously mentioned competitive advantages, which shows that targeting the lower end market along with the added meaning to the product was a very effective strategy.
SMH decided to distribute their product differently than every other watch brand. They decided to avoid jewelry stores and specialty watch shops (favored by most manufacturers), instead, they chose to adopt an unconventional retail approach and many nontraditional points of purchase. As a general opinion, I agree with their channel strategy mainly because they were trying to change completely the perspective of watches and therefore would have to act likewise when dealing with issues such as marketing, promotion and as in this case, distribution.
Customers would not start believing that they were selling something other than a watch if they sold it and treated it in the same way. As said in the case study, SMH’s general approach to promotion was to spend roughly 30% of Swatch’ retail price on advertisement (more than double the industry average). I’m not quite sure why they decide to spend such a large percentage on promotion compared to the industry average but I imagine the purpose of this was to concentrate on their potential clients rather than spending the money in other ways.
The company had become notorious for unorthodox promotional stunts – everything from break-dancing sponsorships to celebrity endorsements. The company also used special events and product placements to promote the Swatch brand. I think that SMH did really well in terms of promotional strategy because they managed to succeed in being viewed as a trendy, fresh, new company in the eyes of the consumers by using promotional techniques as the one used in Frankfurt with the gigantic watch.
The price of Swatch was probably the factor that played the most important part in their success. Although it was already recognized that Swatch was going to be low cost and targeted to the lower end of the market, I think SMH did a really good job in choosing a price tag that made it easy for consumers to purchase Swatches on impulse. It was sold at an affordable, simple, clean price which was never modified, which, in my opinion, helped
SMH on the long run.