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Marketing Strategy of Swatch Swatch

Swatch is one of the most successful brands of the Swatch Group. Its first line of plastic quartz analog line was launched in 1983, and went to become a global phenomenon. It is a cost effective, classic wristwatch, produced in endless bright, appealing designs, and even become a cult collectors' item.

Swatch has enjoyed this success due to its innovative design and quality, with a perfect marketing strategy for its target audience. It is a hot collectable fashion accessory, which could be attached to clothes and also wore as a ponytail band.

However, due to the recent economic downturn coupled with changing taste and culture of the target market, most of the wrist watch companies have been hit hard including the parent company Swatch Group.

SWATCH as a brand has been performing well in these changing environment. But in order to stay ahead of this aggressive market, SWATCH has to work on its R&D with a combination of new marketing strategies.

This is an academically oriented report aimed at recommending a more innovative strategy for ‘SAWTCH’. This could enable them to improve their brand identity, which may help them to survive amongst intense competition and improve the revenue of its parent company

Introduction

The Global watch market reached US$31.5 Billion in 2010. (Global Industry Analysts, Inc)

Spending on valuable and collectibles has gone upward due to increase in disposable income.

However, there has been a significant change due to following factors:

Economic slump in the major developed countries

Product and price competitiveness

Fashion and culture changes

Increased product and brand awareness

Swatch was introduced to the market in Switzerland in 1983. It is part of the famous Swatch Group a Swiss conglomerate. It is one of their most affordable, innovative and trendy lines. It is a breakthrough innovation of analog Quartz with 51 parts as opposed to the traditional 91 parts making it 80% cheaper to produce by a fully automated assembly. It is targeted at people with an exciting lifestyle who enjoy a very fashionable and affordable approach. This success was greatly pioneered by Dr Nicholas Hayek, driven by unrivalled, innovative marketing strategies and brand positioning transformed the whole Swatch Group and gave them a new position in the market over its competitors.

However, in an ever changing market Swatch has to work its way up by introducing different marketing strategy to keep it target audience brand loyal and attract new customers with innovative ideas, keeping in mind the ever-changing fashion.

In this Report, I will be analysing the marketing strategy by assessing the internal and external market situation by using, Porter’s 5- forces, SWOT and also differential advantage analysis.

Following this, I will recommend new strategies for developing their market segmentation and positioning tactics using SMART objectives and goals with the help of the marketing mix 4P’s approach, all of which will reflect the SWATCH mission statement.

Situational Analysis

This involves evaluation of current market situation and the factors effecting the internal and external environment of Swatch. These factors will be analysed with the help of Porter’s 5- forces SWOT and differential Advantage.

Porters’ 5-forces

See appendix A for detailed analysis

SWOT Analysis.

This technique is specially designed to help identify suitable marketing strategies for the company to follow. (hollensen 2007)

Strength

Swatch enjoys consumer loyalty. This was further enhanced with the launch of Swatch Members Club. It is a collectable, which has proven to be a hot asset and has raised high prices at auctions.

It enjoys an esteemed brand position in the world market as being one of the most successful brands of the Swiss Conglomerate Swatch Group.

It has a variety of product lines, including Bijoux Jewelleries: which has new designs for every season with a mixture of fashion, art and sports.

Weakness

The watch market is becoming very fragmented which makes the promotion of the brand difficult.

Swatch product line is very limited to watches and Bijoux jewellery only in comparison to its market competitors.

Swatch has been facing a very low turnover of its assets compared to its competitor’s parent company.

The productivity per employee is weak hence affecting the financial profits of the parent company. The productivity of Swatch Group is $0.2Million Compared to $0.3 Million of its competitor’s Seiko.

Opportunities

Improved economic condition in developing countries like China and India is increasing people’s disposable income.

As developing countries become more westernised; Swatch could gain a competitive edge in these growing markets with a mixture of its innovative design and artistic approach.

The recent economic downturn has changed the spending ability of the con­sumer. They are switching from luxurious to affordable goods.

The innovative change in the E-commerce and retail sector gives a direct exposure to market its product.

Threats

Threats from the counterfeit watch market is growing concern been. This results in loss of brand and its reputation. Recent reports show that, the counterfeit watch industry causes losses of over $1 Billion every year.

Swatch customers are urban trendsetters who prefer changes and are unpredictable. So if swatch fails to produce innovate style it can make huge loss on its sales.

Europe is currently the biggest market for Swatch watches, however due to the economic recession and price fixation its position is threatened.

Plastic and metal is the main raw material for Swatch watches. Recent price increase in crude oil and metal is making the raw material expensive and production cost very high which leaves a very low margin for profit.

Differential Advantage

While differentiating a product it is necessary for the marketer to keep in mind that it should not eliminate the core appeals and features which the customers expects from the product. (John J. Burrnett 2007)

A strategy based on style tends to become common, as a result of which the company needs to constantly innovate in-order to maintain its differential advantage. Its needs to look to other aspects such as core use function, which could give it a competitive edge that is not easily replicable. Attractive style and state-of-the-art technology gives Swatch its global brand image. Fossils, Timex, Titan and Guess are its direct competitors, but swatch has been successful in surviving this fierce competition in this aggressive market.

Firstly swatch capitalized in the market with its unique selling position of:

High-tech watches with a number of parts; reduced from traditional 91 to 51

A fashion accessory, which stands for style and innovation

Quartz analog technology at a low price

Swatch uses artist and designers to create some innovate design with use of different colours and shapes, which is appealing and new. Swatch Club gives it an international image and also the customization of the watches for its loyal club members reflects an exclusive nature over its competitors.

As very well described by Nicholas Hayek “25 years of Plastic Provocation”

Marketing Strategy

Below is the Recommended Marketing Strategy for swatch to maintain its market position and attract new customer.

Mission Statement

Produce high Quality, Yet affordable watches with Synthetic Material.

Marketing Objective

To built a Brand Image as the most stylish , creative yet affordable timepiece

To Lead the market as a Global Brand

To increase its Brand Awareness as the most innovative watch of the time

Market Segmentation

Market Segmentation is the process of dividing a market into distinct groups of buyers with similar requirement. Goods no longer be produced or sold without considering and understanding customer needs and recognizing the heterogeneity of those needs. (Michel Wedel 2000).

Steps involved in Market Segmentation, Targeting Market and Market Positioning follows;

Segmentation in the B2C Market

Sociodemographic, Behivourstic, and Psychographic variables are used to identify the market Segment.

Sociodemographic Variables

This divides the group into age, sex, gender, geography, and family life cycle, income, education, events, religion and social class.

Swatch product line is for both men and women between the age of 15-19, 20-24 and 25-34 who belongs to and income group varying from £12000 to £45000. It could be students, professional, home makers and set of stylish people who like creative and innovative approach.

Figures from Kidd 2007 suggest that the group from 24-35 have the highest spending power in the market. And also women in UK are increasingly purchasing watches for them self and for their partners.

Behaviouristic Variables

Ability to experience brand loyalty and innovative group of people.

Swatch product line is designed for people who desire to try something innovative and be able to experience their creative design of watches for everyday use and a piece of collectable.

Psychographic Variables

This segmentation on lifestyle and personality, group’s consumer on the basis of their activities, interest’s and opinion.

Swatch product line has a whole combination of sports line and also it is the official keeper of the Olympic time. It is involved in a lot of Adventurous sport sponsorship. It uses artist from different countries to outline the design of their watches to represent its fashion and culture.

Targeting Market

Once the company has identified its target market it must be in a position to decide which one to target.

With the above Market Segmentation we identify that Swatch can target market any one between the age of 15- 34 that prefer creative, fashionable and innovative timepiece accessory with an active lifestyle.

Market Positioning

Once the segmentation process gives a clear picture of the market and the target marketing strategy has been selected, the positioning approach can be developed.

With Above market and target position Swatch should market its position for the Youth age of 15-34 who has a strong purchasing power. It should create trend setting watches with an active lifestyle approach. It could pose as a ‘Must Have’ accessory.

Marketing Mix Decision

When marketing their product, firms need to create a successful mix of

the right product

sold at the right price

in the right place

Using the most suitable promotion

Selecting the most effective promotional channel

Two main reasons for the Success of Swatch in comparison to its Far East Competitors were the Marketing Strategy, Quality and Design of their watches. No matter how good the product is but it does need to be marketed correctly. With marketing mix of Product, Price, Place and Promotion we should be able to suggest the future Strategy to maintain its number one position in the market.

Product

Swatch has diversified its original cult plastic design by offering different range from

Metal-bodied watches, diving watches (the Scuba series), thin and flat bodied watches and also internet watch. To improve its product appearance and differentiate itself in the market Swatch can market personalized watches where customers get to choose their colour and design. This can prove to improve the brand appearance of the product in the line to requirement of the target market and in comparison of its competitors.

Price

Pricing is the only Element of the Marketing Mix to help generate the revenue. Pricing sends a very powerful message, it is extremely important that they reflect the customer value the company delivers. To find the trick to balance its pricing Swatch can differentiate its product line on the basis of pricing. It can divide into Economy, Standard and Superior Versions which will help them to protect against the competitors and also to globally gain the market share especially in BRIC countries were Swatch Group is showing a tremendous growth.

Demographic suggest that the Target market of Swatch is the adult between age group of 15-34. Taking this under consideration I suggest it to provide special prices to students and a discount on customization of the watch if registered with Swatch Club Membership.

Promotion

Promotion is the process whereby marketers inform, educate, persuade, remind and reinforce through communication. It is important for Swatch to capture target audience of the market. Swatch has been active sponsor of European sports and official time keeper of Olympic which has helped it to gain the international attention and market international culture. It also had its hand on the entertainment industry through partnership with MTV by running different contest with the shows. It also has a partnership with World Volley Ball federation which help to promote the sport internationally and also helped Swatch to market itself as a company with public interest

Currently the trends of social networking website are in great stipulate. Numbers of people accessing these sites are on a huge raise Also Demographic shows that Swatch target audience is the youth and they are very well connected through these Social Networking Sites. Swatch already has a fan following of 3, 20,102 on face book and the page gives an access to Twitter, Swatch Club and the website. . I suggest Swatch should use these social networking websites like face book, Bebo, Twitter My space etc but putting some Membership Pop up via ad words.

This could increase its brand awareness and also its target audience. Facebook is one of the, most successful social network website. Swatch has an exceedingly good chance to attract new customers. It can also run competition and contest like it does on MTV on these sites.

It should also participate in university based social events which can help gain popularity with the youth who are the trend setters of today’s society. Due to the economic down turn companies have made huge cut down on their marketing budgets and to cash on this Swatch should increase its promotional marketing activity will help Swatch increase its market share.

Place

30% of the revenue for Swatch Group comes from China and 12% from India. The BIRC countries were the least affected by the global downturn. Also people there are very attracted with the western brands. Swiss watch makers are the global leader in this industry because of this Swatch has an advantage of its brand already speaking about its quality. Swatch has already opened its arms for their BRIC countries especially in China and India with organizing event and also opening retails out lets in India recently they launched the Manish Arora collection which shows a very eccentric highlighting of the culture design.

Recommendation

Short Term

Prices of plastic and metal are on speedy increases which are the main raw material used for production of the Swatch watches. Rise in the crude oil price increase the cost of plastic. This makes the production cost high and makes it less profitable for the parent company. Research and Development should work on finding some new material which can be eco friendly and in the line of their Swatch 25 years old Plastic culture should be acceptable to the market as Swatch objective has always reflected innovation in style.

Counterfeit goods are largely available in every market of the country. This causes huge loss of Brand reputation and the revenue. To tackle this in a more productive way as shown in the marketing mix Swatch could try entering this market with dividing their product with a pricing strategy. It can divide into Economy, Standard and Superior Versions which will help people to get a high quality and original product at a value price.

Swatch has always gone beyond doors to promote its brand with labelling and sponsoring different sporting events in Europe and Scandinavian countries which is the biggest market for Swatch. Recently another biggest market for Swatch has been the BRIC countries. Swatch has been making its presence in these countries by using strong PR presence and artist to design the culture oriented time piece. But to increase its brand awareness with the masses and capture a higher market share with the domestic competitor, Swatch could open its arm for sponsoring popular sporting event in these countries with which they can reach a mass target audience.

Long Term

. Swatch competitors like Donna Karen New York or DKNY who from being a popular garment brand worked its way up and tired it hand on bags, watches, footwear perfume, glasses etc. Its product cater women and men and it’s vary can be vast. Swatch target audience is the age group of fashionable urban trendsetter from 15 – 34 who always look for a change. Swatch as already launched its Swatch Bijoux Jewellery and using its brand positioning it can move its market to introduce different product in the market like Stylish Eyewear frames, This can be achieved by using a strong PR presence and promotional activity which can be an asset and money in-flow for its company. As we all know Business is a matter of experimenting and learning.

Swatch could try joint venture in its foreign market with a popular domestic brand. As this can help to gain access of local destruction channels and increase its sales and brand presence with a reduce risk

Conclusion

Swatch has been classic example of marketing success. The quality of its product, style and innovation of its time piece has been the main reason of its success. But as always customers always looks for a change with style and innovation there is always a risk from the competitors.

There s a bigger market for Swatch due to globalisation and its strong brand position.

If Swatch puts the above discusses marketing strategy and recommendations into practice, further brand growth can be achieved.

Bibliography

hollensen, Svend. marketing managment. prentice hall, 2007.

John J. Burrnett. "Product Differentiation." In Nonprofit Marketing Best Practices, by John J. Burrnett. John Wiley & Sons Inc., Hoboken, New Jersey, 2007.

Michel Wedel. "Historical Development of the Market Segmentation Concept." In Market Segmentation: Conceptual and methodological foundations, by Wagner Antonio Kamakura Michel Wedel, 3-5. Norwell,USA: Kluwer Academic Publisher, 2000.

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