Jan 3, 2006

Branding Time

For serious watch collectors and cognoscenti, watches are more than fashion pieces, and a particular timepiece’s brand identity lies in its movement as much as its fashion appeal. One only need click on one of the tens of dozens of watch chat groups on the Internet to learn this truth. Where else would you find a opinion like this: “In seven jewel watches where the balance is fully jeweled, but the train pivots aren’t, it’s difficult to predict which pivots and holes will wear out first.

Sometimes it’s the center wheel pivots, sometimes it’s third wheel pivots, sometimes it’s the fourth wheel pivots and sometimes it’s the escape wheel pivots.” The true watch enthusiast/collector is a rare breed: and he is not responsible for the watch industry’s growth to more than 1.5 billion units annually.

Does it matter that Swatch owns Omega? Does it matter that Ford owns Jaguar? The watch-making and automotive industries have more in common than you may realize. And it often comes down to branding – of the mass marketing kind.

The consolidation/globalization that is taking place in the watch making industry has long been underway in the automotive industry. The great companies of the automobile world’s recent past now own each other: Daimler Benz owns Chrysler, Ford owns the venerable Jaguar.

According to McKinsey, the consulting firm: “In recent years, the number of car makes and models has grown in every product segment. At the same time, the once vast gaps in quality, performance, safety, fuel efficiency, and amenities have all closed significantly. Although variations in quality and performance persist, the remaining possibilities for differentiating products, and thus achieving competitive advantage, revolve around styling and other intangibles and the emotional benefits they confer on the customer”.

Sounds a bit like the watch industry doesn’t it?

Owing to the miracles of globalization General Motors’ and Toyota’s joint venture NUMMI (New United Motor Manufacturing Incorporated) plant in California built both the Toyota Corolla and the Chevrolet Prizm. Toyota designed both models, and the differences in their components and trim are minor. Both vehicles received high marks from Consumer Reports, and comparably equipped midrange models have similar price tags. Same car. Different brand identity. And therein lies the difference. According to an article in The Economist, The Corolla commanded a $300 per vehicle price premium over the Prizm, earning $108 million more in operating profits for Toyota. As For Toyota’s dealers – they made $128 million more on the Corolla than the Chevy dealers made on the Prizm.

Whether this story repeats itself in the watch making industry – as the march of mergers and acquisitions leaves precious few independents – remains to be seen. Today, more than 16 brand names operate under the Swatch umbrella, including famous brands like Omega and the watch case maker Favre & Perret. New watch brand names owned by Swatch include CK Watches, established as part of the fashion trend in watch buying by Calvin Klein and Swatch.
A March article in the Financial Times of London noted that “quality watchbrands move like clockwork…global brands [are] driving record sales, but companies are preparing to consolidate as global luxury conglomerates are steadily snapping up old-established brands as soon as they arrive on the market.”

The July, 2000 purchase of the three luxury watch companies owned by Les Manufactures Horologeres (LMH) by Richemont (Jaeger-LeCoultre, International Watch Company (IWC) and A Lange & Sohne) represented a world record in terms of the absolute sum paid – and also a world record valuation – for a group which manufactures less than 100,000 watches a year. Each of the three companies is well over a century old, with an established culture and rich tradition in watch making. Richemont is the world’s number two luxury goods company after Frances LVMH (which has its own collection of luxury watches). The high price paid by Richemont is a tribute to the strength of the LMH’s brands – based on their history and their excellence.

IWC’s Blumlein (who had run the company for more than 20 years) acknowledges the importance of craftsmanship: “It is important to have the ability to manufacture custom-made movements. If you pay a lot of money for a watch, you want the product to be different. Watch connoisseurs can tell.” – and showmanship: “…you also have to be able to create emotion and get close to the end consumer…This used to be an industry which concentrated on delivering top quality time pieces. Now it has become much more than that. It is also an industry of dreams.”

As the watch making industry has matured, and more consumers recognize the power of luxury watch brands to signal status and wealth, the battle between creating top quality time pieces and the industry of dreams has been set. And the basis for brand identity in the industry is changing – and perhaps even returning to the promise made by the first watch created – as a sign of the status of the wearer to the world.

A brand is not a product or service, or the logo/company name under which it is manufactured and sold. A brand is the promise you make to your customer. The promise of the great watch houses that created their strong brands was based in their superior watchmaking (as well as design) ability.

The great watch houses developed strong brands – and are proof of the maxim that “great brands are in it for the long haul.” Because they took a long term approach and were dedicated to great craftsmanship, they created brands that could travel worldwide and transcend cultural barriers. The great watch houses have great histories that are at once rich and dynamic. They have been consistent, offering a high level of design integrity. And, like the great consumer brands Disney, Nike, Apple and Starbucks, they have been protagonists for their entire category.

Ironically, their success and their purchase by the luxury houses and conglomerates like the one Swatch is building—prompted by their strong craftsmanship brands – is resulting in their repositioning as fashion brands.
A member of the Swatch Group, Omega has established an individual identity through heavy spending and the employment of appropriately-chosen “ambassadors”. Its Constellation watch, worn by tennis star Anna Kournikova, represents 36% of its sales. The Seamaster model, launched in 1948, is worn today by Pierce Brosnan.

Although Omega has been producing reliable timepieces since 1848, the words of its representative Super Model Cindy Crawford tell a lot about today’s brand positioning: “The Constellation represents all the qualities I look for in a watch: class, elegance, subtlety, beauty and fashion.”

The watch-as-fashion accessory (a promise of status) is the wave of the future. The importance of great craftsmanship will increasingly take a backseat to design and marketing.

Luxury goods maker Hermes reports that watches are its fourth biggest product in sales, after leather, silk and ready-to-wear. Gucci acquired Swiss watch manufacturer Severin Montres to bolster its position in the luxury accessories category. And Calvin Klein is expanding its two year old venture with Swatch. Again, according to the Financial Times, “… the trend [is for] consumers to regard watches, even expensive ones, as fashion-oriented products which they might buy because of their association with the visual identity of a particular designer or luxury label, rather than the technical expertise of a specialist manufacturer.”

Arlette Emth, President of CK watches, further emphasizes the trend: “we’ve been researching the market very carefully and there’s clearly a trend …to buy watches in various styles …consumers still want the quality of the traditional Swiss manufacturers, but they also want the flair of a favorite fashion designer. That’s the way marketing’s going. Pretty soon all the well-known designers will have watches, as a standard part of their product ranges.”

Even so, while the global groups buy famous brand names, independent watch makers are getting the nod from watch connoisseurs. Francois-Paul Journe is a young master watch maker who produces only 400 pieces a year. Each of the three wristwatches in his Opus One collection, produced in association with jewelry maker Harry Winston, has totally original and different mechanical movements. Other independent makers include Frederique Constant (Highlife Tourbillion Platinum), Bulgari, Ikepod, Gerald Clerc and Alex Lockett. And, there is still the prestigious annual Salon International de la Haute Horlogerie, which is devoted to the values of fine watchmaking. It invited only 17 exhibitors to its April show. More than 5,000 invited visitors from 150 countries attended the show – each one identified as a “luxurist” – a 17th century expression meaning that they are professionally addicted to the “luxuriance” of the timepieces at the show.

As the emphasis of the brand promise of the watch industry changes from one of great craftsmanship to great design, it may be harder to tell a good watch from a great one. Even though Omega counts tennis stars and yachtsmen among its ambassadors, it is also mindful of its industry’s heritage of excellence. The cooperative agreement it signed with the remarkable English watchmaker George Daniels (the inventor of a new movement the Co-Axial) is certainly an acknowledgment of the importance of craftsmanship.

Daniel says his Co-Axial is “the first practical new watch escapement in the 250 years following the invention of the lever escapement by Thomas Mudge. It fulfills all the requirements of a precision watch escapement, with the advantage of robust reliability and close precision rate for long term performance.” Sounds like the guy with the wheel pivots in the chat group. Maybe the watch industry is smart enough – and sufficiently mindful of where it came from – to satisfy both the fashionistas and the congnoscenti. Only time will tell.

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Gloria. Circa 1955.

Gloria. Circa 2012.

Other than working for the American Red Cross in Korea for two years, Gloria Garvey has lived in Hawai`i since 1971. Her opinion and other writing has appeared in: The American Philatelist. Honolulu Weekly, The Honolulu Advertiser, The Honolulu Star Bulletin, The Star Advertiser, Hawai`i Reporter, Pacific Business News, Island Scene, The Design Management Journal.

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