Case Study: Swatch Group

1 Case Study: Swatch Group Introduction Omega, the flagship brand of one of the leading watch manufacturing companies, the Swatch Group, has established itself internationally as a world leader.

With a lot of potential for growth in the international market, Omega is currently competing with Rolex to become the world’s most popular luxury watch (Deshpande, Misztal & Beyersdorfer 2012). Designed with emphasis on fashion, new technology, glamour, and emotional attachment, Omega has secured acceptance among those in the higher social classes, especially in China and Europe. Though there have been difficulties in securing markets in some areas like the US, it is still possible to maintain growth on the current sales figures. Such growth can only be assured if the kind of marketing strategies adopted outdo those of the competing companies.

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2 One of the main strategies that would work for Omega brand is expansion of Omega range of products. Those customers who purchase other products from the competitors will be confronted with another choice in case the existing range of products does not include those of their taste. Such a move had worked before for the Swatch Group when they relaunched the Constellation brands in 2009. The Omega brand became a success in the Chinese market with this relaunch. Diverse product attributes to a single range of brands can be a great way of attracting customers with different tastes. Potential buyers who base their purchase decisions on attributes different from those within the current Omega range of brands are mainly the target of such a brand extension. However, it is important that design and pricing of the brand extension do not lead to overlapping of the original brands. Distribution strategy adopted for the Omega range of brands is very crucial in order to maximize sales. The luxurious nature of Omega makes its distribution channel unique from usual channels which would otherwise be effective for usual market goods.

Mono-brand retail stores are particularly an effective channel in such a case.

Mono-brand stores can be very effective, especially where discounts are not encouraged or a priority. In 2009, Swatch Group increased the number of mono-brand boutiques at a time of economic recession. This was seemingly a dangerous move and many predicted explosion of parallel shipments and increased retailer discounting.

However, the effects were on the contrary. Sales increased by 17% as a result. This is a proof that quality withstanding, mono-brand distribution channels can be very effective, especially for luxurious commodities. The mono-brand channels place the retailers higher above other vendors in customers ranking and this is healthy in maintaining

3 Omega’s luxury status. Protection of the retailers’ territories, backend rebates, higher margins and loyalty from the vendors are among many other gains that would come with mono-brand distribution channels. It would also help Swatch Group understand market trends better as they would be dealing with the vendors directly. It is possible that this may lead to Swatch Group losing on many customers; but Omega is a luxurious brand and the presence of cheaper substitutes in the same store as Omega would only lower its sales, or lead to calls for discounting. Therefore, it would be more effective for Swatch Group to set up more of mono-brand than multi-brand retail stores.

Among the most probable buyers of Omega range of brands are those in the premium and luxury levels. Both levels comprise of high income earners, although those in the luxury level are bigger spenders and may not necessarily be enticed through discounts. Provision of information on the product is also a very important aspect of their shopping behavior. Very effective marketing strategies are necessary in order to win such buyers. As they mostly do not prefer mass market shops, premium and luxury buyers are likely to visit mono-brand stores for shopping. To win the loyalty of this market, Swatch Group may opt to strategically position their outlets, particularly for Omega, in places commonly associated with luxurious buyers. It is possible to derive higher profit margins from the luxury and the premium markets through mono-brand outlets, though sales may be low. As for multi-brand outlets, sales are generally higher but profit margins lower and discounts necessary in order to complete sales. Luxury consumers, the type of consumers who purchase things to show off, for self expression purposes, for status, to be the first to use a new technology, or to satisfy the need to retain personal values, are best placed to create market for Omega range of brands.

4 Swatch Group should produce brands that incorporate the newest technology with mechanical sophistications, while at the same time improving precision and designs in order to fully exploit the luxury market. Use of rare materials for Omega brands could also improve acceptance among the rich. For instance, a watch whose appearance and history is unique from any other is likely to do better in the luxury market as opposed to numerous watches whose features are similar and their design identical. Since some of these consumers buy goods to imitate their idols, associating Omega brands with high profile individuals in the world could also raise its standards from the buyer’s point of view.

All means to position Omega brands ‘upwards’ so that they compete directly with the other brands of similar nature should be explored. If need be, it would be better for Swatch Group to introduce new brands for the mass market, or even strategize on improving the existing ones. If Omega range of brands is basically recognized as luxury goods, they are likely to do much better in the luxury market. The mainstream brands in the up-market are characterized by higher competition as compared to the luxury market, and the profit margins are much lower. Already, Omega brands have established themselves as potential world leaders in the luxury market, just behind Rolex. Positioning Omega brands ‘downwards’ would only amount to overlapping of other Swatch Group brands like Tissot and Blancpain. This will obviously work negatively for the Swatch Group. The same effect could also result from placing Omega brands in the same stores as the other up-market brands.

Conclusion

5 Swatch Group’s strategy of investing more in innovation than advertising and stock markets is very healthy for the long-term goals of the company. Such an investment may not yield much returns in the short run, but it is a brilliant way of beating competition in the future. Strengthening the existing markets to ensure Omega brands maintain the loyalty of buyers could still work positively for the Swatch Group. Of great importance to the Swatch Group is the Chinese market whose growth is promising to an extent of outdoing the European market in the foreseeable future. More efforts should be done to expand Omega’s presence in the US through distribution channels that are most acceptable in the US market. The US market is still underutilized as far as Omega brands are concerned, mainly due to differences and technicalities in product distribution processes that are popular with the US market and available to the Swatch Group.

6 Reference List Deshpande, R, Misztal, K & Beyersdorfer, D 2012, The Swatch Group, Harvard Business School Publishing, Boston, MA