Master Thesis on Conspicuous Consumption and luxury watches

MASTER THESIS

THE STRATEGIC MANAGEMENT OF LUXURY BRANDS

Strategic brand management of luxury enterprises (Luxury Brands) is characterized by some

peculiarities which mainly arise from the way in which the luxury brand is considered and

Prendergast Phau

defined. and claim that luxury brands are characterized by five main

features:

a) must evoke exclusivity,

b) have a well-known brand identity,

c) enjoy a high reputation,

d) generate a high perceived quality and

e) obtain high levels of customer loyalty.

Kapferer

In line with this view, identifies three types of luxury brands:

a) the Griffe, which has an own identity and counts products of pure and unique

workmanship able to embody standards of perfection,

b) the Luxury Brand, which involves the realization of handicraft and hand-made goods

produced in limited series,

and finally

c) the High-end products/brands, which are characterized by a mass-production of very

high quality goods compared to those of the same category in question.

This division of luxury brands’ universe into specific categories leads to the generation of

alternative strategic-operational mode oscillating around a point of equilibrium that average

economic and financial growth with the need not to distort the brand identity. In fact, it is

easy to imagine how the democratization of luxury’s process and trading up concern in a

more distinct way the categories of "luxury" and "high-end" brands. It is indeed in these

Silverstein Fiske

two areas, according to and , that luxury enterprises can start an important

development.

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Pag. MASTER THESIS

What are consumers longing for? Conspicuous consumption and Luxury watches

For this purpose, operators should be aware that in this border area between "pure luxury"

and "accessible luxury" stand out additional categories of brands to be entrusted with

specific strategic targets: the "Accessible super premium products", the "Old Luxury brand

Masstige

extensions" and “ goods".

In particular, the Accessible super premium products would be given a role linked to

the marketing of its category’s top goods at a "relatively" low price.

Vice versa, with the Old Luxury brand extensions enterprises have the possibility to

prepare a version of products which normally would have a very high entry level but are

instead set on a radically lower price level.

Finally the Masstige brands/goods (neologism that combines the terms "mass" and

"prestige") should cover the area which is well below the Old Luxury products both in terms

of price and performance but that is solidly above the average in its class of reference.

Looking at the definition of these three categories of accessible luxury brands/goods, it is

possible to identify the intent to build effective tools in order to increase sales and the total

Della Bella

turnover of luxury companies. On the other hand, according to , the brand

strategy of luxury brands with a core of non-purely industrial production it is subject to

specific constraints "that once exceeded the luxury nature is…compromised and the brand

rather than increase in value loses it". In particular, the constraints to whom Della Bella

refers are of dimensional nature (related to revenue, produced and sold items and the

number of outlets) and connected with the exploitation of the brand, especially through

licensing to manufacturers of goods belonging to categories other than those of origin and

or to related sectors (in this case it is possible to run the risk brand stretching).

Dubois Paternault

Along the same line of thought there’s the contribution of and which

underlines how the strength and the oneiric dimension of luxury brands are supported by

the level of recognition that they achieve but decay due to excessive levels of sales; for this

reason, luxury companies must know how to find the right balance between spreading their

brand and excessive overexposure.

Others point out how this research for balance is often the result of luxury enterprises’

aversion to mass-marketing management approaches. 17

Pag.

MASTER THESIS

Owners and managers of luxury brands, in fact, have a natural capacity to understand the

market and, rejecting the traditional definitions of marketing, to develop a marketing aimed

at creating customer loyalty based on a timeless, handcrafted, quality brand image linked to

the territory and its traditions.

The aim of this study is to investigate the relationship between brand identity of the Top

four luxury watch brands and consumer behavior related to conspicuous consumers, on the

basis of the way in which the latter is affected in their selection of luxury brand and

willingness to purchase the product offered by such brand. The four brands I have decided

to take into consideration are:

a) Rolex

b) Omega

c) Cartier

d) Tag Heuer

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Pag. MASTER THESIS

What are consumers longing for? Conspicuous consumption and Luxury watches

ROLEX Hans Wilsdorf Alfred Davis

The Rolex SA was founded in 1905 by and his brother , although

currently one of the major Swiss watch companies, Wilsdorf was German by birth and the

first headquarter of the company was London. Wilsdorf & Davis was the original name given

to the company, which later became the Rolex Watch Company. Initially they restricted to

Hermann Aegler

import in England mechanisms produced by Swiss , who later became a

partner, and assemble them into luxury boxes created by the signing Dennison and other

jewelers era who sold early wristwatches customizing with their brand. The first watches

produced by the Wilsdorf & Davis were marked "W & D" (symbol visible inside drum).

Hans Wilsdorf registered the trademark "Rolex" in La Chaux-de-Fonds, Switzerland in 1908.

The meaning of this term is unknown, according to some (version never confirmed by

horlogerie exquise

Wilsdorf) "Rolex" is derived from the French phrase , which means

exquisite watches. Others report that the name derives from the union of the word Rolls

Royce luxury cars loved by Alfred Davis, and Timex, largest producer of watches of the

time, to indicate precisely that the production would be geared to watches “EX” “luxury”

“ROL” which ROLEX.

The Wilsdorf & Davis moved to Britain in 1912. Wilsdorf wanted to make its products cheap,

but taxes and import duties on watch cases (gold and silver) prices rose. Since then, the

headquarters was moved to Geneva, maintaining branches in other cities (such as Biel) and

in other continents: North America, Asia and Australia. Another reason that pushed Wilsdorf

to move to Switzerland because he was with the outbreak of the First World War a German

was not frowned upon in England, and this might cause further obstacles to his company.

The name Rolex was officially registered November the 15 th 1915, it is assumed that this

change would show the will to popularize wristwatches, which at the time were considered

items for ladies because among men was popular the pocket watch. Wilsdorf wanted a

name to pronounce in any language and so he decided to call, in 1919, the company with

the name Rolex Watch Company, later becoming Montres Rolex SA. For now called Rolex

SA whose brand is composed of letters of the same size so they can be written

symmetrically. The characteristic crown with 5 points, the historical symbol of the house,

was instead introduced in 1925. 19

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MASTER THESIS

Among the innovations proposed by the Rolex watch on the market there are the first

waterproof watch with the date, with the time zone and, more importantly, the first

wristwatches to get the highly requested chronometer certification. To date, Rolex still holds

the record for highest number of mechanisms certified.

The first self-winding watch was introduced in 1931, powered by an internal mechanism

which used the movement of the arm and, as well as making unnecessary loading by hand,

that eliminated the technical problems that compromised the operation. Rolex was also the

first company to create a truly waterproof watch, another milestone. Wilsdorf came to

create a special Rolex that in 1960 was pegged to the bathyscaphe Trieste and dragged in

the Mariana Trench. The clock resisted and proved to have kept proper operation during

descent and ascent. This fact was confirmed by a telegram sent to Rolex the following day

which read: “I am happy to confirm that even at 11,000 meters your watch is as precise as

on the surface. Best regards” (Jacques Piccard).

In this way he created the reputation of Rolex watches available for scuba diving, aviation

Chuck Yeager

and mountain climbing, thanks to , the first pilot to take a plane over the

sound barrier with a Rolex bought from him personally. Among the first sports models there

was the Rolex Submariner and the Rolex Sea-Dweller Submariner 2000 (2000 ft = 610 m)

both produced in 1971. This watch boasted a helium release valve (invented with the help

of fellow Swiss Doxa SA) that let the gas flow during decompression.

Other sports model was the Rolex GMT Master, originally developed at the request of the

airlines Pan Am, able to assist pilots in transcontinental flights, because of the presence of a

24-hour hand and a graduated bezel and rotating. The models of the Explorer collection

were created for explorers moving over rough terrain, following the deeds accomplished by

Sir Edmund Hillary and the Sherpa Tenzing Norgay who first reached the top of Everest,

wearing an ancestor of the actual Explorer.

From a more glamorous point of view James Bond, Ian Fleming's character, wore a Rolex

Sean Connery

in the series of novels by the author. In the first movie the legendary wore a

Rolex Submariner without date and with fabric strap military striped in gray and black. In

Pierce Brosnan Daniel Craig

later movies with and those with the watch became an Omega

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Pag. MASTER THESIS

What are consumers longing for? Conspicuous consumption and Luxury watches

Seamaster, following the alliance between the Omega brand and the producers for the

promotion of watches.

Collection

Rolex produces round wristwatches since more than 40 years. The brand encompasses only

two collections: the Oyster that equals around 140 models and 80% of the purchases and

the Cellini. The design has always been very conservative and the only decisive innovation

was brought on the market in 2000 with the launch of a multicolor Oyster Daytona.

Strategy

Conservatism and tradition are the main believes of Rolex’s strategy: same product and

same communication of such items in the last few decades. Its peculiar communication

strategy and differentiation among other brands enabled the company to gain a real

competitive advantage over the years. The brand embodied achievement and keep

nurturing its own myth thanks to successful celebrity endorsement. Rolex also maintai