PRICES, MARGINS AND POSITIONING

Today the price of a watch is mostly dictated by product positioning. If the difference between the price and the intrinsic value of a watch becomes too great, there is the risk of a explosion. We have decided to be completely transparent about our prices, and to use a price multiplier of 3.5.

Positioning

Today the price of a watch is mostly dictated by product positioning. Target consumers are defined by analyzing their behaviour; their buying habits, the brand of their toothpaste. Finally their dream watch can be created, suited to their budget.

After the positioning and price have been defined, production costs are optimized by playing with the origin, the complexity of the construction, and the quality of each component.

The goal is to match the industry standard multipliers, which are generally 6 to 8 times cost price. In practice there are ‘aggressive’ brands which use a multiplier of 5 and, rarely, some who have succeeded in creating a perceived high value, allowing them to apply a multiplier of 10 or more.


Usually the retail price is equal to the cost price multiplied by 6 to 8.

PRICES GO UP PRICES GO DOWN

Between the years 2005 and 2012 the Swiss watch endlessly broke export records. During this euphoria, the general trend was rising prices – meaning a change in market positioning – which has not always translated to rising quality. Often it is simply a case of the margins being raised.

Pricing policy relating to product positioning (which essentially states that the price of a watch should match the price the customer is willing to pay) can lead to excessive variation between the price and the intrinsic value of the product. This pricing approach represents a huge risk at a time of sudden fluctuations in the economy or in purchasing behaviour, as has been the case recently with the global crisis, the strong Swiss France and smartwatches. Prices are not infinitely elastic, and the consumer is not stupid.

In this new environment, many brands have lowered their prices and returned to a reasonable quality/price ratio. This is a healthy reaction, but some consider it to be too late. Inventories have grown amongst retailers who find themselves in a very difficult position. This creates a situation where alternative networks (the secondary market and gray market) are often the only safety valve preventing the explosion. We will go into further detail on this in Chapter 3 on April 27th: Exclusive distribution and community power.

If the difference between the price and the intrinsic value of a watch becomes too great, there is the risk of an explosion.

PRICE TRANSPARENCY

Purchasing behaviours are changing. The consumer compares, shares and comments. They want a watch that is well designed, loaded with emotion, and that has a high quality/price ratio.

We plan on doing two things to mark the foundation of our pricing policy: first, following our commitment to remain transparent we will communicate and explain the production cost of all of our watches. Secondly, by selling directly to the end consumer e will be able to apply a uniquely low multiplier of 3.5 to our production prices. The retail price will not be the result of product positioning; rather it will be directly related to production cost.

Some brands have already started selling online directly to the end consumer, thereby eliminating retailer and distributor margins. We believe this is a trend that will continue to grow in years to come. That said, our approach goes a step further. We will be selling our watches worldwide through our website, but not exclusively. More will be explained in the next chapter on April 27th: Exclusive Distribution and Community Power.

The retail price will not be the result of product positioning; rather it will be directly related to production cost.

NEXT CHAPTER, JAN 16: PROJECT X41 - UPDATE

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  1. Ben Teo says:

    I like the certain designs of your mechanical watches and if I can spot one within my budget,definitely I will get one as one of my friend has it.

  2. Daniel says:

    Bonjour Claudio
    je suis avec vous a 100%
    je fabrique des bijoux haut de gamme pour des marques de fabriques en thailande depuis 1984 et je vois des coefs appliques de 6 a 7.j’aimerai bien aussi vendre mes collections ( pas ceux de mes clients) directement surt le net avec un coef de 2.5. mais coment faire?
    merci
    daniel

  3. Alain says:

    Bonjour,
    Le problème ce n’est pas seulement les marges car il faut en faire, le plus dur à avaler ce sont les naïfs qui achètent des marques très connues voire mythiques (prix supérieur à 6000 euros) qui sont en fait montées avec des calibres très peu coûteux vaguement bidouillés et il y en a beaucoup qui pratiquent ce petit jeu. Là c’est un vrai scandale du côté de ces fabricants. Je ne citerais aucune marque, mais quand on passionné on comprends très vite ces abus. Bonne continuation à vous, car votre démarche est courageuse et saine.

  4. jean-michel chaillou-périssé says:

    Je me limite à 38 mm de diamètre, et je préfère les remontages manuels, avec réserve de marche, avec un nombre important de rubis, pour une usure plus contrôlée, donc par conséquent avec une précision soutenue dans le temps.
    Boitier acier exclusivement.

  5. jean-michel chaillou-périssé says:

    Passionné de montres mécaniques, je suis impatient de connaître l’aboutissement de votre démarche.
    Bien à vous.

  6. Bruno says:

    Bonsoir…moi qui suis fan de montres…j’apprécie cette démarche…enfin des montres de caractères sobres,belles et accessibles à tous…
    Par contre moi qui suis grand gabari…a quand des montres d’un diamètre sup à 45mm voire plus grandes?
    Bonne soirée
    @bientot

  7. Mottin says:

    Bonjour,
    Je trouve vos montres fort jolies, seulement un mouvement asiatique pour l’Anomaly-01 freine un peu mon ardeur.

  8. cscalliet@orange.fr says:

    Bravo pour vos commentaires sur les cumuls de marges. Maintenant il faut comparer à performances égales, et là je ne vois pas d’exemple précis. Pour le moment je ne fait pas le choix de changer ma montre, à suivre ….