13
Apr
2016

Phase 1 , chapter 2

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: 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, 6 FEB: PROJECT X41 - UPDATE

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  1. Doug Peacock says:

    It also occurs to me that frequency of sale might affect pricing for sustainability and/or market positioning, possibly based upon some exposure by a company.

    Reply
  2. Phuong Le Nguyen says:

    Kundenbewertungen
    Die Note „Sehr gut“ berechnet sich aus den 69 Trusted Shops Bewertungen der letzten 12 Monate, die im Bewertungsprofil eingesehen werden können.

    Reply
  4. CULLET says:

    je suis de nature curieuse,c’est pour cette raison que je me suis passionné pour votre cite et vos montres.
    je trouve que vous avez eu une idée de génie de rentre accessible au plus grand nombre de personne une belle montre pour marque un événement pris au cour de sa vie .
    d’avoir une belle montre sans faire un énorme trou dans ces finances.
    Merci beaucoup pour cette généreuse attention.je veux bien faire le porte parole de cette bonne nouvelle.

    Reply
    • Abdel
      Abdel says:

      Bonjour Hamida !
      Nous vous remercions pour votre confiance, vous pouvez passer votre commande directement sur notre site.
      Si vous avez des questions précises concernant votre modèle choisi, vous pouvez nous écrire directement par email 🙂
      Bien à vous

      Reply
  7. Patrick JONCOURT says:

    Article concernant la transparence intéressant, la suite est attendue
    J’ ai un ami qui est concepteur chez un horloger Suisse de grand luxe et de renommée mondiale, je ne manquerai pas de lui demander son avis vous concernant car je n’ai pas les moyens de lui acheter ses montres de milliardaire.
    Merci

    Reply