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.

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  2. Leyn Guy says:

    Je me suis inscrit tout récemment sur votre site

    Vos commentaires m’ont beaucoup intéressé.
    Je me doutais évidemment que la marge prise par les horlogers était celle qu’ on applique aux produits de luxe.

    Reply
    • Valentine
      Valentine says:

      Bonjour Leyn,
      Merci pour votre message.
      Nous sommes ravis de votre réaction 🙂 Nous pensons chez CODE41, que la transparence est un pilier de la consommation 2.0.
      Si vous avez d’autres questions, n’hésitez pas à vous adresser à notre service client 🙂

      Reply
  3. deparcy says:

    Bonjour ,
    Je me rends compte que j’étais loin de la réalité lorsque j’achetais une montre.
    Mon souhait aujourd’hui est d’acquérir une montre dans les projets DAY41. J’ai déjà pris contact avec votre service afin de m’inscrire le 28 Janvier 2020 pour les précommandes. La présentation de votre entreprise depuis le début est absolument superbe. Cette façon de présenter vos produits m’attire comme dans d’autres domaines.
    Bien cordialement,
    Thibault DEPARCY

    Reply
    • Valentine
      Valentine says:

      Bonjour,
      Merci pour votre message 🙂 Oui rendez-vous le 28 janvier pour les pré-commandes !
      Nous nous réjouissons que vous fassiez partie de l’aventure!
      Bonne journée 😊

      Reply
    • Valentine
      Valentine says:

      Bonjour Bernard,
      Merci pour votre message.
      La réserve de marche est d’environ 40heures non portée.
      Si vous avez d’autres questions, n’hésitez pas à nous contacter.
      Bonne journée!

      Reply
  6. Nathalie Vallade says:

    Avant de choisir une montre, j’aime bien les essayer car j’ai de très petits poignets. J’habite Genève et je peux me déplacer. Merci de me tenir au courant.
    N.V

    Reply
    • Jonas
      Jonas says:

      Abbiamo un servizio clienti che vi risponde via e-mail, telefonicamente dal lunedì al venerdì dalle 9.00 alle 12.30 e dalle 13.30 alle 17.00.
      Se il vostro orologio deve essere spedito per la riparazione, ci occuperemo noi e metteremo in funzione il nostro centro di riparazione.
      Nessuna preoccupazione 🙂

      Reply