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Marketing Strategy of Rolex -
December 7th, 2010
Rolex SA is a Swiss manufacturer of high-quality, luxury wristwatches.
Rolex watches are popularly regarded as status symbols and BusinessWeek magazine ranks Rolex #71 on its 2007 annual list of the 100 most valuable global brands. Rolex is also the largest single luxury watch brand, producing about 2,000 watches per day, with estimated revenues of around US$3 billion (£1.75) (3.02 CHF billion) (2003 figures).
In 1905 Hans Wilsdorf and his brother-in-law Alfred Davis founded "Wilsdorf and Davis" in London. Their main business at the time was importing Hermann Aegler's Swiss movements to England and placing them in quality watch cases made by Dennison and others. These early wristwatches were sold to jewellers, who then put their own names on the dial. The earliest watches from Wilsdorf and Davis were usually hallmarked "W&D" inside the caseback.
In 1908 Wilsdorf registered the trademark "Rolex" and opened an office in La Chaux-de-Fonds, Switzerland. The company name "Rolex" was registered on 15 November 1915. The word was made up, but its origin is obscure. Wilsdorf was said to want his watch brand's name to be easily pronounceable in any language. He also thought that the name "Rolex" was onomatopoeic, sounding like a watch being wound. It was also short enough to fit on the face of a watch. One story, never confirmed by Wilsdorf, is that the name came from the French phrase horlogerie exquise, meaning "exquisite clockwork". The book The Best of Time: Rolex Wristwatches: An Unauthorized History by Jeffrey P. Hess and James Dowling says that the name was just made up.
In 1914 Kew Observatory awarded a Rolex watch a Class A precision certificate, a distinction which was normally awarded exclusively to marine chronometers.
In 1919 Wilsdorf moved the company to Geneva, Switzerland where it was established as the Rolex Watch Company. Its name was later changed to Montres Rolex, SA and finally Rolex, SA. The company moved out of the United Kingdom because taxes and export duties on the silver and gold used for the watch cases were driving costs too high.
Upon the death of his wife in 1944, Wilsdorf established the Hans Wilsdorf Foundation in which he left all of his Rolex shares, making sure that some of the company's income would go to charity. The company is still owned by a private trust and shares are not traded on any stock exchange.
In December 2008 the abrupt departure of Chief Executive Patrick Heiniger, for “personal reasons”, was followed by a denial by the company that it had lost SwFr1 billion (approx £574 million, $900 million) invested with Bernard Madoff, the American asset manager who pleaded guilty to an approximately £30 billion worldwide Ponzi scheme fraud.
A plentiful supply of a new model to the market means:
(a) all enthusiasts, grey dealers and joe average gets to buy one from an AD
(b) the grey dealers cannot ask outrageous prices (like 1-200% margins above retail) as supply does not permit that to occur.
(c) there will be a quantity of pieces for sale on e-bay and possibly at or a little below MSRP which will not please AD's who will not be able to extol the notion of 'exclusivity' or 'rarity' and who are also under increasing pressure to discount the new piece and reduce their profit margin.
(d) there will not be a false perception that the new model is 'exclusive' or 'limited' or 'rare' and dealers will not be able to tell their big spenders how fortunate they should feel having received such a 'rare' item.
(e) Rolex is still perceived as a luxury brand but when the 'exclusivity' of the new model is lost, it becomes less desirable to those who want something that Mr. Jones doesn't have a few doors down the road.
A scarce or very limited supply of a new model to the market means:
(a) many enthusiasts will miss out the opportunity to purchase from an AD for some considerable time, possibly years or otherwise spend a large sum buying it from a grey market dealer who makes more profit than Rolex;
(b) grey dealers and others who have a quantity buying relationship from an AD will get preference to buying the new model only to put it on the market for at least 100% margin eg ebay;
(c) AD's who favour their big spending customers can use the rarity of the model to illicit additional purchases from their big spenders (not necessarily Rolex) so AD's can use it to increase their total sales volume and profits;
(d) Joe Average has no chance to acquire this model from an AD for what may be a considerable time being possibly years down the track.
(e) Rolex and AD's cannot get any advantage of calling the model 'rare' or 'scarce' and able to promote an image of exclusivity to bump up price and procure collateral sales i.e. you buy a Patek and you can have a Green Milgauss.
(f) Once the item is sold on Ebay for a massive premium and ADs start to foster the orchestrated believe in the rarity of scarcity of the model, they too charge a premium for the sale of the new model.
(g) The enthusiast suffers buy now for 100% above retail or wait for an indefinite period.
Marketing strategies can be developed with techniques like target marketing, niche marketing, branding and others. Although these techniques can seem confusing, with understanding they can give you a solid framework to begin developing a strategic competitive advantage. Here are explanations of some of the most useful techniques.
I've broken them into two groups for easier understanding: Target Marketing Techniques and Psychological Marketing Techniques.
You'll notice overlap between them. That shows the interconnectedness of all these techniques. Use them together in your marketing strategies to be most effective.
Target Marketing Techniques
Target Marketing - Graphic These technique target consumers based on characteristics they already have such as age, psychological profile, and special interests.
1. Demographic Targeting
This is the most common, and general targeting technique. Demographics target marketing is based on consumers' vital statistics such as age, sex, location, income, etc.
Though superficial, demographics can play a useful role in your marketing strategy.
2. Psycho-graphic Targeting
Though this sounds like a psychological technique, it's really a target marketing technique because it targets consumers based on their pre-existing psychological characteristics.
These characteristics can be general, such as conservative or liberal, outgoing or introverted, social or private. But psychographic profiles can also be quite specific.
Marketing professionals have even created their own psychographic categories with names like 'early adopters', 'opinion leaders' and more.
3. Niche marketing.
Niche marketing simply means finding a specific group of customers from within a larger group of customers and basing your small business marketing strategy on that.
MarketingStrategy Click For example, lets say you want to start a restaurant. 'Restaurants' is a large category with lots of competition. Niche marketing should be applied. What smaller niche within the 'Restaurants' category could you specialize in (and eventually dominate)?
How about Italian Restaurants? Well there are lots of Italian Restaurants around. Further 'niching' might reveal a market segment that's easier to dominate.
What about Pizza Restaurants? Unfortunately, you'll face stiff competition from Dominos, Pizza Hut, Papa Johns and others. Try a smaller niche.
How about a Pizza Restaurant for Kids? Great idea! That's a market niche with no competition. At least, there wasn't until 1977 when the first Chuck E. Cheese restaurant opened. By 2006 there were 524 stores. Their slogan: 'Chuck E. Cheese, Where a Kid Can be a Kid.' 524 stores certainly isn't kids play. And it demonstrates the power of niche marketing.
The trick to using niche marketing as part of your marketing strategy is to choose a niche that's small enough for you to dominate, but big enough to be profitable.
Psychological Marketing Techniques
These are marketing techniques that actually place a thought, impression or feeling into the minds of consumers.
In their book 'Positioning: the Battle for Your Mind', authors Al Ries and Jack Trout popularized the idea that your product, service, or company has an image (like a personality) in the minds of consumers.
Positioning techniques are used to be sure that the image in consumers' minds about your company is the one you want them to have.
Many marketing strategies are founded on the concept of branding. Think of a brand as the reputation of a product or company, translated into a marketing tool.
For example, Rolex is a watch company, but the Rolex Brand is far bigger than just watches. The Rolex Brand - its reputation - stands for elegance, celebrity, and class. It represents an upscale lifestyle and the spirit of achievement. Rolex is Wimbledon. Rolex is The Masters Golf Tournament. Rolex is Le Mans.
A brand's power lies in its ability to translate its reputation to other products and services just by associating itself with them.
The same holds true for people as brands. For example, did you know that Catherine Zeta-Jones was paid $20 million by T-Mobile because they felt the "Catherine Zeta-Jones Brand" was such a good match to their own brand image.
Paul Newman's brands of products have raised $200 million for charities.
Marketing Plans - Thinking Graphic 3. Focus
By making Focus part of your marketing strategy, you create an image of expertise.
The guiding principal of focus is specialization. In the minds of consumers, you can only be an expert in one thing. Therefore, focus all your marketing efforts on that thing, and you will reinforce a perception of specialization and expertise.
This includes your product line. Keep your product line focused. Avoid temptations to apply your name to more than one specialized area. And another Paul, Paul McCartney has trademarked his name. Some have estimated that royalties from products bearing his name could generate
$1 Billion in royalties!
Focus can be a powerful part of a marketing strategy because it goes beyond just promoting products and services and actually infuses your marketing strategy into the product line itself.
Differentiation means just that; making yourself different from the competition.
Fundamentally, differentiation is the underlying aspect of every other technique. Entire books have been written on the subject including 'Differentiate or Die' by Jack Trout.
For now, the principle to keep in mind is that when you are in doubt about your marketing strategy, "be different."
Hopefully, this list helps you understand some of the techniques most often applied to strategy development.
Whether it's target marketing, niche marketing, branding, positioning, focus, or differentiation, the next step is deciding which of these methods are right for you, then applying them to your website design, advertising, packaging, pricing and the rest of your marketing efforts. In other words, making them a integral part of your marketing plan.
Though these explanations are brief, I hope they stimulate you to learn more, and incorporate these techniques into your own small business marketing strategy.