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SI, May 2004

Why do consumers pay top dollar for commoditised products like watches and diamonds? After all, isn’t a watch, a watch, and a diamond, a diamond? So what do manufacturers of such products do to enhance their brand equity and to command premium pricing? Only branding can get them out of the commodity trap, says brand expert Paul Temporal.

How much more would you pay for a watch that tells the basic time as accurately as another, cheaper one? How much more would you pay for a diamond that sparkles just as brilliantly as another less expensive piece? Why are consumers willing to pay more even when such products perform the same functions or posses the same qualities?

“Everything is a commodity these days, even diamonds and watches,” says Dr Paul Temporal, brand expert and group managing director of Temporal Brand Consulting. “Everything is commoditised. Diamonds have always been a commodity,” he continues. “Only branding can get you out of the commodity trap and attract value in terms of premium pricing. Casio keeps time as accurate as Rolex but costs a thousand times less. The premiums are huge but the functions are the same.”

Most of the working parts and mechanisms inside a watch, for example, are made by the same contract manufacturers, Dr Temporal points out. “The rubies or watches you buy may have different designs but these are not key differentiating factors. Designs help but at the end of the day, it is what the brands stand for,” he says.

“Casio was stuck at the low-end pricing range and that is why they started new brands like G-Shock and Baby G,” he explains. “Higher-end brands like Rolex, Omega and Tag Heuer differentiated themselves with a special niche. Rolex and Tag Heuer, for example, have differentiated themselves by putting up and maintaining their brand messages – reliability and performance. These are representational brands, that is, they represent people’s feelings, of which self-expression is the most important factor.”

The Rolex brand needs no introduction as it is widely associated with status and prestige. “In Asia, Rolex makes a statement that you have arrived, like buying a Mercedes Benz, a BMW or a Jaguar. People wear them not only as fashion accessories but as a statement to show others what they have achieved,” says Dr Temporal.

The Image Guide
Associating a brand with events and personalities is one way to build and enhance a brand’s image and status. According to Dr Temporal, the story related to him from those in the sports marketing profession about how Rolex became associated with sports events is a case in point. It seemed that marketers for sports events had for years tried in vain to convince the company chairman of Rolex to endorse their activities.

It was said that his response was Rolex was a high level brand and could not be associated with these events. However, everything changed when he attended the tennis finals at Wimbledon. “He looked at the rock stars, the film stars, the champagne and strawberries and the whole excitement behind the event and felt that this was an event for Rolex. He then became a strong supporter for tennis and sports events. I heard all this from the sports marketing people,” says Dr Temporal. “A clever brand develops that intangible association with consumers just as Rolex has become synonymous with status and prestige in consumers’ minds. This then translates into premium pricing.”

Even personalities have become living and walking advertisements for watch brands like Omega and Tag Heuer. Omega has commissioned actor Pierce Brosnan and actress and model Cindy Crawford to endorse its timepieces. Even tennis sports personality Anna Kournikova is an ambassador for Omega. Tag Heuer has golfing champion Tiger Woods endorsing its timepieces and positioning itself as a professional sports watch brand.

“Omega is using icons in the movie world to stimulate excitement for the people who wish to be Pierce Brosnan or Cindy Crawford, or dating them. The target audience is also people who aspire to be associated with the beautiful, handsome and rich, and at the top of their profession. By having Pierce wearing an Omega in the James Bond movies, Omega has literally gotten half the planet watching. This strategy has fantastic appeal and great exposure. It is worth it because the investment returns will come in,” Dr Temporal believes.

Product placement is another strategy whereby watches, for instance, are seen and used in movies. Have you seen a Breitling in the movie Broken Arrow? How about the Audemars Piguet T3 specially designed for action movie star Arnold Schwarzenegger in the film Terminator 3?

But, as Dr Temporal warns, “marketers have to be careful that they choose people who do not go wild. You have to be careful and not have celebrities that go off the rail. Pierce is a good choice as he is one of the nicest actors around.”

Rather than viewing these as marketing tactics, Dr Temporal figures that these are instead clever brand management skills. “Watch brands sponsor different events to capture audiences and associate themselves with personalities to be even more widely known. All the good brand owners have proper strategies for their brand names and products. These are elements for execution; campaigns to endorse the brands are a basic strategy to differentiate themselves from others.”

But isn’t this luxury space a little overplayed?

“The luxury watch market is indeed getting crowded,” agrees Dr Temporal. “Sports personalities, actresses and film stars all are beginning to endorse watch brands and everything is beginning to look the same again. That is why certain brands hang on to their tradition and heritage and their objective is to make people aware of where their brand came from. Patek Philippe stresses its authenticity and it is its heritage that matters. Its message is that people are buying for the next generation and many of their timepieces are collectors’ items.”

Even Rolex has its strong following of collectors and quite a few pieces have also become investment items, and so have some other watch brands. “It is the perceived value and the emotional aspects rather than the functional features. Such pieces appeal to the right brain rather than the left but it must still satisfy the left brain in the sense that the timepiece works,” explain Dr Temporal.

Creating fashion trends and the use of designs should not be underestimated in capturing market share as well. “Brand owners are constantly innovating and watching fashion and trends closely. Design is important but only from a capture point of view. More products are following the fashion market, especially in Asia where the population is attaining a higher standard of living. More and more people are craving luxury brands,” observes Dr Temporal.

“Louis Vuitton handbags have a chosen female target audience,” he continues. “Japan is in recession but 50% of females there have a Louis Vuitton handbag and 90% have a Louis Vuitton product. This is interesting in a market where unemployment is increasing. People there will give up everything to have such special brands. Consumers can be extremely loyal and the stronger the brand is, the stronger the consumer loyalty will be.”

Broadening The Market
Proper product positioning is key even when attempts are made to capture a different segment of the market. “You must not dilute the brand’s image,” says Dr Temporal. “And that is why Tudor, another product range from the same people behind Rolex, is priced differently. They share similar advertising but Tudor is not associated with Rolex. Creating other brands to widen your customer base is alright as long as you do not devalue prices for your existing brand.”

How about Tag Heuer, which is positioned as a sports watch? “It is its emotional appeal based on inner strength and mind over matter. But Tag Heuer is slowly moving away from sports as it has introduced non-sports timepieces,” notes Dr Temporal. “They have used a Chinese actress and a Spanish model to advertise their watches that are a little dressy.”

That’s perhaps not surprising since the Tag Heuer brand was taken over by luxury goods giant LVMH Moet Hennessy Louis Vuitton in 2001. Non-sports timepieces like the Alter Ego range were introduced a year later in 2002. “They might lose out but then again, they may gain more female consumers,” Dr Temporal says.

Extending its product line is not the only thing Tag Heuer is into. It is also into brand extension with its range of eyewear. “This could possibly damage the brand. The question is not so much if Tag Heuer should do it but whether consumers have given the permission to. There is always the temptation of falling into the brand extension trap. Often, brand extensions end up with failure. The further you move away, the less the chance of success,” says Dr Temporal.

Brand Management
For brands to succeed, there must be a clear differentiation strategy and consistent management of the brand, says Dr Temporal. “Whether it is a luxury brand or falls into any other category, it is how you stand out from the crowd. Know your target audience, get inside their heads, and understand how they think and feel, their fears and anxieties, and their emotions. It is not about demographics, it is about neuro-psychology. Then manage the brand consistently.

“Take the case of Tag Heuer, for example. Friends who buy Tag Heuer may now feel this is not the Tag Heuer they used to know. It is dangerous to switch personalities with a brand because people may get worried. If your friend, for instance, starts doing crazy things, you’d be wondering if he was sick or mad,” he says. “And finally, you may ask if he is someone you’d want to be associated with. Branding is not about logos and advertising. You have to view it holistically. The brand experience counts as well, it is also the service a consumer gets from those behind the counter and from the Website,” says Dr Temporal.

Brand management is tough and it is very easy to kill a brand. “Image is everything,” stresses Dr Temporal. “Do not do things that will devalue a brand’s image. If you have an inventory problem with high-end luxury goods, for instance, then discreetly contact your loyal customers and showcase and sell these in a non-public place. Don’t go plastering ‘sale’ posters all over the place. Never forget the brand’s image over your numbers.”