The common false assumption about the price watches is to generalize and think that it can only be based on the product specifications. Similar characteristics should mean similar price, right? As I will further explain in the Materials and Processes section, «the price of a watch is inversely proportional to the scale at which it is produced and distributed», even if middlemen are involved in the distribution (as I will detail in the page about Sales Channel. Now, let’s list the market price segments that you should be taking into account…
In 2014, HSBC’s Managing Director Erwan Rambourg hypothetized in his book The Bling Dynasty: Why the Reign of Chinese Luxury Shoppers Has Only Just Begun, that luxury brands could be ranked, from the most accessible ones to the ultra high-end ones.
Most premium-goods purchases would correspond to “esteem needs” that include the search for self-esteem, confidence, achievement and respect by others…
The Rambourg pyramid of luxury brands lists segments such as: Everyday Luxury, Affordable Luxury, Accessible Luxury, Accessible Core, Premium Core, SuperPremium, Ultra High End and Bespoke. I also included a reference to the dope of distribution to expect: intensive, selective or exclusive.
In a similar way, the Swiss Watchmaking Federation FHS uses in their statistics: Low End, Low Middle, High Middle and High End.
From 2017 onwards I have been using a chart of quality grades/price segments that superposes the Swiss Watchmaking Federation FHS segments with Rambourg’s segments, to explain how various watch brands differentiate themselves from competitors through their finishing grade.
Since the 4 segments of the FHS are not sufficient to reflect the small subtleties between all watch brands, I have been using the FHS segments as even segments (2, 4, 6, 8) and I have added odd segments (1, 3, 5, 7, 9). These new odd segments allow to account for the 1 billion + watches that are cheaper than the Swiss Low End, and watches that are produced by hand in very limited volumes. This gives us the following 9 segments: Low End, Upper Low End, Low Middle, Upper Middle, High Middle, Lower High End, High End and Master Watchmaker. You access a ranking of 400+ brands according to these segments in my Competitive Intelligence database.
The first step in mastering your cost is to understand at which price point you are going to position your brand:
- The higher you want your brand to be in the segments, the less retail locations you will have (exclusive distribution), and the less you will be able to amortise your Reseach and Development costs.
- The lower you want your brand to be, the more you will have to pay attention to how each cent spent impacts your Cost of Sales.
Your priority will be to find a balance between a price that is high enough to allow you to amortise your R&D costs, but low enough to appeal to a broader clientele.